Bartlem Pty Ltd v CMMC Pty Ltd (Receiver and Manager Appointed)

[2001] FCA 1352

FEDERAL COURT OF AUSTRALIA

Bartlem Pty Ltd v CMMC Pty Ltd (Receiver & Manager Appointed)
[2001] FCA 1352

Calderbank v Calderbank [1975] 3 WLR 586
Magenta Nominees Pty Ltd v Richard Ellis (Western Australia) Pty Ltd [1994] FCA 302
Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721
Cummings v Lewis (1993) 41 FCR 559

BARTLEM PTY LTD (ACN 060 394 158) v CMMC PTY LTD (RECEIVER & MANAGER APPOINTED) (ACN 010 341 625), COX INDUSTRIES (AUSTRALIA) PTY LTD (FORMERLY RURAL PACIFIC MARKETING PTY LTD) (ACN 050 991 038), COX MOWERS PTY LTD (ACN 081 272 371) AND FINDLAY WILLIAM ANDREWS
QG 133 OF 1996

COOPER J
BRISBANE
19 SEPTEMBER 2001

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 133 OF 1996

BETWEEN:

BARTLEM PTY LTD (ACN 060 394 158)
APPLICANT (CROSS RESPONDENT)

AND:

CMMC PTY LTD (RECEIVER & MANAGER APPOINTED) (ACN 010 341 625)
FIRST RESPONDENT

PHILIP ARTHUR HENNESSEY
SECOND RESPONDENT

COX INDUSTRIES (AUSTRALIA) PTY LTD (FORMERLY RURAL PACIFIC MARKETING PTY LTD) (ACN 050 991 038)
THIRD RESPONDENT (FIRST CROSS CLAIMANT)

COX MOWERS PTY LTD (ACN 081 272 371)
FOURTH RESPONDENT (SECOND CROSS CLAIMANT)

FINDLAY WILLIAM ANDREWS
FIFTH RESPONDENT (THIRD CROSS CLAIMANT)

JUDGE:

COOPER J

DATE OF ORDER:

19 SEPTEMBER 2001

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.The application to vary the order for costs made on the cross-claim on 30 August 2001 is dismissed.

2.The applicants on the notice of motion filed 12 September 2001 pay the respondent to the notice of motion its costs of and incidental to the notice of motion to be taxed if not agreed.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 133 OF 1996

BETWEEN:

BARTLEM PTY LTD (ACN 060 394 158)
APPLICANT (CROSS RESPONDENT)

AND:

CMMC PTY LTD (RECEIVER & MANAGER APPOINTED) (ACN 010 341 625)
FIRST RESPONDENT

PHILIP ARTHUR HENNESSEY
SECOND RESPONDENT

COX INDUSTRIES (AUSTRALIA) PTY LTD (FORMERLY RURAL PACIFIC MARKETING PTY LTD) (ACN 050 991 038)
THIRD RESPONDENT (FIRST CROSS CLAIMANT)

COX MOWERS PTY LTD (ACN 081 272 371)
FOURTH RESPONDENT (SECOND CROSS CLAIMANT)

FINDLAY WILLIAM ANDREWS
FIFTH RESPONDENT (THIRD CROSS CLAIMANT)

JUDGE:	COOPER J
DATE:	19 SEPTEMBER 2001
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. On 30 August 2001 I delivered judgment in this matter dismissing both the claim and cross-claim with the costs following the disposition of each.

2. The cross-claimants seek an order varying my order that the cross-claimants pay the cross-respondent’s costs of and incidental to the cross-claim, including reserved costs, to be taxed.  The variation is sought on the basis of a settlement offer made in a letter from the cross-claimants’ solicitors to the cross-respondent’s solicitors dated 21 August 2000.

3. The settlement offer was not made with respect to the cross-claim alone.  It involved both the claim for infringement and the cross-claim for revocation of the patents in suit.  The offer had four elements :

   1.the applicant discontinue the claim for infringement;

   2.the applicant pay the respondent’s costs of the claim to be taxed on a party and party basis.

   3.The cross-claimants discontinue the cross-claim.

   4.The cross-claimants pay the applicant’s costs of the cross-claim to be taxed on a party and party basis.

4. The elements of the offer were interdependent each with the others.  The offer was not an offer under O 23 of the Federal Court Rules.  Rather, the offer was put on the basis of the principle established in Calderbank v Calderbank [1975] 3 WLR 586.

5. The cross-claimants submit that the cross-respondent did no better in the action than it would have achieved if it had accepted the settlement offer of 21 August 2000 and that the costs order on the cross-claim should reflect that fact.  Specifically, the cross-claimants seek an order that the cross-respondent recovers its costs up to and including 21 August 2000 and that thereafter the cross-respondent pay the cross-claimants’ costs of the cross-claim to be taxed, if not agreed, or alternatively that no costs order be made in respect of the costs of the parties incurred after 21 August 2000.

6. The cross-claimants submit that the public interest served in promoting settlements by the making of Calderbank type settlement offers requires the making of an appropriate costs order which reflects that underlying public interest.  In support of this submission, they rely on observations in Magenta Nominees Pty Ltd v Richard Ellis (Western Australia) Pty Ltd [1994] FCA 302; Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 at 724.

7. The underlying principle in Calderbank was that where the offer was one which ought to have been accepted, and the party refusing the offer persisted in the litigation and achieved an outcome less favourable than the offer made, it may be appropriate to make a special order for costs on the basis of what has occurred:  Calderbank v Calderbank at p 596.

8. The reasoning underlying the upholding of special costs orders where Calderbank offers are made is totally consistent with the general approach to the discretion to make costs orders and is but a particular application of the discretion.  In Cummings v Lewis (1993) 41 FCR 559 at 602 - 603 I set out in general terms the applicable principles to the exercise of the discretion as to costs. I said :

   “The nature of the discretion vested in a trial judge as to the award of costs and the principles which guide the exercise of the discretion are set out by Toohey J in Hughes v Western Australian Cricket Association (Inc) at 48,136 :

   ‘Subsection 43(2) of the Federal Court of Australia Act 1976 (Cth) vests the award of costs “in the discretion of the Court or Judge”. The Federal Court Rules 1979 (Cth) do not purport to qualify that discretion.  The only rule to which reference is necessary is O 62, r 15 whereby, when costs are reserved, those costs follow the event “unless the Court or a Judge otherwise orders”.

   The discretion must of course be exercised judicially.  There are decisions, both of Australian and English courts, that throw light on the way in which the discretion is to be exercised.  I shall not refer to those decisions in any detail;  I shall simply set out in a summary way what I understand to be their effect.

   1.Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.  Ritter v Godfrey [1920] 2 KB 47.

   2.Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.  Forster v Farquhar [1893] 1 QB 564.

   3.A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them.  In this sense, “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law.  Cretazzo v Lombardi (1975) 13 SASR 4 at 12.’

   This statement of principle was approved by the Full Court in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 17 FCR 211 at 222.

   It is within the discretion of a trial judge to award only a proportion of a successful party’s costs if the conduct of that party in the trial was such as to unreasonably prolong the proceedings (Latoudis v Casey (supra) at 544, 565;  Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 at 1214, 1217; [1993] 1 All ER 232 at 237, 240).”

9. It is not correct to equate the position of the applicant/cross-respondent as equal to or worse than it would have been had it accepted the cross-claimants’ offer.  Properly characterised, what was proposed was that the parties walk away from the litigation and each pay the other side’s costs of the respective claim and cross-claim up until the date of the agreement.  What has in fact occurred is a quite different outcome.  The issues raised on the claim, being the infringement issues, and on the cross-claim being the revocation of the patents on the grounds of their invalidity, have been litigated to judgment and between the parties are res judicata.

10. The cross-claimants lost on the issues raised in their defence in the claim for infringement and in their cross-claim for revocation on the basis of the claimed invalidity.  The cross-respondent has a judgment in its favour binding the cross-claimants which is a markedly better outcome than walking away from the litigation leaving the cross-claimants free at some future time to seek revocation of the patents in suit of the basis of the alleged invalidity of them.

11. The applicant/cross-respondent was entitled, if it chose to reject the offer made, to seek to establish its claim to infringement and to vindicate the validity of its patents and it did so at risk of an order for costs if it failed in that endeavour.  Once the offer was  rejected, the cross-claimants were free, if they chose, to discontinue the cross-claim and abandon their defence of the infringement proceedings, to the extent that both relied on the claim of invalidity of the patents in suit, in order to protect themselves thereafter from an order for costs in respect of those claims.  The cross-claimants were also free to litigate those issues to judgment if they chose to do so;  but, if they did so and failed, they were at risk of an order for costs being made against them.

12. The issues litigated in the cross-claim and on the defence in the infringement proceedings were substantial and took up a major part of the trial.  The applicant/cross-respondent has not sought that any special order as to costs be made on the claim on an issues basis which would reflect the failure of the cross-claimants on those issues in the infringement proceedings.

13. The parties litigated the claim and cross-claim to judgment.  Each succeeded in defending the proceedings brought against it by obtaining a judgment which, subject to any appeal, is binding against the other party.  It is a judgment which finally determines as between them the issues in controversy.  In my view, costs should follow the event in the ordinary way in respect of the claim and cross-claim.  The delivery of the offer to settle both proceedings on the basis set forth in the letter of 21 August 2000, having regard to the outcome of the litigation, does not constitute a circumstance which would justify a special order as to costs.

14. The application to vary the costs orders made on 30 August 2001 will be dismissed with costs.

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper.

Associate:

Dated:             19 September 2001

Solicitor for the Applicant:	Bennett & Philp
Counsel for the Respondent:	Mr A Crowe SC
Solicitor for the Respondent:	McCullough Robertson
Date of Hearing:	19 September 2001
Date of Judgment:	19 September 2001