Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 7) - [2016] FCA 991

FEDERAL COURT OF AUSTRALIA
Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 7) [2016] FCA 991

File number: WAD 132 of 2007

Judge: BARKER J

Date of judgment: 19 August 2016

Catchwords:
DAMAGES – innovation patents – where patent infringement proceedings dismissed – where cross-claim of patent invalidity dismissed – where threats to bring infringement proceedings declared unjustifiable threats under s 128 of Patents Act 1990 (Cth) – whether first respondent a “person aggrieved” for purposes of s 128 of Patents Act 1990 (Cth) – whether first respondent held a relevant interest in the tool the subject of the threats at material times – whether valid assignment of interest in tool – whether tool of merchantable quality at material times – whether first respondent had a business in the tool at material times – whether threat letters caused first respondent to suffer loss and damage – quantum of loss and damage

PRACTICE AND PROCEDURE – where finding of no assignment in related proceeding – where risk of inconsistent findings – finding of assignment made on the evidence in this proceeding

Legislation:
Evidence Act 1995 (Cth) ss 79, 80, 135, 191

Federal Court of Australia Act 1976 (Cth) s 51A, 51A(2)(a)

Patents Act 1990 (Cth) s 128, 128(1), 128(1)(a), 128(1)(c)

Cases cited:
Australian Guarantee Corporation Limited v Border Printing Services Pty Ltd & Ors [1989] FCA 194

Australian Mud Company Pty Ltd (ACN 009 283 416 and Others v Coretell Pty Ltd(ACN 119 188 493) and Another (2010) 88 IPR 270; [2010] FCA 1169

Australian Mud Company Pty Ltd and Others v Coretell Pty Ltd and Another (2011) 93 IPR 188; [2011] FCAFC 121

Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 2) [2010] FCA 1451

Australian Mud Company Pty Ltd v Coretell Pty Ltd(No 5) [2016] FCA 444

Castel Electronics Pty Ltd v Toshiba Singapore Pte Ltd (2011) 192 FCR 445; [2011] FCAFC 55

Fair Work Ombudsman v Skilled Offshore (Australia) Pty Ltd (No 2) [2015] FCA 1509

Hanave Pty Ltd v LFOT Pty Ltd (2004) 136 FCR 566; [2004] FCAFC 180

JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (2005) 67 IPR 68; [2005] FCA 1474

John Summers & Sons Ltd v Cold Metal Process Co (1948) 65 RPC 75

Johnson v Edge (1892) 2 Ch 1

Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305

Minnesota Mining & Manufacturing Co v Tyco Electronics Pty Ltd (2002) 56 IPR 248; [2002] FCAFC 315

National Telecoms Group Ltd v John Fairfax Publications Pty Ltd (No 1) [2011] NSWSC 455

Date of hearing: 8-12 December 2014, 10 March 2016

Date of last submissions after substantive hearing: 24 February 2015

Registry: Western Australia

Division: General Division

National Practice Area: Intellectual Property

Sub-area: Patents and associated Statutes

Category: Catchwords

Number of paragraphs: 870

Counsel for the Applicants: Mr JM Hennessy SC

Solicitor for the Applicants: Gilbert + Tobin

Counsel for the Respondents: Mr BJ Hess QC with Dr LJ Duncan

Solicitor for the Respondents: Arns & Associates

ORDERS

WAD 132 of 2007

BETWEEN:
AUSTRALIAN MUD COMPANY PTY LTD (ACN 009 283 416)

First Applicant

IMDEX LIMITED (ACN 008 947 813)

Second Applicant

REFLEX INSTRUMENTS ASIA PACIFIC PTY LTD (ACN 124 204 191)

Third Applicant

AND:
CORETELL PTY LTD (ACN 119 188 493)

First Respondent

MINCREST HOLDINGS PTY LTD (TRADING AS CAMTEQ INSTRUMENT SERVICES) (ACN 068 672 471)

Second Respondent

JUDGE:

BARKER J

DATE OF ORDER:

19 AUGUST 2016

THE COURT ORDERS THAT:
1.The first respondent, following consultation with the applicants, to file a proposed minute of orders giving effect to these reasons.
2.The Court will hear further from the parties, if necessary, on the question of the calculation of pre-judgment interest and costs.
3.The applicants’ interlocutory application for summary judgment filed 11 December 2015 be dismissed with costs, such costs to be taxed if not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT
BARKER J:

