Gulf Conveyor Systems Pty Limited v Gulf Integrated Solutions Pty Limited

1. The amended application for leave to appeal be dismissed.
2. The applicant pay the respondents' costs.
3. The parties file within seven days short minutes of order giving effect to the agreed variation of Order 3 made on 28 August 2020 in proceedings NSD 2216 of 2018. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THAWLEY J: 1 This is an amended application for leave to appeal a decision of the primary judge adopting a report dated 1 July 2020 (hereafter referred to as "R") of a Senior National Judicial Registrar who had been appointed a referee to conduct an inquiry into two questions in the proceedings, namely: (a) whether security for costs should be granted; and (b) if so, in what amount: Gulf Conveyor Systems Pty Ltd v Gulf Integrated Systems Solutions Pty Ltd [2020] FCA 1245 (hereafter referred to as "J"). By consent, the adoption hearing before the primary judge was held on the papers. The primary judge adopted the referee's report in whole, making orders on 28 August 2020 including that the applicant provide security for the respondents' costs in the sum of $727,000. 2 The amended application for leave to appeal contained 17 grounds. During oral argument, the applicant's solicitor abandoned grounds 1, 4, 8, 11, 14. 3 The applicant relied on the following evidence: (1) an affidavit of Mr Benjamin dated 18 September 2020; (2) oral evidence given during the hearing by Mr Benjamin; (3) a Court Book of 90 pages which included, amongst other things, the referee's report and the primary judge's decision; (4) paragraph 17(c) of an affidavit of Ms Colantonio dated 5 December 2019; (5) the applicant's written submissions before the referee, dated 10 February 2020, comprising 269 pages including annexures; (6) the applicant's amended written submissions before the referee, dated 9 March 2020, comprising 288 pages including annexures; (7) the applicant's written submissions before the primary judge, dated 27 July 2020; (8) the respondents' written submissions before the primary judge, dated 31 July 2020; (9) the applicant's written submissions before the primary judge, dated 3 August 2020; (10) the respondents' written submissions before the primary judge, dated 7 August 2020.

Leave to appeal 4 An appeal cannot be brought from an interlocutory judgment of the Court constituted by a single Judge exercising the original jurisdiction of the Court, unless the Court or a Judge gives leave to appeal: s 24(1A) of the Federal Court of Australia Act 1976 (Cth) (FCA Act). 5 The question of whether leave to appeal should be granted turns on whether: (1) the decision giving rise to the orders from which the applicant wishes to appeal is attended with sufficient doubt to warrant its being reconsidered by a Full Court; and (2) substantial injustice would result if leave were refused: Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-399. 6 As was stated in Decor at 399, quoting Sharp v Deputy Commissioner of Taxation (1988) 19 ATR 908 at 910, these two issues are interrelated: [T]he sufficiency of the doubt in respect of the decision and the question of substantial injustice should not be isolated in separate compartments. They bear upon each other, so that the degree of doubt which is sufficient in one case may be different from that required in another. Ultimately, a discretion must be exercised on what may be a fine balancing of considerations. 7 Leave to appeal is less readily given where the issue is one of practice and procedure: Decor at 400; Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177 (Gibbs CJ, Aickin, Wilson and Brennan JJ); United States Tobacco Co v Minister for Consumer Affairs (1988) 20 FCR 520 at 532 (Davies, Wilcox and Gummow JJ); Minogue v Williams (2000) 60 ALD 366 at [19] (Ryan, Merkel and Goldberg JJ). In Adam P Brown at 177, Gibbs CJ, Aickin, Wilson and Brennan JJ said (footnotes omitted): Nor is there any serious dispute between the parties that appellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure. Counsel for Brown urged that specific cumulative bars operate to guide appellate courts in the discharge of that task. Not only must there be error of principle, but the decision appealed from must work a substantial injustice to one of the parties. The opposing view is that such criteria are to be expressed disjunctively. Cases can be cited in support of both views: for example, on the one hand, Niemann v Electronic Industries Ltd; on the other hand, De Mestre v A D Hunter Pty Ltd. For ourselves, we believe it to be unnecessary and indeed unwise to lay down rigid and exhaustive criteria. The circumstances of different cases are infinitely various. We would merely repeat, with approval, the oft-cited statement of Sir Frederick Jordan in In re the Will of F B Gilbert (dec): ... I am of opinion that, ... there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal. 8 The Court is not required to provide extensive reasons when deciding whether leave to appeal should be granted. Often "little more may be required than a short, perhaps very short, statement of the chief conclusions which the judge refusing leave has reached": Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vic) (2001) 207 CLR 72 at [26] (Gaudron, Gummow, Hayne and Callinan JJ).

