Speedy Gantry Hire Pty Ltd (ACN 010 593 414) v Preston Erection Pty Ltd (ACN 003 991 062)

[1997] FCA 78

NOT FOR GENERAL DISTRIBUTION
                 NO QUESTION OF PRINCIPLE

IN THE FEDERAL COURT OF AUSTRALIA )
QUEENSLAND DISTRICT REGISTRY     )        No QG 182 of 1995
GENERAL DIVISION                 )

BETWEEN:

SPEEDY GANTRY HIRE PTY LTD (ACN 010 593 414)
         Applicant/Cross Respondent

AND:

PRESTON ERECTION PTY LTD (ACN 003 991 062)
First Respondent/First Cross Claimant

JOHN CLEMENT PRESTON
     Second Respondent/Second Cross Claimant

CORAM:Lindgren J

PLACE:Sydney

DATE:10 February 1997

REASONS FOR JUDGMENT
  (ex tempore)
INTRODUCTION:
The application in this proceeding was filed on 24 November 1995 in the Queensland District Registry of the Court.  The applicant seeks relief based on alleged infringement of its patent 578,176 ("the Patent") by the respondents.  It seeks a declaration as to the validity of the Patent, injunctive relief, damages and other remedies.  The Patent is described as "Modular Gantry Assemblies Providing Temporary Pedestrian Thoroughfares".   The first respondent, of which the second respondent is a director, manufactures, hires and sells gantry systems.

On 13 February 1996, upon the giving of an undertaking as to damages by the applicant, interlocutory injunctive relief was granted to it. On 6 March the proceeding was transferred to this Registry. On 7 June directions were made. On 4 July a cross claim was filed. By the cross claim, the cross claimants, the first and second respondents, counter-claimed for revocation of the patent under section 121 of the Patents Act 1990. The present motion is for leave to file an amended cross claim.

FACTS
Particulars of invalidity are included in the cross claim.  It is said that the Patent is invalidated by lack of an inventive step on the basis that it was obvious to a person skilled in the prior art of manufacture and construction of temporary scaffolding in the light of the common general knowledge as it existed in the patent area before the priority date.  The prior art base is said to be found in certain published available documents.  Particulars of those documents are given.  They are four overseas patents.  It is also said that the alleged invention was not novel in the light of the prior art base.

In the cross claim, the cross claimants further say that by reason of the injunction, they have suffered loss and damage in the form of loss of sales and loss of goodwill.  They seek an order revoking the Patent, damages, interest and costs. 

On 1 November 1996 further directions were made for the
conduct of the matter.  When the proceeding was before me for directions on 3 February 1997, the respondents made it clear that they wished to file an amended cross claim and I gave directions as a result of which a notice of motion was filed on 4 February 1997 returnable today.  It is that motion which has been heard this morning and to which these reasons relate.

By the terms of their notice of motion, the respondents seek leave to file an "amended cross claim in the form annexed to the affidavit of Mr J C Preston filed herein."  In fact there is no cross‑claim annexed to Mr Preston's affidavit.  The amended cross‑claim which is sought to be filed is in the form of "MFI 1" which was handed up in Court.

The proposed amended cross‑claim would omit the references to two of the four patents and would add references to three others.  But it is not this that has caused the applicant to resist the amendment.  Rather, it is an amendment which seeks to add to the particulars of the published documents the following:

"Australian Letters Patent

573384 and the diagram

which is annexure "C"

to the affidavit sworn on

31 January 1997 by John

Clement Preston;" and

"the Preston Folding Scaffold

which is the subject of

paragraphs 9 to 18 of the

affidavit sworn on 31 

January 1997 by John

Clement Preston."

It is proposed to amend the cross‑claim in respects additional to those already mentioned, but these need not be discussed, since the issue on which the argument has turned is whether the respondents should be allowed to include in their amended cross‑claim the material which I have quoted. 

It will be necessary, in due course, to go to Mr Preston's affidavit of 31 January 1997 in order to understand the significance of that material.  Before doing so, I should note that on 25 November 1996, Dibbs, Crowther and Osborne, the solicitors for the respondents, wrote to Bennett & Philp, the solicitors for the applicant, enclosing a copy of a proposed amended cross-claim. This document did not, however, refer to the critical amendment which has generated the difference between the parties to which I have referred.  In fact, as counsel for the applicant has pointed out, there was a considerable exchange of correspondence between the solicitors for the respective parties in relation to progress of the matter generally and amendment of the cross-claim, before the critical amendment was raised by the respondents but recently. 

In an affidavit of Dale James Kemp sworn 7 February 1997 in support of the motion, Mr Kemp, who is a partner of Dibbs, Crowther and Osborne, and who, I think, has the general supervision of the matter in that firm says this: 

"6.On or about 20 January 1997 I received from Mr Preston a copy of Australian Letters patent 573384.  I am informed by Mr Preston and verily believe that on 6 January 1997 he had a conversation with his patent attorney.  As a result of that conversation Mr Preston attempted to locate a copy of Australian Letters patent 573384.  I am informed by Mr Preston and verily believe that prior to 6 January 1997 he had not understood the relevance of Australian Letters Patent 573384 to these proceedings and only forwarded a copy of his patent to his patent attorney between 6 and 14 January 1997 who I am informed and verily believe advised him to make that document available to his lawyers."

I turn now to the affidavit of Mr Preston sworn 31 January 1997 in support of the motion.  In paras 1 to 6, Mr Preston deposes to his experience in what might be referred to as "the scaffolding industry".  That experience has included the design of scaffolding and hoardings and of improvements to them.  He annexes to his affidavit a "patent summary" dated 2 November 1994 which he had caused to be prepared for the purpose of his business, recording some of the patents which he had applied for or been granted since the mid 1970s. 

The document was prepared by his patent attorneys.  It seems clear that Mr Preston is familiar, not only with practical aspects of scaffolding and hoarding, but also with the subjects of design, invention and the obtaining of patents in relation to them.

According to his affidavit, in or about 1983 he commenced work on a design for a combination modular office and pedestrian
gantry.  He annexes to his affidavit a diagram which he prepared at that time.  I need not discuss in detail his evidence in relation to the design.  He says that he inquired of a number of builders and competitors as to whether they were prepared to assist in the production or financing of the concept, or to use it on building sites.

He says that in 1983 or 1984 he also began work on the design of a collapsible scaffolding module which could be erected off site and which would be easily transportable.  He says that he made prototypes of that module and in September 1984 applied for a patent which was subsequently granted as the Patent.

Mr Preston says that after the provisional patent application was lodged, he organised a demonstration of two prototypes of the module on a property next to his office at Silverwater; that he prepared brochures about the module and sent them to people in the building industry; and that he telephoned individuals to promote the demonstration.  He annexes a diary entry dated 30 September 1984 in support.

According to the affidavit, the demonstration took place on a date in late 1984 when Mr Preston was present and saw about 15 persons inspect the two prototype modules.  Mr Preston annexes to his affidavit photographs of the prototypes.  After the demonstration, the prototypes remained on display for a time.  Subsequently, Mr Preston met with about 30 of his employees and discussed the modules, ways of improving them, and the
subject of investment in them.

There was further display of the modules in 1985.  For the purpose of an engineering and building construction industry "field day" held on 27 March 1985, Mr Preston sent out some 200 copies of the brochure referred to earlier, with a view to promoting the demonstration of the modules.  After the Patent was applied for in September 1984, Mr Preston caused some 40 to 50 modules to be manufactured by Preston Engineering Pty Limited.  However, the business of Preston Engineering Pty Limited was sold in about July 1989.

The point of the rather lengthy account given above is that it is surprising that it has taken so long, during the currency of the present proceeding, for Mr Preston to come to the view that his activity in 1984 and 1985 may have some relevance to the cross‑claim for revocation.  Mr Preston does not, in his affidavit, explain why the evidence relating to the Patent was not disclosed to his legal advisers until so late in the day.  The reason could scarcely be naivety or inexperience of Mr Preston. 

The business of the applicant is that of the manufacture and hire of modular gantry units.  It hires out its equipment to customers.  It opposes the application for leave to amend on several grounds.  In support, it has read an affidavit of Anthony James Bennett, a partner of Bennett & Philp, its solicitors.  That affidavit gives an account of the history of
the proceeding and makes out a case of default by the respondents in compliance with directions.  On 7 June 1996 the respondents were directed to file and serve any defence and cross-claim including particulars of invalidity by 21 June 1996.  It will be recalled that the existing cross-claim was filed on 4 July.  Other directions have been made from time to time subsequently.  On 12 November 1996 Mr Bennett travelled to Sydney to inspect the respondents' discovered documents.  One of the points made in opposition to the amendment is that it will be necessary for inspection to take place again, since other documents will be made discoverable by the amendment if it is allowed. 

REASONING
I hope I do not do any injustice to the affidavit of Mr Bennett, which in fact gives a succinct and useful account of the history of the matter, if I come immediately to para 25 in which he summarises the reasons why the applicant opposes the application to amend.  The first reason is that delay will be caused.  He demonstrates that some 12 weeks' delay will be involved since the new material involves a radical departure from that on which the parties have proceeded to date.  The case has not yet been fixed for hearing and Mr Bennett's point is that the delay will occur before the case is ready to be set down.  One matter worth noting is that it is possible, although usually not desirable, for a proceeding to be set down for hearing while there are some procedural steps still to be attended to.  I do not say that this will occur in the
present case, although it might. 

Perhaps more importantly, Mr Bennett's second ground is that the applicant will be caused prejudice.  The applicant wishes to sell its business and its managing director, Mr Nielsen, wishes to retire.  Apparently the business was placed on the market in the second half of last year and a purchaser was found, but the sale fell through, one reason being the currency of the present proceeding.  Mr Bennett asserts in his affidavit that the attack on the validity of "the business" [sic - the Patent] in effect makes it impossible for the applicant's business to be sold. 

There is annexed to Mr Bennett's affidavit an extract from a without prejudice letter dated 15 January 1997 from Preston International Pty Limited to Mr Nielsen in which the signatory, Mr Preston, makes it clear that he is aware that the applicant is trying to sell its business.   The letter states that the current litigation cannot assist such a sale and suggests that a settlement of the proceeding occur to get rid of the litigation, so that the applicant can proceed with the sale of its business. 

No doubt it is galling for the applicant to suffer a further delay and to suffer a difficulty in connection with the sale of its business.  An important matter to take into account, however, is that it is in the interest of any purchaser to know that the Patent is or is not valid.  To put the matter
differently, it seems to me to be in the interest of the market of prospective purchasers of the applicant's business and in the public interest, that if the applicant is not entitled to the monopoly given by the Patent, this should be revealed rather than suppressed.  Of course it goes without saying that I have no view as to whether there is any merit whatever in the amendment sought to be made, but the application has not been opposed on the ground that the amendment sought to be made is irrelevant or demonstrably futile.

The third matter raised by the applicant in opposition is that it will be exposed to substantial additional costs if the amendment is allowed.  For one thing, as Mr Bennett says, it may be necessary for him and others to travel to Sydney for a further inspection of documents.  But costs thrown away by an amendment must usually be paid by the amending party.

At the end of the day, I think that the amendment should be allowed.  The case has not yet been fixed for hearing.  It is not suggested that the further particulars of invalidity would not have been appropriately given if they had been given initially.  It is not put that they are unworthy of consideration on a final hearing.

Some of the matters to which Mr Bennett refers in his affidavit can be met in other ways.  On the question of costs, for example, my preliminary impression, in the absence of more
extensive evidence led by the respondents to explain the lateness of the proposed amendment is that there has been a rather cavalier attitude to the matter which, it seems, has unnecessarily and unreasonably inflicted cost on the applicant.  I do not know what costs will be thrown away by the amendment, but my present intention is to order that the respondents pay such costs on an indemnity basis. 

I will not make that order this afternoon because the question of indemnity costs was not explored in submissions and it may be that the respondents will wish to have an opportunity of putting on evidence in relation to that issue.  But if that evidence is not forthcoming, I will order the respondents to pay the applicant's costs thrown away by the amendment on an indemnity basis.

The next matter is the question of the timetable from here on.  The conduct of the matter should be kept under close review and a tight timetable should be laid down and adhered to.  In fairness to the respondents in this respect, it has been pointed out on their behalf that there have been some defaults to date by the applicant as well. 

The final matter which may meet, to some extent, the applicant's problems in connection with the sale of its business, is that it may be possible for the proceeding to be allocated a hearing date, notwithstanding the fact that some interlocutory steps remain to be performed.

CONCLUSION 
I will make orders 1 to 12 of the short minutes of orders handed up.  I have altered para 1 to read "21 February" and order 3 to read "14 March".  I have "stetted" para 11.  I have added in para 10 "at 9.30 am" and again numbered the final paragraph, "12".  I will add para 13 which will be to reserve for further consideration the question of the basis (indemnity or party and party) of the costs referred to in para 11.

I make orders in terms of paragraphs 1 to 13 inclusive of short minutes of orders as so amended and initialled by me, dated today and placed with the papers.

I certify that this and the preceding 11 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.

Associate:

Dated:21 February 1997

Heard:       10 February 1997

Place:       Sydney

Decision:     10 February 1997

Appearances:  Ms S J Goddard of counsel instructed by Bennett & Philp, solicitors,appeared for the applicant/cross-respondent (respondent on the motion).

Mr M Condon of counsel instructed by Dibbs Crowther & Osborne, solicitors, appeared for the respondents/cross claimants (applicants on the motion).