Brivis Australia Pty Ltd v Seeley International Pty Ltd
[2002] FCA 843
•3 JULY 2002
FEDERAL COURT OF AUSTRALIA
Brivis Australia Pty Ltd v Seeley International Pty Ltd [2002] FCA 843
PATENTS – petty patent – evaporative air conditioner – prior art said to render the applicant’s patent invalid – notice of motion by the applicant seeking a See v Scott-Paine order granting leave to the applicant to discontinue the substantive proceedings with protection from an adverse costs order
PROCEDURE – discretion of the Court when a party seeks leave to discontinue under Order 22 of the Federal Court Rules
Patents Act 1990 (Cth) s 40
See v Scott - Paine (1933) 50 RPC 56 considered
GEC Alsthom Limited’s Patent [1996] FSR 415 followed
SCI Operations Pty Ltd v Trade Practices Commission (1984) 2 FCR 118 appliedBRIVIS AUSTRALIA PTY LTD (ACN 004 783 493) v SEELEY INTERNATIONAL PTY LTD (ACN 054 687 035) and SEELEY INTERNATIONAL PTY LTD (ACN 054 687 035) and BRIVIS AUSTRALIA PTY LTD (ACN 004 783 493)
S 9 of 2000
O’LOUGHLIN J
3 JULY 2002
ADELAIDE (HEARD IN MELBOURNE)
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
S 9 OF 2000
BETWEEN:
BRIVIS AUSTRALIA PTY LTD (ACN 004 783 493)
APPLICANTAND:
SEELEY INTERNATIONAL PTY LTD (ACN 054 687 035)
RESPONDENTSEELEY INTERNATIONAL PTY LTD (ACN 054 687 035)
CROSS-CLAIMANTBRIVIS AUSTRALIA PTY LTD (ACN 004 783 493)
CROSS-RESPONDENTJUDGE:
O’LOUGHLIN J
DATE OF ORDER:
3 JULY 2002
WHERE MADE:
ADELAIDE (HEARD IN MELBOURNE)
THE COURT ORDERS THAT:
1.Further consideration of these proceedings is adjourned to a date subsequent to the expiration of a period of six weeks from the date hereof.
2.Liberty to the parties to apply, thereafter, to have the matter brought on for further consideration upon seven days notice.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
S 9 OF 2000
BETWEEN:
BRIVIS AUSTRALIA PTY LTD (ACN 004 783 493)
APPLICANTAND:
SEELEY INTERNATIONAL PTY LTD (ACN 054 687 035)
RESPONDENTSEELEY INTERNATIONAL PTY LTD (ACN 054 687 035)
CROSS-CLAIMANTBRIVIS AUSTRALIA PTY LTD (ACN 004 783 493)
CROSS-RESPONDENT
JUDGE:
O’LOUGHLIN J
DATE:
3 JULY 2002
PLACE:
ADELAIDE (HEARD IN MELBOURNE)
REASONS FOR JUDGMENT
On 11 February 2000, the applicant in these proceedings, Brivis Australia Pty Ltd (“Brivis”), filed an application and statement of claim seeking injunctive and other relief against the respondent, Seeley International Pty Ltd (“Seeley”). The dispute between the parties is centred upon Brivis’ Australian Petty Patent No 706726 (“the patent”). The patent, the publication of the complete specification of which took place on 24 June 1999, relates to an invention entitled “Evaporative Air Conditioner”. It was not disputed that the particular air conditioner was one that was to be installed on the roof of a property; it featured a sloping design so that it harmonised with the slope of the roof and reduced the visual impact of its structure. Brivis has alleged that Seeley has manufactured and sold evaporative air conditioners under the Trade Mark “Breezair Mirage” and that its conduct in so doing constitutes an infringement of the patent.
Seeley filed its defence, denying infringement, and a cross-claim on 14 April 2000. In its cross-claim it alleged, inter alia, that the patent was invalid “for the reasons appearing in the Particulars of Objections to Validity” that had been filed and served with the defence and cross-claim (“Seeley’s particulars”). Seeley sought a revocation of the patent.
In Seeley’s particulars it was alleged, inter alia, that the patent was not a patentable invention in that it was not novel when compared to the prior art base as it existed before the priority date of the patent. Eighteen items of information were then particularised in support of the allegation of lack of novelty; they included eight United States patents, four Australian patents and sundry books and brochures. Significantly, Seeley’s particulars did not contain any reference to Messrs Benfield, their company, Heatshield Pty Ltd or Heatshield’s evaporative air conditioner with a sloping base (“the Heatshield device”). Other objections were listed in Seeley’s particulars but it is not necessary to refer to them for the purpose of resolving the current dispute between the parties.
On 11 April 2001, a judge of this Court gave Seeley leave to file and serve an amended defence and cross-claim and amended particulars of objections to validity. It is not apparent from the contents of the Court file what information had been placed before his Honour to support the orders that his Honour made; nor is it clear what attitude Brivis took to the application. It is clear, however, that Brivis did not use the occasion of Seeley’s application to amend its pleadings to seek a protective costs order in the form of the orders that were made in See v Scott - Paine (1933) 50 RPC 56.
Seeley duly filed its amended pleadings on 26 April 2001. It listed additional brochures and written material in support of its claim that the patent lacked novelty. It also asserted that the complete specification did not comply with the requirements of s 40 of the Patents Act 1990 (Cth). In its original particulars, Seeley had relied on certain information, as listed in its particulars, in support of its assertion that Brivis’ alleged invention lacked novelty when compared to the prior art base. That information included:
“(i)Installation on rooves (sic) of buildings, visible to the public of numerous “Coolbreeze” airconditioners.
(ii)Installation on rooves (sic) of buildings, visible to the public, of numerous airconditioners of the respondent.”
In its amended particulars, Seeley also relied (for the first time) on the installation, by other competitors, of roof-mounted airconditioners prior to 24 June 1999. Seeley claimed that these additional installations supported its plea of lack of novelty. One such installation upon which Seeley relied was that contained in par 1.1.(b)(iii) of its amended particulars:
“Installation and display of Heatshield airconditioner at various places, in Australia in or about 1994, including at 18-24 Plymouth Road, Wingfield in South Australia.”
Seeley also relied on the installation and display of:
“… Jarrahdale airconditioners at various places in Australia including Western Australia in or about 1990-1991;”
Brivis has complained about Seeley’s late reliance upon the Heatshield device but its complaint has not included any reference to the Jarrahdale units.
Save for the filing of Brivis’ amended reply and defence to the cross-claim, nothing seems to have happened (on the Court file at least) until 10 September 2001. On that date, a judge of this Court made orders (“the September 2001 orders”) for the filing and service of statements of evidence and for supplementary discovery. His Honour also listed the matter for hearing on a date to be fixed but not before 28 February 2002.
Pursuant to the September 2001 orders, the parties filed and served the affidavits of various intended witnesses. Four of the affidavits that were filed by Seeley are, however, now the subject of challenge by Brivis. Those challenged are the affidavits of:
·Peter John Benfield sworn 13 September 2001
·Bruce Victor Benfield sworn 13 September 2001
·Roy Edmond Williams sworn 7 September 2001
·Richard Stuart Catt sworn 15 October 2001
In its notice of motion that was filed on 14 December 2001, Brivis seeks an order that Seeley not be permitted to rely upon those four affidavits. If, however, Brivis is unsuccessful in obtaining that order, it seeks an order that a regime be implemented in terms similar to the orders that were made by Eve J in See v Scott-Paine (above). In that case, which was an action for infringement of a patent, the defendant had counter-claimed for revocation. After the delivery of pleadings, the defendant applied to amend his defence and counter-claim and his particulars of objections by claiming further alleged anticipations. As Eve J noted, when considering the application for leave to amend, the question that was before him involved a consideration of:
“… the proper order as regards the costs of a counter-claiming defendant seeking revocation of the Patent, who has omitted to insert in the original Particulars, a Particular which has been introduced by amendment.”