Adoption of referee's report 9 The Court has power to refer a proceeding or questions in a proceeding to a referee, and to deal with the resulting report as it thinks fit, including by adopting it in whole or in part or varying or rejecting it: s 54A of the FCA Act; Federal Court Rules 2011 (Cth) r 28.67. 10 The principles concerning adoption were summarised by McDougall J in Chocolate Factory Apartments Ltd v Westpoint Finance Pty Ltd [2005] NSWSC 784 at [7]: (1) An application under Pt 72 r 13 [the former NSW equivalent of r 28.67] is not an appeal either by way of hearing de novo or by way of rehearing. (2) The discretion to adopt, vary or reject the report is to be exercised in a manner consistent with both the object and purpose of the rules and the wider setting in which they take their place. Subject to this, and to what is said in the next two sub paragraphs, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised. (3) The purpose of Pt 72 is to provide, where the interests of justice so require, a form of partial resolution of disputes alternative to orthodox litigation, that purpose would be frustrated if the reference were to be treated as some kind of warm up for the real contest. (4) In so far as the subject matter of dissatisfaction with a report is a question of law, or the application of legal standards to established facts, a proper exercise of discretion requires the judge to consider and determine that matter afresh. (5) Where a report shows a thorough, analytical and scientific approach to the assessment of the subject matter of the reference, the Court would have a disposition towards acceptance of the report, for to do otherwise would be to negate both the purpose and the facility of referring complex technical issues to independent experts for enquiry and report. (6) If the referee's report reveals some error of principle, absence or excessive jurisdiction, patent misapprehension of the evidence or perversity or manifest unreasonableness in fact finding, that would ordinarily be a reason for rejection. In this context, patent misapprehension of the evidence refers to a lack of understanding of the evidence as distinct from the according to particular aspects of it different weight; and perversity or manifest unreasonableness mean a conclusion that no reasonable tribunal of fact could have reached. The test denoted by these phrases is more stringent than "unsafe and unsatisfactory". (7) Generally, the referee's findings of fact should not be re-agitated in the Court. The Court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he or she did, particularly where the disputed questions are in a technical area in which the referee enjoys an appropriate expertise. Thus, the Court will not ordinarily interfere with findings of fact by a referee where the referee has based his or her findings upon a choice between conflicting evidence. (8) The purpose of Pt 72 would be frustrated if the Court were required to reconsider disputed questions of fact in circumstances where it is conceded that there was material on which the conclusions could be based. (9) The Court is entitled to consider the futility and cost of re-litigating an issue determined by the referee where the parties have had ample opportunity to place before the referee such evidence and submissions as they desire. (10) Even if it were shown that the Court might have reached a different conclusion in some respect from that of the referee, it would not be (in the absence of any of the matters referred to in sub para (6) above) a proper exercise of the discretion conferred by Pt 72 r 13 to allow matters agitated before the referee to be re-explored so as to lead to qualification or rejection of the report. (11) Referees should give reasons for their opinion so as to enable the parties, the Court and the disinterested observer to know that the conclusion is not arbitrary, or influenced by improper considerations; but that it is the result of a process of logic and the application of a considered mind to the factual circumstances proved. The reasoning process must be sufficiently disclosed so that the Court can be satisfied that the conclusions are based upon such an intellectual exercise. (12) The right to be heard does not involve the right to be heard twice. (13) A question as to whether there was evidence on which the referee, without manifest unreasonableness, could have come to the decision to which he or she did come is not raised "by a mere suggestion of factual error such that, if it were made by a trial judge, an appeal judge would correct it". The real question is far more limited: "to the situation where it is seriously and reasonably contended that the referee has reached a decision which no reasonable tribunal of fact could have reached; that is, a decision that any reasonable referee would have known was against the evidence and weight of evidence". (14) Where, although the referee's reasons on their face appear adequate, the party challenging the report contends that they are not adequate because there was very significant evidence against the referee's findings with which the referee did not at all deal, examination of the evidence may be undertaken to show that the reasons were in fact inadequate because they omitted any reference to significant evidence. (15) Where the court decides that the reasons are flawed, either on their face or because they have been shown not to deal with important matters, the court has a choice. It may decline to adopt the report. Or it may itself look at the detail of the evidence to decide whether or not the expense of further proceedings before the referee (which would be the consequence of non adoption) is justified. 11 In Sheehan v Lloyds Names Munich Re Syndicate Ltd [2017] FCA 1340 at [10], Allsop CJ emphasised a number of matters, including that: the Court should be reluctant to allow factual issues determined by a referee to be reargued; some error of principle, absence or excess of jurisdiction or patent misapprehension of the evidence should generally be demonstrated to justify the rejection of the referee's report; the Court will generally not reconsider disputed questions of fact where there exists factual material that is sufficient to entitle the referee to reach the conclusions that he or she did, particularly where the disputed conclusions are made in a technical area in which the referee possesses appropriate expertise; the discretion to reconsider a referee's factual findings will generally only be exercised if the findings are such that no reasonable finder of fact could have made that finding.

Discretionary decisions 12 The primary judge's decision to adopt the report in whole was a discretionary decision. In House v The King (1936) 55 CLR 499 at 504-5, Dixon, Evatt and McTiernan JJ expressed the principles to be applied in an appeal against the exercise of a discretion as follows: 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.

APPLICANT'S SUBMISSIONS 13 The applicant's submissions were made by reference to each of the grounds identified in its amended application which were not abandoned, namely grounds 2, 3, 5, 6, 7, 9, 10, 12, 13, 15, 16 and 17. I will address the applicant's specific submissions when addressing whether the grounds which were pressed reveal that the primary judge's order was attended with sufficient doubt to warrant its being reconsidered by a Full Court. 14 In its oral submissions, the applicant made clear that its principal complaint was an assertion that neither the referee nor the primary judge had properly considered the material before them as evidenced by the reasons of each. The applicant placed particular emphasis on propositions 11 and 14 identified by McDougall J in Chocolate Factory Apartments, set out at [10] above.

Whether order attended by sufficient doubt 15 Leaving aside for the moment the question of substantial injustice, the critical question is whether the primary judge's order was attended with sufficient doubt to warrant it being reconsidered by a Full Court.

Ground 2 16 The applicant contended that the referee thought the subject matter of the proceeding was the applicant's patent when it was really the entirety of the applicant's intellectual property. This was said to be a "manifestly unreasonable conclusion", upon which the primary judge did not comment adversely, and which ought to have led to the primary judge not adopting the report in whole. 17 The applicant supported its submission by reference to what the referee had stated at R[27]: The question as to whether these proceedings could be characterised as defensive in character was also raised. I accept the Respondents' submission on this point to the effect that the proceedings do not fit the character of a "defensive" proceeding as that term is generally used in the authorities as they are in essence a claim for damages pursued in various forms. Furthermore, there has been no claim for interim relief to restrain any Respondent from any infringement of the patent that is the subject of the proceedings. 18 I do not accept that the referee thought the subject matter of the proceedings was limited to the applicant's patent. The passage at R[27], read in the context of the whole of the referee's report, does not establish the contended misapprehension on the part of the referee. In any event, if there had been a misapprehension on the part of the referee, I am not satisfied that it gave rise to a sufficiently arguable error on the part of the primary judge such as to warrant granting leave to appeal.

Ground 5 19 The applicant asserted that the primary judge erred at J[38] in stating that the applicant complained that the referee did not refer to the amendments to the applicant's written submissions. The applicant submitted that it did not make this complaint. Rather, its position was that the referee did not address any of its written submissions "with any specificity". 20 The transcript made it clear that the referee had read the applicant's written amended submissions. At R[12], the referee noted that she had regard to the parties' oral submissions, during which the applicant spoke to its written submissions. As the primary judge noted at J[39], the referee was not obliged to refer to the written submissions in detail in her report. In any event, I am not satisfied on the basis of the submissions advanced in respect of Ground 5 that the primary judge's decision to adopt the referee's report is attended with sufficient doubt.

Ground 6 21 The applicant contended that the primary judge erred at J[39] in holding that the referee was not obliged to address all of the parties' written submissions in her report. The primary judge noted that this was especially so considering that it was a term of the referral that the report not exceed 10 pages. The applicant submitted that the report was in fact 13 pages in length, and that, regardless, the length of the report was no answer to the fact that the referee failed to address the submissions. 22 The primary judge was correct to observe that the referee was not obliged in her report to refer to each submission contained in the written submissions. The applicant did not seek to support Ground 6 by reference to a failure to deal with specific submissions (except to the extent revealed in the other grounds). I am not satisfied on the basis of the submissions advanced in respect of Ground 6 that the primary judge's decision to adopt the referee's report is attended with sufficient doubt.

