Brooke & Mackenzie Pty Ltd v El-Gra Engineering Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Brooke & Mackenzie Pty Ltd v El-Gra Engineering Pty Ltd [2015] FCA 1495

Citation: Brooke & Mackenzie Pty Ltd v El-Gra Engineering Pty Ltd [2015] FCA 1495
Parties: BROOKE & MACKENZIE PTY LTD (ACN 084 285 736) and MUNRO ENGINEERS PTY LTD (ACN 071 368 422) v EL-GRA ENGINEERING PTY LTD (ACN 097 406 105) and ELTON ROBINSON; EL-GRA ENGINEERING PTY LTD (ACN 097 406 105); BROOKE & MACKENZIE PTY LTD (ACN 084 285 736)
File number: VID 798 of 2014
Judge: MIDDLETON J
Date of judgment: 23 December 2015
Catchwords:

PATENTS – infringement proceedings – cross-claim for invalidity – later amendment of particulars of grounds of invalidity – whether a See v Scott-Paine order is appropriate – consideration of circumstances in which such orders are not appropriate.

COSTS – application for leave to discontinue – general discretion as to costs – application of r 26.12(7) of the Federal Court Rules 2011 that the discontinuing party is liable for costs unless the Court is satisfied that there is a good reason for ordering otherwise – whether the parties acted reasonably in prosecuting and defending the proceeding.

COSTS – overarching purpose – duties of parties and legal representatives.

COSTS – offers of compromise – indemnity costs application.
Legislation: Access to Justice (Civil Litigation Reforms) Amendment Act 2009 (Cth)
Evidence Act 1995 (Cth)
Federal Court of Australia Act 1976 (Cth)
Federal Court Rules 2011 (Cth)
Patents Act 1990 (Cth)
Cases cited: A’Van Campers Pty Ltd v Camoflag Pty Ltd (2003) 57 IPR 494
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225
Croft v Evertop Investments Pty Ltd [2014] FCA 1098
Fresenius Kabi Deutschland GmbH & Ors v Carefusion 303, Inc [2012] 1 All ER 794
GEC Alsthom Limited’s Patent [1996] FSR 415
Lo v Australian Community Pharmacy Authority [2013] FCA 639
Mineralogy Pty Limited v National Native Title Tribunal [1998] FCA 1700
Ryan v Primesafe (2015) 323 ALR 107
Sacco t/as Globeline Automotive Service v FV Bilotto Nominees Pty Ltd [2011] FCA 1287
See v Scott-Paine (1932) 50 RPC 56
Seven Network Ltd v Commissioner of Taxation (No 2) (2015) 324 ALR 137
Taleb v GM Holden Ltd (2011) 286 ALR 309
Travaglini v Raccuia [2012] FCA 620
Ugly Tribe Co Pty Ltd v Sikola & Ors [2001] VSC 189
Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd (1999) 46 IPR 173
Date of hearing: 10 August 2015 and 4 September 2015
Place: Melbourne
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 62
Counsel for the Applicants and Cross-Respondent: Mr T Cordiner
Solicitor for the Applicants and Cross-Respondent: FAL Lawyers
Counsel for the Respondents and Cross-Claimant: Mr L Merrick with Mr M Fleming
Solicitor for the Respondents and Cross-Claimant: Griffith Hack Lawyers

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION

VID 798 of 2014
BETWEEN:

BROOKE & MACKENZIE PTY LTD (ACN 084 285 736)
First Applicant

MUNRO ENGINEERS PTY LTD (ACN 071 368 422)
Second Applicant

EL-GRA ENGINEERING PTY…

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Details
Case
[2015] FCA 1495
Decision Date

CaseChat Overview and Summary

Brooke & Mackenzie Pty Ltd brought proceedings against El-Gra Engineering Pty Ltd alleging patent infringement. El-Gra cross-claimed for the patent to be declared invalid. The primary issue before the court was whether Brooke & Mackenzie were entitled to discontinue the proceeding and surrender the patent in light of new evidence of prior art presented by El-Gra, and if so, what costs orders should be made. The court also needed to consider whether El-Gra was entitled to indemnity costs for the Applicants' conduct in the proceedings.

