Cementech Pty Ltd v Boral Masonry Ltd

Case [2014] FCA 794

FEDERAL COURT OF AUSTRALIA

Cementech Pty Ltd v Boral Masonry Ltd

[2014] FCA 794

Citation: Cementech Pty Ltd v Boral Masonry Ltd [2014] FCA 794
Parties: CEMENTECH PTY LTD (ACN 117 967 192) v BORAL MASONRY LIMITED (ACN 009 223 718)
CEMENTECH PTY LTD (ACN 117 967 192) v ADBRI MASONRY PTY LTD (ACN 000 687 521) 
File numbers: NSD 132 of 2014
NSD 260 of 2014
Judge: RARES J
Date of judgment: 28 May 2014
Legislation: Corporations Act 2001 (Cth)
Federal Court of Australia Act 1976 (Cth)
Patents Act 1990 (Cth)
Cases cited: Cementech Pty Limited v Austral Masonry (NSW) Pty Limited [2013] NSWSC 1888 referred to
Probiotec Ltd v University of Melbourne (2008) 166 FCR 30 applied
Russo v Resource Developments International Pty Ltd [2003] NSWSC 239 referred to
Date of hearing: 28 May 2014
Place: Sydney
Division: GENERAL DIVISION
Category: No catchwords
Number of paragraphs: 44
Counsel for the Applicant: Mr A D B Fox
Solicitor for the Applicant: Hall Partners
Counsel for the Respondent (Boral):

Mr C Dimitriadis
Solicitor for the Respondent (Boral):

DLA Piper Australia
Counsel for the Respondent (Adbri):

Ms C L Cochrane
Solicitor for the Respondent (Adbri):

Minter Ellison

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 132 of 2014   
BETWEEN:

CEMENTECH PTY LTD (ACN 117 967 192)
Applicant
AND:

BORAL MASONRY LIMITED (ACN 000 223 718)
Respondent

JUDGE:

RARES J

DATE OF ORDER:

28 MAY 2014

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The applicant provide security for costs of the respondent in the following tranches:

(a)in the amount of $90,000, by payment into a bank account of the Court or the provision of a bank guarantee, for costs incurred up to the close of pleadings;

(b)in the amount of $170,000, by payment into a bank account of the Court or the provision of a bank guarantee, for costs incurred up to the close of filing of evidence.

2.The proceedings be stayed until such time as the applicant has complied with order 1(a).

3.Upon the close of pleadings, the proceedings be stayed again until such time as the applicant has complied with order 1(b).

4.The parties have liberty to apply to the court to revisit the amount fixed in order 1(b) on the basis that, having regard to the respondent’s defence, cross-claim and particulars of invalidity, when filed, the amount is considered to do injustice to either party.

5.The applicant pay 60% of the respondent’s costs of the interlocutory application filed on 9 April 2014.

6.The respondent has liberty to apply for further amounts by way of security.

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


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 260 of 2014
BETWEEN:

CEMENTECH PTY LTD (ACN 117 967 192)
Applicant
AND:

ADBRI MASONRY LIMITED (ACN 009 223 718)
Respondent

JUDGE:

RARES J

DATE OF ORDER:

28 MAY 2014

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The…

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AGLC
Cementech Pty Ltd v Boral Masonry Ltd [2014] FCA 794
Case
[2014] FCA 794
Decision Date

CaseChat Overview and Summary

In the case of Cementech Pty Ltd v Boral Masonry Ltd, the court addressed the issue of security for costs in the context of patent infringement proceedings. Cementech sought an order for security for costs against Adbri, who had joined the proceedings as a defendant in the patent infringement case. Adbri, in turn, sought a substantial amount of security for costs, arguing that the proceedings were complex and costly due to the nature of the claims and defences involved. The central legal issue was whether the court should grant Adbri's application for security for costs and, if so, in what amount.

The court considered the arguments presented by both parties and the implications of granting security for costs. Cementech argued that the order would impede their ability to proceed with the litigation effectively, especially considering their limited resources compared to the well-funded respondents. They also contended that the cross-claims challenging the validity of the patent should not be subject to security because they were not inherently defensive. On the other hand, Adbri submitted that the proceedings were complex and costly, justifying the requested security. The court found that the nature of the claims and defences, along with the significant resources already expended by Adbri, warranted an order for security for costs. The court ultimately granted Adbri's application for security for costs, but in an amount less than that sought. The court concluded that the proposed amount was excessive, taking into account the public policy considerations and the overall efficiency of the court's caseload.