Ground 7 23 The applicant submitted that the primary judge failed to afford the applicant procedural fairness by not considering the content of a transcript to which the applicant had referred, but which had not been tendered on the adoption hearing. The effect of the applicant's oral submissions was that the primary judge had an obligation to search out material not tendered on the application on the basis that a reference had been made to the material. This is not correct. The primary judge had to determine the matter on the basis of the evidence tendered. In any event, the absence of the transcript did not form any part of the primary judge's reasons for rejecting the relevant submissions of the applicant, and the applicant did not identify the way in which the transcript would have assisted its case.

Ground 9 24 The applicant contended that the primary judge erred in making inconsistent findings. The alleged inconsistency arose from the primary judge's statement at J[47]: In any case, on the face of the report, the referee had regard to the material to which she was taken. She simply concluded that it did not support the allegations and, as a result, could not weigh against the grant of security. and her Honour's statement at J[39]: I reject the submission made in reply that (contrary to what she said in her report) the referee confined her consideration to the oral submissions. 25 There is nothing inconsistent in these two statements. The statements reflect a finding by the primary judge that the referee had regard to both the parties' oral submissions and written submissions.

Ground 10 26 Ground 10 was that the primary judge erred in finding at J[50] that "[t]he referee addressed the suggestions of possible criminal activity in her report. I am not satisfied that her treatment of them discloses error". 27 The applicant contended that the referee did not address the suggestions of possible criminality in her report. This submission is not made out. The referee directly addressed the applicant's submissions regarding criminality at R[23], where she stated that the allegations of criminality were not substantiated by the evidence to which she was taken. 28 The applicant also submitted that, contrary to what was said by the referee at R[23], the referee was taken to evidence which substantiated the allegations of criminality made by the applicant. This submission did not address any supposed error of the primary judge. The Court's role on an application for leave to appeal is not to rehear factual issues that were before the referee. In any event, the submission that the referee erred in some way in not accepting that the evidence established criminal conduct was not made out. I am not satisfied on the basis of the submissions advanced in respect of Ground 10 that the primary judge's decision to adopt the referee's report is attended with sufficient doubt.

Ground 12 29 The applicant contended that the primary judge erred at J[57] in stating that the applicant's submission that there was a high degree of overlap between the subject matter of the claim and cross-claim was "little more than an assertion". The applicant did not explain how this finding was in error, except for stating that "it was open to the primary judge to make a finding of overlap on the pleadings and associated documents available". 30 In any event, the primary judge rejected the applicant's submission regarding the overlap between the claim and cross-claim on the basis that the argument was not raised before the referee: J[58]. The applicant did not show how any supposed error identified in Ground 12 had the effect that the discretion of the primary judge had arguably miscarried. I am not satisfied on the basis of the submissions advanced in respect of Ground 12 that the primary judge's decision to adopt the referee's report is attended with sufficient doubt.

Ground 13 31 Ground 13 stated: The primary judge erred in J[58] in failing to reject the Report, but instead in adopting the Report on a technicality, namely the referee not being advised of the applicant's argument, as given the overlap referred to in [Ground 12] above, the referee would have been obliged to find against the respondents had the referee been advised of the applicant's argument during the enquiry. 32 In support of this ground of appeal, the applicant submitted that the respondents failed to state to the referee that they would not pursue any claims against the applicant if the applicant were unable to meet an order for security. 33 The primary judge's decision not to allow a new argument to be raised at the adoption hearing was not shown to be attended with sufficient doubt, in particular in circumstances where the applicant had not provided reasons as to why the argument had not been put before the referee. I am not satisfied on the basis of the submissions advanced in respect of Ground 13 that the primary judge's decision to adopt the referee's report is attended with sufficient doubt.

Ground 15 34 The applicant contended that the primary judge erred at J[61] by failing to afford the applicant procedural fairness in rejecting the evidence of Mr Benjamin contained in his affidavit sworn 26 July 2020 on the basis of lack of relevance, when the applicant submitted that in fact the evidence was relevant. The basis for the claim that the applicant was not afforded procedural fairness is unclear. The evidence was rejected after objection was taken to the evidence in the respondents' submissions. The primary judge was entitled to reject the evidence. There was no denial of procedural fairness. I am not satisfied on the basis of the submissions advanced in respect of Ground 15 that the primary judge's decision to adopt the referee's report is attended with sufficient doubt.