The court found that the Applicants were entitled to discontinue the proceeding and surrender the patent because the evidence presented by El-Gra showed that the patent was invalid. However, the Applicants were not entitled to indemnity costs as they had acted reasonably in prosecuting and defending the proceeding. The court found that the Applicants had not acted unreasonably in failing to earlier discover the prior art evidence presented by El-Gra. However, the Applicants were liable for the majority of the Respondents' costs of the interlocutory application and the application for indemnity costs.

The court ordered that Brooke & Mackenzie discontinue the proceeding, surrender the patent, and pay the majority of El-Gra's costs of and incidental to the proceeding. The surrender of the patent resulted in the dismissal of El-Gra's cross-claim for invalidity. The court also discharged a subpoena issued by Brooke & Mackenzie.

Orders

Orders of the court

1. The Applicants have leave to discontinue the Originating Application filed on 24 December 2014.

2. The First Applicant be granted leave to surrender the Australian Innovation Patent No 2010101083 (‘Patent’).

3. The cross-claim filed on 16 March 2015 be dismissed upon the surrender of the Patent pursuant to s 137 of the Patents Act 1990 (Cth).

4. The subpoena addressed to Mr Jamie Kochaniewicz dated 29 June 2015 be discharged.

5. The Applicants to pay the Respondents’ costs of and incidental to this proceeding (other than in respect of the interlocutory application filed on 24 July 2015), such costs to be taxed, if not agreed, on a party/party basis.

6. In addition to the order for costs made in favour of the Respondents on 10 August 2015, the Applicants pay 90 percent of the Respondents’ costs of and in connection with the interlocutory application filed on 24 July 2015 and the application for indemnity costs brought by the Respondents, such costs to be taxed, if not agreed, on a party/party basis.

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

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

In Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234, Sheppard J stated the following as a non-exhaustive summary of the kinds of conduct justifying an order for indemnity costs:I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.EVIDENCEApplicants The following affidavits were filed in support of the Applicants’ interlocutory application:·Two affidavits of Marianne Dunham, lawyer of FAL Lawyers for the Applicants, made on 24 July 2015 and 4 August 2015;·Affidavit of Rodney Brooke, engineer and Director of Brooke & Mackenzie, affirmed on 14 August 2015 (‘Brooke Affidavit’); and·Affidavit of Warren McLean, General Manager of Munro Engineering Pty Ltd, affirmed on 14 August 2015 (‘McLean Affidavit’).Respondents The Respondents in resisting the making of the costs orders sought by the Applicants and in seeking indemnity costs relied upon the following affidavits:·Three affidavits of Graeme Robert Robinson, Chief Design Engineer and General Manager of El-Gra, affirmed on 29 June 2015, 31 July 2015 and 27 August 2015;·Affidavit of Michael James Mason, Managing Director of Mike Mason Fencing Pty Ltd (a fencing and road barrier contractor), sworn on 1 July 2015 (‘Mason Affidavit’);·Affidavit of John Nazzareno D’Angelo, founder and Research and Development Manager of J.N. & R. Engineering Pty Ltd, sworn on 2 July 2015; and·Two affidavits of Timothy David Mahood, Principal of Griffith Hack Lawyers, lawyers for the Respondents, both sworn on 31 July 2015. No cross-examination of any deponent took place, although there were objections taken to certain parts of the affidavits of both parties to which I will come later in these reasons.CONSIDERATIONCosts generally

