FEDERAL COURT OF AUSTRALIA

Unilin Beeher BV v Huili Building Materials Pty Ltd (No 3) [2008] FCA 488  

UNILIN BEEHER BV v HUILI BUILDING MATERIALS PTY LTD, BAO JIA SUN T/AS HUILI AUSTRALIA TRADING, GONG DAO ZHANG T/AS HUILI AUSTRALIA TRADING, HUILI AUSTRALIA TRADING PTY LTD, GREMOS HOLDINGS PTY LTD AND HUILI FLOORING PTY LTD

NSD 2329 OF 2005

ALLSOP J

11 APRIL 2008

SYDNEY

THE COURT ORDERS THAT:

1. The first, second, third and fourth respondents pay the fifth respondent the sum of $46,227.78, being the sum of $189,845.31 owed to the fifth respondent pursuant to the orders of 29 November 2007, less the sum of $143,617.53 owed by the fifth respondent to the first, second, third and fourth respondent dated 26 November 2007.
2. The first and fourth respondents pay the costs of the fifth respondent.

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

REASONS FOR JUDGMENT

1                     This matter was before me two weeks ago.  The transcript of that day will reveal a less than satisfactory afternoon.  Both sides had evidence that they had not adequately served in time and I stood the matter over to today.  Mr Sun, who I had given leave to appear for the first and fourth respondents, was present.  He had a motion on behalf of the first and fourth respondents to have the fifth respondent, Gremos Holdings Pty Limited (“Gremos Holdings”), pay $143,617.53, being the sum which had been admitted in the defence to a cross-claim that Gremos Holdings had not paid by way of invoices for product.

The history of this matter is fully set out in my earlier reasons, in particular my reasons of 24 October 2007 ([2007] FCA 1615).  Pursuant to orders that I have made in the past, which no one has sought specifically to set aside, I declared that the four Huili defendants (if I may use that expression), Huili Building Materials Pty Limited, Mr Bao Jia Sun, Mr Gong Dao Zhang and Huili Australia Trading Pty Limited, being the first to fourth respondents to the main action and cross-respondents to the cross-claim filed by Gremos Holdings, were jointly and severally liable to indemnify and keep Gremos Holdings indemnified in respect of any and all damages, costs and other sums that Gremos Holdings may be ordered by the Court to pay the applicant in these proceedings and I ordered that the cross-respondents pay the costs to date of the cross-claimant on an indemnity basis.  I also declared that the cross-respondents had infringed s 52 of the Trade Practices Act 1974 (Cth)

2                     After those orders were made on 29 November 2006 at the liability hearing, consent orders were made by Unilin Beheer and Gremos Holdings dealing with the monetary sums to which Unilin Beheer was entitled from Gremos Holdings.  Those orders were made in March 2007.  Again, no application has been made to set them aside.

3                     Unilin Beheer then proceeded to prove its claim for monetary relief and I dealt with those issues in my reasons published on 24 October 2007.  What was left outstanding was the tying up of the accounting between the relevant infringers, that is Mr Sun and his colleague and their two companies, and Gremos Holdings.

4                     That tying up of the accounting was to take place under two mechanisms.  One, the mechanism brought by Mr Sun, was a notice of motion for Gremos Holdings to account to his two companies for the $143,617.53.  The second was a notice of motion which was later amended by Gremos Holdings for orders for judgment in the sums that it has paid out consequent upon its found infringement in these proceedings.

5                     The commercial arrangements between Mr Sun and his associated entities and Gremos Holdings are not complicated.  Mr Sun and his companies were, as I described in my judgment of 24 October 2007, wholesalers of goods to Gremos Holdings.  The complaint of the Huili companies is that Gremos Holdings has not paid for $143,617.53 worth of stock supplied to it.  That is accepted, but the difficulty is that Gremos Holdings has been found liable for a patent infringement which, in the respects I identified in my reasons of 29 November 2006, was the fault of Mr Sun and the Huili companies. 

6                     Hence I made the orders that I did, making Mr Sun and the Huili companies and Mr Zhang responsible to Gremos Holdings for the consequences of Gremos Holdings’ found infringement.  Clearly, the cross-liabilities of the Huili parties and the Gremos party are all in the one transaction and the principles of equitable estoppel would have those liabilities net off against each other.

7                     The position has now been reached with Gremos Holdings that it has outlaid the following sums of money for which it wishes to hold the Huili companies responsible and which, pursuant to my orders, it can hold the Huili companies responsible. They are as follows:

(a)        The first sum is $122,183.50.  This is a conversion of two sums of US$77,500 and US$25,000. The US$77,500 was a royalty fee based on $2 per square metre of offending product. The evidence discloses that this was a tolerably reasonable royalty by way of damages and it was converted at the US dollar exchange rate at or about the time of payment.  US$25,000 was for legal costs incurred by Unilin against Gremos Holdings.  A reading of the materials in this proceeding from its beginning would testify amply to the reasonableness of that sum to anyone who had familiarity with legal proceedings in this country.  That sum of US$25,000 was then exchanged into Australian dollars at a relevant rate at or about the time of payment.

(b)       The second sum is $45,513.81. This amount represents the actual legal costs incurred by Gremos Holdings in respect of the patent infringement claim in the cross-claim.  This needs to be divided into two sums, the costs of the cross-claim and the costs of Gremos in the main claim.  This is so because I ordered that the costs of the cross-claim be paid on an indemnity basis.  The evidence discloses that these costs are $36,052.38.  The balance, $9,461.43, is claimed as damages arising from the breach of s 52 of the Trade Practices Act.  I am prepared to allow that sum under that classification.

(c)        The third sum is $2,750 being the costs of destruction of unsold offending product. 

(d)       The fourth sum is $19,398 for offending product which was not sold and which will need to be destroyed.  A set off against the purchase price is requested in relation to that sum. 

8                     In all the circumstances, and in an effort to bring finality to these proceedings, the appropriate course (notwithstanding the fact that Mr Sun has failed to appear today) is to deal with both motions and to set off the $143,617.53 for unpaid stock against the total sum which Gremos Holdings has proved that it is owed by the Huili companies.

9                     I think this course, which was not opposed by counsel for Gremos Holdings (very sensibly if I may say so) leads to my netting off against the sums owed to Gremos Holdings the sum owed to the Huili cross-respondents.

10                  Calculating those matters, Gremos Holdings is entitled to $189,845.31 being the total of $122,183.50, $45,513.81, $2,750 and $19,398.  Set off against this is the sum of $143,617.53.  That should give a total $46,227.78 and it is in respect of that sum, in effect, pursuant to the declaration made in November 2006 that I order judgment be entered in favour of Gremos Holdings against the cross-respondents being Bao Jia Sun, Gong Dao Zhang, Huili Australia Trading Pty Ltd and Huili Building Materials Pty Ltd.  Interest can net off and therefore there is no need for a calculation of interest.  And in all the circumstances I do not propose to award any.

11                  It should be noted that Mr Sun was not present today.  He was present two weeks ago.  In my presence he was clearly told the time and place of the hearing of his motion, indeed he filed but did not serve an affidavit for today.  I have not read his affidavits today.  No one propounded his motion, but the gist of his claim is that he is owed $143,617.53.  I am satisfied that Gremos Holdings has proved the balance of the sums and I hope that this is both a fair and final determination on these proceedings.  Given the netting off, I do not propose to make any separate order for costs for today.

12                  I order that the first and fourth respondents pay the fifth respondent’s costs.

Associate:

Dated:         13 May 2008