Kinabulu Investments Pty Ltd v Barron & Rawson Pty Ltd (No 2) [2009] FCA 57 (6 February 2009)

Last Updated: 9 February 2009

FEDERAL COURT OF AUSTRALIA

Kinabulu Investments Pty Ltd v Barron & Rawson Pty Ltd (No 2) [2009] FCA 57

COSTS – whether the usual order as to costs should be made – where only part of the cause of action was successful – whether that should influence the apportionment of costs – held that the fact that the respondent succeeded on only one ground does not require a departure from the ordinary rule as to costs – usual order for costs made

Federal Court of Australia Act 1976 (Cth) s 43

ACCC v Nationwide News Pty Ltd; ACCC v Smartcom Telecommunications (1996) ATPR 41-519 - followed
Hughes v West Australian Cricket Association Inc & Ors [1986] FCA 382; (1986) 8 ATPR 40-748 - followed
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 - applied
Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 - considered

KINABULU INVESTMENTS PTY LTD (ACN 001 469 718) v BARRON & RAWSON PTY LTD (ACN 000 065 636), ANTHONY J CAREY and WAY TO GO AUSSINDO PTY LTD (ACN 080 761 511)
QUD 217 of 2005

SPENDER J
6 FEBRUARY 2009
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 217 of 2005

BETWEEN:

KINABULU INVESTMENTS PTY LTD (ACN 001 469 718) Applicant

AND:	BARRON & RAWSON PTY LTD (ACN 000 065 636) First Respondent ANTHONY J CAREY Second Respondent WAY TO GO AUSSINDO PTY LTD (ACN 080 761 511) Third Respondent

JUDGE:	SPENDER J
DATE OF ORDER:	6 FEBRUARY 2009
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The applicant pay the respondents’ costs of and incidental to the proceedings, to be taxed if not agreed.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QUD 217 of 2005

BETWEEN:

KINABULU INVESTMENTS PTY LTD (ACN 001 469 718) Applicant

AND:	BARRON & RAWSON PTY LTD (ACN 000 065 636) First Respondent ANTHONY J CAREY Second Respondent WAY TO GO AUSSINDO PTY LTD (ACN 080 761 511) Third Respondent

JUDGE:	SPENDER J
DATE:	6 FEBRUARY 2009
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. These reasons concern the question of costs in the principal proceedings, which were directed at the validity of the applicant’s patent, and whether the respondents had infringed that patent.
2. The applicant had, as the owner of Australian Patent 774224 A barrier, alleged that the respondents had infringed that patent. The respondents alleged that there had been no infringement, and counter-claimed that the patent was invalid on a number of grounds.
3. On 11 March 2008, in reasons for judgment published on that day, I declared that Australian Patent 774224 A barrier is, and has been at all material times, invalid, and I ordered that that patent, and each of the claims of the complete specification thereof, be revoked.
4. On the question of costs, I then ordered that:
   1. Within 7 days of this Order, the Respondents are to file any submissions they wish to make on costs, including a draft of the Orders sought from the Court.
      
   2. Within a further 7 days, the Applicant is to file and serve any submissions it wishes to make on costs, including a draft of the orders sought from the Court.
      
5. On 18 March 2008, the respondents filed an outline of submissions on costs.
6. On 19 March 2008, the time for the application to file submissions was extended to 28 March 2008, and, on that date, the applicant filed its outline of submissions.
7. By way of summary of the proceedings, the applicant sought relief in respect of what it claimed was infringement of claims 1, 2, and 4 of the patent. The respondents contested the infringement case by arguing that the steel beam in the guardliner system was not “mounted on” the barrier element, did not overlie the side walls, and was not on the side walls. The respondents also contested the liability of the second and third respondents in the principal proceedings.
8. The respondents also cross-claimed against the applicant, asserting that the patent was invalid on the grounds:

(a) lack of novelty;
(b) lack of inventive step;
(c) not a patentable invention;
(d) not a manner of manufacture;
(e) lack of clarity;
(f) no utility;
(g) lack of fair basis.

9. The ground of fair basis was not pressed at the hearing of the principal application.
10. The respondents failed in their defence of the infringement allegation, and they failed on all of the grounds of invalidity pleaded and argued at trial, except for the ground lack of novelty. The grounds of lack of novelty and inventive step were highly pressed at the trial.
11. While it is not relevant on the question of costs in the principal proceedings, it is to be noted that an appeal against the judgment pronounced on 11 March 2008 was dismissed with costs by a Full Court of the Federal Court (Sundberg, Emmett and Greenwood JJ) on 31 October 2008.
12. The respondents seek an order that the applicant pay the respondents’ costs of the proceeding to date, including the costs of the cross-claim.
13. Their submission is based on their assertion that the applicant failed to establish an entitlement to the relief which it sought in the amended application.
14. The applicant’s submission is based on my finding that the respondents failed in the defence of the infringement allegation, and failed on all grounds of invalidity which they asserted, except for lack of novelty. In those circumstances, the applicant submits, the appropriate order is that the applicant be ordered to pay 40 per cent of the respondents’ costs.
15. The question of costs is governed by s 43 of the Federal Court of Australia Act 1976 (Cth) which provides:

(1) ... the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded.
...

(2) Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.

16. The general principle as to costs was expressed by Toohey J in Hughes v West Australian Cricket Association Inc & Ors [1986] FCA 382; (1986) 8 ATPR 40-748, at 48,136, where his Honour said:
    1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v Godfrey (1920) 2 KB 47.
       