This judgment deals with the question of what damages, if any, were sustained by Coretell Pty Ltd, the first respondent, as a result of unjustifiable threats made by the first applicant, Australian Mud Company Pty Ltd (AMC), to the respondents not to infringe its patent.
In Australian Mud Company Pty Ltd (ACN 009 283 416 and Others v Coretell Pty Ltd(ACN 119 188 493) and Another (2010) 88 IPR 270; [2010] FCA 1169, the Court dismissed the patent infringement proceedings instituted by the applicants and the cross‑claim of the respondents for invalidity of the patent. In Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 2) [2010] FCA 1451, the Court:
·declared that the threats made by AMC by letters from its solicitors dated 14 November 2006, 5 December 2006 and 13 February 2007 to the second respondent (Mincrest Holdings Pty Ltd, sometimes referred to in passing as Camteq) and the respondents’ solicitors and threatening the bringing of infringement proceedings against the respondents for infringement of Australian Innovation Patent No. 2006100113 were unjustifiable; and
·ordered that there be an enquiry into the amount payable by the applicants to the respondents by way of damages in respect of the cross‑claim for unjustified threats.
The declaration and order were made pursuant to s 128(1)(a) and (c) of the Patents Act 1990 (Cth) which provides:
(1)Where a person, by means of circulars, advertisements or otherwise, threatens a person with infringement proceedings, or other similar proceedings, a person aggrieved may apply to a prescribed court, or to another court having jurisdiction to hear and determine the application, for:
(a)a declaration that the threats are unjustifiable; and
(b) …
(c)the recovery of any damages sustained by the applicant as a result of the threats.
The grant of this relief was not contested, in the sense that it was considered by the parties, at the time it was granted, and accepted by the Court, to be consequential upon the dismissal of the applicants’ patent infringement proceedings. To an extent, as discussed below, the applicants now seek to avoid the terms of the declaration made, both by construing the declaration in a particular way, and by denying that Coretell was, or is, a “person aggrieved”.
A subsequent appeal by the applicants against the dismissal of the infringement proceedings was dismissed. See Australian Mud Company Pty Ltd and Others v Coretell Pty Ltd and Another (2011) 93 IPR 188; [2011] FCAFC 121. The declaratory relief and damages enquiry order referred to above were not in issue on the appeal.
Coretell now submits that it, and it alone, is entitled to an award of damages in the amount of $3,290,386, together with interest thereon at such rate or basis as determined by the Court, and costs. Mincrest makes no claim for damages.
The applicants contend that Coretell’s claim should be dismissed. A primary issue raised by the applicants is whether Coretell held any interest in the Camteq tool (also referred to as the Barker tool) the subject of the threat letters, at material times. If it did not, it cannot demonstrate that it sustained any damage. Coretell says, at material times, the intellectual property, or at least an equitable interest, in the tool had been assigned to it by Mincrest. The applicants contend no such assignment has been proved.
In pressing this contention, the applicants rely particularly on the findings of McKerracher J in Australian Mud Company Pty Ltd v Coretell Pty Ltd(No 5) [2016] FCA 444, a related proceeding commenced in the New South Wales registry of the Court (NSW proceeding) in which judgment was delivered following the conduct of the damages enquiry, to the effect that the alleged assignment was not made. The Court heard interlocutory argument, following the completion of the damages enquiry, as to the implications in this proceeding of his Honour’s finding in the related NSW proceeding.
The applicants further contend that only the third threat letter was directed to Coretell, the first two being directed to Mincrest, and so any damages assessment must be from that date.
The applicants contend, in any event, that the threat letters did not cause the loss Coretell now alleges it sustained and that, in reality, any alleged loss was the result of entirely different factors, factors rooted in the product being developed, its stage of development and its lack of merchantable quality at material times when the threats were made.
The applicants contend that Coretell’s conduct following receipt of the threat letters is inconsistent with the assertion of its principal, Mr Nicky Kleyn, that supply and marketing of the Camteq tool ceased as a result of the letters.
The applicants say, in a related submission, that Coretell could not have ceased trading consequent on the threats as it had no business at the time the threat letters were sent: it was a dormant company. In this regard, they say the respondents have not provided any evidence of any cancelled orders for the Camteq tool resulting from the applicants’ threats to commence proceedings.
They also say that Mr Ashley Gordon Barker’s evidence, given on behalf of Coretell, was that the reason provided to him by Mr Kleyn for ceasing development and manufacture of the Camteq tool in late July 2007, was the commencement of the infringement proceedings. The applicants say this was consistent with Mr Kleyn’s evidence that, after legal proceedings were commenced on 2 July 2007, he refused to supply customers with core orientation tools because of the legal proceedings – not because of the threat letters.
Finally, the applicants contend that the calculation of loss made by Mr Gregory Pollard Meredith, an expert accountant called by Coretell, was flawed and (as discussed below) cannot be relied upon for the purpose of assessing loss and damage in the enquiry in any event.
Coretell notes that, by their response to the damages enquiry, the applicants seek to put in issue whether actionable threats were made against Coretell. In this regard, it contends that the question whether Coretell is a “person aggrieved” for the purposes of the damages enquiry is res judicata in light of the declaration and order made, and cannot now be re-litigated.
It rejects the proposition that the first two threat letters were not also aimed at Coretell.
Coretell rejects most of the applicants’ other propositions, particularly the claim that Coretell did not hold a relevant interest in the tool at material times.
Coretell says that the following key issues need to be determined:
(1)Whether Coretell was “in business” at the dates of receipt of the threat letters, if the existence of such business is in fact or law necessary to the damages enquiry, and whether any such business ceased as a result of the threat letters.
(2)Whether the Camteq tool was of merchantable quality at the dates of receipt of the threat letters.
(3)Whether Mr Meredith’s calculation of loss and damage is a reasonable estimate of loss suffered by Coretell.
(4)Whether the opinion evidence of Mr A M Ross, an expert forensic accountant called by the applicants to express an opinion concerning damage, is admissible (which, it says, it is not).
In these circumstances, the following primary questions arise for determination:
(1)Is Coretell a “person aggrieved” for the purposes of s 128(1) of the Patents Act?
(2)Did Coretell hold a relevant interest in the Camteq tool at material times when the threat letters were received?
(3)Was Coretell at material times operating a business?
(4)Was the Camteq tool of merchantable quality at material times?
(5)What damage has Coretell sustained in light of the Court’s findings?
EVIDENCE
In order to answer these questions a range of factual findings need to be made having regard to facts agreed by the parties and the testimony of witnesses called at the damages enquiry and the evidence led. Factual matters will be considered first and then each of the key questions will be answered. The evidence of the expert accounting witnesses Mr Meredith and Mr Ross will be considered separately later.
Agreed facts
The factual circumstances in which the damages enquiry is to be conducted are the subject of a statement of agreed facts made by the parties dated 26 November 2014, and received by the Court pursuant to s 191 of the Evidence Act 1995 (Cth).
The agreed facts are as follows:
1This Statement of Agreed Facts (SOAF) is made jointly by the First Applicant (AMC), Second Applicant (Imdex), Third Applicant (Reflex) and First Respondent (Coretell), pursuant to section 191 of the Evidence Act 1995 (Cth).
The Parties
2Coretell was incorporated on 25 May 2006.
3Coretell is and was at all material times an associated entity of Mincrest Holdings Pty Ltd (Mincrest) and Kleyn Investments Pty Ltd (Kleyn Investments) within the meaning of s.50AAA of the Corporations Act 2001 (Cth).
4Coretell’s business address is at the premises at 6 Davison Street, Maddington, Western Australia (the Maddington Warehouse).
5Mincrest was incorporated on 17 March 1995.
6Mincrest:
(a)is and was at all material times an associated entity of Coretell and Kleyn Investments within the meaning of s.50AAA of the Corporations Act;
(b)is the trustee of the Kleyn Family Trust ABN 39 593 588 385.
7Kleyn Investments was incorporated on 29 March 2006.
8Kleyn Investments:
(a)is and was at all material times an associated entity of Coretell and Mincrest within the meaning of s.50AAA of the Corporations Act,
(b)the owner of the business name Camteq International Services, registered on 23 November 2009; and
(c)the trustee of the Kleyn Investment Trust ABN 71 981 731 047.
9The business address for Kleyn Investments is the Maddington Warehouse.
10Mr Nicky Kleyn (Mr Kleyn) is and was at all material times engaged in and responsible for directing the conduct, management, control and day to day operations of:
(a)Coretell;
(b)Mincrest; and
(c)Kleyn Investments.
Theequipment
11Core orientation tools indicate the orientation of core samples.
12Survey   instruments   (cameras)   determine   geo-spatial   properties   of   down-hole environments.
13These pieces of equipment are complementary products; typically drilling rig operators require the supply of both before commencing drilling and mineral exploration activities.
14The applicants’ core orientation tool is the Ace Core Tool (ACT).
Coretellequipment
15There are two models of ‘Coretell Equipment’:
(a)the core orientation tool (the First Tool) as described in the document entitled “Camteq- Orientation Tool quick user guide” (Camteq User Manual); and
(b)the core orientation tool (the Second Tool), as described in the documents entitled “ORishot Tool - Quick user guide” and “ORishot multifunction Orientation Instrument” available at: .com.au/ppp_oritool.htm (together, the ORishot User Manual),
(together, the Coretell Equipment).
16The Second Tool is comprised of probe Part Number CNPS100 and handset Part Number CNH 100.
17Coretell updated, amongst other things, the Second Tool’s handset design and wireless communication means in about May 2012.
18Photographs of the First Tool are at Annexure A.
19Photographs of the Second Tool are at Annexure B.
Development of the Coretell Equipment
20In late 2004, Mincrest engaged Mr Ashley Barker (Mr Barker) to develop and manufacture a core orientation tool, which would become the First Tool.
21Between 5 September 2005 and November 2006, Mincrest:
(a)manufactured or caused to be manufactured the First Tool; and
(b)kept stock of the First Tool at Lot 4 Reservoir Road, Orange Grove, Western Australia (Orange Grove).
22From about December 2005 until around December 2006 the First Tools were trialled without payment with potential customers by Mincrest.
23On 31 October 2006, Mincrest supplied six First Tools to MTL Philippines. Mincrest invoiced MTL Philippines and was paid by MTL Philippines for these tools.
24On 16 November 2006, Mincrest received the first unjustified threat in these proceedings, being a letter from Mallon & Co to Mincrest dated 14 November 2006 alleging infringement of AMC’s patent.
25On 22 November 2006 Arns & Associates replied to Mallon & Co on behalf of Coretell denying infringement of the patent and challenging its validity.
26On around 5 December 2006, the Applicants made a further unjustified threat of patent infringement by a letter from Mallon & Co to Arns & Associates.
27On 14 December 2006 Arns & Associates replied to Mallon & Co.
28On 31 January 2007, two invoices issued on Mincrest letterhead to Silver City Drilling (NSW) Pty Ltd (Silver City) for the hire of four First Tools. Mincrest was paid by Silver City for these tools.
29On 13 February 2007, the Applicants made a further unjustified threat of patent infringement by letter from Mallon & Co to Arns & Associates.
30On 28 February 2007 and monthly until 1 July 2007, Coretell invoiced Silver City for the hire of kits of the First Tool. These invoices were paid by Silver City.
31On 31 May 2007 and 1 July 2007, Coretell issued invoices in respect of the hire of kits of the First Tool to GOS Drilling (GOS). These invoices were paid by GOS.
32On 2 July 2007, the Applicants commenced these proceedings.
33By 31 July 2007, Mr Barker was instructed to cease manufacturing the First Tool.
34Since January 2009, Coretell has:
(a)made and thereafter supplied, hired and offered for supply and hire and kept for the purposes of supply and hire Second Tools to customers and distribution agents for use:-
1        in Australia; and
2        in countries outside Australia;
(b)kept Second Tools at Orange Grove and, since September 2010, at the Maddington Warehouse; and
(c)supplied Second Tools to customers and distribution agents in Australia and in countries outside Australia together with the ORishot User Manual and such Second Tools have been used in accordance with the ORishot User Manual.
Previous Proceedings
35The First Tool and the Second Tool were the subject of a claim of patent infringement of Innovation Patent 2006100113 by Imdex and the First and Second Applicants, which claim was unsuccessful:
(a)at trial (WAD 132 of 2007; [2010] FCA 1169); and
(b)on appeal (WAD 8 of 2011; [2011] FCAFC 121).
36The First Tool and the Second Tool were subject of a claim of patent infringement in respect of Australian Innovation Patent No AU2010101356 entitled ‘Core Sample Orientation’ and Australian Innovation Patent No AU20111 01041 entitled ‘Core Sample Orientation’ in proceedings NSD 2082 of 2011. The claims of patent infringement were heard in a trial that concluded in July 2014 and in respect of which judgment is yet to be delivered.
[insert photographs]
Evidence received at the hearing
The evidence of witnesses bearing on key factual issues is recounted in this section.
Mr Kleyn’s evidence
By his evidence in chief, Mr Kleyn, called by Coretell, explained how his business developed from that of a watchmaker into the Camteq business. He initially received work from Ace Drilling Supplies to fix a timing device in an industrial camera used in the mining industry for down-hole surveys. From about May 1993, he began working exclusively on Ace Drilling work. On the advice of his accountant he acquired Mincrest, which was registered and commenced business in March 1995. He and his wife each hold one share in that company and he is the sole director and person primarily responsible for managing its affairs. From the outset, Mincrest traded as “Camteq Instrument Services”. Before that, Mr Kleyn had personally used that business name.

