F45 Training Pty Ltd v Body Fit Training Company Pty Ltd (No 3)
[2022] FCA 162
•1 March 2022
FEDERAL COURT OF AUSTRALIA
F45 Training Pty Ltd v Body Fit Training Company Pty Ltd (No 3) [2022] FCA 162
File numbers: NSD 1003 of 2019
NSD 1795 of 2019Judgment of: NICHOLAS J Date of judgment: 1 March 2022 Catchwords: COSTS – where applicant’s claim for patent infringement dismissed and patents in suit revoked – whether respondents’ costs of infringement proceeding and preliminary discovery proceeding should be payable on an indemnity basis – whether rejection of Calderbank offer was imprudent or unreasonable
Held: application for indemnity costs refused
Legislation: Patents Act 1990 (Cth) s 18(1A)(a) Cases cited: F45 Training Pty Ltd v Body Fit Training Company Pty Ltd [2019] FCA 1911
F45 Training Pty Ltd v Body Fit Training Company Pty Ltd (No 2) [2022] FCA 96
Division: General Division Registry: New South Wales National Practice Area: Intellectual Property Sub-area: Patents and associated Statutes Number of paragraphs: 17 Date of hearing: Determined on the papers Counsel for the Applicant/Cross-Respondent: Mr C Dimitriadis SC Solicitor for the Applicant/Cross-Respondent: Baker McKenzie Counsel for the Respondents/Cross-Claimant: Mr R Cobden SC with Ms L Thomas and Mr E Thompson Solicitor for the Respondents/Cross-Claimant: MinterEllison – Gold Coast ORDERS
NSD 1003 of 2019 BETWEEN: F45 TRAINING PTY LTD (ACN 162 731 900)
Prospective Applicant
AND: BODY FIT TRAINING COMPANY PTY LTD
(ACN 622 444 008)Prospective Respondent
ORDER MADE BY:
NICHOLAS J
DATE OF ORDER:
1 MARCH 2022
THE COURT ORDERS THAT:
1.The prospective applicant pay the prospective respondent’s costs of this proceeding as taxed or agreed excluding the costs of the application for indemnity costs.
2.The prospective respondent pay its own costs of the application for indemnity costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
NSD 1795 of 2019 BETWEEN: F45 TRAINING PTY LTD (ACN 162 731 900)
Applicant
AND: BODY FIT TRAINING COMPANY PTY LTD
(ACN 622 444 008)First Respondent
BODY FIT TRAINING SOUTH YARRA PTY LTD
(and others named in the Schedule)
Second RespondentAND BETWEEN: BODY FIT TRAINING COMPANY PTY LTD
(ACN 622 444 008)Cross-Claimant
AND: F45 TRAINING PTY LTD (ACN 162 731 900)
Cross-Respondent
ORDER MADE BY:
NICHOLAS J
DATE OF ORDER:
1 MARCH 2022
THE COURT ORDERS THAT:
1.Notwithstanding order 4 made on 15 February 2022, the respondents must pay their own costs of their application for indemnity costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
NICHOLAS J:
Before me are two related costs issues. The first concerns a claim for indemnity costs made by the first respondent (“BFT”) in the preliminary discovery proceedings (“the PD proceeding”) and the second concerns a claim for indemnity costs made by the respondents in the infringement and revocation proceeding (“the substantive proceeding”).
I have previously delivered judgments in the PD proceeding (F45 Training Pty Ltd v Body Fit Training Company Pty Ltd [2019] FCA 1911) and in the substantive proceeding (F45 Training Pty Ltd v Body Fit Training Company Pty Ltd (No 2) [2022] FCA 96).
In the principal judgment I indicated that my provisional view was that there should be an order in the PD proceeding that the prospective applicant (“F45”) pay BFT’s costs in that proceeding. BFT has since filed a written submission accompanied by a supporting affidavit seeking costs of the PD proceeding on an indemnity basis.
The orders made by me in the substantive proceeding included orders dismissing F45’s claim, revoking each of the innovation patents in suit, and requiring F45 to pay BFT’s and the other respondents’ costs (including the costs of the cross-claim) as agreed or taxed. BFT and the other respondents have since filed a written submission seeking a variation of the costs order which would require F45 to pay their costs of the substantive proceeding on an indemnity basis.
For the reasons that follow I am not persuaded that an order for indemnity costs should be made in either proceeding. In both proceedings F45 is or will be required to pay costs on the ordinary basis.
In support of the applications for indemnity costs BFT and the other respondents rely on a Calderbank letter sent by the solicitors for BFT to F45 on 28 June 2019 in the PD proceeding. According to BFT’s submission, the letter “provided a succinct explanation of relevant aspects of system [sic] that BFT was using at that time” and “identified three integers of the asserted patent claims that are not present in the BFT system”. The letter also stated that there were “significant concerns regarding the validity of the patents in relation to whether the subject matter is patent eligible.” The letter invited F45 to withdraw the PD proceeding and the allegation of infringement on the basis that, if it did so, BFT would bear its own costs of responding to the correspondence and defending the application for preliminary discovery to the date of the letter. The letter advised that if the offer was not accepted it would be relied on on the question of costs, including indemnity costs. The letter required a response by 5.00pm, 2 July 2019 (ie. three clear days later).
At 9.51pm on 3 July 2019 BFT’s solicitors wrote to F45’s solicitors attaching an unsworn affidavit from Mr Falloon. According to BFT’s submission, this correspondence provided further explanation in response to questions raised by F45’s solicitors. The letter of 3 July 2019 again stated that BFT would bear its own costs if F45 withdrew the preliminary discovery application, but that if it proceeded, BFT would seek an order for indemnity costs. This letter required a response by 2.00pm the next day (ie. less than 24 hours later).
BFT also relied on a letter its solicitors sent to F45’s solicitors dated 18 July 2019. It is not clear what time of day that letter was sent, but it indicated that BFT would bear its own costs if F45 withdrew its preliminary discovery application before 9.00am the next day and that BFT would seek indemnity costs if F45 did not do so.
BFT’s written submissions note that an amended application was later filed in the PD proceeding and that application was eventually dismissed by consent. The circumstances in which that occurred are set out in the judgment delivered in the PD proceeding. In that judgment I noted at [8]-[9]:
[8]The respondent submitted that since the applicant’s application for preliminary discovery had been dismissed, it followed that the applicant had been unsuccessful in this proceeding and that, in accordance with what was said to be the usual rule, the applicant should be required to pay the respondent’s costs. I do not accept that submission.
[9]It will frequently happen in a proceeding for preliminary discovery that a respondent will voluntarily produce material to the applicant in advance of the hearing of the application which may provide the applicant with sufficient information to make a decision whether or not to bring a substantive proceeding without the need to proceed to a contested hearing. If the application for preliminary discovery is dismissed prior to the hearing on the basis that the applicant has obtained sufficient information to decide whether to commence a substantive proceeding, the Court will have regard to the circumstances in which the order was made including, in particular, whether by bringing the preliminary discovery proceeding the applicant was able to obtain access to information it required in order to decide whether or not to bring a substantive proceeding.
The order that I made in the PD proceeding reserved costs for consideration by a Judge of the Court in the substantive proceeding which had by that stage been commenced. During the course of argument that led me to make that order, BFT submitted that it should be awarded indemnity costs in the PD proceeding. As to this I said at [15]-[17]:
[15]I should record that the respondent submitted that the applicant should pay the respondent’s costs of and incidental to the preliminary discovery application on an indemnity basis. The justification for the respondent’s claim to indemnity costs is said to reside in the applicant’s failure to accept Calderbank offers made by the respondent on 28 June 2019 and 18 July 2019 and that documents and information provided to the applicant by the respondent prior to 5 July 2019 should have satisfied the applicant that the respondent does not infringe either patent.
