FEDERAL COURT OF AUSTRALIA

Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2013] FCA 567

THE COURT ORDERS THAT:

1.    Order 1 of the orders of 2 November 2012 be confirmed.

2.    The applicants pay the respondents’ costs of the respondents’ interlocutory application filed 27 September 2012 to be taxed, if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

overview

1    On 2 November 2012, I heard an interlocutory application filed on behalf of the respondents seeking to vary costs orders dated 22 December 2010. At the time, I made the orders sought but said I would publish my reasons later. I also reserved on the question of the costs of the interlocutory application.

2    These are my reasons for making the orders sought, as well as for ordering that the applicants pay the respondents’ costs of the interlocutory application.

background

3    By an amended application dated 28 July 2008, the applicants sought relief in relation to the alleged infringement of Australian Innovation Patent No. 2006100113. By a further amended cross-claim dated 14 April 2010, the respondents sought relief in relation to allegations of unjustified threats and also revocation of the patent for invalidity.

4    By consent orders of French J made on 19 June 2008, it was ordered that the issue of liability in the proceeding be determined separately from and in advance of the issue of quantum of relief.

5    On 29 October 2010, I dismissed the applicants’ amended application and the respondents’ further amended cross-claim for revocation of the patent for invalidity. However, I held that the respondents were entitled to relief in relation to the further amended cross-claim for unjustified threats: Australian Mud Company Pty Ltd v Coretell Pty Ltd [2010] FCA 1169; (2010) 88 IPR 270.

6    On 22 December 2010, following submissions by the parties, I made orders (with accompanying reasons: Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 2) [2010] FCA 1451) to reflect my findings (December 2010 orders). These included the following orders:

6.    The applicants pay the respondents’ costs of and incidental to the amended application, including reserved costs (which includes the respondents’ costs of and incidental to the applicants’ notice of motion dated 15 April 2010), including the costs of the hearing on 26 October 2010; however, each party shall pay its own costs as to the costs hearing on 13 December 2010.

7.    The applicants pay the respondents’ costs of and incidental to the cross claim for unjustified threats, including reserved costs.

8.    The respondents pay the applicants’ costs of and incidental to the cross claim, apart from those attributable to the issue of their liability for unjustified threats, including reserved costs (which includes the applicants’ costs thrown away by and incidental to the respondents’ notice of motion dated 6 April 2010).

7    The orders were sealed and entered with the Court on 3 March 2011.

8    On 15 September 2011, the Full Court of the Federal Court dismissed an appeal from my decision of 29 October 2012 with costs: Australian Mud Company Pty Ltd v Coretell Pty Ltd [2011] FCAFC 121; (2011) 93 IPR 188.

9    On 16 August 2012, the respondents filed bills of costs in relation to the December 2010 orders and the orders of 15 September 2011. However, Glenn Michael Scott, a solicitor employed by the respondents’ solicitors, deposes that on or about 6 September 2012 Registrar Stanley informed him that she did not consider it was open to her to assess the bill of costs in relation to December 2010 orders on the basis that the matter was ongoing.

10    On 27 September 2012, the respondents filed an interlocutory application seeking to vary orders 6, 7 and 8 of the December 2010 orders such that the costs the subject of these orders be taxed and paid forthwith.

applicants’ submissions

11    The applicants’ position is that the respondents should wait until after the determination of the issue of quantum of relief in relation to the further amended cross-claim for unjustified threats before the respondents gain access to any of the costs due to them pursuant to the December 2010 orders.

12    The applicants’ primary submission is that the respondents’ interlocutory application does not come within any of the limited exceptions in R 39.05 of the Federal Court Rules 2011 (Cth) (Rules), or under the common law, to the rule that orders entered cannot be varied. In this respect, the applicants note the comments of Kenny J in McDermott v Richmond Sales Pty Ltd (In Liq) [2006] FCA 248 at [25] (in relation to the predecessor to R 39.05) that:

It is well established that the discretion conferred by O 35 r 7(2) should be used only in exceptional circumstances: Dudzinski v Centrelink [2003] FCA 308 at [11] per Spender J. The principle of finality of litigation requires courts to exercise great caution when considering whether exceptional circumstances exist warranting the variation of orders: see Wati v Minister for Immigration and Multicultural Affairs (1997) 78 FCR 543 at 549-552 per von Doussa, Moore and Sackville JJ.

13    The applicants submit that there are no relevant “exceptional circumstances” to warrant departure from the general rule. That is, the orders of 22 December 2010:

    have not been obtained fraudulently: R 39.05(b);

    are final (notwithstanding that they relate to interlocutory elements in the proceeding): Re Luck [2003] HCA 70; (2003) 203 ALR 1 at [4]; R 39.05(c);

    reflect the intention of the Court and contain no ambiguity as to meaning: R 39.05(e); and

    contain no clerical mistake or slip or omission within the judgment: R 39.05(g)-(h).

14    Further, the applicants submit that the respondents have not invoked the Court’s jurisdiction for making supplemental orders: Caboolture Park Shopping Centre Pty Ltd (In Liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 at 235, and do not point to any new circumstances to warrant the making of supplemental or consequential orders.

15    The applicants’ alternative submission is that the December 2010 orders constituted an interlocutory decision. Therefore, pursuant to R 40.13 of the Rules the costs the subject of these orders should not be taxed until the conclusion of the proceeding.

16    The applicants refer to the comments of Dodds-Streeton J in SNF (Australia) Pty Ltd v CIBA Speciality Chemical Water Treatments Limited [2011] FCA 794 (SNF) at [17], where her Honour noted that the application before her:

… is relatively unusual, because it seeks leave to appeal from a substantive judgment on liability from which an appeal would ordinarily lie as of right, but (due to the order that liability and quantum be determined separately) is interlocutory.

17    Similarly, the applicants contend that the December 2010 orders constituted an interlocutory decision.

18    The applicants then submit that the general rule in R 40.13 will only be dispensed with where the “interests of justice” in the circumstances of the case require it: QS Holdings Sarl v Paul’s Retail Pty Ltd (No 2) [2011] FCA 1038 at [37]-[38]. However, the applicants contend that discretionary reasons which favour refusing the interlocutory application are:

    that the proceeding is ongoing and costs are continuing;

    that the more efficient course for the Court and the parties is for taxation and payment of costs to proceed after the conclusion of the proceeding: Vasyli v AOL International Pty Ltd (unreported, Federal Court of Australia, Lehane J, 2 September 1996) at 3-4; and

    the absence of any element of “unreasonableness” or “special circumstances” (for example, a sufficiently complicated or time-consuming proceeding; or a financial impediment on the part of the respondents in prosecuting its claim for damages for unjustified threats) justifying a departure from the general rule.

respondents’ submissions

19    In relation to order 6 of the December 2010 orders, the respondents note that all aspects of the applicants’ claim against the respondents (both as to liability and quantum) have been finally determined by the Court. Therefore, the respondents submit that R 40.13 of the Rules does not apply to prevent the registrar from proceeding with the taxation of costs in relation to this claim as the dismissal of the amended application was a final judgment. The respondents submit that the present case can be distinguished from SNF (where liability had been determined but there was a later separate trial still to be had in relation to quantum of damages), as in the present case there are no outstanding issues to be determined in relation to the applicants’ amended application.

20    Furthermore, the respondents submit that even in a factual situation such as existed in SNF it is appropriate for the successful party’s costs in a patent infringement case to be taxed and paid prior to the second and separate trial on quantum: Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (No 2) [2007] FCAFC 172 (Lockwood) at [20].

21    In relation to orders 7 and 8, the respondents note that the December 2010 orders finally determined the rights of the parties with respect to issues of liability, but left for determination the issue of quantum of damages payable to the respondents in respect of the applicants’ unjustified threats. The respondents also note that Sch 1 of the Rules defines “interlocutory application” as “an application, other than a cross-claim, in a proceeding already started”. The respondents contend that orders 7 and 8 of the December 2010 orders were not in relation to an interlocutory application as defined in the Rules (although the decision of the Court may have been an interlocutory judgment), and therefore R 40.13 has no application with respect to these orders.

22    In any event, the respondents submit that as all aspects of the parties’ claims in respect of liability have been finally determined, the rationale as to why it is generally inappropriate for the costs of an interlocutory application to be taxed and paid forthwith do not apply: Brasington v Overton Investments Pty Ltd [2001] FCA 571 at [13]; Australian Securities and Investments Commission v Cassimatis [2011] FCA 796 (Cassimatis) at [7]-[9]. Furthermore, the respondents contend that, even in the case of interlocutory applications, costs may be ordered to be paid forthwith if the interlocutory application raises a separate and discrete issue: Amalia Investments Ltd v Virgtel Global Networks N.V. [2011] FCA 409 (Amalia Investments) at [22]-[25]; Yarrabee Chicken Company Pty Ltd v Steggles Limited (No 3) [2011] FCA 993 (Yarrabee Chicken) at [46].

23    Finally, the respondents contend that financial stress and prejudice is being caused to the respondents by the cessation of the taxation process and the failure to recoup costs in a timely way. The respondents contend that considerable delay can be grounds for an order that the costs of an interlocutory application be taxed and paid forthwith: Amalia Investments at [22]-[23]; Cassimatis at [12].

24    The respondents submit that R 39.05(e) of the Rules, which provides that “The Court may vary or set aside a judgment or order after it has been entered if … it does not reflect the intention of the Court”, gives the Court the power to vary orders 6, 7 and 8 of the December 2010 orders.

consideration

25    Pursuant to s 43(2) of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act), the award of costs is in the discretion of the Court. However, R 40.13 of the Rules provides:

If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished.

Note:    The Court may order that costs of an interlocutory application be taxed immediately.

26    As noted, Sch 1 of the Rules defines “interlocutory application” as “an application, other than a cross-claim, in a proceeding already started”.

27    In my view, orders 6, 7 and 8 of the December 2010 orders are not “order[s] for costs … on an interlocutory application” for the purposes of R 40.13. That is, these orders do not relate to “an application, other than a cross-claim, in a proceeding already started”. Rather, they are costs orders on the applicants’ amended application and the respondents’ further amended cross-claim. Therefore, in my view R 40.13 does not apply in the present case.

28    In this respect, I note that R 40.13 may be slightly narrower in its terms than its predecessor, O 62, r 3(3) of the Federal Court Rules 1979 (Cth) (previous Rules), which refers to an “interlocutory proceeding” and an “interlocutory order” (terms which are not defined): compare Stack v Brisbane City Council (1997) 71 FCR 523 at 534-535. Order 62, r 3(3) provides:

An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order.

It is unnecessary for me to form a concluded view on this issue.

29    However, even if I were to accept that R 40.13 does apply I am satisfied that I should exercise my discretion to order that costs be taxed and paid forthwith. In this respect, it is useful to have regard to the policy reasons that have been said to support the general rule that O 62, r 3(3) and R 40.13 embody. These were referred to in the parties’ submissions, and include:

    discouraging interlocutory applications;

    avoiding the inconvenience and possible oppression involved in a series of taxations where there are successive interlocutory applications; and

    the fact that it is usually inappropriate to require the unsuccessful party to interlocutory proceedings to pay costs immediately, since that party might ultimately succeed in the substantive proceeding: Courtney v Medtel Pty Ltd (No 3) [2004] FCA 347 (Courtney) at [20].

30    It is evident that these policy reasons are not applicable here. Although the proceeding is ongoing (on a limited basis) and costs are continuing, issues relating to liability in the proceeding have been finally determined. By making orders that orders 6, 7 and 8 of the December 2010 orders be taxed and paid forthwith I do not agree that I will be encouraging interlocutory applications, nor raising the possibility of a series of taxations. The proceeding will now continue to a hearing on quantum of relief in respect of the further amended cross-claim for unjustified threats, after which, if required, a second taxation of costs will occur.

31    Furthermore, this Court has accepted that the general rule regarding the taxation of costs of an interlocutory proceeding can be departed from where the proceeding involves the resolution of a discrete issue: see, for example, Australian Flight Test Services Pty Ltd v Minister for Industry, Science and Technology (unreported, Federal Court of Australia, O’Loughlin J, 26 April 1996) at 4; Courtney at [23]; Lockwood at [20]; Yarrabee Chicken at [46].

32    For these reasons, at the time of making the December 2010 orders it was my intention that the costs the subject of orders 6, 7 and 8 be taxed and paid forthwith. Therefore, given that orders 6, 7 and 8 do not currently reflect the intention of the Court, I am satisfied that I should exercise my discretion pursuant to R 39.05(e) of the Rules to vary these orders by adding the words “to be taxed and paid forthwith” to each of the orders.

costs of the interlocutory application

33    After I gave my decision on 2 November 2012, the applicants submitted that inherent in making orders pursuant to R 39.05(e) is an acceptance of the fact that the applicants were blameless. As such, the applicants submit that the appropriate costs order is that each party bear their own costs.

34    In response, the respondents contend that they wrote to the applicants seeking their consent to the variation of orders 6, 7 and 8 of the December 2010 orders, and that the applicants could have consented to these variations and saved both the parties’ and the Court’s resources. The respondents submit that prior to Registrar Stanley’s refusal to assess the bill of costs in September 2012, the applicants were proceeding on the assumption that costs were to be taxed and paid forthwith, and that the applicants’ current position is “entirely opportunistic”. In support of this submission, the respondents rely on the affidavit of Mr Scott, which annexes relevant correspondence between the parties’ solicitors in relation to this issue.

35    I agree with the applicants’ submission that, everything else being equal, the fact that a Court makes an order pursuant to R 39.05(e) (or its predecessor, O 35, r 7(2)(e) of the previous Rules) suggests that each party should bear its own costs: see, for example, Blacker v National Australia Bank Ltd [2000] FCA 1011; The Food Improvers Pty Ltd v BGR Corporation Pty Ltd (No 5) [2007] FCA 466; Von Reisner v Commonwealth (No 3) [2008] FCA 1028.

36    However, in my view the present case warrants a departure from this general position. Mr Scott deposes that since 10 February 2012 the applicants’ solicitors have been writing to the respondents’ solicitors demanding that the respondents proceed with the taxation of costs. This correspondence continued up until 25 July 2012. The applicants submit that they were writing to the respondents in the hope that there could be a final resolution to the proceeding, absent a claim for relief in respect of the successful further amended cross-claim for unjustified threats. They submit, however, that correspondence in relation to the issue of taxation of costs ceased once the respondents indicated that they would pursue a damages claim against the applicants.

37    I do not agree that this inference can be drawn. By an affidavit sworn on 24 April 2012 by Paul Theodore Arns, the principal of the respondents’ solicitors, the respondents made clear to the applicants that they would be pursuing a damages claim. Furthermore, at a directions hearing on 27 April 2012, I made orders, inter alia, directing the respondents to file and serve a statement of claim articulating their claim for damages by 15 June 2012. This statement of claim, with accompanying particulars, was filed on 15 June 2012. In such circumstances, the applicants’ solicitors’ letters dated 4 May 2012 and 25 July 2012, requesting, inter alia, that the respondents proceed with the taxation of costs, contradicts the applicants’ current submission. In this respect, I note that correspondence annexed to an affidavit sworn on 19 June 2012 by Paul Gerard Stephen Mallon, the principal of a firm of solicitors previously engaged by the applicants, also contradicts the submission.

38    By a letter dated 11 September 2012, the respondents’ solicitors wrote to the applicants’ solicitors, drawing their attention to the previous correspondence between the parties in relation to the issue of taxation of costs and seeking their consent to the variation of orders 6, 7 and 8 of the December 2010 orders in light of Registrar Stanley’s refusal to assess the respondents’ bill of costs. The applicants refused. In such circumstances, I am inclined to agree with the respondents’ submission that the applicants’ current position is “opportunistic”. Accordingly, in my view it is appropriate to exercise my discretion pursuant to s 43(2) of the Federal Court Act and order that the applicants pay the respondents’ costs of the interlocutory application.    

Associate:

Dated:    10 June 2013