In fashioning his order as to costs, his Honour neither addressed the defendants’ excuse (if any) for the omission nor the reason why the amendment might have a material effect on the plaintiff’s application. Instead, he assumed that it might be possible that the plaintiff might seek to discontinue his proceedings as result of the proposed amendment. Thus the orders that his Honour made were to the following effect:
·the plaintiff was to elect, within a certain time whether he would discontinue the action, withdraw his defence to the counter-claim and consent to an order for revocation;
·if that were to occur the defendant was to have his costs up to and including the date of his delivery of his defence and counter-claim and particulars of objection (sometimes called “the switch over date”) except in so far as the same had been increased by reason of the failure of the defendant originally to deliver the particulars of objection in their amended form (“the defendant’s failure”);
·the plaintiff was to have his costs as from the switch over date in so far as they were increased by reason of the defendant’s failure;
·if the plaintiff declined to make the election, the defendant was to be at liberty to file his amended defence, counter-claim and particulars;
·in the latter case, the plaintiff had the right to file an amended reply and an amended defence to the defendants’ counter-claim and was entitled to his costs that had been occasioned by the amendment, including the costs of the application that was then before the Court.
Based upon the orders that were made in See v Scott-Paine, the alternative orders that were sought by Brivis in their notice of motion are as follows:
“2.Alternatively to the orders sought in paragraph 1 above, on or before a date to be fixed (“the relevant date”) the Applicant [ie Brivis] elect whether it will discontinue this proceeding and consent to an order for the revocation of Australian Petty Patent No. 706726.
3.In the event that the Applicant elects of discontinuing this proceeding:
(i)Australian Petty No. 706726 be revoked;
(ii)the Applicant pay the Respondent’s costs of this proceeding up to and including the date to be determined by this Honourable Court or otherwise as agreed between the parties before that date;
(iii)the Respondent pay the Applicant’s costs of this proceeding from the date referred to in paragraph (ii) above.
4.In the event that the Applicant does not elect to discontinue this proceeding on or before the relevant date, the Applicant file and serve its evidence in answer on the issue of invalidity within 8 weeks of the relevant date.
5.The Respondent pay the Applicant’s costs of this motion.
6.Such further or other orders, directions or relief as to this Honourable Court may seem fit.”
Before giving further consideration to the orders sought by Brivis it is first necessary to summarise the relevant aspects of the four challenged affidavits. It will also be necessary to give some consideration to the affidavits of Gregory Ralph Tye, the solicitor for Brivis and Anthony Norman Abbott, the solicitor for Seeley. I turn first to the four challenged affidavits. In summarising the factual assertions that are contained in these affidavits I am not making any finding of fact: I am merely summarising what the deponents have said.
Mr Bruce Benfield and his brother Peter, were, in 1993, directors and shareholders of Heatshield Pty Ltd. The company had been incorporated in 1985 and between then and 1993 it had carried on business as a manufacturer of “heaters, flue kits, large heating units and components for airconditioners and heaters manufactured by others.” From late 1990, Heatshield’s business had been conducted in rented premises at 18-24 Plymouth Road Wingfield. The company remained at that address until May 1994 when either its shares or its business were purchased by Rib Loc Group Ltd (“Rib Loc”) – it is not clear from the evidence what was sold.
In about September 1993, a Mr Neville Mannix of Mannix Air Conditioning, probably the biggest customer of Heatshield, approached Mr Bruce Benfield. Mr Mannix invited Mr Benfield to have Heatshield manufacture roof-mounted evaporative airconditioners with a base that “followed the typical roofline of a building”. The purpose of such a design was said to be the maintenance of a profile that was as low and as small as possible when viewed from ground level.
