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Dura-Post (Aust) Pty Ltd v Delnorth Pty Ltd (No. 2) [2009] FCAFC 93 (10 August 2009)

Last Updated: 14 August 2009

FEDERAL COURT OF AUSTRALIA

Dura-Post (Aust) Pty Ltd v Delnorth Pty Ltd (No. 2) [2009] FCAFC 93

DURA-POST (AUST) PTY LTD v DELNORTH PTY LTD
NSD 1392 of 2008

KENNY, STONE & PERRAM JJ
10 AUGUST 2009
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1392 of 2008

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	DURA-POST (AUST) PTY LTD Appellant
AND:	DELNORTH PTY LTD Respondent

JUDGES:	KENNY, STONE & PERRAM JJ
DATE OF ORDER:	10 AUGUST 2009
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The Appellant pay the Respondent’s costs of the appeal.

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
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1392 of 2008

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	DURA-POST (AUST) PTY LTDAppellant
AND:	DELNORTH PTY LTDRespondent

JUDGES:	KENNY, STONE & PERRAM JJ
DATE:	10 AUGUST 2009
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1 On 30 June 2009 Dura-Post’s appeal to this Court was dismissed. At the time we directed the parties to file any further submissions on costs by 10 July 2009. Submissions were received from both parties.
2 The appeal having been dismissed, Dura-Post accepts that it must pay Delnorth’s costs of the appeal. It submitted, however, that the costs orders made against it by the primary judge should be varied. To understand the issues which arise it is necessary to rehearse a little of the procedural history of the matter.
3 His Honour delivered judgment on 13 August 2008 and stood the proceedings over for the purpose of settling the consequent orders and for the hearing of any argument on costs. It is not clear when the argument on costs took place but it does appear that his Honour made orders disposing of the matter, including costs, on 19 August 2008.
4 So that the orders are more readily comprehensible it is useful to recall that before the primary judge Delnorth was the applicant and had brought infringement proceedings. Dura-Post cross-claimed for declarations that Delnorth’s patents were invalid.
5 Delnorth’s infringement proceedings relied upon patents which have been called throughout this litigation Patent One, Patent Two and Patent Three.
6 Both parties had some success before the trial judge. On Delnorth’s part, it succeeded in showing that Dura-Post’s flexible steel roadside posts infringed a number of the claims in each of Patents One, Two and Three. Further it sought of, and obtained from, the learned primary judge orders enjoining Dura-Post from infringing those claims.
7 On the other hand, Dura-Post was not unsuccessful itself. It persuaded the learned primary judge that two of the claims in Patents Two and Patent Three should be revoked. That victory, however, did not prevent the trial judge from concluding, and hence declaring, that Dura-Post’s Flexi-Steel and Reflex flexible steel roadside posts infringed Patent One, Patent Two and Patent Three. This was because the claims in respect of which that infringement was found to have occurred were unaffected by the revocation of the two claims in Patents Two and Three. Viewed from that perspective, the party who was substantially successful was Delnorth.
8 The relevant orders made by the primary judge on 19 August 2009 were orders 13 and 14 and were as follows:

13. The cross-claim otherwise be dismissed.

14. The Respondent pay the Applicant’s costs of the application and the cross-claim to date, subject to the following:

(a) the operation of costs orders already made in the proceedings;

(b) the Applicant pay the Respondent’s costs:

(i) incurred after 5 July 2008 insofar as those costs relate to the particulars of invalidity of lack of innovative step based on United States Patent No US 3312156 (Pellowski);

(ii) in relation to the integer of a surface coating; and

(ii) in relation to the integer of longitudinally extending ribs.

9 No transcript of argument before his Honour on this issue was made available to us. Further, his Honour does not appear to have produced any reasons for orders 13 and 14. Neither party referred us to anything said in argument or to any aspect of his Honour’s reasons (or absence of reasons).

The Appeal

10 Dura-Post appeals by ground 8 of its amended notice of appeal against the order that it pay Delnorth’s costs in relation to the cross-claim. Dura-Post did not submit that the order should be set aside because the trial judge provided no reasons for it. Instead, it submitted that his Honour should have additionally ordered Delnorth to pay Dura-Post’s costs of litigating Patent One and Patent Three.
11 Dura-Post argued that this was so because of the way in which Delnorth had conducted the litigation. In particular, Delnorth drew attention to the fact that the litigation had initially only involved Patent One. At that time, the original infringement proceeding was brought only in respect of Dura-Post’s Flexi-Steel post.
12 Subsequently, Delnorth filed Patent Two which was broad enough to obtain injunctive relief not only in respect of Dura-Post’s Flexi-Steel posts but also, for the first time, Dura-Post’s Reflex post. The proceedings were amended accordingly.
13 Shortly thereafter, Dura-Post pointed out to Delnorth the existence of the Kennedy patent and its argument that Patent Two was, thereby, invalid. This, Dura-Post submitted, then brought forth from Delnorth Patent Three and concomitant amendments to the proceedings.
14 Dura-Post’s basic submission was that whilst it was true that the new innovation patent system permitted innovation patents to be divided out of a standard patent application on an unlimited basis before the grant of the standard patent, this necessarily imposed upon patentees doing so some obligations of responsibility. This was because the dividing out feature allowed a patentee to react dynamically in infringement proceedings to the various defensive postures adopted by a respondent through the simple expedient of lodging further innovation patents.
15 There is, we think, some force in this proposition. There are, however, difficulties in fitting it into the present appellate context. The making of a costs order involves the exercise of a discretionary power to which the principles in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 504-505 apply: see Probiotec v University of Melbourne [2008] FCAFC 5; (2008) 166 FCR 30 at 44 [54] per Rares J (with whom Finn and Besanko JJ agreed). In House Dixon, Evatt and McTiernan JJ said:

The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

(emphasis added)

16 Because no reasons are available to us it is necessary for Dura-Post to bring its argument within the emphasised words. To put the matter another way, it must be shown that the orders were "unreasonable or plainly unjust". It is clear that where that test is satisfied it indicates that substantial wrong "has" occurred, that is, it is a sign that an error – although unidentified – must have taken place.
17 Although, as we have said, there is force in Dura-Post’s submission we do not think that the learned primary judge’s orders were "unreasonable or unjust" in that sense. The fact is that Dura-Post’s cross-claim was largely dismissed and it was enjoined on the basis of all three patents. It might well have produced a result not susceptible to challenge if the primary judge had reasoned as Dura-Post submits that his Honour should. However, his Honour was not bound to reason that way. The result at which his Honour arrived was not one which is capable of being described as plainly unjust nor was it, in the circumstances, one which was unreasonable. That minds might differ about the result is not a sufficient ground for intervention.

Conclusion

18 Dura-Post must pay Delnorth’s costs of the appeal. The trial judge’s costs order should not be disturbed.

I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Kenny, Stone & Perram.

Associate:

Dated: 10 August 2009

Counsel for the Appellant:	Mr S C G Burnley SC with Ms P Arcus

Solicitor for the Appellant:	Norman Waterhouse

Counsel for the Respondent:	Mr R Cobden SC with Mr C Dimitriadis

Solicitor for the Respondent:	Spruson & Ferguson Lawyers

Date of Hearing:	14 July 2009

Date of Judgment:	10 August 2009

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1	On 30 June 2009 Dura-Post’s appeal to this Court was dismissed. At the time we directed the parties to file any further submissions on costs by 10 July 2009. Submissions were received from both parties.
2	The appeal having been dismissed, Dura-Post accepts that it must pay Delnorth’s costs of the appeal. It submitted, however, that the costs orders made against it by the primary judge should be varied. To understand the issues which arise it is necessary to rehearse a little of the procedural history of the matter.
3	His Honour delivered judgment on 13 August 2008 and stood the proceedings over for the purpose of settling the consequent orders and for the hearing of any argument on costs. It is not clear when the argument on costs took place but it does appear that his Honour made orders disposing of the matter, including costs, on 19 August 2008.
4	So that the orders are more readily comprehensible it is useful to recall that before the primary judge Delnorth was the applicant and had brought infringement proceedings. Dura-Post cross-claimed for declarations that Delnorth’s patents were invalid.
5	Delnorth’s infringement proceedings relied upon patents which have been called throughout this litigation Patent One, Patent Two and Patent Three.
6	Both parties had some success before the trial judge. On Delnorth’s part, it succeeded in showing that Dura-Post’s flexible steel roadside posts infringed a number of the claims in each of Patents One, Two and Three. Further it sought of, and obtained from, the learned primary judge orders enjoining Dura-Post from infringing those claims.
7	On the other hand, Dura-Post was not unsuccessful itself. It persuaded the learned primary judge that two of the claims in Patents Two and Patent Three should be revoked. That victory, however, did not prevent the trial judge from concluding, and hence declaring, that Dura-Post’s Flexi-Steel and Reflex flexible steel roadside posts infringed Patent One, Patent Two and Patent Three. This was because the claims in respect of which that infringement was found to have occurred were unaffected by the revocation of the two claims in Patents Two and Three. Viewed from that perspective, the party who was substantially successful was Delnorth.
8	The relevant orders made by the primary judge on 19 August 2009 were orders 13 and 14 and were as follows:

10	Dura-Post appeals by ground 8 of its amended notice of appeal against the order that it pay Delnorth’s costs in relation to the cross-claim. Dura-Post did not submit that the order should be set aside because the trial judge provided no reasons for it. Instead, it submitted that his Honour should have additionally ordered Delnorth to pay Dura-Post’s costs of litigating Patent One and Patent Three.
11	Dura-Post argued that this was so because of the way in which Delnorth had conducted the litigation. In particular, Delnorth drew attention to the fact that the litigation had initially only involved Patent One. At that time, the original infringement proceeding was brought only in respect of Dura-Post’s Flexi-Steel post.
12	Subsequently, Delnorth filed Patent Two which was broad enough to obtain injunctive relief not only in respect of Dura-Post’s Flexi-Steel posts but also, for the first time, Dura-Post’s Reflex post. The proceedings were amended accordingly.
13	Shortly thereafter, Dura-Post pointed out to Delnorth the existence of the Kennedy patent and its argument that Patent Two was, thereby, invalid. This, Dura-Post submitted, then brought forth from Delnorth Patent Three and concomitant amendments to the proceedings.
14	Dura-Post’s basic submission was that whilst it was true that the new innovation patent system permitted innovation patents to be divided out of a standard patent application on an unlimited basis before the grant of the standard patent, this necessarily imposed upon patentees doing so some obligations of responsibility. This was because the dividing out feature allowed a patentee to react dynamically in infringement proceedings to the various defensive postures adopted by a respondent through the simple expedient of lodging further innovation patents.
15	There is, we think, some force in this proposition. There are, however, difficulties in fitting it into the present appellate context. The making of a costs order involves the exercise of a discretionary power to which the principles in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 504-505 apply: see Probiotec v University of Melbourne [2008] FCAFC 5; (2008) 166 FCR 30 at 44 [54] per Rares J (with whom Finn and Besanko JJ agreed). In House Dixon, Evatt and McTiernan JJ said: