Australian Mud Company Pty Ltd v Coretell Pty Ltd

1. The respondents' application for a stay of the costs orders made by McKerracher J on 23 March 2016 and 29 April 2016 be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

NICHOLAS J: 1 Before me is an application by the respondents for a stay of a costs order made in this proceeding by McKerracher J on 23 March 2016 as later varied by another order made by his Honour on 29 April 2016 ("the costs order") following judgment on questions of liability for patent infringement (see Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2015] FCA 1372; Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 5) [2016] FCA 444). The respondents are appealing against his Honour's judgment and they have already been granted leave to appeal. 2 The respondents say that the costs order should be stayed because neither they nor the Court should be put to the trouble and inconvenience of a potentially difficult taxation of costs in circumstances where McKerracher J's judgment is under appeal. They also submitted, at least at one stage of the argument, that the costs order is in any event not taxable at this stage of the proceeding (ie. liability only having been determined) because the proceeding has not been finally determined, as evidenced by the need for them to obtain leave to appeal. It is convenient to deal with the latter argument first. 3 Rule 40.13 of the Federal Court Rules 2011 (Cth) ("FCR") provides: If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished. 4 Schedule 1 of the FCR defines "interlocutory application" as "an application, other than a cross-claim, in a proceeding already started". The costs order made by McKerracher J was not a costs order made on an interlocutory application, hence, r 40.13 does not apply to it: see also Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2013] FCA 567 (Barker J) at [25]-[27]. 5 I return then to the possibility that the costs order might be set-aside in the event that the respondents are successful in their appeal. In some cases it would be most sensible to stay a costs order pending determination of the appeal. But whether or not it is appropriate to do so must always depend upon the circumstances of the particular case in which the judge is required to exercise his or her discretion. 6 In this case there is some evidence to suggest that Mr Kleyn, the third respondent, who effectively controls the first, second and fourth corporate respondents, may have sought to arrange his own financial affairs, or at least those of some other respondents, in a manner that may make it more difficult for the applicants to successfully enforce the costs order made against them. In this regard, McKerracher J referred in his principal judgment at [384] to evidence that Mr Kleyn told a Mr Weston that he had transferred assets into other companies to avoid the consequences of any adverse judgment in a prior proceeding. This is apparently a reference to an earlier proceeding heard by Barker J that was brought by the applicants against the first and second respondents for infringement of another patent. 7 There was no evidence from Mr Kleyn in support of the application for a stay of the costs order nor did he or any of the other respondents proffer any undertaking that might provide the applicants with some comfort that they would not enter into any transaction or arrangement outside the ordinary course of business that might prejudice the applicants' prospects of successfully enforcing the costs order in the event that the respondents' appeal is unsuccessful. I do not suggest that Mr Kleyn will take any such steps, but in light of some of the observations that were made by McKerracher J in relation to Mr Kleyn, and given the absence of any evidence from him as to his or the other respondents' financial affairs or intentions, I think I should infer that there is a real risk that he might do so. In the circumstances, I think the stay sought by the respondents should be refused. 8 The respondents' interlocutory application for a stay of the costs orders made by McKerracher J on 23 March 2016 and 29 April 2016 will be dismissed with costs. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholas.