Vector Corrosion Technologies Limited v E-Chem Technologies Ltd

In the case of Vector Corrosion Technologies Limited v E-Chem Technologies Ltd, the respondents, E-Chem Technologies Ltd and related entities, sought indemnity costs from Vector Corrosion Technologies Limited in two related proceedings. The first proceeding, QUD117/2019, involved claims for sole or joint entitlement to the E-Chem patent. The second proceeding, QUD649/2018, involved allegations of patent infringement and a cross-claim for revocation of the asserted claims of Vector’s Australian high voltage anode patent. The Federal Court dismissed Vector’s claims in both proceedings and ordered costs against Vector. The respondents sought indemnity costs for both proceedings, arguing that Vector’s claims were weak and that the delay in bringing the proceedings increased the costs incurred by the respondents.

The legal issues before the court were whether the respondents were entitled to indemnity costs for the entitlement proceeding and whether they were entitled to indemnity costs for the infringement proceeding. Indemnity costs are awarded when a party’s conduct in bringing or persisting in a case is unreasonable, such as bringing a case that should have been known to be hopeless, causing unnecessary costs, or prolonging a hearing. The court had to consider whether Vector’s conduct in bringing and pursuing the proceedings was unreasonable.

The court found that the respondents’ claim for indemnity costs of the entitlement proceeding should be rejected. The court was not persuaded that Vector commenced and prosecuted the proceedings for the ulterior purpose of causing the respondents’ business to fold under the substantial costs of the litigation. The court also found that the mere fact of Vector’s unreasonable delay in commencing the proceedings did not support an inference that Vector knew or reasonably ought to have known its claims were hopeless. However, the court found that the respondents’ claim for indemnity costs of the infringement proceeding should be accepted. The court accepted that the offers of compromise and the Calderbank offer made in the infringement proceeding were reasonable and that Vector’s rejection of these offers was unreasonable.

The court ordered that the respondents’ costs of the proceeding in order 2 of the orders made on 9 March 2022 (order 2) exclude the respondents’ costs of seeking to vary order 2 to claim indemnity costs. The respondents were ordered to pay the applicant’s costs of seeking to vary order 2, as agreed or taxed.