In late 1996, Ace Drilling ceased its relationship with Mincrest. Mr Kleyn then said he resolved through Mincrest to develop what he considered to be an improved version of the Ace Drilling camera, based on his belief that the survey camera he had been repairing was a relatively unsophisticated mechanical device and the technology was in the public domain. Mincrest then rather quickly developed its own camera, which it offered to clients for hire and sale, and by the end of 1996, had approximately 10 functioning units and soon all were on hire to clients. At that point Mincrest traded from Mr Kleyn’s home in Orange Grove.
Mr Kleyn said that by late 1997, Mincrest had 20 units out in the market on regular hire and in March 1998, Mincrest commenced operating under the business name “Camteq Instruments”. Often the business was referred to as “Camteq”.
By late 1998, Mr Kleyn said he had approximately 50 units, most of which were on hire. Business was steady and Mincrest was making a profit. In November 1998, he employed its first employee, Mr Ian Bennett.
Mr Kleyn said that in about late 2000, there was greater demand for electronic, as opposed to mechanical, cameras, and he decided that Mincrest should develop its own electronic camera. It engaged an electronics company called Globaltech Corporation Pty Ltd to develop an electronic probe to perform the same function as the camera.
Then, from January 2003, Mincrest purchased from Downhole Surveys (Australia) Pty Ltd, agents for Reflex Instruments Asia Pacific Pty Ltd, around 30 Flex-it camera probes. He said there was a growing demand for electronic cameras and Reflex was the company that supplied the best product. Mincrest hired out to its customers the cameras supplied by Reflex and this was known to and authorised by Reflex.
Mr Kleyn said that in or around early 2004, he had a discussion with the representatives of Globaltech in relation to producing an orientation device, being a device similar to the probe but minus the inclusion of a magnetometer. He then began receiving enquiries from customers about when Mincrest would be making available for hire an electronic orientation device. One of these enquiries was from Mr Harry Koushappi, the manager of the drilling division of Barminco Limited at Kalgoorlie.
Later in 2004, Mincrest ceased its relationship with Globaltech after Mr Kleyn heard it was embarking on its own programme to develop similar devices.
At that point, Mr Kleyn said, he needed to retain a different developer to assist in the design and manufacture of the orientation tool and that was when he met Mr Barker, who he understood was a physics graduate at Curtin University in Perth who had an interest in the technology required for down-hole probes and orientation devices. (The Court should note here that Mr Barker is not related to or known to the Court).
Mr Kleyn and Mr Barker then discussed a project and came to an agreement, whereby Mr Barker (through his company Hightech Laboratories) would prepare a working prototype electronics board, but without casing, which Mr Kleyn intended that Mr Steve Walton and he would design and Mr Walton, who had been engaged as another employee of Mincrest in early 2004, would machine – at least for the prototypes. At that point in dealing with Mr Barker, Mr Kleyn did not immediately prepare a purchase order for the prototype.
Mr Kleyn recalled that by early 2005, Mr Barker showed him a circuit board and explained to him its capabilities and connected it to a monitor which showed the operation of the tool with a graphic on a screen, coinciding with the movement of the tool. He said he identified some immediate difficulties with the prototype and it was apparent to him that there was still a lot of work to do before “we would have a viable orientation tool”. Nonetheless he took confidence from the work that Mr Barker had done. Indeed, he requested him to continue with his work and thereafter remained in touch with him, as they discussed improvements on the design and function of the tool.
Mr Kleyn said that at one of these meetings, someone proposed a separate handset from the down-hole component of the tool and Mr Barker agreed to explore the viability of a separate handset and later told him it was viable and the design of the tool thereafter changed so that the operation of the tool was controlled by a separate handset.
Mr Kleyn said that about 13 January 2005, Hightech provided a quotation for the design and production of the circuit board for the tool, which he accepted and caused Mincrest to issue a purchase order of that date. Then in March 2005, Camteq received a quotation from Hightech for the handset design. He said the work undertaken by Hightech did not include the manufacture of the external steel casing for the probe, which work was undertaken by a machining shop in Perth in early 2005.
Mr Kleyn said that while there were some issues with the first batch of casings produced because the steel had not been hardened correctly for the intended use, the tools produced using the initial batch of casings were “adequate” for the trials conducted, but not for extended use and the issue was resolved by the next batch of housings manufactured.
He said the plastic fitting which housed the electronics and fitted inside the steel housing was machined by Mr Walton at Mincrest’s premises in Orange Grove.
Mr Kleyn said that from 2003, he was receiving regular enquiries from customers about electronic survey cameras and at that time Mincrest was supplying the mechanical camera but only had limited Flex-it stock for hire, given that it cost Mincrest $30,000 per tool purchased.
So, when he engaged Mr Barker in 2005, he had Mr Barker work simultaneously on both a digital survey camera and the orientation tool.
Mr Kleyn said Mr Barker commenced working from the Orange Grove premises in or around August 2005, and the arrangement was that although Mr Barker would work from those premises, he would remain a contractor and invoice Mr Kleyn for his work on a regular basis. Mr Barker apparently wished to be free to take on other work.
Mr Kleyn said Mr Barker’s time was predominately spent in the development of the camera but he worked on the orientation tool as and when time permitted. By late 2005, Mr Barker produced the first working prototype of the orientation tool. The two part orientation tool was a significant improvement, Mr Kleyn said, over the products of competitors.
Mr Kleyn said he believed “that we had a good, viable functioning product. I concluded that it had reached a stage where the tool could be demonstrated to, and trialled by, prospective customers”.
In late 2005, he spoke to Mr Eric Tonkin at Boart Longyear, which managed a gold mining operation at Leinster in Western Australia. He says Mr Tonkin offered to “road‑test the tool for me and provide feedback”. This was then done for an extended period without charge. He received an email later from Mr Tonkin dated 16 December 2005, reporting that the tool had been used by the drilling crews and there were no problems with it.
It appears Mr Barker also dealt directly with Mr Tonkin in relation to the tool and emails passed between the two of them on 5 March 2006.
In an email of 15 March 2006, it appeared an issue had emerged concerning the batteries in the tool, which Mr Kleyn said he and Mr Barker concluded was caused by vibration resulting in the batteries’ wires breaking loose. Mr Barker proposed a solution to this, as a result of which modifications were made and it ceased to be a problem.
Mr Kleyn said that in May 2006, Mr Tonkin reported to Mr Barker another issue with accuracy of the data rendered by the tool and, on further investigation, he and Mr Barker concluded the problem was not with the tool itself but rather in the operation of the tool by the drillers by not following the correct sequence of steps required to achieve the correct readings. He was surprised to find such an elementary mistake was being made but, as a result, he and Mr Barker reviewed the instruction sheet and emphasised the importance of the survey being taken before the sample was snapped off from the surrounding rock, and not afterwards.
Mr Kleyn said in his evidence in chief that he was confident by May 2006 that the orientation tool was ready for commercialisation and he decided to market it through a new company with the intent of making an entirely separate business operation. He said that his intention was that as the new tool gained acceptance in the industry the new company and business would be sold. So he proceeded to incorporate Coretell on 25 May 2006. He was and is the sole director and shareholder of Coretell and there is only one issued share in the company. As with Mincrest, the company initially traded from his home premises in Orange Grove, although at the time of this enquiry it traded from premises in Maddington.
Mr Kleyn said the promotion and marketing of the tool was “understated”. He made clients aware of it mainly by word of mouth. Most of his customers were interested in the camera but he took the opportunity when speaking with them to tell them about the orientation tool. He began, he said, by having such discussions with customers in early 2005, when he only had the prototype, but by the time the tool was “ready for market in May 2006”, Coretell had established customer demand for its tool.
In June 2006, he said he supplied two prototype tools to Mr Dwayne Reynolds of Drillshop Pty Ltd, which was an agency that sold mining equipment on a commission basis and had successfully arranged hires of Mincrest products in the past. He said he asked Mr Reynolds to also market and promote the orientation tool.
In his evidence in chief, Mr Kleyn said that, on the basis of his discussions with Mr Reynolds, he was aware that Drillshop subsequently demonstrated the tool to prospective customers and was informed that Ausdrill Northwest Pty Ltd and Barminco wanted to conduct their own trials and asked for three tools to be supplied for that purpose, which Mr Kleyn agreed to.
Mr Kleyn understood that the tools were trialled at least at two rigs and he received feedback via Mr Reynolds. He did attend on site, however, personally to view a trial during a visit to Kalgoorlie in around August or September 2006 and, on that occasion, there was a minor issue with the synchronisation between the handset and the down-hole component for one of the tools. Mr Kleyn said it was “not a serious issue” and they merely continued the trial with a different unit that Mincrest made available. Mr Barker later agreed to investigate what the issue was and Mr Kleyn said the problem “was not reported to me again”.
Mr Kleyn said that in about October 2006, a Mr Paul Manda of Boart Longyear telephoned him and said he wanted to trial another one of the orientation tools at a mining site and Mr Kleyn agreed to supply a tool for that purpose. The tool was returned a few weeks after being supplied and recorded as having as a “flat battery”. Mr Kleyn personally inspected the tool and it was apparent to him that the tool had been opened.
He telephoned Mr George Smith at Boart Longyear and asked him whether he knew anything about where the tool had been and who had used it and was told, in substance, that it had been delivered to Imdex Limited (one of the applicants) for inspection.
Mr Kleyn also indicated that Mincrest had, in some instances, been having difficulty in getting opportunities to demonstrate the tool to potential customers and a number of representatives had declined his offers to demonstrate the tool.
Mr Kleyn stated in his evidence in chief that “prior to the transfer of the orientation tool business to Coretell”, Mincrest had agreed, in about October 2006, to supply six orientation tools (three kits) to Mr Peter Draper of EastWest Drilling, who had mining interests in the Philippines. He said he was not entirely sure whether he discussed with Mr Draper his purchase personally or through the company. The tools were charged at around $10,000 per tool, being a total of around $60,000. He said the payment was receipted by Mincrest and used by Mincrest to off‑set its costs in having paid for the development and production of the tools and that is why they were recorded as a sale by Mincrest of those tools – even though the orientation tool business had been transferred to Coretell.
Mr Kleyn said that Mr Draper directed that the invoices for the tools be made out to MTL Philippines.
Mr Kleyn said that in early November 2006, he informed Mr Barker that he had separated the activities of Mincrest and Coretell and requested that in future Mr Barker direct his Hightech invoices for work in relation to the camera to Mincrest, and any work on the orientation tool to Coretell.
Mr Kleyn said that, on occasion, Mr Barker later issued some of his invoices to Mincrest, which should have gone to Coretell, and when these errors were detected, the invoices were paid by Coretell and entered into the accounts of Coretell.
Mr Kleyn said Coretell started “actively trading” on 14 November 2006, and its transactions were entered into the general ledgers of the company as at that date. He said the first transaction is recorded as occurring on 14 November 2006.
He said Coretell opened a bank account with the National Australia Bank (NAB) on 20 November 2006, and the first transaction is recorded as occurring on 26 November 2006.
Mr Kleyn said that it was on or around 16 November 2006 (that is, two days after he said Coretell started actively trading) that he received the letter from Mallon & Co, the then lawyers for AMC, alleging patent infringement and seeking the undertakings mentioned above.
He said he then consulted his lawyers, Arns & Associates, and refers to the correspondence already set out above that passed between Mallon & Co and Arns & Associates.
Mr Kleyn said that in the period from the receipt of the initial letter from Mallon & Co, Coretell discontinued all further marketing and general supply of the Coretell orientation tool, with one exception, because of an existing commitment to an important customer – Silver City Drilling (NSW) Pty Ltd.
He said he told other customers that he could no longer supply them, including Barminco, and he told Mincrest employees to inform all customers who inquired about it, that Mincrest could not supply the tool until further notice.
He said he made one exception in the case of Silver City, because Mincrest’s sales manager, Mr John Penrose, had made a firm commitment in October 2006, before the Mallon & Co first threat letter.
Mr Kleyn said that although the first invoice for hire to Silver City was processed through Mincrest, this was an administrative error and it should have been through Coretell. He said the error occurred because his wife, who manages the accounts, was on holidays at the time and once she returned to the office, Coretell began invoicing Silver City in around February 2007.
Mr Kleyn said Coretell agreed to supply up to six more kits to Silver City after the initial supply of three kits. But he then instructed Mr Penrose to inform Silver City that Coretell would no longer supply further kits after that. He said they gave an excuse that there were technical problems with the tools, but that excuse was not in fact true.
Mr Kleyn said that in around July 2007, he ceased the further hire of the orientation tools to Silver City and used the pretext that there was a problem with the batteries and the calibration of the tool, when in fact there were no such problems. He said he was worried about the threats of litigation by AMC.
He then learned in July 2007, that Silver City had on‑supplied one of the tools to another company and that arrangement was later terminated.
Mr Kleyn said, as Mr Barker was not involved in the marketing and did not have regular contact with the customers, he did not recall giving Mr Barker any particular direction in regards to whether to continue manufacturing the orientation tool in November 2006, but at that point, he was primarily working on the camera.
In about May 2007, Mr Kleyn said he told Mr Barker that he had withdrawn the orientation tool in late 2006 because of the threats and, in order to keep Mr Barker fully occupied in the event that the camera work was not sufficient, he requested him to continue manufacturing the components of the orientation tools and assemble the completed tools. He said he did this “because of the assurances I had given to Mr Barker that there would be sufficient work to continue to retain him. The second reason was that when the infringement proceedings ended, Coretell would have in stock sufficient working tools to supply the market”.
Thus, Mr Barker continued to produce tools until about July 2007, when he ceased work on the orientation tools. At that point, Coretell had approximately 25 kits in stock, and in each kit there were two tools with a handset.
Mr Kleyn said that after the infringement proceedings were commenced in July 2007 by the applicants, he advised customers that Coretell was being sued by Imdex and, until the legal action was resolved, Coretell could not supply any orientation tools and it did not do so. Mr Kleyn stated that thereafter “[m]y business was dependent upon revenue received from the hire of cameras through Mincrest”.
In that regard, Boart Longyear was a major customer for the hire of the camera and it was also told that Coretell could not supply the orientation tool because of the infringement proceedings.
Mr Kleyn said that in the three months after the infringement proceedings were commenced, orders from Boart Longyear for the cameras “dropped markedly” and when he made enquiries of Boart Longyear, he was told that it had moved all of their business, including the hire of cameras, to Imdex.
Mr Kleyn said the loss of business from Boart Longyear resulted in significant cashflow problems for Mincrest.
At this time, Mr Barker was no longer working for “my business”, as Mr Kleyn put it, having stopped working from the premises from late 2006, and he ceased manufacturing the orientation tool around July 2007, and ceased invoicing either Mincrest or Coretell altogether by late 2007. Mr Kleyn said he did not have financial capacity to pay Mr Barker for his services, and that is the reason for him leaving.
However, Mr Kleyn said that when he decided to re-enter the market later, he contacted Mr Barker, who at that time was also assisting him in the legal proceedings with AMC. He asked if Mr Barker would resume work on the manufacture of the orientation tool and the camera probe, but he declined, responding in an email dated 8 August 2008, expressing confusion about why Mr Kleyn would continue to manufacture an orientation tool when the company was being sued. He spoke with Mr Barker by telephone and met with him in an effort to persuade him to at least resume production of the orientation tools but he refused and was not willing to assist because of his concerns about being implicated in the infringement proceedings.
Mr Kleyn said he then contacted a company in Melbourne called Procept Pty Ltd, with which he had had some initial discussions in mid‑2007 regarding a new camera probe but did not retain them at that point but eventually met with them in February 2008. He was told by their representatives they would not use the designs produced to that point by Hightech (Mr Barker) because of intellectual property difficulties and would only use workings and software that Procept had wholly designed.
Later, he also asked Procept about manufacturing the orientation tool in addition to the camera, after Mr Barker said he did not want to be involved. Procept agreed, but again said they would start that design brief afresh.
In October 2008, he came to an agreement with Procept with a view to the prototype tools being manufactured by December 2008.
He said Procept manufactured electronics for a prototype orientation tool quickly and, by Christmas 2008, had produced an electronic board that he was able to fit into a casing. It took Procept approximately two months to produce this which on testing proved to work very well.

He then, in January 2009, instructed his solicitors to inform AMC’s solicitors that Coretell was going back into the market to supply an orientation tool.
After that, Coretell commenced trialling the core orientation tools with a number of customers organised by Mr Reynolds and did not charge for the trialling.
Mr Kleyn said that in around early 2009, Procept commenced manufacturing of the electronic orientation tools but did not, at that time, have a trading history and did not have the funds itself to fund the production of the orientation tool and accordingly borrowed the funds from Mincrest, the loans of which were recorded.
He said Coretell assembled the tools itself at its business premises.
By April 2009, he said, Coretell had 20 kits available for supply to customers and there was an immediate demand for the tools. Mr Kleyn said he used the business contacts he had in camera hire to promote the core orientation tool and sale records show 10 tools on hire in April 2009, 15 in May 2009 and 20 in June 2009. He said the customers were Australian mining entities and a number of overseas companies in South East Asia, Europe, South America and Africa.
Mr Kleyn said he was also told in early April 2009 by a person from Boart Longyear, that AMC had told Boart Longyear that Coretell’s tool was “illegal and I can’t hire it”.
At that point, correspondence flew between solicitors for Coretell and solicitors for AMC.
Mr Kleyn also gave evidence concerning management of Coretell and the involvement of his wife and daughter in the company.
He also confirmed that as at July 2007, Coretell had 25 kits of orientation tools in stock in addition to the six or more kits returned from Silver City when that hire ceased that month.
He also said that as at November 2006, the cost of producing a tool was not significant as Mr Barker was charging about $500 per tool circuit board (being $1000 for a complete kit, including handset), which was cheaper per kit than when Procept was engaged by Coretell for that work.
The assembly lines were the same for the initial Hightech version of the equipment as the later Procept version and assembling the circuit boards into the housing only took a few minutes, permitting assembly of 20 tools within three hours.
Coretell was able to obtain funding for its operations if necessary from Mincrest as trust distributions or loans. Mincrest was continuing to operate a profitable business on survey cameras throughout the period.
He believed Coretell, if necessary, could have made use of the 30 days’ credit period arrangement.
Mr Kleyn said the anticipated better news from hire of the orientation tools was substantial given the capital cost of manufacture and in his experience from running both the survey camera business and, from 2009, the successful core orientation business. He believed that the business would have, within a matter of one to two months, been wholly self-funding and profitable, which would ensure that it had sufficient ongoing manufacturing capacity to meet demand, as it does today.
Mr Kleyn also said that from July 2007 to early 2009, Coretell was able to obtain substantial funding for defending the infringement proceedings and to him that indicates that Coretell had the capacity to source funds to cover the initial cost of manufacture, assembly and distribution of the orientation tool, which costs would have been a “mere fraction” of the costs of the litigation, particularly as the manufacture, assembly and distribution quickly becomes self-funding.
Mr Kleyn also addressed the four email threads between himself and Mr Barker about the orientation tools and cameras.
As to the first, an email thread from 20 to 22 December 2006, Mr Kleyn said that he was annoyed with Mr Barker as he had gone on holiday to Indonesia during a period Mr Kleyn thought was important to continue manufacture of the camera and also gear up for the first provision of hires to Silver City in early 2007. There was also an argument about fees as Mr Kleyn was concerned about Mr Barker’s absence in what Mr Kleyn saw as a critical period in the lull between the 2006 mining activities and the 2007 mining activities.
As to a reference to “4 of the units are not working”, Mr Kleyn said that referred to the four demonstration units that had been sent to Magnet Drilling, for which there was no charge and with which there were battery problems on three units and the fourth was physically damaged. He recalled reviewing the fourth unit and considering it had been mishandled or dropped as a lens was broken. He believed the battery problems were similar to the early 2006 battery movement issues which had otherwise largely been resolved. He recalled the problem “did not occur in all units provided to Magnet Drilling”, and that battery housing improvements continue to this day to reduce failure rates of tools in the field.
As to a statement that “more units are being returned from Silver City not working”, he said this referred to demonstration kits provided to Silver City at that time. He believed that only one kit ended up being returned, not two. He recalled the only problem was a battery movement issue or physical breakages of the tools in handling. He recalled an occasional tool being returned by Silver City but it was not a common occurrence.
As to the reference in the email to a possibility of refunding Mr Draper’s approximately $60,000 due to a lack of tools available, Mr Kleyn said he was exaggerating this issue to put pressure on Mr Barker and he did not refund, and nor was he asked to refund, the money paid to him by MTL Philippines.
As to a statement that “I can’t charge rent until you fix these problems”, Mr Kleyn said he was concerned Mr Barker was not available for the work and there was a possibility that in his absence Mr Kleyn would not be able to sufficiently gear up for commercial hires (once the dispute with the applicants had been resolved). Accordingly, he was putting pressure on Mr Barker to return his attention to that work.
The second of the email threads was from 3 July 2007. Mr Kleyn said at that time they were discussing improving the handset so it was less prone to damage when handled by the drillers. He had decided it would be useful for future models to have a stronger handset. When he referred to having “lots of faulty [orientation tools] for return”, he said he was referring to tools that had been returned in the trial period in about December 2006, such as the Magnet Drilling ones and the Silver City ones. This was not unusual, Silver City had at one stage about 15 kits. He would send out a replacement tool when a tool was having problems.
As to another email thread of 30 July 2007, where he is stating “as we still have problems with the Ori device we still can’t charge any hire”, Mr Kleyn said he was in this sentence referring to making the handset more robust and did not consider the handset was a major issue but they wanted to improve it. He did not believe he should be charged for a redesign by Mr Barker at that stage. He said that as Coretell was not earning income, then he was concerned about incurring further costs, particularly if the tool handset had not been improved as they had hoped.
As to the fourth thread from 21 to 24 January 2008, Mr Kleyn said prior to that email, he had been discussing Coretell ceasing the hire with Silver City, which had occurred in July 2007. Mr Barker had asked about the return of the tools including the one referred to as broken. He informed Mr Barker that the broken tool was a mechanical break and the others had been returned and were still working. Mr Kleyn said he referred to planning to send some tools overseas but he never did so as he was concerned this would be considered infringing conduct.
Mr Kleyn corrected some aspects of initial evidence in chief, in the following respects.
He confirmed that Mr Graeme Maurice Lightfoot stopped working for Mincrest in November 2005 and so references to him being involved in any trialling was an error after that date and either he, Mr Barker, or Mr Reynolds performed demonstrations in that later period.
Mr Kleyn also said that Mr Des Forde at Boart Longyear was one company representative who declined his offer to demonstrate the tool, although he did eventually perform a demonstration at their offices in Wangara.
Also a company representative from Kluck Drilling said it had an existing relationship with Imdex and did not want a demonstration.
Also on a number of other occasions, such as at Barminco and Boart Longyear, company representatives initially declined a demonstration, but one was nonetheless performed by Mr Reynolds at a different site.
Mr Kleyn also emphasised the work done in the design of the Camteq mechanical survey camera and the improvements made to it.
He also discussed making available some Eastman cameras that Camteq had purchased.
He also mentioned supplying Maxibore tools to customers, a tool which costs about $100,000 per tool.
He also expanded on his evidence about the use of the Flex-it camera probes, the Globaltech electronic survey camera and the “Barker electronic survey camera”.
Finally, in relation to this technology, Mr Kleyn further discussed the Procept camera and the Procept orientation tool.
For the record, the Court notes that it upheld objections by the applicants to the following paragraphs or portions of Mr Kleyn’s first affidavit that went into evidence as exhibit 2A: [61] excluded; [115] admitted, but not as to the truth of what was said. As to Mr Kleyn’s second affidavit, exhibit 3, [12]‑[50] excluded; [55(b)] admitted on a limited basis of what the witness said was said, but not as to the truth of the matters referred to; [101] second sentence to the same effect.
Mr Kleyn was cross‑examined.
Mr Kleyn accepted that when Mincrest first hired cameras out, the firms that were hiring equipment were keen to utilise new and improved technology, so long as it was fit for the purpose they required. Mr Kleyn accepted that he understood that these firms operated in a market where the costs of exploration were high and that those for whom they worked, typically mine site operators, expected exploration activities to be conducted competently and efficiently.
Mr Kleyn accepted that the ProShot camera proved to be a significant success at a later point, as developed by Procept.
Mr Kleyn also accepted that when he retained Procept to design a core orientation tool in October 2008, he was keen to replicate the success of the ProShot that had been designed by Procept.
He also agreed that he was certain that the second tool, the Procept tool (also referred to as the ORIshot tool), as distinct from the Camteq or Barker tool, would be ready for commercial release by March 2009.
Mr Kleyn indicated that the tool was demonstrated in the January, when the first prototypes were provided and tested.
In relation to the Procept tool, Mr Kleyn rejected a proposition that his company needed 200 kits in order to start trading. He said, by reference to an earlier email to Procept, that a reference to delivery of 200 kits was related to Procept’s requirements to know what he would take if manufactured. But he did not need that number to start trading.
He said it was incorrect that he raised with them and identified the number of units he required to commercially release the tool, and settled on the figure of 200 units.
When pressed about earlier discussions between him and Procept about 350 units being available, Mr Kleyn considered it was an economic decision on how many should be made to make it economically viable for Procept to manufacture a board. He accepted, however, that he would still require enough units to meet demand upon commercial release. His point was a narrower one, that he did not need 200 units before entering the market.
Mr Kleyn’s evidence in cross‑examination at this point was cautious, not readily agreeing with any propositions put to him.
Going back to the initial “Barker tool” which became the “Camteq tool” for the purposes of description, when asked whether it was critical to the success of a new piece of equipment that it be “tested and trialled” to ensure it was fit for purpose, Mr Kleyn suggested it was not critical but advisable to test it beforehand. He added to that by saying he did not accept the word “critical” because that suggested that if it did not work, that would be the finish of it.
He accepted, however, in further questioning, that testing and trialling of such a product in real world conditions is attempted, apart from anything else, to encourage some demand upon commercial release. While Mr Kleyn responded by saying that “you could do it that way, yes”, that indeed appears to be exactly what he planned at relevant times.
As to the Boart Longyear trial in 2006, he accepted that the first part of the trialling was testing with them. He said that later in that year, Coretell did more trialling, more to see if people accepted the handset and the tool in its entirety.
When his evidence concerning that tool being ready for market in May 2006 was raised, Mr Kleyn immediately insisted that it was ready to go to market, stating:
We weren’t releasing it, at that stage, but it was ready to go to market, yes.
When asked whether he meant by that, that it was “ready for trialling off-site”, he agreed.
When challenged as to whether or not it was ready for commercial release, he added that it was “ready for commercial release in November, but I wanted to gauge to make sure that people would accept the fact there was a handset with ours”. He said he was not sure that it was going to be accepted or not.
He rejected the concept that he did not even have a tool at that point and was still developing it. He insisted that “we have a tool”.
Mr Kleyn was then taken to evidence that he gave in the NSW proceeding. His attention was drawn to a letter of demand in November 2006, and that, on the transcript, he had indicated that “Coretell” was being set up to operate the core orientation tool. He did not have a core orientation tool at that stage. “We were still developing it”.
When again challenged that it was not ready for commercial release as of November 2006, Mr Kleyn responded that in June 2006‑2007 “we were getting the results back from Boart Longyear”. He said they were testing the tool at the beginning of 2006. “So we had a tool, they were testing it”.
Mr Kleyn further insisted that “they were testing it, an orientation tool. It was a complete orientation tool”. He also agreed that it was not released for commercial release at that stage, but that they had an orientation tool “because they were using it”.
When further pressed, he said it was ready to go to market and they gave it to Silver City in late 2006 and Silver City paid hire in 2007. He insisted it was definitely ready in November 2006, regardless of the evidence given in the NSW proceeding. Of that evidence, he said it was “incorrect”.
Mr Kleyn was then cross‑examined about supplying two tools for testing and evaluation by Mr Reynolds of Drillshop. He thought it was about the same time as he provided tools to Boart Longyear.
He was taken to the pleadings, which contained an admission that Coretell developed and manufactured the tool and supplied demonstration units of the tool to various parties for testing and evaluation in the field in various states, but ceasing on or about 25 May 2006. He then a little later in his evidence thought that either he got these dates wrong or Coretell gave Drillshop the two tools in 2005. He withdrew the tools. But he then said that he did not recall giving Mr Reynolds any tools in 2005.
The evidence in further cross‑examination makes it clear that Mr Kleyn considered that the tools were provided to Mr Reynolds in June 2006. He agreed that he asked Mr Reynolds to market and promote the orientation tool. He also agreed that Drillshop subsequently demonstrated the tools to prospective customers.
In passing, as to any suggestions that tools were going out in 2005, having regard to the cross‑examination of Mr Kleyn, I reject that that occurred.
Ultimately, it was put to Mr Kleyn that it was a fact that despite extensive trialling at Boart Longyear’s Leinster mine throughout 2006, the tools were ultimately rejected by site geologists and sent back in May 2006. Mr Kleyn accepted they were sent back then, but “weren’t rejected though, totally”. He recalled “lots of problems on that site”.
When emails from Mr Tonkin from Leinster were put to him, he accepted that the email suggested there were “accuracy issues” with the tool. He accepted they “had a few problems with the Ori-tool” – that is to say the Camteq or Barker tool.
Mr Kleyn also accepted as correct that he appreciated it was going to take him a while to regain the confidence of some people, in these circumstances.
Mr Kleyn accepted that through Mr Reynolds he also arranged trials of the tool between April and December 2006. Mr Kleyn thought he only had two tools or two kits. One tool he agreed was returned by BHP Billiton to Mr Reynolds.
Mr Kleyn suggested that he tried them out and “we didn’t have an accuracy issue”. He accepted the proposition that it was only the people who were running the sites who were having the accuracy issues. He considered that there was an issue with the way drillers were breaking off the bottom and doing surveys at the wrong time, a common problem because it was a new tool. He ascribed the perception difficulties with what Mr John Emerson of BHP was saying.
He rejected the concept that Boart Longyear were trialling the tool, insisting that it was “testing”.
In relation to the question of sales to MTL Philippines, counsel for the applicants noted that in [62] of his first affidavit, Mr Kleyn had said that “prior to the transfer of the orientation tool business to Coretell, Mincrest had agreed in or around September or October 2006 to supply six orientation tools to Peter Draper”, Mr Draper being with that company.
Mr Kleyn said that as far as he was concerned, the transfer happened in May 2006 to Coretell, but Coretell never had an income, Mincrest was paying its bills. He said he never transferred it “clearly like I should’ve done”. He said that in hindsight he should have transferred it properly in May, but because Mincrest was paying the bills he did not.
When pressed that he “didn’t transfer it properly” and accepted that he did not transfer it, Mr Kleyn responded that it was transferred “so far as I was concerned” but there was no legal reason for him to do it in writing. He insisted that Coretell owned the core orientation tool but Mincrest was doing the dealing because Coretell had no income at that stage.
He insisted that the completion of the transfer was after he had supplied the tools to Mr Draper.
When pressed as to what he meant by “the completion”, he said that he opened the bank accounts in November and then Mincrest never dealt again on the core orientation tools.
As to the payment by MTL Philippines, he said that the money went to Mincrest and he opened the accounts in the name of Coretell so that further transactions could be done through the Coretell account.
Mr Kleyn plainly appreciated the apparent inconsistency between him insisting that Mincrest had transferred the ownership in the core orientation tool to Coretell before the dealings with MTL Philippines, and the documents that suggested Mincrest was, at material times, the owner of the tool and the payment by MTL Philippines went into Mincrest’s account.
As on other instances, Mr Kleyn’s response was that, in hindsight, if he had known he was going to be in the Federal Court dealing with this question eight years after the event, he would have done the transfer “properly with lawyers on the day that Coretell was incorporated”. He acknowledged that he did not do that and hence “it wasn’t completed until November”.
This evidence was challenged by counsel for the applicants in cross-examination, who took Mr Kleyn to the actual words used in [62], on the fifth to the last line, where he stated:
The tools were charged at around $10,000 per tool, being a total of around $60,000. And the payment was receipted by Mincrest. And was used by Mincrest to offset its costs in having paid for the development and production. These were recorded as a sale by Mincrest of those tools.

Counsel suggested to Mr Kleyn that he was being very careful with his wording, so as to not mention whether as part of the deal he was identifying, he actually supplied any tools.
Counsel said that he was being very careful not to assert that any tools were supplied to EastWest as part of the deal identified. Mr Kleyn categorically refuted that and said he supplied the tools to MTL Philippines via Mr Draper in about October 2006, but definitely before November 2006.
He accepted, however, that, as disclosed in an email of 22 December 2006 to Mr Barker, the tools stopped working after a short time and that he “may have to refund Draper’s $60,000 because I have no tools to give and he is in town”.
As to this email, Mr Kleyn suggested that he was having a dispute with Mr Barker at that time “over him not working hard enough to get the tools finished” and so, he “exaggerated” issues with Mr Barker to get him to do more work on the tools. He said the tools had been supplied to MTL Philippines at that stage.
The question of MTL Philippines is, to say the least, confusing, because of the respondents’ pleading. Counsel put it to Mr Kleyn that the defence at [5.2] expressly pleaded that neither Mincrest nor Coretell had supplied any tools in response to the MTL Philippines order, but Mr Kleyn insisted that the tools were definitely supplied in October 2006.
Mr Kleyn was also cross‑examined by reference to a further set of particulars in which the respondents said that in October 2006, Mincrest received an order for the supply of six tools of $60,000, but was unable to overcome “technical difficulties in the calibration of the tools” and did not supply them.
Mr Kleyn insisted that the tools were supplied to the client.
When pressed about this Mr Kleyn said he had always maintained that he supplied the tools and “I don’t know where this has come from. I’m sorry”.
Counsel then put it to Mr Kleyn that he had not supplied the tools and the reason for that was, they were not fit for purpose. Again, this proposition was denied by Mr Kleyn.
Mr Kleyn refuted a suggestion that it had been a characteristic of his in the proceeding to have a tendency, well after discovery had taken place and at a time when he was wishing to file some affidavit evidence, to all of a sudden say that he had discovered further material and then put it on when he thought it was advantageous to him. Specifically it was put to him that he had come across a copy of an old MTL Philippines invoice and sought to take advantage of it.
Mr Kleyn, following cross-examination, denied the proposition in effect that he had seized upon the MTL Philippines transaction both to fix an alleged date for transfer of the core orientation tool from Mincrest to Coretell, and to show that there was at material times a business in that core orientation device.
When counsel further challenged Mr Kleyn that, as at November 2006 when the first threat letter was received, the core orientation tool was still in development, he insisted that the tool was ready to be commercialised and that “we had sold three kits to MTL Philippines and were getting ready to supply Silver City”, which he did not want to supply but did supply because they had promised those tools to Silver City.
He insisted that “we had tools in the marketplace at that time. We had tools that we’d sent to MTL Philippines and we had tools getting ready for Silver City in late 2006, prior to this letter”.
Mr Kleyn was then cross‑examined about the transfer of the tool claim. He was taken to evidence in the NSW proceeding.
He confirmed that his evidence was that the transfer “finished by mid-November. It was started when Coretell was incorporated. Coretell, that’s why it was called Coretell, because it was doing the core orientation equipment”. When challenged as to exactly what was said in [27] of the affidavit he filed in the NSW proceeding, which stated that “in mid-November 2006 all proprietary right which Mincrest had in the orientation tool were assigned to Coretell. There was no written document recording the assignment.” Mr Kleyn said that he was explaining it. He said he was not good at paperwork. He did not do it very well. And he did not expect to be in the Federal Court for eight years.
He insisted that Coretell was incorporated for the core orientation tool and that is where the name came from. Again, he explained that he should have completed the transfer all at once and transferred money into Coretell at the time, but it took six months to transfer it across because Coretell never had an income.
When again challenged that there was no tool in May 2006, he insisted that there was. When challenged that there was certainly no business in 2006, he conceded that there were “no rentals as such”. He added that there was a business in November 2006. There was Coretell and there was Mincrest. He said Mincrest was probably making about $300,000 per month at that stage from trading activities.
As of November 2006, Mr Kleyn insisted there was a core orientation device to be transferred, that it was ready for hire and it was going to Silver City, and that three kits had already been sold to MTL Philippines. “So therefore yes, there was a business”.
In cross‑examination, counsel also took Mr Kleyn to an affidavit made by Mr Barker in which he said that in or around late 2006, Mr Kleyn met with him and said that “he was restructuring his business and wanted to transfer that part of the business engaged in the development and sale of the ORIshot to a new business entity”. Mr Barker also made reference to “now the tools are ready”.
Mr Kleyn said he did not agree that in or around late 2006 he told Mr Barker he wanted to transfer part of the business and the orientation tool to a new business entity. He said he asked him to invoice Coretell in the future for core orientation work. He considered that Mr Barker had interpreted what he said. “He’s a university person. He can do big words and all that sort of stuff. I can’t”.
When put to him that Mr Barker was not interpreting what was said but saying what he was told, Mr Kleyn denied there was any restructuring; he just got Coretell to do the core orientation devices.
Mr Kleyn also denied that he used words to the effect, in speaking with Mr Barker, that it would be a good idea to quarantine the ORIshot business away from the general Camteq business in case allegations of patent infringement were made in respect to the ORIshot tool. Mr Kleyn said: “that would be his interpretation, again, not mine”. He denied that he had said that to Mr Barker.
Mr Kleyn insisted, so far as the transfer was concerned, that he “started doing it” when Coretell was incorporated but “I didn’t finish it because Coretell had no income. We finished it in November, when we finally got the tools finished and we had a client base that were going to take the tools”.
Even on the case put, counsel put it to Mr Kleyn, the “completion” was motivated by a desire to quarantine liability for any actions undertaken in respect of the tool to Coretell. He said that was “totally incorrect”. He also said it was totally incorrect that that was what he had told Mr Barker.
Senior counsel for the applicants also took Mr Kleyn to the chronology of events filed by Coretell, noting that it asserted that intellectual property was transferred to Coretell in May 2006. Mr Kleyn said that was his belief. Counsel then reminded Mr Kleyn that in the NSW proceeding he had made an affidavit stating that there was a transfer in mid‑November 2006. He responded by saying that it was his belief that it was “all transferred” as soon as he incorporated Coretell. He added: “It came to be that it wasn’t or I couldn’t claim it as being until I opened the bank accounts and Mincrest had nothing more to do with the core orientation device”.
Counsel also took Mr Kleyn to Coretell’s amended statement of claimed loss and damage and how it asserted that, after May 2006, all dealings were carried on by Coretell. That was the initial position. And then, as amended, it alleged in the alternative that this was only from November 2006. To explain the change of position, Mr Kleyn stated that “I should have done it better in May”.
Then Mr Kleyn was cross‑examined concerning his statement at [66] of his first affidavit that “Coretell started actively trading on 14 November 2006”. He confirmed that by that he meant the cheque account was opened.
Counsel then identified, by reference to Mr Kleyn’s affidavit in the NSW proceeding, that on or around 19 November 2006, he received a letter from the solicitors for the applicants effectively accusing Mincrest of infringing patents. Mr Kleyn said that while the letter was dated 16 November 2006, it was received on 18 November 2006. Counsel took Mr Kleyn to the transcript of his evidence in the NSW proceeding, noting that the bank account was set up four days later on 20 November 2006. Mr Kleyn confirmed that that was the bank account that he now wished to place emphasis on as to when completion of the transfer occurred. He stated that it was a coincidence that the letter of demand was issued on 16 November 2006 and Coretell established its bank account on 20 November 2006. He repeated his earlier evidence that Coretell had been incorporated in May 2006 to operate the core orientation device business.
Senior counsel noted that in his evidence in the NSW proceeding on this point, Mr Kleyn had stated: “Well, it hadn’t started to trade, I suppose, because there wasn’t an orientation tool at that stage”. Counsel then identified that counsel in the NSW proceeding said to Mr Kleyn: “You began ostensibly trading through Coretell after you had received the letter of demand … didn’t you?”. He noted Mr Kleyn’s answer was: “After we were advised that they thought we were infringing, that is correct”. Counsel in that proceeding then asked: “That was no coincidence, was it?”. Mr Kleyn responded: “Well, it wasn’t a coincidence. The fact was, there was no money coming into Coretell because we didn’t have core orientation devices yet”. Mr Kleyn clarified his evidence to mean that they did not have core orientation devices for hire. He said they were being trialled, they were being tested by people.