Mr Bruce Benfield next said that, having agreed to manufacture units as suggested by Mr Mannix, he consulted a Mr Richard Catt, a Patent Attorney. According to Mr Benfield Mr Catt advised that:
“… it was not worth making any application for a patent for the concept of design of airconditioner which I had raised with him. (sic)”
Mr Bruce Benfield said that he arranged for Heatshield to build a prototype of the unit that Mr Mannix required. When completed, the Heatshield device was installed in the premises at Plymouth Road so that it could be tested. He thinks that a further four units were built and that they were sold to various purchasers as part of a clearing sale of the stock and plant that was not wanted by Rib Loc. He does not know the names of the purchasers and he now has no record of the sales nor any drawings or designs of the unit other than those to which reference is made later in these reasons. For reasons which are not clear, the Heatshield device did not proceed to commercial production.
The case for Seeley, as spelt out in par 2 of Mr Abbott’s affidavit on 13 March 2002 (“the March affidavit”) was:
“… that at no time prior to August 2000, when Bruce Benfield contacted Mr Arnold [the managing director of Seeley] were they, or anyone else on behalf of Seeley, aware of the manufacture and sale, or existence, of roof mounted evaporative air conditioners with a sloping base sold and manufactured by Bruce Benfield or a company on his behalf in about 1993 or 1994 or at any time.”
Mr Caine, counsel for Brivis, conceded that these claims were not challenged by Brivis
The Heatshield device remained installed in the premises at Plymouth Road and, according to Mr Bruce Benfield, he showed Mr Abbott, Seeley’s solicitor, that unit some time in November 2000. It was removed, however, at Seeley’s request in May 2001.
There was an assertion in the affidavit of Mr Bruce Benfield that Mr Mannix said that he approached Brivis about his idea of a sloping base. That hearsay was challenged by more hearsay. Mr Tye deposed that he had spoken to the former Managing director of Brivis who had read Mr Benfield’s affidavit and who had informed Mr Tye that he had not been approached by Mr Mannix in the manner claimed. Although it is permissible to include hearsay material in affidavits in interlocutory proceedings one would have thought that, on such an important issue, one or other of the parties might have approached Mr Mannix for his assistance. Neither party chose to do so and I do not feel that it would be appropriate for me to express any opinion about such contact (if any) that Mr Mannix may have had with Brivis.
Mr Peter Benfield’s affidavit is supportive of his brother’s but it does not add anything of a material nature.
Mr Williams is a sheet metal worker who worked for Heatshield in the 1980’s and on a second occasion from 1993 to May 1994. He continued after the sale of the business to work for Rib Loc. Mr Williams was able to recall his work with respect to the installation and satisfactory operation of the Heatshield device that had been installed in the Plymouth Road premises while he had been working at Heatshield.
Mr Catt supported Mr Bruce Benfield. He recalled being consulted by Mr Benfield in 1993 and discussing with him the proposal for “a roof-mounted evaporative airconditioner …”. Mr Catt concluded his affidavit, after having referred to the results of his sketches and searches, by saying:
“… that there was nothing which precisely anticipated the sloping base features of the airconditioner, but apart from that feature every other feature of the airconditioner as drawn was anticipated by prior art.”
Mr Catt said that he had “significant reservations” about whether “the sloping base feature” was sufficient to patent the invention. He communicated this view to Mr Benfield.
I turn now to discuss the circumstances under which the Heatshield device came to play such an important part in these proceedings.
On 10 April 2001, the day before the directions hearing at which leave was given to Seeley to file amended pleadings, Brivis’ solicitors received from Seeley’s solicitors a letter of the same date which enclosed copies of the proposed amended pleadings. The draft of the amended particulars included a reference to the Heatshield device but not the Jarrahdale airconditioner. As Mr Abbott acknowledged in par 11 of his March affidavit, the draft particulars that were forwarded to Brivis’ solicitors under cover of his firm’s letter on 10 April 2001 “contained for the first time the allegation of prior use in the form a Heatshield airconditioner …”. This means that a period of almost eight months since August 2000 had expired since Seeley first became aware of Mr Benfield’s work. It must be accepted that Seeley would have needed time within which to assess the information that Mr Benfield possessed and to take the advice of its counsel but, in my opinion eight months was an inordinately long period of time.
