FEDERAL COURT OF AUSTRALIA

Stena Rederi Aktiebolag v Austal Ships Sales Pty Ltd [2007] FCA 1141

COSTS – apportionment of costs

Federal Court of Australia Act 1976 (Cth) s 43(2)

Patents Act 1990 (Cth) s 40

Beecham Group PLC v Colgate-Palmolive Pty Ltd (2005) 66 IPR 273 cited

Cretazzo v Lombardi (1975) 13 SASR 4 cited

Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 cited

Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 48-134 cited

James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 cited

JMVB Enterprises (Formerly A’Van Campers Pty Ltd) v Camoflag Pty Ltd (No 2) [2007] FCAFC 6 cited

TCN Channel Nine Pty Ltd v Network Ten Pty Ltd (No 3) [2005] FCAFC 194 cited

Trade Practices Commission v Nicholas Enterprises Pty Limited (No 3) (1979) 28 ALR 201 cited

STENA REDERI AKTIEBOLAG v AUSTAL SHIPS SALES PTY LTD (ACN 079 160 651), AUSTAL SHIPS PTY LTD (ACN 079 160 679) AND AUSTAL LIMITED (ACN 009 250 266)

NSD 1602 OF 2005

TAMBERLIN J

10 AUGUST 2007

SYDNEY

THE COURT ORDERS THAT:

1.                  The respondents pay 90% of the costs of the applicant in these proceedings; and

2.                  The parties arrange further directions in the matter after Austal’s application for leave to appeal or, if leave is granted, Austal’s appeal from the orders of 20 July 2007, is determined.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT ON COSTS

1                     These reasons concern costs in respect of an application for injunctive and other relief by Stena Rederi Aktiebolag (“Stena”), a Swedish company which is the proprietor of Australian Patent No. 648634.  Stena sued the respondents (“Austal”) for infringement of its patent and sought to restrain Austal from continuing to infringe.  Specifically, Stena alleged that the hull forms of three types of vessels manufactured, sold or promoted by Austal – namely the Austal 94, Austal 196 and Austal 285 hull forms – infringed its patent.

2                     In response, Austal filed a cross-claim seeking revocation of the patent for invalidity on the grounds of lack of novelty, lack of inventive step or obviousness, and/or failure to comply with the requirements of s 40 of the Patents Act 1990 (Cth).

3                     On 21 June 2007, I handed down my reasons for judgment.  I decided that the Austal 94 hull form infringed Stena’s patent, but that the Austal 196 and Austal 285 hull forms did not.  I dismissed the cross-claim for invalidity.  The reasons were given effect by orders proposed by the parties and made by me on 20 July 2007.

4                     By Orders 7, 8 and 9, I directed the parties to file written submissions on the question of costs, and noted that it would be determined on the papers.  I have now had the benefit of those submissions.

SUBMISSIONS

5                     Stena seeks an order that Austal pay all of its costs of the proceedings.  Stena submits that costs should follow the event and that no apportionment of costs should be awarded.  In support of this, Stena notes that it succeeded on all points raised in the proceedings, with the exception of the infringement claims for the Austal 196 and Austal 285 hull forms.  Despite its failure on these points, Stena maintains that no apportionment of costs is appropriate due to the overlap in the evidence and submissions concerning the Austal 94 hull form on the one hand and the Austal 196 and Austal 285 hull forms on the other; the acceptance of Stena’s submissions on other points such as construction and invalidity; its acknowledgement that the Austal 196 and Austal 285 infringement case was “close to the margins”; its restraint on adducing evidence and making submissions concerning only the Austal 196 and Austal 285 hull forms; and the way in which any such submissions and evidence was interwoven with its response to Austal’s invalidity case.

6                     As an alternative, Stena argues that any apportionment should be an extremely modest one, in the order of 1 to 2% of the total costs incurred by it in the proceedings.

7                     Austal submits that a larger adjustment in its favour is appropriate.  It emphasises that Stena succeeded in establishing infringement in respect of only one hull form, which is substantially less than the ten hull forms which Austal sought to impugn earlier in the proceedings.  In light of the costs incurred by Austal in defending or preparing to defend an infringement case of much larger scope than that which ultimately succeeded, Austal submits that a substantial reduction is appropriate.

8                     Finally, Austal acknowledges that Stena should receive the costs of the cross-claim, but only if those costs are discounted to take account of costs thrown away as a result of Stena’s late withdrawal of its reliance on the expert evidence of Mr Beck and its late notice that Mr Wagner (a witness from Germany) was not required to attend for cross-examination.

9                     In reply, Stena submits that Austal’s submissions do not justify an apportionment.  It reiterates that minimal costs were devoted to the question of infringement in respect of the Austal 196 and Austal 285 hull forms.  It also argues that it managed its complaint responsibly, abandoning as early as possible its infringement case against seven other Austal hull forms and its reliance on Mr Beck’s evidence.  Stena submits that Austal’s submissions regarding Mr Wagner are irrelevant, and notes that Austal own conduct increased the costs of the proceedings, particularly in relation to its submissions on revocation and novelty which were subsequently abandoned before the hearing.  Finally, Stena criticises Austal for not quantifying the apportionment sought.

APPORTIONMENT OF COSTS

10                  Whether an award for costs is apportioned between the parties is a matter for judicial discretion: s 43(2) of the Federal Court of Australia Act 1976 (Cth).  In the ordinary course of litigation costs follow the event; that is, unless special circumstances exist to order otherwise, the successful party should be reimbursed its costs of the litigation: Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 48-134 at 48-136; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271; Beecham Group PLC v Colgate-Palmolive Pty Ltd (2005) 66 IPR 273 at 274; TCN Channel Nine Pty Ltd v Network Ten Pty Ltd (No 3) [2005] FCAFC 194 at [2].

11                  Although courts have in the past been inclined to take a broad approach by looking at the substance of the overall outcome and have been reluctant to exercise discretion to apportion costs according to parties’ success or failure on particular issues (see Trade Practices Commission v Nicholas Enterprises Pty Limited (No 3) (1979) 28 ALR 201 at 208), recent authorities accept that in complex commercial matters, and particularly in patent suits where there are numerous issues, the discretion may be exercised to apportion costs concomitant with the parties’ respective success or failure on certain issues: JMVB Enterprises (Formerly A’Van Campers Pty Ltd) v Camoflag Pty Ltd (No 2) [2007] FCAFC 6 at 7; and see James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].

12                  When apportioning costs, however, a Court should be mindful not to discourage litigants from canvassing all material issues for fear of an adverse costs order: Cretazzo v Lombardi (1975) 13 SASR 4 at 12.  Equally, litigants should not be rewarded for the injudicious pursuit of issues without substance.

13                  In this case, I consider it appropriate to apportion the costs to some extent.  Having regard to the authorities and the submissions of the parties summarised above at [5]-[9], I find that it is appropriate to reduce the costs award by 10%.

14                  Accordingly, the order is that the respondents pay 90% of the costs of the applicant in these proceedings.  I direct the parties to liaise with my associate to arrange further directions in the matter after Austal’s application for leave to appeal or, if leave is granted, Austal’s appeal from the orders made on 20 July 2007, is determined.

Associate:

Dated:         10 August 2007