Senior counsel put a series of facts to Mr Kleyn that included him consulting his solicitor on 21 November 2006. He noted the letter of response and put it to Mr Kleyn that what was sought to be put front and centre in the response was the suggestion that it was Coretell and not Mincrest who was involved with the core orientation tool. Mr Kleyn responded “Because it was”.
Again, Mr Kleyn, in further questioning, said that he should have done everything in May 2006 and in hindsight appreciated that. He added: “I didn’t. That’s where we stand at the moment”.
Elsewhere, Mr Kleyn insisted that Coretell owned the orientation equipment from May 2006 onwards as far he was concerned.
Senior counsel cross‑examined Mr Kleyn concerning the general ledger entry of 14 November 2006, with the ultimate intent of suggesting that an entry concerning payment of Mr Barker for and on behalf of Coretell did not occur until 11 January 2007, whilst the general ledger suggested an earlier entry. It was put to Mr Kleyn that on 8 May 2007, he made the entry for 14 November 2006, six months after receiving the letter of demand. Mr Kleyn denied this.
Mr Kleyn was further cross‑examined concerning dealings between him and Mr Barker from about March 2007, concerning the development of a multi-shot version of the orientation tool and an email of 7 March 2007 from Mr Barker to him with the subject heading “Camteq‑Coretell IP”. Mr Kleyn explained that he thought that if they had a multi‑shot orientation tool, he would get a patent on it.
Subsequently, he said he dealt with Mr Adrian Crouch of Procept and identified an email dated 10 July 2007 in this regard, in which he noted that “It may be prudent to produce the first 200 kits using the technology we already have”. Mr Kleyn said he was not, at that point, proposing that Procept manufacture the tool as it was at that point, but that he was telling Procept that he would get Mr Barker to make the first 200 tools. Mr Kleyn clarified that he was wanting Mr Barker to finish the camera at that stage and he was trying to put pressure on him to do so before he started the orientation tool.
Mr Kleyn also explained that as of May 2006, Coretell operated from his residential premises and it was not until September 2010 that he moved to the Maddington warehouse.
Mr Kleyn further explained that Silver City was the only entity supplied on a commercial basis, in late 2006. And that was because he had made a commitment to supply tools to Silver City. He denied this was a commitment made by Mincrest and said it was on behalf of Coretell. He explained that Mincrest invoiced the first two tools supplied because Coretell’s accounts had not been set up at that point. He said that Mincrest, and Mr Penrose, who worked for it, did work for Coretell. He insisted Coretell took the order from Silver City and Mincrest invoiced the first cameras because he was not able to invoice it from Coretell.
So far as the tools supplied to Silver City were concerned, Mr Kleyn denied that they experienced many problems. When faced with documentation of 22 December 2006, that Silver City was having to send back kits that were not working, Mr Kleyn said that in 2006, they were “demo kits” that were sent. He added: “Demonstration kits on a commercial supply”. He accepted that as of December 2006, they needed to be upgraded.
As to the fact that Mincrest on its website, maintained promotion of the tools into 2007, Mr Kleyn said that was “accidental”.
When challenged as to the fact that no further orders by way of any of that sort of promotion had occurred, Mr Kleyn said that they did not receive the orders because “we decided not to supply those orders”.
When Mr Kleyn was challenged as to what enquiries he had received, he could not produce any documents but said they were telephone enquiries.
Mr Kleyn confirmed that regardless of the lack of success in promoting interest in the tool, Mr Barker continued to manufacture and develop it at least until July 2007. Or even a little bit after that. He accepted that he did not give him any directions to stop manufacturing.
Mr Kleyn said it was totally incorrect that from January to July 2007, he had Mr Barker producing modest numbers of tools for the purposes of continuing the development phase for trialling and replacing tools being trialled in the field in the expectation that he might encourage some demand for the tools from prospective customers.
Mr Kleyn would not accept that an email from Mr Barker that said that “after more than two and a half years and a lot of money we are still only testing products, although I do think we are getting close” was a reference to the orientation tools and said it was only a reference to the camera.
Senior counsel then noted that the statement of claim in the proceeding was served on or about July 2007 and that soon after that, Mr Kleyn and his solicitor attended on a Mr Plummer, a patent attorney, on about 26 July 2007. And that soon after that, he arranged to meet with Procept to discuss further developments of the orientation tool and the ProShot camera. Mr Kleyn said that was incorrect. In response to the question that he did this because he was convinced that an electronic orientation tool would be commercially successful, he stated that he was convinced a tool would be commercially viable. He insisted, however, that in July 2007 he already had one that was commercially viable.
He insisted he was being paid by Silver City for exactly that tool.
In response to the question that in July 2007 he felt that he needed to get it professionally developed by Procept, he said that was “totally absurd and totally incorrect”.
Mr Kleyn said it was incorrect that going to Procept in July 2007, was in the context of having been sued earlier in the month by AMC.
Mr Kleyn was then challenged as to his dealings with Mr Barker in late July 2007. References in an email by Mr Kleyn that “we still have problems with the Ori device, we still can’t charge any hire” was put to Mr Kleyn. He denied that by 30 July 2007, he wanted one or other of the ProShot camera or the orientation tool to be commercially released. He said he was actually being sarcastic and said that if he could get rid of his legal problems then he would be happy. He was referring to the camera probes to get the handsets sorted out so that he could buy another two Flex-it cameras. He said it was totally incorrect that the words “we still have problems with the Ori device” meant that he still had technical problems with it in July 2007. Again, Mr Kleyn reverted back to the fact that the tool was on hire to Silver City and “they were very happy”.
Faced with further documentation of 30 July 2007, being an email to Mr Barker, Mr Kleyn denied that there was any calibration error on the tool, despite a reference made by Mr Barker: “Whether the attachment is the old dodgy calibration or is that the new ones, which are better?”.
In the event, Mr Kleyn was taken to the further email by him which instructed Mr Barker: “However, please leave the Ori-tool for now and finish the camera”. Mr Kleyn said that did not say to “stop the development work on the orientation tool”. He added: “It says please stop the – leave the Ori-tool for now. That’s not development work. When we do – when we make equipment, we are always upgrading equipment”. Mr Kleyn denied there was any calibration.
Mr Kleyn agreed that he then took up discussions with Mr Barker again after a hiatus of about six months, with a view to proceeding “with the new version of the Ori-tool as soon as the new probe is complete”. The new probe was a reference to the camera probe. He denied, however, that he was trying to get Mr Barker back into harness “in terms of development work”. He said he was trying to get Mr Barker “to start manufacturing the Ori‑Shot tool again”.
Mr Kleyn also explained, in cross‑examination, that in an email of 8 August 2008, he was trying to convince Mr Barker to “continue manufacturing” notwithstanding the litigation between the parties, and that Mr Kleyn would indemnify him about any litigation.
Mr Kleyn then accepted that about that same time, he was again dealing with Procept. Mr Kleyn rejected the proposition that, even after the commencement of this proceeding, he was determined to commit to Coretell to continuing to try and bring the tool to market, saying: “The tool had been in the market. I withdrew the tool because of the threats”. He denied that he wished to keep developing the earlier tool that Mr Barker had been working on. Again, he insisted that the tool had been out in the marketplace to Silver City. He insisted it was working very well.
As to the Procept tool which was developed thereafter, Mr Kleyn denied that it was different in material respects from the Barker tool. He said they were both orientation tools. He said it was like a Ford and a Holden. They are cars but they are still both different, but they are still both cars. He said these were both orientation tools. They do the same job in exactly the same way.
When counsel suggested to him that it was a bit like the difference “between a Skoda and a Bentley”, Mr Kleyn said “Yes, could be”.
A question was then raised in cross‑examination as to the extent to which the Procept tool was relevantly different from the Barker tool.
In re-examination, Mr Kleyn identified a purchase order from Boart Longyear to Camteq for the hire of an electronic orientation device with HQ barrel and extension from 23 October 2006.
Mr Kleyn also confirmed the existence, at material times, of an exclusive agreement between Mincrest and Boart Longyear, which he said was worth about $100,000 a month to Mincrest.