On 13 June 2001, Brivis’ counsel, solicitor and patent attorney visited the Plymouth Road premises, intending to inspect the Heatshield device. There were several aspects of that visit and the events subsequent to that visit which, in my opinion, were interesting. In the first place, counsel and the patent attorney were both based in Melbourne. Brivis must have regarded the intended inspection as a matter of importance, justifying the expense occasioned by such a visit. Yet, on the other hand, it made no prior contact with Seeley’s solicitors in order to arrange the inspection. When the party arrived at the premises, it found that the device was not there. The receptionist to whom they spoke was unaware that it had been earlier installed and that it had been removed sometime in the preceding month and taken to Seeley’s premises. Other inquiries were made by Brivis’ solicitor without success but the obvious line of inquiry was not made – no attempt was made to approach Seeley’s solicitors with a request that Brivis’ advisers be allowed to inspect the Heatshield device. Counsel’s explanation for this, during the course of his submissions, was that Brivis was awaiting the receipt of the witness proofs of Seeley so that it could obtain further and better particulars of the Heatshield device. The witness proofs were not forthcoming until late September and early October 2001. It was, in my opinion, most unusual conduct on the part of Brivis and its advisers. For some unexplained reason, they denied themselves the opportunity of pursuing legitimate inquiries about the Heatshield device. For this they have only themselves to blame. As a last resort, they could have approached the Court for orders granting them some right of inspection if Seeley ignored their reasonable requests to view the Heatshield device. The pleadings with respect to the Heatshield device were, furthermore, quite deficient. They contained no description of its features; nor were there any sketches or photographs. There was no indication that any of the three features that had been claimed in the Petty Patent were present in the Heatshield device. Brivis could have sought, but it failed to seek, further and better particulars.
Brivis cannot now lay all the blame at Seeley’s door. It was as much guilty of delay as was Seeley. As of 10 April 2001, Brivis knew of the Heatshield device, but it did nothing other than make one abortive attempt to inspect the device. Between April and 14 December 2001 – when it finally moved the court – Brivis could have done a number of things. It could have made direct enquiries of Seeley; it could have sought further and better particulars; and it could have sought orders to inspect the Heatshield device. But instead, it did nothing until 23 November 2001. In par 12 of his March affidavit Mr Abbott claimed that at no time after April 2001 did he or his assistants receive any request from Brivis or its solicitors for information about the Heatshield device until Mr Tye’s letter of 23 November 2001. That letter was in the following terms:
“23 November 2001
Piper Alderman
Lawyers
DX 102
ADELAIDEAttention: Tony Abbott
Dear Sir
Seeley International Pty Ltd ats Brivis Australia Pty Ltd (Your Ref: ANA SEL 620/1)
We refer to the statements of Evidence served on behalf of your client on 15 September 2001.
The statements of Messrs Benfield, Williams, Catt and James contain evidence of an alleged prior use of Heatshield in 1993/4. This evidence is the first notice received by us or our client of this allegation of invalidity.
The very late notice of this allegation has prejudiced our client. In all the circumstances our client considers it necessary to apply for a ‘See v Scott-Paine’ type order. Accordingly, we hereby put you on notice that a Notice of Motion in that regard is being prepared and will be filed in the very near future. For your information we enclose a copy of the case of See v Scott-Paine 1932 RPC 56 [sic].
Yours faithfully
NORMAN WATERHOUSE”Whilst it may be accepted that this was the first occasion upon which Brivis had knowledge of the evidence with respect to the Heatshield device, it was not the first occasion when Brivis heard about the device. It would have acquired initial information in the preceding April when it was served with a copy of Seeley’s proposed amended pleadings.
