The power of the Court to set aside an order pursuant to r 39.05(c)
133 Rule 39.05(c) of the FCR provides that the Court may vary or set aside a judgment or order after it has been entered if it is interlocutory. SNF contended that if the judgment was interlocutory, the power conferred by r 39.05(c) to vary or set aside judgment is enlivened. SNF contended that the orders of Kenny J were interlocutory in nature by reason that the trial before her Honour was split and, as the orders only determined the issues relating to liability, the orders did not finally dispose of the entire proceeding by reason that the usual pecuniary relief remains to be determined.
134 The test for determining whether a judgment is final, as distinct from interlocutory, is whether the judgment finally determines the rights of the parties to the proceedings: Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767; [1984] HCA 47 ("Computer Edge"). In that case, orders had been made by the Full Federal Court restraining the respondents from infringing copyright and from certain acts of importation. Orders were also made that if the appellants wished to pursue claims for damages, they should file and serve on the respondents notice to that effect. The High Court held that the judgment was interlocutory, not final. Gibbs CJ (with whom Murphy and Wilson J agreed) stated at [2]-[3]:
What is plain is that the judgment of that Court comprised two orders which, viewed by themselves and apart from the rest of the judgment, were final orders, and one order which was plainly interlocutory. The result of the judgment as a whole was that some of the questions in issue in the case were determined and others were not. The question then is whether a judgment of that kind is a final judgment within the meaning of s 33(4) of the Federal Court of Australia Act and s 35(3) of the Judiciary Act as they stood at the material time.
The test for determining whether a judgment is final, which has been laid down in a number of cases including Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20; 1981 147 CLR 245, is whether the judgment finally determines the rights of the parties, and the authorities have held that the Court in applying the test must have regard to the legal rather than the practical effect of the judgment. So that the question in the present case is whether the whole judgment finally determined, in the legal sense, all the rights of the parties that were at issue in these proceedings. And the answer, is plainly, that it did not, because it left undetermined the question whether any, and what, damages were payable. The conclusion that the judgment is not a final judgment is supported by a short passage from the judgment of Dixon CJ in John Grant & Sons Limited v Trocadero Building and Investment Company Ltd [1938] HCA 20; (1938) 60 CLR 1 at page 35 where his Honour said:
The judgment of the Supreme Court did not determine the action, for the demurrers did not affect pleas to or replications in relation to all counts of the declaration. The judgment was, therefore, interlocutory, and this appeal did not lie without leave.
SNF argued that Computer Edge has since been applied by the Courts to hold that judgments which consist of declarations together with orders for further quantification of pecuniary relief are interlocutory in nature. SNF referred to the following cases.
135 In Hall v Lewis (2004) 64 IPR 61; [2004] WASC 217, the plaintiff alleged infringement of its patent by the defendants. The defendants by way of cross-claim alleged that the patent was invalid and sought declarations to that effect. The Supreme Court of Western Australia held that the patent was valid and infringed, making orders which included declarations. The Court also ordered that an account of profits arising from the infringement be referred to a Master of the Court. The appellant in that case appealed. In Lewis v Hall (2005) 68 IPR 89; [2005] FCAFC 251 ("Lewis v Hall"), the Full Court held that the appellant required leave to appeal, stating that at [7]:
The judgment of the Supreme Court was an interlocutory judgment limited to questions of liability, the further rights of the parties being left for determination at a later date. See: Computer Edge Pty Ltd v Apple Computer Inc. (1984) 54 ALR 767
136 In an earlier decision in NZI Securities Australia Ltd v Poignand (1994) 51 FCR 584 ("Poignand"), the Full Federal Court held that it was necessary for the appellant in that case to obtain leave to appeal from orders that were "in truth" interlocutory. Relevantly, the orders included declarations that the appointment of a receiver and manager was initially invalid but the appointment became valid and operative as from a specified date, and an order that the applicant "have liberty to apply for a determination of the amount of any loss or damage sustained … by virtue of any action taken … in reliance upon the purported appointment". The Court reasoned at 594 as follows:
In our opinion, in accordance with the reasoning of the High Court in Computer Edge Pty Ltd v Apple Computer Inc (1984) ALR 767, the orders made at first instance were for the purposes of s 24(1A) of the Federal Court of Australia Act 1976 (Cth) interlocutory.
137 In Caboche v Ramsay (1993) 119 ALR 215; [1993] FCA 611 ("Caboche"), the trial judge had made declarations that the bankrupt was absolutely entitled to payment of an amount out of a superannuation fund which had vested in the trustee in bankruptcy (Order 1), gave liberty to the parties to apply to enable further declarations to be made once the amounts to which the bankrupt was absolutely entitled to payment had been precisely quantified (Order 2) and made an order that the respondents pay to the trustee in bankruptcy out of the fund that amount once ascertained (Order 3). Gummow J, with whom Ryan and Lee JJ agreed, stated at 225-226;
It was pointed out in the course of argument that, given the terms of orders (2) and (3) … and consistently with a reasoning in Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767, leave to appeal was necessary … leave should be granted in each matter. I should add that the applicability in this Court of Apple Computer has been affirmed by the Full Court on numerous occasions, most recently in Australian Builders' Labourers' Federated Union of Workers - Western Australian Branch v J - Corp Pty Ltd (1993) 114 ALR 551 at 552-553.
138 Ciba, on the other hand, relied on authority that declarations are, by definition, final and therefore, it was submitted the orders are final. The proposition that declarations are, by definition, final must be accepted: Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 at [128]; Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 at [143]; Warramunda Village Inc v Pryde (2002) 116 FCR 58 at [68]; Ho v Grigor (2006) 151 FCR 236 at [54]; Magman International Pty Ltd v Westpac Banking Corporation (1991) 32 FCR 1 at 15. However the nature of declarations as final does not provide the complete answer. As the authorities make clear, where a judgment comprises orders that are final orders and orders that are interlocutory, some of the questions in issue remain to be determined. The question is whether the whole judgment finally determined, in a legal sense, the rights of the parties in issue. In the present case, the declarations were plainly final but other orders were made which were interlocutory.
139 Ciba next contended that the whole of the proceeding commenced by SNF in which the declarations were made has been finally determined. Before Kenny J, there were two proceedings heard concurrently - the revocation claim commenced by SNF and the infringement claim commenced by cross-claim by Ciba. As a cross-claim is a separate proceeding (see O 5 r 15 of the Federal Court Rules 1979 (Cth) as it was in September 2008 when the cross-claim was filed; Gray v Sirtex Medical Limited (2011) 193 FCR 1 at [35]), Ciba submitted that SNF's revocation claim was finally determined against it by the orders made by Kenny J. Kenny J made declarations that the patents were valid, certified pursuant to s 19 of the Act that the validity of each of the claims of the patents had been questioned and ordered that "the application, as amended, be dismissed". Ciba submitted that such orders were final.
140 There is merit in the submission for Ciba that the revocation proceeding was finally determined and r 39.05(c) therefore is not the source of the Court's power to set aside the orders of Kenny J. First, this case has strong parallels to Old Digger Pty Ltd v Azuko Pty Ltd (2002) 123 FCR 1 ("Old Digger"). In that case, the applicant commenced proceedings alleging infringement of two patents and the respondents cross-claimed for revocation. The initial trial was limited to questions of infringement and revocation, with issues relating to remedies, if necessary, to be determined at a later date. At first instance, the Court dismissed the respondents' cross-claim seeking revocation of the patents and further held that the respondents had infringed the patents. The respondents appealed to the Full Court with limited success and special leave to appeal to the High Court was subsequently refused. Subsequently the respondents applied to re-open the cross-claim so that the cause of action could be further agitated. The applicant argued, amongst other things, that the judgment was interlocutory, referring to Computer Edge. Von Doussa J rejected the submission and held that the orders on the cross-claim were final and there was no power in the Court to set them aside. His Honour reasoned at [37]-[43] as follows:
In my opinion the judgment that has been entered on the cross-claim is a final judgment dismissing the claim for revocation.
The proceedings for revocation were brought by way of cross-claim. This procedure is permitted by s 121 of the Patents Act, which uses the expression "counter-claim" to describe the proceedings for revocation. This is a convenient course to allow proceedings on separate causes of action to be heard together, as the issues likely to arise in a case to which s 121 has application will, to an extent at least, be common. The proceedings brought by way of cross-claim are nonetheless proceedings in their own right, and in that respect are no different to any other cross-claim or counter-claim: see Cairns, Australian Civil Procedure (5th ed. 2002), 207-208. The proceedings by way of cross-claim have been finally concluded by the entry of a judgment, and the cause of action asserted by the cross-claimant in the cross-claim has merged in the judgment. The claim for revocation is at an end between the parties. The Court has no power to set aside a final judgment which has been entered: Bailey v Marinoff (1971) 125 CLR 529. For this reason, FCR O 35 r 7(2)(c), which empowers the Court to set aside a judgment after it has been entered where the order is interlocutory, has no application.
Counsel for the respondents sought to persuade the Court to a contrary view by pointing out that the appeal to the Full Court was brought by leave, leave being necessary in the case of an interlocutory judgment: s 24(1A) of the Federal Court of Australia Act 1976 (Cth). In reply, counsel for the applicant referred to Computer Edge Pty Ltd v Apple Computer Inc (1984) 54 ALR 767. In that case the appellant sought to appeal to the High Court against orders made in the Full Court of the Federal Court which first, restrained the appellants from infringing copyright, and secondly, restrained the appellants from certain acts of importation. Both orders were for permanent injunctions. The Full Court had then ordered that if the respondents wished to pursue claims for damages they should file and serve on the appellants notice to that effect. Other orders were made as to the taking of further evidence and as to the settling of minutes to give effect to the Court's findings on matters arising under Trade Practice Act claims. Gibbs CJ, with whom Murphy and Wilson JJ agreed said (at 767):
"What is plain is that the judgment of that Court [the Full Court] comprised two orders which, viewed by themselves and apart from the rest of the judgment, were final orders, and one order which was plainly interlocutory. The result of the judgment as a whole was that some of the questions in issue in the case were determined and others were not. The question then is whether a judgment of that kind is a final judgment within the meaning of s 33(4) of the Federal Court of Australia Act, and s 35(3) of the Judiciary Act as they stood at the material time."
Counsel for the applicant sought to rely on this passage as indicating that in a composite order of the kind in the present case, some of the individual orders can be final orders. Counsel suggested that a distinction is to be drawn between rules governing appeals, and rules governing the re-opening of those parts of a composite order that are final. It is to be noted, however, that the appeal to the High Court in Computer Edge Pty Ltd v Apple Computer Inc was held to be incompetent. Gibbs CJ said (at 768):
"… the question in the present case is whether the whole judgment finally determined, in a legal sense, all the rights of the parties that were at issue in these proceedings. And the answer is, plainly, that it did not, because it left undetermined the question whether any, and what, damages were payable …"
In my opinion Computer Edge Pty Ltd v Apple Computer Inc does not assist the applicant in the way counsel contended. Nor do I think that the case of the respondents is assisted by pointing out that the appeal to the Full Court was brought by leave.
The question is not whether some of the orders are final, but whether the judgment is final. This is clear from the reasons of Gibbs CJ. In the present case, by parity of reasoning the judgment on the applicant's application for remedies for infringement is not a final judgment. However, in my opinion the same reasoning indicates that the judgment on the respondents' cross-claim is a final judgment. That judgment dismissed the entire proceeding. No issue in the cross-claim is left undetermined.
In my opinion the order dismissing the cross-claim was not an order in respect of which leave to appeal was necessary. The cross-claim stood as a separate and distinct proceeding: see National Society for the Distribution of Electricity by Secondary Generators v Gibbs [1900] 2 Ch 280 at 287-288. Had they chosen, the respondents could have appealed as of right from the dismissal of the cross-claim, for example if they chose not to contest the finding of infringement. As it was, the respondents desired to attack the finding of infringement, and for that reason they required leave.
The respondents' application to re-open the cross-claim is, in substance, an application to set aside the judgment on the cross-claim so that the cause of action for revocation can be further agitated. For the reasons given, I consider the Court has no power to make such an order.
In the present case, similar considerations apply. The purpose of the application to set aside the orders of Kenny J is so that SNF can challenge the validity of the innovation patents on the ground of prior use and secret use. The fact that the quantum of pecuniary relief to which Ciba is entitled on its cross-claim for infringement has not been determined does not render interlocutory in character the orders made by Kenny J in finally dismissing the revocation proceeding. That proceeding, concerning the validity of the patents, was finally determined.
141 SNF claimed that the decision of Von Doussa J in Old Digger was inconsistent with the decision of the Full Court in Lewis v Hall. SNF contended that the reasoning in Old Digger was fundamentally based on characterising a judgment dealing with a claim for infringement and a cross-claim for invalidity as, in fact, two separate judgments. By contrast, in Lewis v Hall, the Full Court consistently referred to the declarations and orders of the Western Australian Supreme Court relating to both the claim and cross-claim as "the judgment" and found that the "judgment" was interlocutory in nature. Similarly, in correcting some errors to her orders, Kenny J referred to "the judgment" delivered in the proceeding and Dodds-Streeton J, in considering whether to grant leave to appeal in this case also referred to Kenny J's reasons and orders as "the judgment". SNF argued that to characterise it as two separate judgments instead ignores the fact that a claim for patent infringement and an allegation of invalidity are inextricably linked.