I should also note here that I reject Coretell’s submission that damages should also be assessed having regard to what it says is the anti-competitive behaviour of the applicants. Damages should be awarded only for the damages already sustained as proved by the evidence, not by way of some generalised penalty for alleged bad market behaviour.
In the circumstances, I should also add that no question of mitigation of loss arises.
To that sum, pre-judgment interest should also be added. By its amended statement of claimed loss and damage, Coretell claims damages together with interest on such an amount pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth).
Section 51A relevantly provides:
(1)In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either:
(a)order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or
(b)without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.
(2)Subsection (1) does not:
(a)authorize the giving of interest upon interest or of a sum in lieu of such interest;
(b)apply in relation to any debt upon which interest is payable as of right whether by virtue of an agreement or otherwise;
(c)affect the damages recoverable for the dishonour of a bill of exchange;
(d)limit the operation of any enactment or rule of law which, apart from this section, provides for the award of interest; or
(e)authorize the giving of interest, or a sum in lieu of interest, otherwise than by consent, upon any sum for which judgment is given by consent.
(3)Where the sum for which judgment is given (in this subsection referred to as the relevant sum) includes, or where the Court in its absolute discretion, or a Judge in that Judge’s absolute discretion, determines that the relevant sum includes, any amount for:
(a)compensation in respect of liabilities incurred which do not carry interest as against the person claiming interest or claiming a sum in lieu of interest;
(b)compensation for loss or damage to be incurred or suffered after the date on which judgment is given; or
(c)exemplary or punitive damages;
interest, or a sum in lieu of interest, shall not be given under subsection (1) in respect of any such amount or in respect of so much of the relevant sum as in the opinion of the Court or the Judge represents any such amount.
(4)Subsection (3) shall not be taken to preclude interest or a sum in lieu of interest being given, pursuant to this section, upon compensation in respect of a liability of the kind referred to in paragraph (3)(a) where that liability has been met by the applicant, as from the date upon which that liability was so met.
It is accepted that the award of interest is mandatory unless good cause is shown and, to that extent, the Court exercises a discretion. See Australian Guarantee Corporation Limited v Border Printing Services Pty Ltd & Ors [1989] FCA 194 at [12] and [16].
It is also accepted that the calculation of the sum of pre-judgment interest is in the discretion of the Court. However, the Court is usually guided by Practice Note CM16 – Pre-judgment interest. This provides that the Court will have regard to the rates agreed upon by the Discount and Interest Rate Harmonisation Committee, that rate being 4% above the cash rate last published by the Reserve Bank of Australia before the relevant period commenced.
If the Court is satisfied there is “good cause to the contrary” it must not order interest under this provision. See Hanave Pty Ltd v LFOT Pty Ltd (2004) 136 FCR 566 at [45] (Kiefel J); [2004] FCAFC 180; Fair Work Ombudsman v Skilled Offshore (Australia) Pty Ltd (No 2) [2015] FCA 1509 at [45].
There is no good reason why an order for interest should not be made in favour of Coretell, and neither Mr Meredith nor Mr Ross suggested there was one.
Mr Meredith, in GM2, stated that in order to calculate a pre-judgment interest he applied simple interest; that is, Coretell would not be entitled to interest on any interest granted, consistent with s 51A(2)(a).
He also assumed that pre-judgment interest should be calculated to 31 October 2014, being the last day of the month that GM2 was submitted to the Court.
In calculating pre-judgment interest he said he applied the Practice Note as last published on 1 August 2011.
He said that applying the cash rate, plus the 4% margin stipulated in it, he calculated the pre‑judgment interest to be $1,118,369. He set out the interest calculation at annexure I of that report.
That calculation, however, commenced as of 1 November 2006, whereas I have estimated damages from early June 2007. Mr Meredith’s report, as I understand it, did not include an alternative interest calculation on this basis. It will now be necessary for this calculation to be made and I will hear from the parties as to an (hopefully) agreed calculation.
Mr Meredith correctly noted that Mr Ross suggested that pre-judgment interest should be calculated on Coretell’s after-tax losses in AR1 at [19]; although ultimately it was a matter for the Court.
Mr Meredith said he adopted the interest calculation based on a “simple reading” of the Practice Note and said he was not aware of appropriate precedence for calculating interest on an after-tax basis.
Mr Meredith suggested, and I accept, as did Mr Ross, that if tax payments are not deducted from the estimates of lost profit, Coretell will be subject to tax on the compensation received.
In the circumstances, I consider that interest should be calculated on the damages assessed, namely the $1,506,859, and not by reference to some lesser sum considered to represent “after tax” profits.
As I have noted, I will hear from the parties as to the final calculation of pre‑judgment interest from 1 June 2007.
Ruling on objections made by Coretell to Mr Ross’ reports
I should, at this point, formally deal with objections made by Coretell to the reception of Mr Ross’ expert reports, which have been referred to above as AR1 and AR2.
Coretell objects to these two Ross reports on the basis of: relevance; s 135 of the Evidence Act; not based on specialist knowledge; conclusions based on hearsay; Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305; assertion; argument; and speculation.
Coretell notes that Mr Ross purports to give admissible opinion evidence based upon his expertise as a forensic accountant. It says that in Minnesota Mining & Manufacturing Co v Tyco Electronics Pty Ltd (2002) 56 IPR 248 at [47]-[50]; [2002] FCAFC 315, the Full Court discussed the admissibility and weight to be given to the evidence of experts who purport to give opinion evidence, noting the requirements of ss 76, 79 and 80 of the Evidence Act.
Coretell contends that Mr Ross’ reports are replete with assertion, argument and speculation, and he sets out summaries from a great many documents, transcript and other materials and purports to draw inferences from those documents and materials to come to a view about matters such as whether or not Coretell had a business at particular dates, whether Coretell had a tool which lacked merchantable quality or whether the unjustifiable threats for the litigation were the cause of the asserted damage, and that none of these involves an expression of an opinion in relation to accountancy. That he has, in effect, usurped the role of the Court.
Attention is drawn by Coretell to the rejection of sections of a report that Mr Ross made, it says of a similar nature, in National Telecoms Group Ltd v John Fairfax Publications Pty Ltd (No 1) [2011] NSWSC 455. In that proceeding, the trial judge (Davies J) at [33], in effect, criticised the setting out of extracts and summaries from documents, and drawing inferences from these documents about matters that were ultimately for the Court to decide; at [34], her Honour said that conclusions were reached not as a result of experience but rather by drawing inferences and reaching conclusions as any informed person might do; at [35], that the conclusions amounted only to submission and argument; at [44], that Mr Ross’ opinion did not show a “demonstration or examination of the scientific or other intellectual basis of the conclusion reached”, referring to Makita at [85].
Coretell ultimately submits that the reports should be ruled inadmissible for not complying with s 79 or s 80 of the Evidence Act, and that they should be excluded under s 135 as any probative value of the reports is substantially outweighed by the danger that the evidence might be unfairly prejudicial to Coretell, misleading or confusing, or cause or result in an undue waste of time.
The applicants note that a similar broad brush objection was taken by the respondents against AMC’s expert in the NSW proceeding and note that a similar approach was taken to an expert in JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (2005) 67 IPR 68 at [98]; [2005] FCA 1474.
The applicants note that notwithstanding the rejection of certain evidence of Mr Ross in the National Telecoms Group case, the Court there found, at [18], that the transgression into evidence outside expertise was “not so self‑evidently irrelevant” as to justify a rejection of the whole of Mr Ross’ report nor even the specific paragraphs to which objection was taken.
The applicants submit the objection to the whole of the evidence should be treated with considerable scepticism and that Mr Ross has demonstrated considerable expertise in forensic financial and business analysis, and noted that Mr Ross should be considered to have given balanced evidence when he and Mr Meredith gave expert evidence concurrently at the enquiry.
The applicants submit the respondents’ objections are without specificity and should be rejected on that basis. It was plainly within Mr Ross’ study, training and experience to give evidence identifying whether Coretell in fact sustained loss and assessing the financial impact, if any, of that loss based on the financial information provided to him, referring to Castel Electronics Pty Ltd v Toshiba Singapore Pte Ltd (2011) 192 FCR 445 at [203]; [2011] FCAFC 55.
At the hearing, I indicated that I would rule on the objections to the expert evidence once I had heard the evidence and in the course of coming to a proper appreciation of its content. I indicated that it was difficult, at the outset of hearing from the experts, to rule a section or particular portion of the evidence objected to as failing the Makita test, which was the substantial ground upon which Davies J ruled parts of Mr Ross’ evidence inadmissible in the National Telecoms Group case.
In the result, I do not consider, on balance, that any portion of Mr Ross’ expert testimony should be struck out on any of the grounds of objection advanced by Coretell.
My primary reason for considering the evidence, in the circumstances of this damages enquiry, not to be objectionable, is that there are unusual factual circumstances in this case, many of which have already been canvassed. There are serious questions raised as to whether or not Coretell can have suffered any financial loss if it had not developed the Camteq tool to the point where it was marketable or merchantable. In such circumstances, it is, in my view, permissible for a forensic accountant, with the training and experience evidenced by Mr Ross, to be asked to interrogate financial records and other materials relevant to the question whether Coretell appears to have been conducting a business or have a track record of sales. A typical range of financial records may be assumed to exist at the commencement of any such enquiry, in order to establish trading figures, profit and loss, and lost revenue. If, in the course of interrogating such materials, the forensic accountant observes materials which throw doubt on the fact of trading or revenue receipt either because there appears to be no business or because there are, to put it generally, problems with the product in which it is assumed trading is being carried out and revenue is being earned, then it seems to me the forensic accountant can draw attention to that material.
If the forensic accountant goes further and draws conclusions, for example, that a product is “unmerchantable”, then it may well be that the forensic accountant is usurping the role of the Court about the existence of that fact. Broadly speaking, I do not consider that Mr Ross, in the approach that he has taken, and as illustrated by the discussion of the differing assumptions of Mr Ross and Mr Meredith in the joint report, just set out above, when properly assessed, has transgressed into impermissible areas not based on his qualifications and experience.
In my view, this is not a case like Makita and other instances where a capable and informed person has, in effect, been asked to read a set of documents and to inform the Court what, in their opinion, are the factual conclusions that may be drawn from it. What Mr Ross did, albeit that his approach to the questions in issue had been different from that adopted by Mr Meredith – although only because Mr Meredith was instructed to make certain assumptions and had no need to undertake any additional forensic enquiry of the type that Mr Ross did – was to employ his forensic accounting skills to interrogate relevant financial and other records of Coretell and related companies which plainly bore on the primary question whether Coretell suffered financial loss by withdrawing the Camteq tool from circulation in late 2006, and material times thereafter.
It may be accepted that when adopting this forensic accounting approach there is a danger that the forensic accountant will find himself or herself canvassing some issues that also fall to the Court for ultimate resolution, because they have a factual component. But that is not to say that such issues having some factual component are irrelevant to the accounting exercise and the bringing to bear of the forensic accounting qualifications, training and experience of the expert witness.
In short, just because Mr Ross’ approach to the task of interrogating Coretell’s financial records to determine whether or not they disclose loss from withdrawal of the Camteq tool from circulation following the making of the threats, has led Mr Ross to doubt the existence of a “business” at material times, including because of issues going to the substance of Coretell’s operation at material times, is not, in my view, an adequate reason to rule inadmissible the forensic accounting evidence proposed to be given by him.
One example that might be given to illustrate the point made is that in the course of the experts giving concurrent evidence, Mr Meredith confirmed that he was asked to provide an opinion on the alleged loss suffered, assuming that (1) Coretell withheld from sale and hire the core orientation equipment; and (2) that causation had been established, that is, that the withholding was due to the unjustified threats. Mr Meredith indicated that he proceeded on the instructed assumption that the tool was withheld and therefore there were lost sales, so the task became, how do you estimate those lost sales, and for that purpose he used a regression analysis technique (discussed below).
Mr Meredith told the Court that he accepted that as an instruction, and by implication did not need to interrogate the records to validate the allegation or the instruction that Coretell withheld the equipment from sale and hire.
Mr Ross explained that Mr Meredith and he both agree that the way to approach loss is to compare the position in which Coretell was as a result of the threats and the position it would have been in had the threats not occurred. Mr Meredith had an instruction as to what the position was as a result of the threats. He was instructed to assume they stopped selling. Mr Ross said that he was not given that instruction. He was asked to consider, based on the information put to him, what happened as a result of the threats and how Coretell responded, and, having identified how they responded, that made it possible for him to consider what would have been different had the threats not occurred. He said that until one identified what change in position occurred as a result of the threats, in his view, one could not identify what the different position would have been had the threats not occurred.
Mr Ross repeated that he was asked to consider that himself and he went and looked at the financial records to see what Coretell said and did in response to the threats. He analysed that information, which included a large amount of financial information from Coretell’s records and a chronology of events that he was instructed to adopt. He formed conclusions that it did not, in fact, see selling or trading in that period. He also formed the view that it did not actually have a business to begin with, to cease trading. He said the whole proposition about how it changed its position in response to the threats, which drives the damages calculation, needs to be undertaken in the context of what it actually did. And what it might have done two years later (with the ORIshot tool) is, in his opinion, not particularly relevant to that question.
In my view, the forensic accountant enquiry that Mr Ross thereby described is not impermissible and lies at the root of the analysis he made in his expert report, as well at the root of the objection made by Coretell. I do not consider it to be a valid objection in the circumstances of this case.
I therefore do not allow the objections made by Coretell to the admission in its entirety (or, for that matter, portions) of the expert reports of Mr Ross. Mr Ross’ reports go into evidence, as does the joint report made by Mr Meredith and Mr Ross.
OTHER MATTERS
As intimated elsewhere in this judgment, these parties are never satisfied unless they are continually turning stones. Certainly it is the case that no stone in the proceeding has been left unturned by them. Even after closing submissions were made, further submissions came in. First, Coretell filed “Submissions in reply to applicants’ closing submissions” which received a rejoinder, “Applicants’ response to Coretell’s reply submissions”. I have had regard to both sets of submissions.
As to other matters that then, as a consequence, fell into some disputation (as set out in the letter of Arns & Associates Lawyers dated 24 February 2015, addressed to my Associate), I make the following rulings:
·I abstain from making any amendments to the transcript at p 237, lines 11‑12.
·As to the document at tab 15 of Mr Kleyn’s cross‑examination bundle, the further evidentiary matter that remained in dispute at the conclusion of the damages enquiry, was the evidentiary status of the email there included dated 2 April 2007 from Mr Kleyn to Mr Brian Hales of Boart Longyear. Coretell sought to rely on this as showing that it was trading in the orientation tool at material times earlier than the date of that email. Coretell submitted that the significance of the email was emphasised by the fact that the applicants did not cross-examine Mr Kleyn on the email and did not make any submissions on it, even though it was in the Kleyn cross-examination bundle. The applicants, however, submit that the document did not go into evidence and is not evidence and formed no part of Coretell’s affidavit evidence in chief or in reply and was not tendered by them. The applicants submit that the document was not referred to by Coretell until after judgment had been reserved and was not referred to in cross-examination or re‑examination. The applicants reasonably point out that the practice followed at trial was that materials in cross-examination bundles not referred to were to be removed from exhibits. I accept the submission made on behalf of the applicants and rule that this document did not go into evidence and so exclude it from my consideration of the material issues considered above.
·The Court further rules that the applicants’ understanding of the Court’s ruling on the objection, referred to at [30] of the applicants’ response to Coretell’s reply submissions, is correct and, in the result, no real regard has been given to the evidence referred to.
ORDERS

The appropriate substantive order would appear to be that the Court finds the damage sustained by the first respondent to be in the sum of $1,506,859, together with interest calculated thereon under s 51A of the Federal Court of Australia Act 1976 (Cth).
The Court will hear from the parties, if necessary, concerning the calculation of the interest payable in accordance with these reasons; and on the question of costs of the enquiry into damages.
The immediate orders should however be made:
(1)The first respondent, following consultation with the applicants, to file a proposed minute of orders giving effect to these reasons.
(2)The Court will hear further from the parties, if necessary, on the question of the calculation of pre-judgment interest and costs.
(3)The applicants’ interlocutory application for summary judgment filed 11 December 2015 be dismissed with costs, such costs to be taxed if not agreed.

I certify that the preceding eight hundred and seventy (870) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.
Associate:
Dated: 19 August 2016

File number:	WAD 132 of 2007
Judge:	BARKER J
Date of judgment:	19 August 2016
Catchwords:	DAMAGES – innovation patents – where patent infringement proceedings dismissed – where cross-claim of patent invalidity dismissed – where threats to bring infringement proceedings declared unjustifiable threats under s 128 of Patents Act 1990 (Cth) – whether first respondent a “person aggrieved” for purposes of s 128 of Patents Act 1990 (Cth) – whether first respondent held a relevant interest in the tool the subject of the threats at material times – whether valid assignment of interest in tool – whether tool of merchantable quality at material times – whether first respondent had a business in the tool at material times – whether threat letters caused first respondent to suffer loss and damage – quantum of loss and damage PRACTICE AND PROCEDURE – where finding of no assignment in related proceeding – where risk of inconsistent findings – finding of assignment made on the evidence in this proceeding
Legislation:	Evidence Act 1995 (Cth) ss 79, 80, 135, 191 Federal Court of Australia Act 1976 (Cth) s 51A, 51A(2)(a) Patents Act 1990 (Cth) s 128, 128(1), 128(1)(a), 128(1)(c)
Cases cited:	Australian Guarantee Corporation Limited v Border Printing Services Pty Ltd & Ors [1989] FCA 194 Australian Mud Company Pty Ltd (ACN 009 283 416 and Others v Coretell Pty Ltd(ACN 119 188 493) and Another (2010) 88 IPR 270; [2010] FCA 1169 Australian Mud Company Pty Ltd and Others v Coretell Pty Ltd and Another (2011) 93 IPR 188; [2011] FCAFC 121 Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 2) [2010] FCA 1451 Australian Mud Company Pty Ltd v Coretell Pty Ltd(No 5) [2016] FCA 444 Castel Electronics Pty Ltd v Toshiba Singapore Pte Ltd (2011) 192 FCR 445; [2011] FCAFC 55 Fair Work Ombudsman v Skilled Offshore (Australia) Pty Ltd (No 2) [2015] FCA 1509 Hanave Pty Ltd v LFOT Pty Ltd (2004) 136 FCR 566; [2004] FCAFC 180 JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (2005) 67 IPR 68; [2005] FCA 1474 John Summers & Sons Ltd v Cold Metal Process Co (1948) 65 RPC 75 Johnson v Edge (1892) 2 Ch 1 Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305 Minnesota Mining & Manufacturing Co v Tyco Electronics Pty Ltd (2002) 56 IPR 248; [2002] FCAFC 315 National Telecoms Group Ltd v John Fairfax Publications Pty Ltd (No 1) [2011] NSWSC 455
Date of hearing:	8-12 December 2014, 10 March 2016
Date of last submissions after substantive hearing:	24 February 2015
Registry:	Western Australia
Division:	General Division
National Practice Area:	Intellectual Property
Sub-area:	Patents and associated Statutes
Category:	Catchwords
Number of paragraphs:	870
Counsel for the Applicants:	Mr JM Hennessy SC
Solicitor for the Applicants:	Gilbert + Tobin
Counsel for the Respondents:	Mr BJ Hess QC with Dr LJ Duncan
Solicitor for the Respondents:	Arns & Associates