Orders

Orders of the court

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Background

Background to the litigation

The efficient disposal of the Court’s overall caseload would be significantly impeded by the parties’ suggestion that Boral should be completely free of the Parliamentary public policy expressed in s 19(2) that it be at risk for re-litigating an issue that had already been determined. And, it would cause other litigants to be displaced in their ability to have access to the Court by reason of those further proceedings clogging the Court’s lists. It is not appropriate for parties to agree on terms that do not have proper regard to the public policy in s 19(2) and the overarching purpose. I am of opinion that the conditions proposed are not appropriate ones on which to order a stay.Background - Adbri’s claim for security The Adbri proceedings were conducted initially in the Supreme Court. Originally they had been commenced solely against Austral. On 2 August 2013, about a week after their commencement, Cementech joined Adbri. Adbri had received a letter of demand on 28 June 2013 with the then-proposed version of Cementech’s pleading of infringement against it. The evidence of Adbri’s solicitor, Wayne McMaster, indicated that Adbri commenced work in preparing its defence and cross-claim from 28 June 2013, although the proceedings had not yet been instituted against it. Adbri foreshadowed that it would seek security for costs and, on 10 October 2013, it filed a notice of motion in the Supreme Court for security. It sought a total of $500,000 by way of security. This was based on the evidence of Mr McMaster. He estimated that the total cost, in a solicitor-client assessment, of preparing a defence and cross-claim impugning the validity of the patent would be $279,100. He estimated that, in addition, there would subsequently be further costs for reviewing and preparing evidence totalling $417,900, and that the costs for the general conduct of the matter up to the time at which the infringement of validity evidence was complete would amount to another $204,975, totalling $901,975. From that acorn, Adbri developed its claim for the figure of $500,000 as the amount it sought by way of security. (All the amounts claimed by both Adbri and Boral exclude goods and services tax.) Mr McMaster said, in his affidavit of 28 November 2013, that the actual costs incurred by Adbri between 28 June 2013, being the date of receipt of Cementech’s letter of demand, and 26 November 2013, were approximately $235,000. Those included the costs attributed to work of a senior associate who had billed $136,404, which, according to the scale of fees, is equivalent to approximately 250 hours of work. Mr McMaster said that he considered that those costs had been reasonably and properly incurred by Adbri from the commencement of the dispute, having regard to the vague and imprecise nature of Cementech’s allegations of infringement, the significant cross-claim, number of grounds of invalidity investigated by Adbri, and the number of interlocutory disputes and associated voluminous correspondence necessitated as a result of the involvement of Adbri.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Cementech argued that there should be no order for security for costs because, based on Mr Rafidi's evidence, such an order would stultify its ability to conduct either of the proceedings. It argued that there was a public interest in its being able to litigate the validity of, and to enforce, the claims in its patent. It contended that, because each of Adbri and Boral were significant, large companies associated with well-resourced public companies, and Cementech was a small, family-held company, no particular predisposition to ordering security to protect the interests of the two respondents should be assumed. It argued that the cross-claims challenging the validity of the patent should not be the subject of any grant of security because such cross-claims were not inherently defensive by nature. It submitted that the context, nature and extent of the matters that any such cross-claim would raise in either of the proceedings was not known. It argued that, as was evident from Mr McMaster's affidavit of 9 October 2013, a great deal of work had been done by Adbri from the day of the letter of demand, of 28 June 2013, to advance both invalidity and a defence of non-infringement which, by 28 November 2013, totalled about $235,000. Cementech noted that neither respondent’s evidence had sought to distinguish between the costs of its substantive defence against the infringement of the patent’s claims and the other aspects of its defence and cross-claim that asserted that the patent was invalid. Cementech argued that it was evident that, by reason of the work already done, Adbri was very close to being able to file and serve its defence, as indeed it had offered to do, within 28 days, in a letter of 31 March 2014. Alternatively, if security were ordered, Cementech argued that it should not include an allowance for that part of the defences consisting of the positive cross-claims that the patent was invalid, and any security should not be in the quantums asserted.Consideration I accept that Mr Rafidi's business career has demonstrated that one thing he does not wish to do is to go bankrupt, and that his proffer of a guarantee is likely to have some substantive value. His sons’ offers of guarantees are not backed by assets. I am not satisfied by the evidence of Cementech that it is without resource or assets to marshal to be able to provide security. Mr Rafidi's evidence in chief did not include what he subsequently offered in the course of cross-examination, namely, that he would provide a detailed explanation of his assets and liabilities and those of the companies in which he was interested or involved. The absence of that material and the fact that there is no explanation as to how Cementech is funding the three patent infringement cases and its proceedings involving Bankwest, together with the late revelations of the real property interest that Mr Rafidi says, and I am prepared to accept, he held simply as a bare trustee, leave me unsatisfied that I am in a position to find that these two litigations would not be able to proceed if security for costs were ordered.