142 I do not accept that submission. First, the appeal to the Full Court in Lewis v Hall was exclusively concerned with the question of patent infringement. No appeal was lodged in respect of the judgment of the trial judge dismissing the cross-claim for invalidity. Secondly, it does not assist SNF that Kenny J subsequently referred to the reasons and orders as "the judgment", nor that Dodds-Streeton J granted leave to appeal "the judgment". Precisely the same submission was rejected by Von Doussa J in Old Digger at [40]. Similarly, in Polyaire Pty Ltd v K-Aire Pty Ltd (No 4) [2007] SASC 36 ("Polyaire"), Besanko J at [32] did not place any weight on the fact that leave to appeal had been granted because:
that was by consent and the question whether the orders, or at least some of them, were final orders appears not to have been considered.
The same can be said here as there was no argument before Dodds-Streeton J as to whether any of the orders were final or interlocutory and leave to appeal was granted with the consent of Ciba: SNF (Australia) Pty Ltd v Ciba Specialty Chemicals Water Treatments Ltd [2011] FCA 794 at [3]. Finally, it does not assist SNF that the claim for patent infringement and the allegation of invalidity are "inextricably linked": see Old Digger at [40].
143 There is a further reason for accepting Ciba's submission. In this case, there was an order for a split trial. In Damorgold Pty Ltd v JAI Products Pty Ltd [2014] FCA 448, Tracey J considered an application by a patentee for leave to appeal from the judgment following a trial on validity and infringement only. Tracey J held at [9]-[10] that:
I am not persuaded that the applicants require leave to appeal. In TAG Pacific Limited v McSweeney (1992) 34 FCR 438 Olney J held that, in a split trial in which questions relating to liability are ordered to be determined as preliminary questions, orders finally determining those questions are not to be treated as interlocutory: see at 444-5. A similar conclusion was reached by the majority of the Full Court of the Supreme Court of Victoria in City of Camberwell v Camberwell Shopping Centre Pty Ltd [1994] 1 VR 163 at 173-175. See also Cairns B, Australian Civil Procedure (10th ed, Lawbook Co, 2013) at 568-569. The orders made by His Honour in relation to the revocation of the patent bear the same character of finality as would have attended such orders had they been made following a trial in which questions of liability and relief had been considered in the normal manner. Left undisturbed those orders would finally determine the issues relating to the validity of the patent. They fall within the defined meaning of the word 'judgment' for the purposes of s 24(1) of the Act.
The principal concern of the applicants is that, in the absence of a grant of leave, the stay granted by Middleton J would cease to operate. Plainly, Middleton J considered that, if his orders were to be considered by a Full Court, they should remain inoperative pending the hearing and determination of any appeal. Lest I be wrong in my view that His Honour's orders are not interlocutory in nature, I consider that the appropriate course is to continue the stay granted by His Honour until 21 days after the final determination of the applicants' appeal and to direct that, should any application for leave to appeal be necessary, it be heard concurrently with the appeal by the Full Court.
In reaching that conclusion Tracey J cited and followed the earlier judgment in TAG Pacific Ltd v McSweeney (1992) 34 FCR 438. In that case, which also involved a split trial between liability and quantum, Olney J reviewed a line of High Court authority and concluded at 444 that:
The Court, having exercised its power to try the issue of liability before and separately from the issue of the quantum of damages, the rights "that were at issue" in the proceedings presently under review related solely to the question of liability and those rights have been finally determined as between the parties.
The same conclusion was reached by Besanko J in Polyaire where his Honour held at [32] that:
In a case where there is a split trial the orders which determine liability have been held to be final orders.
See also Camberwell v Camberwell Shopping Centre Pty Ltd [1994] VR 163 and Major Engineering Pty Ltd v Timelink Pacific Pty Ltd [2007] VSCA 228. Hall v Lewis, Poignand and Caboche are all distinguishable because in none of those cases was there a split trial.
144 Finally, SNF is not assisted by its submission on Brouwer v Titan Corporation Ltd (1997) 73 FCR 241. In that case, the Full Federal Court stated at 242 that:
[T]he test for determining whether a judgment is final, as distinct from interlocutory, is whether the judgment finally determines the rights of the parties to proceedings.
SNF submitted that the use of the plural form "proceedings" by the Full Federal Court "clearly contemplates a single judgment disposing of more than one proceeding". That distinction does not, however, appear in the judgment of the Full Federal Court.