[16]It follows from what I have already said that I do not propose to determine who should pay the costs of the preliminary discovery proceeding, or on what basis such costs should be paid at this time.
[17]If the Judge hearing the substantive proceeding is persuaded that either the preliminary discovery or the substantive proceedings were bound to fail, or that it was otherwise unreasonable for the applicant to commence or maintain this proceeding or the substantive proceeding, either at all, or from some particular point in time, then it will be open for him or her to make an award of costs on an indemnity basis.
The written submissions filed by BFT in support of its application for indemnity costs do not advance any submission that either the PD proceeding or the substantive proceeding was bound to fail, or that it was otherwise unreasonable for F45 to commence or maintain either the PD proceeding or the substantive proceeding. However BFT does submit that F45’s failure to accept the offer of 28 June 2019 was “imprudent and unreasonable”.
The failure of a party to accept a Calderbank offer does not give rise to any presumption that costs should be awarded to the offeror on an indemnity basis in the event that the offeror is successful in the proceeding. In any event, the order dismissing the PD proceeding was made in circumstances where it cannot be said that F45 was unsuccessful in the PD proceeding.
In considering whether F45’s rejection of any of the offers made in the PD proceeding was imprudent or unreasonable, I have had regard to Mr Falloon’s evidence given at the trial which showed that the affidavit made by him in the PD proceedings was misleading in an important respect. So too was correspondence sent by BFT’s solicitors to F45’s solicitors on his instructions. I refer, in particular, to evidence given by him during his cross-examination in the substantive proceeding (see Transcript pp 78 and 97). In the circumstances, I am not persuaded that F45 acted imprudently or unreasonably in not accepting BFT’s offers, particularly when the time for their acceptance was unreasonably short.
So far as the substantive proceeding is concerned, BFT and the other respondents again rely on the same offers made by BFT in the PD proceeding. In the circumstances where I am not persuaded that F45’s refusal of those offers was imprudent or unreasonable, and where there is no evidence of any further offer being made by BFT in the substantive proceeding, BFT and the other respondents’ application for an order that F45 pay costs in that proceeding on an indemnity basis should also be rejected.
BFT placed some emphasis in its submissions on the fact that I held that the patents were invalid. It is true that BFT’s solicitors raised the issue of validity of the patents in correspondence exchanged with F45’s solicitors during the course of the PD proceeding. However, that correspondence stopped short of providing any meaningful exposition of the challenge to validity based on s 18(1A)(a) of the Patents Act 1990 (Cth). Moreover, when BFT was later sued for infringement, it initially sought to defend the proceeding not on the basis that the patents were invalid, but solely on the basis that they were not infringed. The issue of validity was first raised by BFT in the substantive proceeding about six months after it was commenced with the filing of a cross-claim on 23 June 2020. BFT’s own hesitation in pursuing its revocation case does not sit comfortably with its submission that F45’s conduct in rejecting the offers was imprudent or unreasonable.
In the PD proceeding, there will be an order requiring F45 to pay BFT’s costs of that proceeding as taxed or agreed excluding the costs of BFT’s application for indemnity costs. BFT must pay its own costs of that application. It is not necessary to make any further order in relation to costs in the substantive proceeding, save for an order requiring BFT and the other respondents to pay their own costs of their application for indemnity costs.
Orders accordingly.
I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Nicholas. Associate:
Dated: 1 March 2022
SCHEDULE OF PARTIES
NSD 1795 of 2019 Respondents
Third Respondent:
BODY FIT TRAINING PRAHRAN PTY LTD
Fourth Respondent:
BODY FIT TRAINING ST KILDA PTY LTD
Fifth Respondent:
BODY FIT TRAINING RICHMOND PTY LTD
Sixth Respondent:
CAMERON JOHN FALLON
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