Decision

Reasons for decision

As to the Applicants’ objections, I do not uphold them on the basis that the evidence objected to is relevant to the reasonableness of the Respondents’ conduct in the proceedings, irrespective of whether or not the statements made are accepted as being true and impeach the validity of the Patent. I am not conducting a mini trial in relation to the validity of the Patent. However, the evidence is relevant to the conduct of the litigation and the state of mind of the various parties preparing for trial and acting in accordance with the normal conduct expected by the Court of a litigant: see Taleb v GM Holden Ltd (2011) 286 ALR 309 at [49] per Finn and Bennett JJ and Seven Network Ltd v Commissioner of Taxation (No 2) (2015) 324 ALR 137 at [17] per Bennett J. CONCLUSION Most of the argument on this cost contest related to the application by the Applicants, which has been unsuccessful. The Respondents’ indemnity costs application only took up a minor proportion of the overall contest. The Respondents have been unsuccessful on this aspect but the evidence and argument on this aspect was in the main part and parcel of the overall contest. It is appropriate that the interlocutory application of the Applicants and the Respondents’ claim for indemnity costs be treated as effectively one contest and should be taxed accordingly. I will deduct 10 percent of the Respondents’ entitlement to costs (treating all cost applications brought by the parties as one contest) to take account of the Respondents’ failure on the indemnity costs application. Based upon the above conclusions and the submissions of the parties, I will order that:(1)The Applicants have leave to discontinue the Originating Application filed on 24 December 2014.(2)The First Applicant be granted leave to surrender the Australian Innovation Patent No 2010101083.(3)The cross-claim filed on 16 March 2015 be dismissed upon the surrender of the Patent pursuant to s 137 of the Patents Act 1990 (Cth).(4)The subpoena addressed to Mr Jamie Kochaniewicz dated 29 June 2015 be discharged.(5)The Applicants to pay the Respondents’ costs of and incidental to this proceeding (other than in respect of the interlocutory application filed on 24 July 2015), such costs to be taxed, if not agreed, on a party/party basis.(6)In addition to the order for costs made in favour of the Respondents on 10 August 2015, the Applicants pay 90 percent of the Respondents’ costs of and in connection with the interlocutory application filed on 24 July 2015 and the application for indemnity costs brought by the Respondents, such costs to be taxed, if not agreed, on a party/party basis.

Ratio Decidendi

Legal Principle Established

No cross-examination of any deponent took place, although there were objections taken to certain parts of the affidavits of both parties to which I will come later in these reasons.CONSIDERATIONCosts generally Prior to the proceeding commencing on 22 December 2014, the parties were engaged in correspondence regarding the allegations of infringement and invalidity of the Patent. In particular, the Respondents asserted that the claims of the Patent were anticipated by El-Gra’s own post driver which had been displayed at the Warragul Field Day in 2009. That assertion was rejected by the Applicants as there was some dispute about the sufficiency of the evidence being provided by the Respondents in demonstrating this fact. The proceeding then commenced on 22 December 2014. At the first directions hearing on 5 February 2015, the Respondents sought and obtained leave until 16 March 2015 to file the cross-claim for invalidity. Other orders made on 5 February 2015 required mediation and the filing of evidence, and the matter was set down for trial on 10 August 2015. The Respondents did not seek to commence preparation of their evidence before the mediation. I accept that the course now taken by the Applicants in seeking to discontinue the proceeding was adopted in light of the Mason Affidavit filed by the Respondents and the amended particulars of invalidity. The evidence of Mr Mason and the amended particulars are to the effect that Mr Mason had made and publicly operated a prior art post driver before the priority date of the Patent (‘Initial MM Post Driver’). The Initial MM Post Driver plainly anticipated both claims of the Patent. Until the Mason Affidavit, the Applicants were unaware of the Initial MM Post Driver (or any other relevant post driver of Mr Mason). The Applicants contended that, had the Respondents acted with appropriate diligence, especially in light of the position taken by the Applicants in relation to the other prior art asserted by the Respondents, the Respondents should have given notice of the Initial MM Post Driver at the time El-Gra served its original particulars of invalidity on 16 March 2015. Mr Graeme Robinson sought to explain why he did not obtain evidence from Mr Mason earlier about the Initial MM Post Driver, by suggesting that he was only aware of the latest range of Mike Mason Fencing Pty Ltd’s hydraulic percussion post drivers (‘Recent MM Post Driver’). It was submitted by the Applicants that the delay in seeking to obtain evidence of the information contained in the Mason Affidavit was not properly explained given that:(a)the dispute arose in September 2014;(b)it was apparent even before the proceeding commenced that the Applicants did not accept the assertions that the Respondents had evidence of prior art machines that anticipated the claims of the Patent; and(c)the Respondents were given until 16 March 2015 to file their cross-claim (with the proceeding commencing just before Christmas the previous year).