    2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v Farquhar (1893) 1 QB 564.
       
    3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them. In this sense, ‘issue’ does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. Cretazzo v Lombardi (1975) 13 SASR 4 at p 12.
       
17. As Heerey J noted in ACCC v Nationwide News Pty Ltd; ACCC v Smartcom Telecommunications (1996) ATPR 41-519 at 42,508:

That statement of principle [in Hughes] was approved by the Full Court of this Court in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1988) ATPR 40-841 at 49,077; (1987)17 FCR 211 at 222.

I would observe that the use of the word “may” by Toohey J makes it clear that he is not suggesting an encroachment on the essentially discretionary nature of a costs order, a conclusion made all the clearer by his Honour’s reference to the remarks of Jacobs J in Cretazzo. In Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166 at 169 Burchett J had to consider the case of a successful defendant who had failed in respect of some issues. His Honour said:

It does not necessarily follow that the costs orders otherwise appropriate should be affected. A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitled to raise his earthworks at every reasonable point along the path of assault. At the same time, if he multiplies issues unreasonably, he may suffer in costs. Ultimately, the question is one of discretion and judgment.

18. Observations by McHugh J in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 96, [66] – [70] are directly relevant:
    66. By far the most important factor which courts have viewed as guiding the exercise of the costs discretion is the result of the litigation. A successful litigant is generally entitled to an award of costs. As Devlin J said in Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co [No 2] [1953] 1 WLR 1481 at 1484; [1953] 2 All ER 1588 at 1590, when setting aside an arbitrator’s costs award:
        

“the arbitrator is not directing his mind to one of the most, if not the most, important of the elements which ought to affect his discretion, namely the result of the case. Prima facie, a successful party is entitled to his costs. To deprive him of his costs or to require him to pay a part of the costs of the other side is an exceptional measure.”

The combined force of the sentiments recognised above by Mason CJ, regarding the need for consistency in order to avoid injustice, and by Devlin J, regarding the most significant factor affecting the costs discretion, provides the jurisprudential basis for the important principle commonly referred to as the “usual order as to costs”.

The usual order as to costs

67. The expression the “usual order as to costs” embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party [Latoudis [1990] HCA 59; (1990) 170 CLR 534 at 543, per Mason CJ; at 562-563, per Toohey J; at 566-567, per McHugh J; Cachia v Hanes [1994] HCA 14; (1994) 179 CLR 403 at 410; per Mason CJ, Brennan, Deane, Dawson and McHugh JJ]. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
    
68. As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice.
    
69. The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874, Devlin J formulated the relevant principle as follows:
    

“No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.”

“Misconduct” in this context means misconduct relating to the litigation [King & Co v Gillard & Co [1905] 2 Ch 7; Donald Campbell & Co Ltd v Pollak [1927] AC 732 at 812], or the circumstances leading up to the litigation [Bostock v Ramsey Urban District Council [1900] 2 QB 616]. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation [Jones v McKie [1964] 1 WLR 960; [1964] 2 All ER 842; Bostock [1900] 2 QB 616 at 622, 625, 627]; unnecessarily protracts the proceedings [Forbes v Samuel [1913] 3 KB 706]; succeeds on a point not argued before a lower court [Armstrong v Boulton [1990] VR 215 at 223]; prosecutes the matter solely for the purpose of increasing the costs recoverable [Hobbs v Marlowe [1978] AC 16]; or obtains relief which the unsuccessful party had already offered in settlement of the dispute [Jenkins v Hope [1896] 1 Ch 278].

70. Apart from anomalous examples in the equity jurisdiction [These anomalies typically feature a trust fund or property which will readily satisfy benevolent costs orders. Such examples were recognised by O 55 of the 1875 Rules which, after stating that costs shall be in the discretion of the Court, declared that “nothing herein contained shall deprive a trustee, mortgagee, or other person of any right to costs out of a particular estate or fund to which he would be entitled according to the rules hitherto acted upon in Courts of Equity”], there are very few, if any, exceptions to the usual order as to costs outside the area of disentitling conduct.
    
19. The applicant refers to the observations of the Full Court in Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at 234-235 where the Full Court recognised that the ordinary rule is that the successful party gets its costs, but:

Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed.

20. The applicant contends in the present matter that:

... having regard to the time spent and the issues on which the Respondent failed, it is submitted that an award in its favour of 40% of its party/party costs in the proceeding gives adequate recognition of the fact that it succeeded in the overall case, but failed in most of the arguments that it advanced.

21. In my judgment, the usual order as to costs should be made in this case.
22. The fact that the respondents succeeded on one only of the many grounds of invalidity they asserted is not in my view, in the circumstances of this case, “misconduct” such as to require a departure from the ordinary rule. Nor is the respondents’ unsuccessful claim of non-infringement. As a matter of fact, the respondents’ challenge based on lack of novelty was at the forefront of its defence, and, in my assessment, was the central issue joined on the question of validity.
23. Pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth), on the whole of the material in these proceedings, I order that the applicant pay the respondents costs of and incidental to the proceedings, to be taxed if not agreed.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender .

Associate:

Dated: 6 February 2009

Counsel for the Applicant:	Mr S Burley SC
Solicitor for the Applicant:	Bennett & Philp Solicitors
Counsel for the Respondents:	Mr D Yates SC
Solicitor for the Respondents:	Freehills

Date of Last Submission:	28 March 2008
Date of Judgment:	6 February 2008