Federal Court of Australia

UON Pty Ltd v Hoascar (No 2) [2025] FCA 1608

ORDERS

THE COURT ORDERS THAT:

1.    The amended interlocutory application filed on 3 February 2025 is dismissed.

2.    The respondents must pay the applicants' costs of and incidental to the interlocutory application in any event.

3.    The cross-claimant must file a notice of discontinuance of the cross-claim by 4.00 pm AWST on Wednesday 24 December 2025.

4.    The applicants must pay the second respondent's costs of and incidental to the claim for infringement of former Australian Innovation Patent No. 2020103197:

(a)    until 11.00 am AWST on 17 March 2023, on a party-party basis; and

(b)    thereafter, on an indemnity basis.

5.    The cross-respondent must pay the cross-claimant's costs of and incidental to the cross-claim:

(a)    until 11.00 am AWST on 17 March 2023, on a party-party basis; and

(b)    thereafter, on an indemnity basis.

6.    The costs referred to in paragraphs 4 and 5 of these orders are to be assessed by a Registrar on a lump sum basis.

7.    The applicants/cross-respondent must pay the second respondent's/cross-claimant's costs of and incidental to the matters determined at [95]-[129] of the reasons published on 17 December 2025, discounted by 25%.

8.    There is liberty to apply in relation to paragraphs 4 to 7 above, which may be exercised in the fourteen day period commencing on the day after final judgment in this proceeding is delivered.

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

REASONS FOR JUDGMENT

JACKSON J:

1    This proceeding concerns a motor starting, control and power management system with specific application to dewatering remote island mine sites and generally. The applicants allege that the first respondent, Mr Hoascar, obtained confidential information about the system in the course of his employment with the first applicant, UON Pty Ltd. They claim that the confidential information was disclosed and used to the benefit of Mr Hoascar's next employer, the second respondent, Taranis Power Group Pty Ltd. This is said to have involved breaches of contractual and equitable obligations of confidence (among other things).

2    Until last year, the proceeding also contained a claim for infringement of Australian Innovation Patent No. 2020103197, of which the second applicant, LAA Industries Pty Ltd, was patentee. But in November 2023, Downes J held that the Patent was invalid: Allied Pumps Pty Ltd v LAA Industries Pty Ltd [2023] FCA 1457. As a result, last year the applicants amended their statement of claim to remove the infringement claim. (In this judgment, references to the Statement of Claim are references to that amended version, specifically the Second Further Amended Substituted Statement of Claim filed on 22 May 2024.)

3    The respondents have brought an interlocutory application to strike out substantial remaining aspects of the Statement of Claim. They say that in light of Allied Pumps, it would be an abuse of process for the applicants to proceed with those aspects of the claim. For the reasons that follow, that application will be dismissed.

4    There is also a dispute about the precise orders that should follow from the dismissal of the infringement claim. While the parties agree in broad terms what the orders should be, as described below they do not agree on certain aspects. These reasons also determine those areas of disagreement.

The strike out application

5    In order to understand the strike out application, it is necessary first to describe the relevant claims made in the Statement of Claim, and then to review the relevant findings in Allied Pumps which, the respondents say, mean that those claims can no longer be maintained.

The confidentiality claims made in the Statement of Claim

6    The claims that rely on alleged obligations of confidence centre on an allegation that from 2014 until 2017, employees of UON 'invented and developed an alternative motor starting control and power management system with specific application for dewatering remote island mine sites and generally': para 8 (all paragraph references are to the Statement of Claim unless stated otherwise). This is defined as the New System.

7    Particulars are given of characteristics of the New System. It is said to be a 'starting and control system for an assembly having at least one motor' which includes a number of features that are set out in paragraph 8 of the Statement of Claim, including:

(i)    a generator assembly comprising an engine and an alternator

(ii)    an automatic voltage regulator (AVR) for controlling voltage output of the alternator;

(iii)    an engine control unit (ECU) for varying the engine speed and therefore varying the frequency of the alternator voltage;

(iv)    a system controller connected to and operable to control the AVR, the system controller controlling the manner in which the AVR controls the alternator voltage output, the system controller being connected to the ECU and operable to control the manner in which the ECU controls the generator engine speed and therefore frequency of the voltage output from the alternator;

(v)    wherein parameter set points are set in the system controller, and the system controller receives sensor signals, and based on type of control selected, the system controller is configured and operable to control the AVR and/or the ECU to vary the speed of the generator engine and the alternator voltage output by the generator assembly so that the speed of the electric motor or motors is appropriately varied to maintain the parameter set points …

8    Another feature described as being part of the New System is that it could be configured by reference to flow and pressure control and, from late April or early May 2016, flow, pressure and water level control.

9    It is pleaded that UON commenced marketing and offering the New System as the Pro Power General Motor Control Generator (GMC Pro Power) from December 2015, subject to the variation in relation to flow, pressure and water level control that occurred in late April or early May 2016: para 9.

10    Mr Hoascar's employment relationship with UON and confidentiality obligations said to have arisen out of that relationship are then pleaded: paras 14-20. In brief, that relationship is alleged to have existed from 30 March 2015 until 24 March 2016, pursuant to certain written agreements. Obligations of confidence are alleged to have arisen pursuant to contractual terms. For present purposes, it is only necessary to describe these in overview.

11    Under a written contract of employment dated 30 June 2015, Mr Hoascar is alleged to have had obligations to keep defined 'Confidential Information' strictly confidential and only to use it in the ordinary and proper course of his employment with UON: para 18. The definition was broad and meant 'all information in oral, written, printed, electronic or other tangible form which had already been disclosed or may be disclosed to Mr Hoascar in the course of his employment with UON'.

12    It is further pleaded that under a Confidentiality Agreement dated 19 October 2015, Mr Hoascar was, broadly, obligated not to disclose defined 'Confidential Information' or use it to the competitive disadvantage of UON: para 19.3. Mr Hoascar is alleged to have agreed to keep 'Confidential Information' strictly confidential and only to use it for a defined purpose of allowing him access to (again, defined) 'Intellectual Property' for the purposes of fulfilling his obligations as an employee of UON: para 19.4. Once again, the definition of 'Confidential Information', while different to that in the contract of employment, was broad and is pleaded to mean 'all information in oral, written, printed, electronic or other tangible form which had been or may be disclosed to Mr Hoascar': para 19.1.

13    Then, it is pleaded that Mr Hoascar resigned from his full-time employment, with his last day of employment being 9 March 2016. It is also alleged, however, that he remained an employee of UON under a casual employment contract from 15 March 2016 to 24 March 2016: paras 20, 23.

14    Mr Hoascar is alleged to have commenced employment with Taranis on 10 March 2016, pursuant to a contract of employment that had been executed on 19 February 2016: paras 21-22. So it is alleged that Mr Hoascar was employed on a casual basis by UON and at the same time employed by Taranis (the applicants say that they were not aware that he was employed by Taranis until later). The applicants allege that during the period of overlapping employment, Mr Hoascar had access to UON's defined 'Confidential Information'.

15    The Statement of Claim then turns to describing and defining the precise confidential information which, it is claimed, was disclosed to Mr Hoascar while he was employed by UON: paras 28-29. It is pleaded that confidential information was disclosed to him during his employment by UON 'for the express purpose of Mr Hoascar assisting in the documenting, development, testing and/or recording of the New System': para 28. This is defined as the New System CI. In paragraph 29 the New System CI disclosed to Mr Hoascar is set out, which includes 'the idea of the New System' and specific occasions on which or documents in which the New System or the idea of it was imparted. That information is comprised of a large number of items, set out at paragraphs 29.1-29.4. Those paragraphs are long and I will not quote them or attempt to summarise them here. It is more convenient to describe them when I come to determine the respondent's application from [79] below.