Grounds 3, 16 and 17 35 Ground 3 was that the primary judge erred at J[36] in rejecting the applicant's submission that the failure of the referee to address the applicant's submissions dated 9 March 2020 in the report "led to a finding that no reasonable finder of fact could have made". The applicant accepted in oral submissions that the transcript of the hearing before the referee made it clear that the referee had considered the applicant's amended submissions dated 9 March 2020. The applicant's real complaint was that the referee failed to refer to the submissions in her reasons. 36 Ground 16 asserted that the primary judge erred in adopting the report in circumstances where the referee failed to refer to the majority of the applicant's 10 February 2020 submissions and 9 March 2020 amended submissions. 37 The applicant's complaint in relation to Ground 16(a), as put in written submissions, was that the referee did not have regard to the written submissions and only had regard to the oral submissions. The complaint, as put in oral submissions, departed from the written submissions. The complaint as put in oral submissions amounted to a contention that the referee ought to have accepted what the applicant had submitted in writing or, perhaps, that the referee should have drawn inferences from the material contained in the submissions before the referee in accordance with the submissions put to the Court orally on this application. 38 Extensive oral submissions were made on this application, many of which included allegations of criminal conduct. Some of these submissions departed from those which had been made in writing on this application. The applicant did not establish that the specific matters put to the Court on this application were ones specifically put to the referee. 39 The applicant did not establish on this application that it had established before the primary judge that the referee reached conclusions which were not open or that she failed to reach a conclusion based on a submission and substantial evidence such that it could be said that the referee did not undertake the task or that she made a decision which no reasonable decision-maker could have made. The applicant did not establish any arguable error on the part of the primary judge to the extent its submissions on this application covered the same ground as that put to her Honour. 40 The applicant's written submissions on this application contended in relation to Grounds 16(b), (c) and (d) that neither the referee not the primary judge addressed the following paragraphs of its written submissions dated 9 March 2020: [28], [30], [31(e)]. The referee did consider those written submissions, as the primary judge concluded, and as the applicant conceded on this application. The applicant did not establish that the referee's reasons were inadequate. It was not the primary judge's role to address each of the submissions which the applicant had made to the referee. The primary judge's role was to consider whether the referee's report should be adopted. That did not require the primary judge to undertake again the task undertaken by the referee. 41 The applicant's written submissions on this application contended in relation to Grounds 16(e), (f) and (g) that the primary judge failed to address the following paragraphs of its written submissions dated 9 March 2020, being written submissions before the referee: [31(a)], [31(b)] and [31(d)]. It was not the primary judge's role to address each of the submissions which the applicant had put in writing to the referee. It was the referee's role to consider those submissions. The primary judge's role was to consider whether the referee's report should be adopted in whole, in part or at all. To the extent the applicant's submissions should be read as an allegation that the referee failed to consider its submissions, it is clear that the referee did consider the submissions. 42 As to Ground 17, the applicant submitted that the failure of the primary judge to make reference to the failure of the referee to address significant evidence, gives rise to sufficient doubt to warrant reconsideration of the primary judge's judgment on appeal. The applicant did not establish that there was a failure on the part of the referee to have regard to significant evidence. The primary judge stated at J[47]: On any view of the matter, the failure to specifically mention the particular allegations of criminal conduct does not warrant the rejection of the report. In any case, on the face of the report, the referee had regard to the material to which she was taken. She simply concluded that it did not support the allegations and, as a result, could not weigh against the grant of security. 43 These conclusions were not shown to be attended with sufficient doubt to warrant granting leave to appeal. 44 The applicant has not established that there is sufficient doubt about the primary judge's orders to warrant a grant of leave to appeal.

Whether substantial injustice 45 In my view, particularly in light of the fact that the primary judge's order adopting the report in whole is not attended by substantial doubt, substantial injustice would not result if leave to appeal were refused. 46 Accordingly, leave to appeal is refused.

CONCLUSION 47 By its amended application, and in the event its application for leave to appeal were unsuccessful, the applicant sought a variation of Order 3 made on 28 August 2020 in proceedings NSD 2216 of 2018 to grant it 14 days within which to pay the first tranche of security. 48 This variation was not opposed by the respondent. 49 The amended application for leave to appeal is dismissed with costs and Order 3 made on 28 August 2020 will be varied. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley.

SCHEDULE OF PARTIES NSD 997 of 2020 Respondents Fourth Respondent: OIL AND GAS SOLUTIONS PTY LTD ACN 143 501 464 Fifth Respondent: ANTHONY LUKE CONNOR