Mr Whitington QC, counsel for Seeley, submitted that Brivis was not seeking protection against an adverse costs order because of Seeley’s amended pleadings in April 2001: it was seeking leave to discontinue as a result of receiving copies of Seeley’s witnesses’ proofs in October 2001. Mr Caine, counsel for Brivis, did not run away from that submission. On the contrary, he sought to use it to his client’s advantage, saying that the receipt of the evidence was “the trigger” – it was only then that Brivis knew of the risk that the Heatshield device represented. He did not complain about Seeley’s tardiness in supplying its evidence: rather, so he submitted, Brivis had been awaiting receipt of the details of Seeley’s evidence. If this were a true See v Scott-Paine situation, Mr Whitington’s submission would probably be correct (although it overlooks the abortive visit to the Plymouth Road premises in June 2001). However, as the argument developed on both sides, the issue in this application became one which involved the exercise of the general discretion of the Court as to costs, but aided by reference to the manner in which costs issues have been resolved in earlier patent cases.
Mr Whitington submitted that I should look at the scope of the action, at the nature of the invention (which, so he said was no more than a sloping base) and his client’s pleadings. This would show, so he submitted, that Brivis had an inherently weak case from the outset. It would show that Brivis had opportunistically clasped the Heatshield device as a new line of defence and now seeks to use it so that it can discontinue its case with a minimum exposure to costs. I do not think that this would be the correct approach; it would involve me making some assessment of the substantive merits of the Brivis patent. That argument was rejected by Laddie J in GEC Alsthom Limited’s Patent [1996] FSR 415 at 421 (“GEC Alsthom”). In the circumstances of that case, his Honour said:
“However I decline to follow Mr Mellor’s suggestion that I should look now at the strength of the original attack on the patent and decide that to have continues to assert validity this far indicated mala fides on GEC’s part. I cannot engage in such a mini-trial at this stage. All that I can do is bear in mind, as must be the case, that it is possible that the patent would have been held invalid even on the unamended particulars of objection and that GEC realise that.”
With respect, I propose to adopt and apply the views of Laddie J. I will not proceed upon the premise that Brivis’ case was inherently weak; I will only allow for the possibility that it might have been held invalid, even on the unamended particulars of objection, and that Brivis realises that.
Relying upon the remarks of Laddie J in GEC Alsthom, Mr Whitington submitted that it would be improper to plead prior art until a party was certain of its claim. He did not identify the passage in the judgment upon which he relied but it probably was that appearing at 418:
“Furthermore, even if material is found, it cannot, or should not, be pleaded unless the attacking party can show that it was made available to the public prior to the priority of the patent.”
In any event, the material that was presented to the Court on Seeley’s behalf failed to explain why it took Seeley from August 2000 to April 2001 to satisfy itself that it was open to it to make use of the Heatshield device. Furthermore, Seeley was in possession, as from 31 August 2000, of a letter of the same date from Mr Bruce Benfield together with the sketches that are referred to in that letter. That letter clearly disclosed the existence of the Heatshield device. It read:
“Seeley International Pty. Ltd.
Roy Arnold
1-11 Rothesay Ave.
ST MARY'S S.A. 5052 31 AUGUST 2000TO WHOM IT MAY CONCERN
RE – LOW PROFILE CONTOUR AIR CONDITIONER
Early in 1993 Mr. Mannix of Mannix Air Conditioning discussed with me a concept of an air conditioner that sat low on a roof and followed the roof line. We agreed that Heatshield Pty. Ltd. would manufacture some prototypes.
Heatshield made these prototypes in 1993 and early 1994, as shown in Figures one and two. We then consulted with Richard Catt of R.K. Madderns & Associates patent and trade mark attorneys, to discuss design and or patent protection of the concept. We were advised that a patent for the unit was unlikely to be successful.
The units were shown to Mr. Mannix in early 1994, to see if Mr. Mannix liked the concept and wether [sic] he would buy them if we manufactured the units.
One unit was installed in the Heatshield building to cool the flexible duct machine area, and test the unit for reliability and performance under extreme workload conditions.
In April 1994 we sold Heatshield Pty. Ltd. and prior to this sold much of the stock of the company including the prototype air conditioners.
Bruce Benfield
Ex Managing Director of Heatshield Pty. Ltd.”If Seeley had done no more than complied with its routine obligation to make supplementary discovery as and when the material came to its notice (and was classified as relevant to its case), Brivis would have been put on notice many months prior to Seeley’s application to amend its pleadings. This would have given Brivis ample opportunity to inspect the Heatshield device, to assess its likely effect on Brivis’ Petty Patent and, perhaps to ask for a See v Scott-Paine order at the time when Seeley applied to amend its pleadings.
It might be argued that this is not an appropriate case for a See v Scott-Paine order for the reason that such an order is usually sought at the time when a respondent seeks leave to amend its pleadings. As Mr Whitington suggested, it could be that this application should be treated as an application under O 22 for leave to discontinue on terms. Neither counsel sought to engage in a procedural dispute; both were content to deal with the merits of the application. For my part, I am content to follow counsel’s lead. I will not therefore address the question of the correct procedure, but, rather, I will consider what might be the appropriate costs regime in the event of Brivis electing to discontinue its proceedings. Brivis seeks a period of six weeks within which to make its decision. As Seeley did not challenge that period as unreasonable, I will allow Brivis a period of six weeks from the date of the publication of these reasons within which to file and serve, if so advised, a notice of discontinuance of the whole proceedings. It remains then to consider the terms that should be attached to the grant of that leave.
Whether the Court operates along the lines of a See v Scott-Paine order or whether the Court exercises its general jurisdiction on the question of costs, the matter is one of general discretion. I turn then to the general rules as they apply to costs on the filing of a notice of discontinuance.
Order 22 of the Rules of Court deals with the subjects of “Withdrawal and Discontinuance”. The general proposition, as contained in r 2, is that a party requires the leave of the Court to discontinue an action unless the notice of the discontinuance is filed before the directions hearing that is appointed in the application: in that case leave is not required. Rule 3 provides that a party who discontinues before the first direction hearing or after the first direction hearing but before the close of pleadings:
“… shall be liable to pay the costs of the other party …”
However, O 22 r 2(1)(d) also provides that a party may discontinue at any time with the leave of the Court. Where discontinuance is effected under that particular provision, there is no specific mention in O 22 about costs. That, in my opinion, triggers the general discretionary power that is reserved to the court to investigate and adjudicate on the questions of costs. The operation of O 22 r 2(1)(a) was discussed by the Full Court in SCI Operations Pty Ltd v Trade Practices Commission (1984) 2 FCR 118. Lockhart J said at 162:
“Rule 2(1)(d) of O. 22 does not specify the matters which the court must take into account when considering an application for leave to discontinue; nor does the paragraph impose any fetter upon the exercise by the court of its discretion. It is for the court in the exercise of its discretion in each case to decide whether leave to discontinue should be granted and, if so, on what terms. The court must consider all the relevant circumstances including any injustice that may be sustained by any party if leave to discontinue is granted or refused as the case may be.”
The fact that the Court has a wide discretion as to the terms upon which leave to discontinue may be granted was also recognised by Sheppard J in the same case at 182:
“… it seems to me that the Court in deciding whether to grant leave and, if so, upon what terms that leave should be granted, has a wide discretion to do justice between the parties.”
In assessing the issue of costs, I have had regard to the following facts:
·Brivis did not oppose Seeley’s application to amend its particulars of objection;
·Brivis had been supplied on 10 April 2000, the day preceding the directions hearing, with a copy of the proposed amendment to the particulars of objection; that draft referred to the Heatshield device;
·Brivis did not seek particulars about the Heatshield’s device;
·Brivis did not seek a See v Scott-Paine order as a condition of agreeing to the amendment;
·For the reasons that are set out in the next paragraph, the nature of the Heatshield device could not have been earlier ascertained by Seeley or its advisers by diligent search;
·the nature of Brivis’ present application suggests that it regards the Heatshield device as likely to defeat its claim;
·Seeley was guilty of unreasonable delay in filing and serving its amended particulars of objection and its evidence with respect to the Heatshield device.
There is a burden on a respondent to disclose the existence of prior art, and it behoves a respondent to make diligent inquiries about the existence or possible existence of prior art. Counsel for Brivis was quite open in acknowledging that the Heatshield devise is a “vital piece of prior art”, but he was also equally open in accepting that one would not have expected Seeley to know of, or to have ascertained, the existence of the Heatshield device in the ordinary course of making diligent inquiries. The limited nature of Heatshield’s operations and of its sales were such that there was very little likelihood that a stranger – even within the same trade – could have learnt of the existence of the Heatshield device. On the material that is presently before the Court, it could not be said that Seeley had failed to make reasonable inquiries in the field of prior art. There is nothing in the material that has been placed before me (for the purpose of deciding this interlocutory issue) that points to Seeley, at the time when it filed its original particulars of objection, having failed to make reasonably diligent inquiries. The nature of the work that had been performed at Heatshield’s premises was such that it had not attracted any form of presentation to the public. On the contrary, it was a private arrangement involving very few people, the details of which would not be readily ascertainable to the most diligent searcher.
On the other hand, I reject the submission of counsel for Seeley that Seeley acted with reasonable diligence in bringing its case forward in relation to the Heatshield device. Having first obtained information about the existence of Mr Bruce Benfield and the nature of the evidence that he might be able to give in August 2000, it was not until April 2001 that Seeley applied for leave to amend its particulars of objection and it was September 2001 before it served the relevant affidavits on Brivis’ solicitors. This period, in excess of twelve months, was extravagantly large.
Were it not for the inordinate delay on Seeley’s part in supplying to Brivis full and detailed particulars of the Heatshield device until September 2001, I would have been inclined to conclude that this was not an appropriate case to relieve Brivis from the usual order that requires a party who discontinues to pay its opponent’s costs – I would have concluded that if Brivis chose to discontinue, it should pay Seeley’s costs in full. However, I believe that some recognition must be given to the consequences of Seeley’s delay. In my opinion, both parties have been guilty of unreasonable delay in the prosecution of their respective interests. Delay on the party of Brivis was such as to deny it some of the costs that it might otherwise have received if a See v Scott-Paine order were to be made. Seeley’s delay was such as to deprive it of the normal costs order that accompanies a notice of discontinuance.
Working upon the premise that Seeley should have given full particulars of the Heatshield device to Brivis within a reasonable time – and allowing a period of about four months or so as a reasonable time – I would conclude that if Brivis elects to discontinue within six weeks of this date, it should have to pay Seeley’s costs only up to 31 December 2000. As from that date, because of the unexplained delays of both parties, it seems to me that justice will be done if I order that both parties should bear their own costs including the costs of this motion and this order. This order is not, however, intended to interfere with any orders that might earlier have been made in favour of one or other of the parties. For the time being I will adjourn this application to a date subsequent to the expiration of six weeks from the date hereof so that I can ascertain what action Brivis will take. Thereafter either party is at liberty to have the matter brought on for further consideration on seven days notice. I apprehend that it will then be appropriate to make formal orders.
I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O’Loughlin. Associate:
Dated: 3 July 2002
Counsel for the Applicant: Mr BN Caine with Mr GR Tye Solicitor for the Applicant: Norman Waterhouse Counsel for the Respondent: Mr RJ Whitington QC with Mr GS Clarke Solicitor for the Respondent: Piper Alderman Date of Hearing: 18-19 March 2002 Date of Judgment: 3 July 2002
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