16    Paragraph 30 then lists a large number of further occasions on which it is alleged the knowledge of the New System CI was imparted to Mr Hoascar in the course of his work for UON. An example chosen at random is when Mr Hoascar was involved in '[t]esting alternator electrical performance on 11 December 2015': para 30.5.

17    It is also pleaded that Mr Hoascar had access to other confidential information that was unrelated to the New System: para 31. Obligations of confidence in respect of both the New System CI and that other information are alleged to have arisen out of express contractual terms as well as out of the circumstances in which the New System CI was disclosed, which is said to have given rise to what is later alleged to be an equitable obligation of confidence: paras 32, 56.

18    It is then alleged that between December 2015 and February 2016, Mr Hoascar committed various breaches of his obligations of confidence to UON by sending to his personal email addresses various instances of what is said to be New System CI: para 38. This is alleged not to have been for the purposes of his employment with UON: para 39. It is also alleged that Mr Hoascar used a fuel consumption spreadsheet he created in the course of his employment with UON: para 40. All this is pleaded to have been in breach of a range of Mr Hoascar's obligations to UON: para 41.

19    It is also pleaded that from 10 November 2016, Taranis commenced to advertise a product described as the VarioGen which, it is alleged, operates in the same way as the New System: paras 33-35, 43. The similarities in operation are alleged to have been the result of Mr Hoascar's use and disclosure of some or all of the New System CI and other confidential information breaching various obligations of confidence: para 44. Bases for inferring that are alleged at paragraph 45 of the Statement of Claim.

20    It is pleaded that UON has suffered loss and damage as a result of those breaches: paras 46, 58. Alternatively, it is alleged that Mr Hoascar's use and disclosure of the New System CI and the other confidential information provided a springboard for Taranis to obtain a commercial advantage: para 48.

21    The alleged disclosures are also pleaded to have been in breach of a fiduciary duty Mr Hoascar owed to UON: paras 64-68. This is the basis of an allegation that Taranis received the New System CI with knowledge of Mr Hoascar's breaches of fiduciary duties, alternatively that Taranis knowingly assisted him in such breaches, which includes allegations that Mr Hoascar and Taranis held the confidential information on constructive trust: paras 66, 69-80. It is also alleged that Taranis knew or ought reasonably to have known that the information provided to it was confidential, so that Taranis had obligations of confidence to UON which Taranis breached: paras 81-85.

22    Other miscellaneous allegations against the respondents in the Statement of Claim do not need to be described.

23    What emerges from the above is that a central component of the allegations in the Statement of Claim depends on the proposition that, between December 2015 and February 2016, the New System CI was confidential to UON and, correspondingly, the subject of obligations of confidence owed by Mr Hoascar and Taranis.

24    The respondents submit that findings made and conclusions reached in the Allied Pumps decision mean that to continue to maintain that central plea is an abuse of process. To that decision I now turn.

Relevant findings and conclusions in Allied Pumps

25    The applicant in Allied Pumps was Allied Pumps Pty Ltd (APPL), which supplied a configuration of devices known as the Allied Pumps System to mining companies and others. LAA claimed that this supply infringed the Patent. APPL applied for declarations that the Patent was invalid, and LAA and UON cross-claimed for infringement of the Patent. Justice Downes generally referred to LAA and UON together as UON throughout Allied Pumps.

26    Relevantly for present purposes, APPL claimed that the Patent was 'invalid for want of novelty in light of prior public disclosure by the act of UON hiring out two of its GMC Pro Power variable speed generators to Roy Hill Iron Ore Pty Ltd before the earliest priority date' (Allied Pumps at [10(1)]) and also that it was invalid for want of novelty in light of each of the following prior art documents (Allied Pumps at [10(2)]):

(a)    International Patent publication number WO2015/041805 (Torrey);

(b)    Patent Application JP H08270594 (Komatsu); and

(c)    US Patent application number 2014/0209289 (Boot) in combination with US Patent number 8,347,953 (Elizondo), which is incorporated by reference in Boot.

27    In Allied Pumps, Downes J found that APPL had made out its claim for invalidity of the Patent on each of these bases (at [456], [495], [538]). It is necessary to examine the factual underpinnings of those conclusions so as to understand what impact, if any, her Honour's findings have for the present proceeding.

28    After describing the background to the (alleged) invention that was the subject of the Patent (Invention), Downes J described one aspect of the Invention as summarised in the specification to the Patent (Allied Pumps at [101]) and, later, set out the claims 1-4 of the Patent (at [118]). It is only necessary to reproduce claim 1:

1.    A power and control system when used for a dewatering submersible pump, the system including:

a generator comprising an engine and an alternator, the engine having an Engine Control Unit (ECU), the alternator having a voltage regulator, the generator supplying electrical power to the pump;

at least one sensor arranged to provide information regarding pump operation and/or surrounding conditions; and a system controller, the system controller being arranged to receive information from the sensor and to control the voltage regulator and the ECU based on the received information,

wherein the voltage regulator is an automatic voltage regulator,

wherein the ECU is controlled to govern the speed of the engine and thus the frequency of the electrical power supplied to the pump, and the voltage regulator is controlled to govern the voltage of the electrical power supplied to the pump,

and wherein the sensor is arranged to measure borehole water level.

29    While the applicants contest the proposition that the Invention is the same as the New System, I have not found it necessary to resolve that controversy for the purposes of this decision. I proceed on the assumption, favourable to the respondents, that that Invention and the New System are indeed the same.

30    After dealing with other matters, Downes J turned, relevantly, to the issue of whether the Patent was invalid for want of novelty because UON had hired out two of its GMC Pro Power variable speed generators (VSGs) to Roy Hill before the earliest priority date. Her Honour discussed the principles as to lack of novelty in connection with prior acts and documents.

31    As to prior acts as disclosures, 'the skilled addressee must at least be able to observe on inspection enough to enable them to comprehend the complete invention': Allied Pumps at [191]. Downes J then said (at [192]) that:

it will suffice if, through the prior act, the information was made available to at least one member of the public who was not constrained by any express or implied confidentiality obligations either in law or equity not to make use of it. Importantly, the question is not whether access to the invention was availed of, but simply whether the act made the information available to the public without restraint: Insta Image at [124].

32    The passage from Insta Image Pty Ltd v KD Kanopy Australasia Pty Ltd [2008] FCAFC 139; (2008) 239 FCR 117 cited there is important to this judgment too, and will be quoted below (at [63]).

33    Much of the factual controversy in relation to the Roy Hill acts and trials centred around whether the two VSGs that were supplied to Roy Hill (the Roy Hill Systems) (known respectively as the bore 64 VSG and the bore 65 VSG) had all the features of the Invention, in particular the capacity to control the output of the generator by reference to the water level inside the borehole. Downes J found that the Roy Hill Systems had that capacity: Allied Pumps at [249].

34    After reviewing further evidence as to whether Roy Hill Systems were in fact controlled by water level, her Honour found that both the bore 64 VSG and bore 65 VSG were capable of being controlled in that way: Allied Pumps at [268], [269]-[274].

35    Then at [277], Downes J expressed her conclusion, reached for reasons she then set out, that 'taking into account my finding that the Roy Hill Systems could be controlled by level, the Roy Hill Systems that were supplied and commissioned by UON possessed each of the physical integers of the claims' of the Patent. Further, the interrelationship and functionality according to the Invention could be ascertained by the skilled addressee looking at bore 64 VSG and bore 65 VSG once commissioned and left at the Roy Hill mine: Allied Pumps at [278].

36    Downes J also found that Roy Hill and its personnel had not been made subject to any obligation of confidence when they were permitted to take possession of the Roy Hill Systems and trial them. Her Honour found:

[285]    UON parted possession with the Roy Hill Systems, and Roy Hill was given unrestricted access to the product to see and understand the essential integers of the invention; and it was possible to reverse engineer the product. Thus, the skilled addressee could, on inspection of the Roy Hill Systems, comprehend the complete invention, and make it.

…

[287]    Further, the commissioning of the Roy Hill Systems, and the systems as commissioned, comprised information that was publicly available in the requisite sense: see Insta Image at [124]. There was no dispute that Roy Hill was under no obligation of confidence with respect to the Roy Hill Systems and the commissioning of those systems, and the Roy Hill Systems were available for any employee of Roy Hill, or person attending the Roy Hill mine site, to inspect. Such persons were all free in law and equity to use the information discerned from the commissioning and inspection of the Roy Hill Systems.

[288]    For these reasons and subject to consideration of the reasonable trial defence, the commissioning of the bore 64 VSG and bore 65 VSG and the resulting Roy Hill Systems anticipates the claims.

37    Downes J also found that training which Mr Reid, a UON technical support technician, had given to employees of Roy Hill on the bore 64 VSG made information 'publicly available in the requisite sense', that is, in the sense explained in Insta Image: Allied Pumps at [296]. This too meant that, subject to consideration of the reasonable trial defence (which her Honour went on to reject), the training anticipated the claims in the Patent, so that they were not novel: Allied Pumps at [297].

38    At [324] Downes J quoted from Lux Traffic Controls Limited v Pike Signals Limited (1993) RPC 107 (Aldous J), including the following passage (at 134):

In the case of a written description what is made available to the public is the description and it is irrelevant whether it is read. In the case of a machine it is that machine which is made available and it is irrelevant whether it is operated in public. A machine like a book can be examined and the information can be written down. Thus what is made available to the public by a machine, such as a light control system, is that which the skilled man would, if asked to describe its construction and operation, write down having carried out an appropriate test or examination. To invalidate the patent, the description that such a man would write down must be a clear and unambiguous description of the invention claimed.

39    At [325] Downes J went on to apply this to the case before her as follows:

Here, the bore 64 VSG was made available to a member of the public (being a third-party customer, Roy Hill) by UON. As such, the disclosure included any information which could be gleaned by any step which Roy Hill took or could take to examine, handle, measure or test the VSG. It follows then that the disclosure to the public included the information that Mr Pilson derived from the testing that he carried out on 3 and 4 August 2016.

40    Downes J emphasised that Mr Pilson (a Roy Hill employee) was under no obligation of confidence to Roy Hill or UON and 'considered himself free in law and equity to tell the world about what he did and observed': Allied Pumps at [326]. It followed that the testing of the bore 64 VSG which he performed was publicly available, so that (subject to consideration of the reasonable trial defence) the testing anticipated the claims of the Patent, with the result that they were not novel: Allied Pumps at [329]-[330].

41    After rejecting another claimed basis of invalidity, Downes J turned to questions of novelty in respect of the prior disclosure found in each of Torrey, Boot (as combined with Elizondo) and Komatsu. Each of these had been published before the earliest priority date for the Patent.

42    Downes J concluded that each of them anticipated each of the claims in the Patent, so that those claims were not novel: Allied Pumps at [456], [495], [538]. Relying on Hanwha Solutions Corporation v REC Solar Pte Ltd [2023] FCA 1017 (Burley J) and other authorities, her Honour proceeded on the basis (at [391]) that in order to anticipate the Invention, the prior art documents needed to contain 'clear and unmistakeable directions' to do or make something that would infringe the Patent.

43    It is not necessary to summarise Downes J's detailed reasoning in relation to each of the prior art documents. It is sufficient to summarise, by way of example, her Honour's findings about Torrey in connection with claim 1 of the Patent. The presence or absence in Torrey of disclosure of two integers from that claim was in issue in Allied Pumps: dewatering submersible pump and level sensor. As to the first of these, Downes J found (at [421]-[423]) that while Torrey discussed applications in the oil and gas industry, it would still be understood by a person skilled in the art of dewatering to disclose a system for use in that application. As to the second, her Honour found, essentially, that while Torrey spoke of a sensor for fluid pressure, not for fluid level, because inlet pressure is a function of the level of fluid above the inlet of the pump (at [437]), 'a skilled addressee would understand that Torrey discloses a system for regulating the level of water in a well': at [438].

44    Hence her Honour found that Torrey contained the requisite clear and unmistakeable disclosure of all the integers of the Invention. Similar findings were made in respect of Boot (at [471]-[473] and [479]-[482] (Boot and Elizondo together)) and Komatsu (at [508]-[510]).

45    It is not necessary for present purposes to summarise the balance of the reasoning in Allied Pumps.

The parties' submissions on the strike out application

46    The respondents' interlocutory application seeks the striking out of the Statement of Claim save for certain specified sections (the Statement of Claim is divided into sections with alphabetic labels). In oral argument, senior counsel for the respondents limited the scope of the application somewhat, so that claims for breach of contractual non-solicitation obligations and copyright infringement would be preserved. Certain claims in respect of confidential information that is not related to the New System would also remain. But if the application is granted, the applicant's claim will be hollowed out. It is not only the claims arising out of the allegedly confidential nature of the New System that will be removed. Also under attack are related claims against Mr Hoascar for misleading or deceptive conduct and breach of fiduciary duty, and against Taranis for knowing assistance and receipt, breach of confidence and procurement of Mr Hoascar's alleged breaches.

47    The strike out is sought pursuant to r 16.21(1) of the Federal Court Rules 2011 (Cth), specifically paragraphs (c) (evasive, ambiguous pleadings), (d) (pleading likely to cause embarrassment or delay) and (f) (abuse of process). While there was a suggestion in oral submissions that the issue was also whether the pleading discloses a reasonable cause of action (r 16.21(e)), the respondents' submissions focussed on abuse of process and the application will be addressed on that basis. Nothing turns on the difference for the purposes of this application. The practical question is whether the findings in Allied Pumps are so inconsistent with the case put by the applicant in this proceeding as to make that case, or most of it, untenable.

48    It is uncontroversial that it may be an abuse of process to make a claim that was made and determined in an earlier decision: Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; (2015) 256 CLR 507 at [26]. The applicants did not dispute that, in principle, if they were making claims that are contradicted by the findings in Allied Pumps, those claims should be struck out. Their resistance to the application is founded on the proposition that there is no necessary inconsistency between their claims and those findings.

49    The respondents submit that the integers of claim 1 of the Patent and the features that make up the New System are identical - they describe the same invention. Similarly, there is no distinction between the New System and the Roy Hill Systems. Downes J found that any person with relevant expertise could have reverse engineered the GMC Pro Power and built it themselves from that time on. This, they say, means that information about the New System is not confidential. Hence the claim is said to be untenable and should be struck out.

50    According to the respondents, the same follows from the disclosure found in the prior art documents, that is Torrey, Komatsu and Boot. The respondents point out that the New System CI is defined in paragraph 29.1 of the Statement of Claim to include 'the idea of the New System', which is the very matter disclosed in the prior art documents, that is the Invention found in claim 1 of the Patent.

51    As to the New System CI specified in paragraph 29.2 and 29.4 of the Statement of Claim, with a handful of exceptions, the respondents rely on the loss of confidentiality they say follows from the disclosure at Roy Hill as was the subject of findings in Allied Pumps. The exception is that in the case of paragraph 29.4(d), 29.4(e) and 29.4(g) they rely on the prior art documents, not the disclosure at Roy Hill. They do not seek to strike out the claim in respect of the New System CI specified in paragraph 29.3. Again, their submissions on these points, which are central to the strike out application, will be described in more detail when I come to determine the application from [79] below.

52    The respondents submit that to the extent that the New System had characteristics that were not found in the Invention, information about those characteristics is inextricably bound up with information that comprises the integers of claim 1, so that the entire claim based on the New System should be struck out.

53    The respondents submit that the loss or damage claimed by UON in this proceeding is said to follow from Taranis selling its VarioGen from November 2016. This, the respondents say, amounts to 'doing from November 2016 what Downes J has determined was something anyone was free in law and equity could so from at the latest May 2016': Respondents' Submissions in Support of Strike Out Application dated 24 July 2024, para 27 (emphasis in original).

54    The applicants do not accept that claim 1 and the New System describe the same invention, but, as I have said, I proceed on the assumption that they are the same.

55    The applicants submit in any event that patent validity and misuse of confidential information are different questions. They accuse the respondents of eliding the two throughout their submissions.

56    The applicants' main point is that the respondents wrongly equate the finding that the Invention is not novel with the proposition that all the information relating to the New System is not confidential. But as a matter of law, they say, a finding that an invention is not novel is not the same as a finding that all the information that pertains to the invention is not confidential.

57    The validity of the Patent in Allied Pumps turned on the question of whether the Invention was novel when compared with the prior art base as it existed before the priority date of the claim: Patents Act 1990 (Cth) s 18(1A)(b)(i). Relevantly, an invention will be taken to be novel when compared to the prior art base unless it is not novel in light of prior art information that is made 'publicly available' through doing a single act: s 7(1)(a). The applicants submit that the question is not whether the prior art or the prior act discloses the complete workings of a particular product or device that embodies the invention. They have pleaded that Mr Hoascar has misused and wrongly disclosed a range of information pertaining to the New System in the specific form in which it was developed and, ultimately, marketed by UON as the GMC Pro Power.

Some basic points

58    In order to determine the respondents' interlocutory application, it is necessary to appreciate a few basic points about the applicants' pleaded claim, and a few basic points about the law concerning patents and the protection of confidential information.

59    As to the applicants' pleaded claim, the first point is that, save in the respects that the respondents are not presently attacking, the claim depends entirely on the ability of the applicants to establish that the New System CI is subject to obligations of confidentiality owed by Mr Hoascar to UON. This appears from the description of the pleading given above. To that extent, then, several oral submissions by senior counsel for the respondents attacking paragraphs subsequent to paragraph 29 of the Statement of Claim did not advance his clients' position. Those subsequent paragraphs stand or fall on the applicants' ability to assert that the New System CI is subject to confidentiality obligations.

60    The second point about the Statement of Claim that must be appreciated is that the New System and the New System CI are not the same thing. The latter is pleaded to include the idea of the former, but the New System CI is much more extensive and detailed than that idea. That appears from the discussion of paragraph 29 of the Statement of Claim at [79] below. It is true that if Allied Pumps means that the idea of the New System was not confidential, the question arises whether the New System CI can be pleaded without abuse of process. But it would be wrong to equate the two concepts.

61    To put these two points together, the present question is whether the applicants are entitled to maintain that the New System CI is subject to confidentiality obligations. The fate of the claim does not depend on their ability to assert, as they do in paragraph 8 of the Statement of Claim, that UON personnel invented and developed the New System.

62    As to the law of patents and the law of confidential information, the first basic point to appreciate is that a lack of novelty and a lack of confidentiality are not the same thing.

63    The lack of novelty in the Invention as found in Allied Pumps stemmed from two areas: the prior acts concerning the hire and trials of the Roy Hill Systems and the prior art documents (Torrey, Komatsu and Boot). The sense in which information in such forms can be held to be 'publicly available' so as to destroy novelty for the purposes of the Patents Act emerges clearly from Insta Image at [124] (on which Downes J relied):

In respect of the issue whether information was 'publicly available' before the priority date, the following principles emerge from the cases:

•    The information must have been made available to at least one member of the public who, in that capacity, was free, in law and equity, to make use of it (PLG Research Ltd v Ardon International Ltd [1993] FSR 197 at 226 per Aldous J cited in Jupiters at [141]). (This test of communication to a member of the public who is free in law or equity to use the information as he or she pleases had been enunciated by the English Court of Appeal as early as 1887 in Humpherson v Syer (1887) 4 RPC 407 at 413 per Bowen LJ.)

•    It is immaterial whether or not the invention has become known to many people or a few people (Sunbeam Corporation v Morphy- Richards (Aust) Pty Ltd (1961) 180 CLR 98 at 111 per Windeyer J). As long as it was made available to persons as members of the public, the number of those persons is not relevant. Availability to one or two people as members of the public is sufficient in the absence of any associated obligation of confidentiality (Fomento Industrial SA v Mentmore Manufacturing Company Ltd [1956] RPC 87 at 99-100; Re Bristol-Myers Company's Application [1969] RPC 146 at 155 per Parker LJ).

•    The question is not whether access to an invented product was actually availed of but whether the product was made available to the public without restraint at law or in equity. (Merck & Company Inc v Arrow Pharmaceuticals Ltd (2006) 154 FCR 31 (Merck) at [98]-[103]).

•    In order to be 'available', information said to destroy novelty must be of a kind that would disclose to a person skilled in the relevant art all of the essential features or integers of the invention (cf RD Werner & Company Inc v Bailey Aluminium Products Pty Ltd (1989) 25 FCR 565 at 593-594).

•    In order to be 'available', information said to destroy novelty must 'enable' the notional person skilled in the art at once to perceive, to understand, and to be able practically to apply the discovery, without the need to carry out further experiments in order to arrive at that point (Stanway Oyster at 581-582).

64    In Sunbeam Corporation v Morphy-Richards (Aust) Pty Ltd (1961) 180 CLR 98, a case cited by the Full Court in Insta Image, Windeyer J said (at 111-112):

Since the question was, 'is it new or has it been earlier disclosed?', it was immaterial whether or not it had become known to many people or to few people. A description in an obscure publication would suffice to destroy novelty, provided that it was a publication, that is to say that the document whether or not it was read generally by the public, had been available to the public: and similar considerations applied to publication by user.

65    Thus, in Bristol-Myers Company's Application (1969) 86 RPC 146, Lord Parker, delivering the judgment of the Court of Appeal and speaking of Fomento Industrial S.A. v Mentmore Manufacturing Coy Ld (1956) 73 RPC 87 (a case where a gift of pens to three individuals amounted to anticipation of the invention) said (at 155):

It seems to us that we are bound by this authority to reject the contention that publication depends either upon anything in the nature of a dedication to the public or upon the degree of dissemination of the information alleged to have been published. On the contrary, if the information, whether in documentary form or in the form of the invention itself, has been communicated to a single member of the public without inhibiting fetter that is enough to amount to a making available to the public and we do not think it is open to us to construe the words 'made available to the public' in section 101 in a sense which conflicts with this decision.

66    To similar effect is the passage from Lux Traffic Controls quoted in Allied Pumps as set out at [38] above.

67    The conception of disclosure to the public which is operative in the field of restraining misuse of confidential information is quite different. In Ansell Rubber Co Pty Ltd v Allied Rubber Industries Pty Ltd [1967] VR 37, Gowans J described the indicia of a 'trade secret' or 'highly confidential information' arising from English law (at 49):

Its subject-matter may not be a process in common use, or something which is public property and public knowledge, but if it is the result of work done by the maker upon materials which may be available for the use of anybody, so as to achieve a result which can only be produced by somebody who goes through the same process, it will be sufficient. All of its separate features may have been published, or capable of being ascertained by actual inspection by any member of the public, but if the whole result has not been achieved, and could not be achieved, except by someone going through the same kind of process as the owner, it will not fail to qualify by reason of the publication. It may derive from a maker in another country without losing its character, if it is used, or entitled to be used, by the owner alone in the country in which the owner operates. There is no suggestion of the need for invention. Little can be gathered of the degree of secrecy required beyond what is implied in what is said. But it is a fair inference from what is said that the employer must have kept the matter to himself and from his competitors. The emphasis in the cases is on the confidence.

68    But it does not follow from that emphasis that unfettered disclosure to a small group of persons results in the loss of the necessary quality of confidence. That is so, even apart from the need to engage with the scope of express contractual constraints. For what is required is sometimes described as 'relative secrecy'.

69    In Franchi v Franchi (1967) 84 RPC 149, Cross J considered whether the publication of allegedly confidential information in a patent specification published in Belgium meant that it had lost the character of secrecy in the United Kingdom. His Lordship held (at 152-153):

Clearly a claim that the disclosure of some information would be a breach of confidence is not to be defeated simply by proving that there are other people in the world who know the facts in question besides the man as to whom it is said that his disclosure would be a breach of confidence and those to whom he has disclosed them.

There appear to be no English cases on this branch of the law of trade secrets, but the plaintiffs referred me to the United States case of Vulcan Detinning Co. v. Assam (1918) 185 N.Y. App. Div. 399 (mentioned in Turner on the Law of Trade Secrets, page 25) where it was held that the fact that a German and a Dutch firm had complete knowledge of the process in question which one of the defendants (an employee of the plaintiffs) had disclosed to the other defendant was no bar to the plaintiff's success. If it is not impertinent for me to say so, that seems to me sound sense. It must be a question of degree depending on the particular case, but if relative secrecy remains, the plaintiff can still succeed. But I do not understand that case to have decided, as I think the plaintiffs suggested, that knowledge by persons in another country can never be relevant in this connection.

70    The plaintiffs lost the case before Cross J because his Lordship found as a fact that patent agents in the United Kingdom often inspect patent specifications abroad as soon as they are published. But the term 'relative secrecy' has been picked up as good law in subsequent Australian decisions: Artedomus v Del Casale [2006] NSWSC 146 at [25]-[28] (Burchett AJ); Australian Medic-Care Company Ltd v Hamilton Pharmaceutical Pty Limited (ACN 008 204 635) [2009] FCA 1220 at [633] (Finn J); CA Inc v ISI Pty Ltd [2012] FCA 35; (2012) 201 FCR 23 at [376] (Bennett J). These authorities recognise that it is a question of degree. See also Gaudron J's discussion of the concepts of 'the public domain', 'public knowledge' and 'common knowledge' as essentially questions of fact in Johns v Australian Securities Commission (1993) 178 CLR 408 at 460-463.

71    Hence it does not follow from the demonstration of the Invention to a small number of people at Roy Hill, in the absence of confidentiality restraints, that any confidentiality was lost against all the world. When asked to identify authority for the proposition that disclosure to one person (without obligations of confidentiality) destroys confidentiality against all the world, the respondents cited only O'Brien v Komesaroff (1982) 150 CLR 310 at 326 (Mason J) and Saltman Engineering Coy Ld v Campbell Engineering Coy Ld (1948) 65 RPC 203 at 215. But the proposition simply does not appear in O'Brien. To the contrary, Mason J draws a contrast between information that was regularly published to the world at large, and information which the person seeking to protect it keeps 'largely' to themselves (at 326). And references in the Saltman case to information which is 'public property and public knowledge' (see 215) say nothing about the effect, if any, of disclosure of information to one person only.

72    A further basic point pertaining to the prior art documents is that, as has been said, the question in Allied Pumps was whether the documents contained a clear description of, or clear instructions to do or make, something that would infringe the claims in the Patent if carried out. That is, it was necessary to establish that the documents described or instructed as to the making or doing of something that had all the integers in the claims in the Patent, since the claims define the Invention: Patents Act s 40(2)(c); Insta Image at [124] (fourth bullet point, see [63] above, per Lindgren, Bennett and Logan JJ).

73    But a finding that a given prior art document did contain such description or instructions is not the same as a finding that the document discloses the integers of the invention to all the world. Whether it is so is a matter for submissions, which may rely on evidence and judicial notice of notorious matters. But the respondents did not rely on those matters in the interlocutory application. The simple equation between prior art documents and destruction of confidentiality cannot be assumed. 'A prior publication may be an anticipation and so destroy novelty even though the material so published has not entered the common general knowledge in Australia': RD Werner & Co Inc v Bailey Aluminium Products Pty Ltd (1989) 25 FCR 565 at 593 (Gummow J, Jenkinson J agreeing).

74    Further, even if it is assumed that the prior art documents meant that the idea of the New System was in the public domain, it is necessary to engage with the fact that the applicants rely on express contractual terms as to confidentiality. The canonical statement of the equitable duty of confidence given by Megarry J in Coco v AN Clark (Engineers) Ltd (1968) 1A IPR 587 at 590 says at the outset that it stands 'apart from contract'. Here, the applicants plead a formal signed confidentiality agreement between UON and Mr Hoascar under which Mr Hoascar arguably agreed to keep confidential information that may not of its nature have been confidential. The respondents admit that there was an agreement that contained the terms pleaded by the applicants. Neither side pleads an exception to these contractual obligations that the information has been disclosed publicly.

75    It is true that in Maggbury Pty Limited v Hafele Australia Pty Limited [2001] HCA 70; (2001) 210 CLR 181 at [45]-[57] the majority of the High Court was uncomfortable with contractual restraints that require the parties to treat as confidential information that is not confidential by nature. Their Honours were disposed to find such provisions effective only if expressed in 'inescapable terms', and such provisions may then fall foul of the common law doctrine respecting restraint of trade (at [54]-[57]). But for the purposes of this proceeding these are all questions which, if raised at all, are palpably matters for trial, and not to be decided on a strike out application. It is open to the applicants to argue that Mr Hoascar breached contractual terms even if aspects of the New System CI had entered the public domain.

76    A further basic point is that the integers of an invention and information pertaining to the invention that is subject to obligations of confidence are not necessarily the same thing. This reflects a similar point made above about the pleading, and will be developed below by reference to paragraph 29.2 of the Statement of Claim.

77    Differences between the law of patents and the law of confidential information of the kind canvassed above led to the following observations of Bowen CJ in Eq in Interfirm Comparison (Australia) Pty Ltd v Law Society of New South Wales [1975] 2 NSWLR 104. In response to an argument by the defendant, relying on patent cases, that a disclosure to any member of the public destroyed confidentiality, his Honour said at 118:

It appears to me that decisions relating to patents are not helpful in dealing with questions of confidentiality. The Patents Act, 1952-1969 (Cth.) itself, by its provisions, raises some points of difference. But apart from that, in the case of an invention the State offers to the inventor a monopoly in return for disclosure in his specification of his invention. If an inventor has already disclosed his invention, even to one member of the public, it may be held as a matter of principle that he has no consideration to offer in return for the grant of monopoly: see Humpherson v Syer [(1887) 4 RPC 407 at 413]. The law relating to confidentiality of communications appears to me to be based upon different principles - the long-standing equitable principles relating to fair-dealing with the work of another. It is closer to the law relating to copyright in unpublished works than to the law of patents. The authorities indicate that even though secrecy may be imperfect in relation to communication which is given in confidence, that communication may still be protected by the principles of confidentiality. The matter was discussed by Sir J.L. Knight-Bruce V.-C. in Prince Albert v. Strange [(1848) De G. & Sm at 652]. The learned Vice-Chancellor said: 'Nor is this right to prevent "innocent" writings from being published without the consent of the proprietor, the author, confined to those instances where he has kept them in a state of entire privacy and secrecy before the invasion complained of. The right is not lost by partial and limited communications not made with a view to general publication, as is shown by several cases, that on Lord Clarendon's History, and others.'

78    In my respectful view, this passage confirms the fallacy in the argument the respondents put here.

Application of these points to the present case

79    It follows from the points made above that the focus of consideration needs to be on paragraph 29 of the Statement of Claim describing the New System CI, and whether the findings in Allied Pumps render untenable the claim that the information was confidential.

80    It may be granted that paragraph 29.1 is open to attack on that basis, because it says that the New System CI disclosed to Mr Hoascar included 'the idea of the New System', and on the assumption made above, this is the same as the idea expressed in claim 1 of the Patent. The respondents rely on the prior art documents as having disclosed that idea, and also on the Roy Hill trials. But for three reasons, it does not follow that the plea at paragraph 29.1 cannot be maintained.

81    The first reason is that, as already explained, it does not follow from the lack of novelty resulting from the prior art documents that the idea of the New System was not confidential in 2015 to 2016 when the events central to the claim occurred. That is especially so when it is appreciated that UON relies on express contractual confidentiality obligations.

82    The second reason is that, as also already explained, the conclusions about the Roy Hill trials in Allied Pumps do not necessarily mean that the requisite confidentiality attaching to the idea of the New System was destroyed. Whether there had been public disclosure of the components and configuration of the New System is a question of fact, a question of degree, and so a question for trial.

83    I therefore do not find it necessary to deal with alternative submissions made by the parties about the relevance of the springboard doctrine, as pleaded by UON. The findings in Allied Pumps about the Roy Hill trials do not necessarily disentitle UON from relying on its principal case as to misuse of confidential information.

84    The third reason why the findings in Allied Pumps do not make paragraph 29.1 of the Statement of Claim untenable is that, even if the idea of the New System was not confidential, paragraph 29 deploys certain features of that system, not alone, but as part of a plea of disclosure of information said to be confidential with the specificity required by this area of the law: see O'Brien at 326-328. Importantly, it needs to be read with paragraph 28, which pleads that the information was disclosed to Mr Hoascar during the course of his employment by UON for the purpose of the development of the New System, and with paragraph 30, which pleads a large number of occasions on which the New System CI was imparted to Mr Hoascar in the course of work for UON. Many of these are very specific, such as the example given above (at [16]) of '[t]esting alternator electrical performance on 11 December 2015'.

85    It is trite that the purpose of pleading these matters is to put the opposing parties on notice of the case they will need to meet at trial, and to confine the issues to be determined at trial, including the evidence that will be admissible: Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15 at [13] (Greenwood, McKerracher and Reeves JJ). But the plea of the New System, assuming it is a plea of concepts that are described in claim 1 of the Patent, is not the same thing as the evidence that will be led about the communication of those concepts to Mr Hoascar. The evidence adduced to make good paragraph 29.1, read with paragraphs 28 and 30, will not be about some abstract communication of the pure concepts described in claim 1 of the Patent. It will be evidence about particular discussions and drawings in which those concepts were communicated in a particular way. Those particular communications may, on that evidence, have been communicated in circumstances of confidence, even if (contrary to my view) it follows from Allied Pumps that the more general ideas that were communicated in particular ways were public knowledge.

86    Turning to paragraph 29.2 of the Statement of Claim, it identifies a large number of documents stored on UON's server as comprising in part the New System CI. It includes material which on the face of things was capable of being confidential even if the idea of the New System was not, such as testing data, data for the purpose of programming an external fuel system, scans of drawings and schematics, emails and internal communications relating to the testing of the New System, and product manuals where UON pleads that, while they were not in themselves confidential, the fact that UON was researching them for the purposes of developing the New System was.

87    The respondents rely on the Roy Hill trials to say that some of this information cannot have been confidential after May 2016 (they do not seek to strike out the particulars of information that was on the face of it internal to UON). For the reasons given, that does not necessarily follow.

88    Paragraph 29.3 of the Statement of Claim refers to a particular spreadsheet about fuel consumption said to have been created by Mr Hoascar in his capacity as an employee of UON and the respondents do not seek to strike this out.

89    Paragraph 29.4 pleads as New System CI: components of the New System that had been tested by UON and found to have performed optimally; components that had been tested and rejected; and certain methods of operation of the system and programming which appear not to be part of the Invention. For these, again, the respondents rely on the Roy Hill trials. For reasons given, I do not accept that the findings about the trials in Allied Pumps makes these pleas untenable.

90    In relation to three matters, however, the respondents rely on the prior art documents. They are set out in paragraph 29.4:

(d)    the necessity to program the system controller to control the ECU and AVR concurrently;

(e)    bore pump control so as to enhance systems and monitoring of the pump;

…

(g)    how each component of the New System operates and integrates.

Compare this with the description of the New System at [7] above (which also explains the meaning of the initials used here).

91    For the first two reasons given at [81]-[82] above, I do not accept that Allied Pumps makes these pleas untenable, even if these matters do correspond to integers of the Invention described in claim 1 of the Patent.

92    Similarly, as to paragraph 29.4, the way in which the matters particularised at paragraphs (d), (e) and (g) were in fact disclosed to Mr Hoascar is able to be the subject of evidence adduced under cover of those paragraphs even if (contrary to my view) Allied Pumps means that the ideas must be accepted as public knowledge.

93    Further, there would be an undesirable artificiality in excising from the applicants' ability to lead evidence about the relevant communications with Mr Hoascar, particular communications that convey, at a conceptual level, integers of the New System. The applicants should be able to lead the evidence in a natural, chronological way without having to redact or skip over certain parts of certain communications. Even if ultimately those matters are found not to have been confidential, it is not an abuse of process for the applicants to seek to advance them as part of their case overall.

Conclusion on the respondents' interlocutory application

94    The respondents have not persuaded me that the findings in Allied Pumps make any of the allegations in paragraph 29 about the New System CI untenable, and so an abuse of process. It follows that paragraph 8 of the Statement of Claim is defensible as a necessary step to the key pleas in paragraph 29. As already said (above at [59]), the other paragraphs attacked by the respondents stand or fall with those paragraphs, meaning that they stand. The respondents' strike out application will be dismissed with costs.

Orders consequent on the finalisation of the cross-claim

95    At the time of the Allied Pumps decision, in this proceeding the applicants were suing Taranis for infringement of the Patent, and Taranis had made a cross-claim for a declaration that the Patent was invalid (together, the Patent Claims). In these reasons, the respondents/cross-claimant will generally be referred to as Taranis, as the relevant submissions on the Patent Claims concern Taranis's costs, despite being filed by the respondents/cross-claimant.

96    The parties are agreed that Allied Pumps means that the Patent Claims falls away. They agree that it follows that the applicants are liable for costs in respect of the Patent Claims, and that those costs should be assessed by a Registrar of the Court on a lump sum basis. But they do not agree on other aspects of the orders that should result. The areas of disagreement are:

(1)    LAA says that the cross-claim should be dismissed. Taranis says that it should be given leave to discontinue.

(2)    Taranis seeks its costs of the Patent Claims on an ordinary basis up to 17 March 2023, and on an indemnity basis thereafter, on the basis of an offer of compromise it served shortly before that date.

(3)    The applicants accept that they should pay Taranis's the costs of the Patent Claims until 28 September 2023, being the date on which the Court ordered this proceeding to be stayed pending the outcome in the Allied Pumps litigation. But thereafter they say that they should only be liable for Taranis's costs of reviewing, considering and advising on the Allied Pumps decision and corresponding with the applicants about it.

(4)    Taranis seeks an order that its costs of the Patent Claims be paid forthwith. The applicants oppose this.

The first issue: discontinuance or dismissal of the cross-claim

97    The applicants' patent infringement claim was dismissed by an order made by consent on 8 May 2024. No order has yet been made to bring to an end Taranis's cross-claim for invalidity of the Patent.

98    LAA's objection to the discontinuance of the cross-claim is that, in theory, discontinuance allows the claim to be revived. LAA says that there is no need to preserve that entitlement in circumstances where the Patent has been declared invalid in any event.

99    However, the possibility that Taranis would seek to revive the cross-claim is entirely theoretical. As a result of Allied Pumps, the Patent has been revoked.

100    It is therefore appropriate to give Taranis leave to discontinue, to reflect the fact that its cross-claim did not fail; rather, it is no longer necessary to pursue it, because a different proceeding led to the outcome that Taranis was pursuing. The terms as to costs on which leave to discontinue will be granted are addressed in what follows.

Second issue: the offer of compromise and indemnity costs

101    On 15 March 2023, the respondents/cross-claimant served an offer of compromise on the applicants/cross-respondent under r 25.01(1) of the Federal Court Rules. The offer was essentially to compromise the Patent Claims. It was on terms that the applicants' claim for infringement of the Patent would be dismissed, Taranis's cross-claim for revocation of the Patent would be discontinued, and each party would bear their own costs of those claims. The offer was open for acceptance until 29 March 2023. The applicants/cross-respondent did not respond to it.

102    Apart from costs, the outcome after Allied Pumps has been identical to that in the offer. As to costs, the applicants/cross-respondent would have been better off had they accepted the offer, since they would have avoided the liability for costs that the parties now agree must be borne by the applicants/cross-respondent (even though they are not in agreement as to the basis on which the costs will be calculated).

103    Taranis relies on r 25.14(2) in relation to the dismissal of the patent infringement claim and r 25.14(3) in relation to the cross-claim. For the first of these provisions, the question is whether the applicants/cross-respondent have unreasonably failed to accept the offer. For the second, the question is whether Taranis in its capacity as applicant in the cross-claim has obtained a judgment that is more favourable than the terms of the offer.

104    In relation to r 25.14(2), the applicants say that it was not unreasonable of them not to have accepted the offer, for two reasons: it cannot be said that on the information available to them at the time of the offer, they should have known that they were likely to fail; and in respect of the cross-claim, the offer was only to discontinue, so that it could have been revived.

105    As to the first of these points, the onus of establishing that the non-acceptance of the offer was unreasonable rested on Taranis: Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCA 108 at [72] (Greenwood J). In deciding whether they have discharged that onus, I am bound to apply the following statement of principle from Rakman International Pty Limited v Boss Fire & Safety Pty Ltd [2023] FCAFC 202 at [155]:

FCR 25.14(2) provides that if an offer is made by a respondent and an applicant unreasonably fails to accept the offer, and the applicant's proceeding is dismissed, the respondent is entitled to indemnity costs after the date of the offer. The question of the reasonableness of the refusal to accept the offer is primarily to be determined from the date of the rejection, not looking at the ultimate conclusion of the proceeding, which is a circumstance that may be taken into account in considering the application of FCR 1.35. The question that matters most in this context is whether, given the information then available to the appellants, they should have known that their case was likely to fail; Anchorage Capital [Partners Pty Ltd v ACPA Pty Ltd [2018] FCAFC 6; (2018) 259 FCR 514] at [239].

106    No party relies on r 1.35 of the Federal Court Rules here.

107    As to what is meant in Rakman by 'the ultimate conclusion of the proceeding', the above observations were made in relation to an argument that it was not unreasonable for the party who was unsuccessful overall to have rejected an offer, because the offer did not account for significant issues on which it did succeed, or which the offeror party abandoned (see [153(c)]). It therefore appears that the knowledge that is to be disregarded is the knowledge of ultimate success or failure on each relevant issue.

108    It does not follow, however, that observations made by a trial judge based on the material that was available to the offeree party at the time of the offer are irrelevant. This case is somewhat unusual because the judge now assessing the reasonableness of the offer is not the judge who presided over the relevant trial. The trial judge will be in a good position to assess directly from their own knowledge the reasonableness of not accepting the offer, looking forward from the time it was made. No party here suggested that I should become as familiar with the evidence and issues in the Allied Pumps proceeding as Downes J was, and I have not attempted to do so. But nor did any party suggest that I cannot apply observations her Honour made in her reasons for decision, to the extent that they shed light on the position that presented itself to the applicants here at the time the offer was made.

109    By 15 March 2023, all the evidence in the Allied Pumps trial was in, and cross-examination had occurred. It is sufficient to focus on the Roy Hill issue. Indeed, that was the issue relied on by the respondents/cross-claimant in the covering letter to the offer in asserting that the Patent was invalid. In Allied Pumps, Downes J found that the evidence of the two witnesses called by UON and LAA on that issue was either of no assistance or unreliable. That was so as a result of things they said in cross-examination: see Allied Pumps at [208]-[210]. Further, in her own costs decision, Allied Pumps Pty Ltd v LAA Industries Pty Ltd (No 2) [2024] FCA 188, her Honour said (at [33]):

UON fought every aspect of the Roy Hill case, and put Allied Pumps to proof, even though its position that the Roy Hill Systems could not control on level was contradicted by contemporaneous documents and it chose not to call witnesses who could have given evidence about this issue: see [Allied Pumps] [217]-[221], [223], [226], [227], [231], [232], [237]-[246], [248].

110    And at [35]:

Further, UON persisted with the reasonable trial defence, notwithstanding that this case contradicted its own case on novelty. While this case was arguable, it was a very weak one especially in circumstances where UON maintained the position during closing submissions that the Roy Hill Systems could not control by level …

111    These observations show that at the time the offer in this proceeding was made, the evidence before the applicants meant that they should have known that their case was likely to fail. Regardless of the outcome of the other issues, if they failed on the Roy Hill trials, their defence of the Patent as a whole could not succeed.

112    The second submission the applicants make as to the reasonableness of not accepting the offer is that the offer was to discontinue the cross-claim, meaning that accepting it would not provide certainty as to the outcome.

113    I do not accept that submission. I do accept that this is a factor that can be used to assess the reasonableness of not accepting the offer as a whole. It is true that when considered in isolation, the discontinuance only related to the cross-claim, so as to engage r 25.14(3), not r 25.14(2). But it was part of a broader offer engaging the latter provisions, and not a severable part.

114    Nevertheless, the evaluative judgment as to reasonableness must surely be made on the basis of a common sense assessment of realistic possibilities, rather than merely theoretical ones, that is, it must be made as a matter of substance: see Henley Arch Pty Ltd v Henley Constructions Pty Ltd (No 2) [2022] FCA 231 at [33] (Anderson J). The covering letter to the offer said that Taranis brought the cross-claim as a purely defensive measure to respond to the infringement claim made by the applicants. That this is so can be inferred from the circumstances of the case as a whole.

115    Further and importantly, if the infringement claim were to be dismissed, there would be no incentive for Taranis to have pursued a (fresh) revocation claim, because the res judicata or issue estoppel that followed from the dismissal would have left it free to exploit its own pumping system, which had been alleged to infringe. Looking forward from 15 March 2023, and weighing realistic rather than theoretical possibilities, it would have been reasonable for the applicants to have accepted the offer, even though that would have led only to discontinuance of the cross-claim.

116    In resisting that conclusion, the applicants refer to Anchorage Capital Partners Pty Limited v ACPA Pty Ltd [2018] FCAFC 6; (2018) 259 FCR 514 and Rakman. The point on which they rely is captured in the following paragraphs of Rakman, the first of which is a quote from Anchorage, where the Full Court's disagreement is with the primary judge's view that an offer of discontinuance of the cross-claim would have been the abandonment of something valuable by the cross-claimant:

[164]    On appeal, the Full Court disagreed, saying of the offer:

[242]    …It required the appellant to pay a substantial portion of the respondents' costs but offered the appellant little in return for that payment. The mutual discontinuances proposed by the respondents would have permitted the respondents to bring a fresh proceeding for cancellation of the appellant's registered marks at any time in the future and without any contractual restraint upon their right to do so or their right to use the US ANCHORAGE names in Australia. The underlying commercial dispute would have been left entirely unresolved.

[165]    In our view, the position in the present case in relation to Offer 1 is similar to that in Anchorage. The costs offer may hardly be said to amount to a compromise in circumstances where typically party and party costs are significantly taxed and often end up amounting to about 66% of actual costs. The offer merely to discontinue the cross claim served to leave the validity of the patent at large, with no contractual obligation on the respondents not to bring fresh proceedings for cancellation. Whilst there was no evidence to say that Boss would resurrect its cross-claim alleging the invalidity of the patent, there was no legal impediment to Boss doing so. Whilst, for the reasons set out by the primary judge at [53], that might not have eventuated, we consider that those advising the appellants were entitled, if not obliged, to take that fact into account and to conclude that an offer merely to discontinue the proceedings may not quell the controversy between the parties. We respectfully consider that the primary judge erred in discounting the difference between the offer to discontinue the claim and the cross-claim and a dismissal of both.

117    But there is an important point of distinction between both Anchorage and Rakman on the one hand and this case on the other. Both Full Court authorities concern offers where each of the claim and cross-claim were to be discontinued. It is easy to see why, then, the Full Court in Anchorage decided that the 'underlying commercial dispute would have been left entirely unresolved' and the Full Court in Rakman found that 'an offer merely to discontinue the proceedings may not quell the controversy between the parties'.

118    Here, in contrast, the claim for infringement was to be dismissed. The purely defensive nature of the cross-claim meant that infringement was the underlying commercial dispute and controversy between the parties. The possibility that Taranis would embark on a fresh claim for revocation when the question of infringement had been resolved in its favour was entirely theoretical. That, together with the assessment of prospects of success which the applicants should have made at the time of the offer, means that it was unreasonable of them not to have accepted it.

119    As to the costs of the cross-claim itself, r 25.14(3) of the Federal Court Rules creates a presumptive right to costs where it is engaged, which the unsuccessful party must rebut by showing proper reason, which will generally only be in an exceptional case: see Australian Skills Quality Authority v Western Institute of Technology Pty Ltd [2017] FCAFC 183 at [23]-[24] (Tracey, Griffiths and Charlesworth JJ). In its capacity as second respondent and cross-claimant, Taranis made an offer; in its capacity as the second applicant and cross-respondent, LAA did not accept it; and Taranis has obtained judgment more favourable than the terms of the offer, because this judgment includes an order for its costs. The applicants have not pointed to any reason why the presumption is rebutted here.

120    Under each of r 25.14(2) and r 25.14(3), then, Taranis is entitled to its costs on an indemnity basis from 11.00 am on the second business day after the offer was served, being 17 March 2023.

Third issue: costs after the stay

121    On 28 September 2023, orders were made in this proceeding staying the infringement claim and the cross-claim for revocation of the Patent, pending the determination of the Allied Pumps proceeding. The latter proceeding was determined on 24 November 2023.

122    The applicants submit that the respondents have not established why it is appropriate for any costs to be payable to them after the date of the stay. They seek orders to the effect that, after the stay, the respondents are only entitled to costs 'with respect to reviewing, considering and advising on the Allied Decision and corresponding with the Applicants regarding that decision'. The applicants submit, for example, that Taranis have not made it clear what kind of work was required in relation to infringement and the cross-claim while those matters were stayed.

123    I do not consider that it is appropriate to resolve that question in the way the applicants propose. It is not appropriate for a judge of the Court who is not assessing the quantum of costs to be so prescriptive as a result of abstract submissions of the kind advanced by the applicants. The applicants say that they should not be liable for the costs of work done after the stay. That is a question of whether particular costs that will be claimed by Taranis, but have not yet been claimed, were reasonably incurred in connection with the infringement claim or the costs claim: Federal Court Rules r 40.30(b)(i); Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 2) [2012] FCA 23 at [77] (Edmonds J). It is a question that the taxing officer, in this case a Registrar, will be well placed to determine on the basis of evidence and submissions as to why actual costs were incurred. The Court will not determine it now in the absence of such evidence and submissions. No order of the kind sought by the applicants will be made.

Fourth issue: costs payable forthwith

124    Taranis advances two reasons why the costs of the Patent Claims should be assessed and paid forthwith. The first is that the costs relate to what it describes as a discrete part of the proceedings relating to the Patent Claims. The second is that the final resolution of the proceedings is likely to be some time away.

125    There is some merit in these points. But I have decided nevertheless not to exercise the discretion in the matter sought by Taranis. That is because, while the Patent Claims are conceptually discrete from the balance of the main proceedings, I doubt that they can easily be separated at the practical level required to proceed with a separate assessment of costs. As the applicants submit:

(a)    in their further amended substituted defence filed 7 September 2022, the respondents refer several times to allegations of fact made in the statement of cross-claim, including in order to rely on Torrey, Komatsu and Boot to allege that the New System had been developed by third parties well before 5 August 2016; and

(b)    more broadly, the main aspect of the respondents' strike out application determined above indicates that they intend to press the point that the same matters that led to the invalidity of the Patent mean that the confidential information claim cannot succeed.

126    While Taranis submits that this is not an extensive cross over, that is rather belied by the vigour with which they pursued the strike out application. In my view, the assessment of the costs of the Patent Claims should occur at the same time as the assessment of the costs of the proceeding as a whole. If the respondents are successful overall, the costs can be assessed on a simple global basis. If the applicants are successful on the balance of the claims they pursue, it will be a matter of discretion then how to proceed, but a broad impressionistic apportionment of the kind described in Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 at [52] may be appropriate.

127    I therefore put little weight on a submission by Taranis that difficulties in apportionment are likely to arise anyway. While that may turn out to be so, the Court will have at its disposal well-established techniques to do justice in all the circumstances having regard to the outcome of the proceeding as a whole. To attempt to assess the costs of the infringement claim and cross-claim in isolation from the costs of the rest of the claim now is likely to be fraught with difficulty and in my view is more likely to lead to an unjust result.

128    That conclusion makes it likely, perhaps inevitable, that the costs of the proceeding as a whole will be assessed on a lump sum basis, but the parties were in agreement that this is the appropriate method as far as the costs in relation to the Patent Claims go, so it does not appear that will cause any problems. But I will provide for express liberty to apply in relation to the costs orders after the end of the proceeding, in case some variations prove necessary.

Costs of the disputes about the form of orders

129    Although the parties have had mixed success in relation to the above four issues, the Taranis has enjoyed the greater measure of success, especially in view of the fact that the issue as to indemnity costs was both the most significant and the most time consuming. It is appropriate to reflect that by ordering that the applicants must pay 75% of Taranis's costs in relation to the form of orders consequent on the termination of the Patent Claims.

Associate:

Dated:    17 December 2025