U & I Global Trading (Australia) Pty Ltd v Tasman-Warajay Pty Ltd [1995] FCA 794 - FCA 1995 case summary — Zoe

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U & I Global Trading (Australia) Pty Ltd v Tasman-Warajay Pty Ltd [1995] FCA 794

[1995] FCA 794

Federal Court of Australia|1995-10-05|Before: Cooper J

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Source facts

Court

Federal Court of Australia

Decision date

1995-10-05

Before

Cooper J

Source

Original judgment source is linked above.

Judgment (19 paragraphs)

[1]

The applicant alleges that the respondent breached an undertaking given on 16 December 1994 in the following terms :- "Unless and until Tasman-Warajay Pty. Ltd. obtains a patent for its training idler, it will not threaten persons with patent infringement proceedings in relation to such training idlers. Tasman-Warajay Pty. Ltd. reserves its rights to notify persons of any pending patent application in respect of its training idler and possible consequences of infringement."

[2]

The undertaking was not an undertaking given to the court. That is clear from the circumstances in which the possibility of an interlocutory injunction or undertaking to the court were dealt with by Spender J when the matter came before his Honour on 16 December 1994 :- "HIS HONOUR: Yes. What has happened to the interlocutory injunction? MR CARRIGAN: Your Honour, an undertaking has been offered at court this morning by the respondent. The undertaking in its terms is not totally acceptable although it does take a lot of the heat out of our urgency for an urgent hearing date for an injunction. Nevertheless, your Honour, what we would be seeking today is really directions for the filing of affidavit material and for the setting down of a hearing of the matter, at some time convenient to the court, early next year. By that, I mean, if it can be done in February or March, depending - - - HIS HONOUR: Well, almost certainly, it cannot be. I mean, there is a callover of matters awaiting trial by Cooper J this morning, and it was the intention, I think, that every skerrick of time in February and March that could be set down was going to be set down. But in any event, is it the case that this is to proceed to a final hearing? MR CARRIGAN: Yes, your Honour. Yes. HIS HONOUR: So I am not concerned with interlocutory relief, or undertakings to be offered, or what is the situation? MR CARRIGAN: Well, yes. I think that in terms - the undertakings as such are not acceptable, but it is probably matters we can address, given some more time; so I think the way to proceed, your Honour, is really to give interim directions and with liberty for the parties to come back to the court if there is demonstrated a need for an urgent hearing on an interlocutory matter. HIS HONOUR: Well, are you happy with that? MR SOMERS: Yes, your Honour; and I do have a copy of the undertaking which has been offered to the applicants, if your Honour wishes to see it. HIS HONOUR: No, I do not, you see. I mean, if the parties want an undertaking to be given to the court, it has to be accompanied with an assurance by the representatives that their clients know what it is all about, because an undertaking is the equivalent of an injunction, and if there is a breach of it, somebody might chew corn. And that is different, you see, to an agreement between the parties which - - - MR SOMERS: I am not instructed to go that far. HIS HONOUR: No, all right. If there is any difficulty, however, liberty to apply will be the vehicle by which the matter can be agitated. I will give directions with the intention that this matter can be as ready for trial as - as soon as possible. MR CARRIGAN: Yes, your Honour."

[5]

The applicant relies upon the first sentence of the statement as supporting the enforcement of an undertaking given by one party to litigation to another on the same basis as an undertaking to the court. The cases cited in Oswald as authority for the proposition set out above require consideration. The first relied upon by the applicant is the Neath Canal Company case. At pages 453 and 454 of the report it is recorded that there was a settlement of an action which involved the defendants applying to the court for leave to withdraw their pleas in defence and an order being made granting such leave on conditions including the giving of an undertaking not to repeat the trespasses. The undertaking was also signed by the defendants' attorneys. The plaintiffs sought to enforce a breach of the undertaking by injunction. At first instance an injunction was granted without the usual undertaking as to damages. On appeal the Court of Appeal (at 457) was of the opinion that such an undertaking as to damages ought to have been given. The case did not concern proceedings for contempt for breach of undertaking and nothing said by James LJ assists the applicant. Neither do the two other authorities cited in Oswald assist the applicant. In re the Solicitor of a Defendant: Lawford v. Spicer (1864) 2 Jur (N.S.) 564 was a case of an undertaking given to the court by a solicitor on behalf of the client which was incorporated in an order of the court. A.-G. v. Boyle (1864) 10 LT 290 was a case of a party submitting to a perpetual injunction. The authorities referred to do not support a reading of Oswald which would allow an undertaking inter partes to be treated as an undertaking given to the court or to be enforced by contempt proceedings as such. In Windsurfing International Burchett J said (at 113) that he accepted that a breach of an undertaking was to be treated as a breach of an injunction and referred with approval to the decisions in Biba Ltd v. Stratford Investments Ltd [1973] 1 Ch. 281 at 286 and Williams v. Fawcett [1986] 1 QB 604 at 607 as authority for the principle. However Windsurfing International and the two English authorities were cases of undertakings given to the court. They did not concern undertakings given inter partes and do not discuss the enforcement of such undertakings. The citation in Miller (at 411) from Biba has to be put in context. Brightman J said (at 287) :- "I approach the case before me on the basis that Mr. Lawson adopted a purely passive role and did not aid and abet a contempt in any way. The question to be decided is whether, despite this purely passive role, he can be made liable under R.S.C., Ord. 45, r. 5, in consequence of the breach by the defendant company (which I assume to have taken place) of an undertaking, as distinct from disobedience to an order. In my view, I ought to follow and apply the decision of Warrington J. in Milburn v. Newton Colliery, 52 S.J. 317. That is a clear authority, to my mind, that an undertaking given to the court and embodied in the written order of the court, whereby a party undertakes to abstain from doing an act, has the same effect for the purposes of R.S.C., Ord. 45, r. 5 as a judgment or order enjoining that act. It is a common practice for a plaintiff in this sort of proceedings to accept an undertaking offered by a defendant as a substitute for the imposition of an injunction. I think it would be a pity to disturb that practice by giving a lesser quality to an undertaking than to an injunction."

[12]

The test is whether the language would convey to any reasonable person that the author of the letter in the present case intended to bring proceedings for infringement against the person said to be threatened. It is not necessary that there be direct words that action would be taken. There is some similarity between the present case and Lido Manufacturing Co Pty Ltd v. Meyers & Leslie Pty. Ltd. (1964) 5 FLR 443. There McClelland CJ in equity said (at 450-451) :- "... Mr. Meyers said that he had a provisional patent in circumstances which would have suggested to an ordinary person that he had the rights which the holder of a patent had and which would become enforceable when the full patent' was issued, and what was said was more than a mere notification of the existence of an application for a patent. However, the fact that s.121(2) is inapplicable does not necessarily mean that what was said amounted to a threat or threats within the meaning of s.121(1). Mr. Ramsden agreed that the discussion was quite a friendly one and that Mr. Meyers did not say I am going to take action against Farmers' and Mr. Faulkner agreed that Mr. Meyers did not say If you do not withdraw the goods from sale I am going to take proceedings against the company', or words to that effect. Indeed Farmers had been a customer of the defendant for a long time and Mr. Meyers was no doubt anxious not to say things which would offend its officers and lose him custom and it is unlikely that he would have bluntly said, If you don't withdraw the goods from sale I will in due course take proceedings against Farmers'. However, the absence of direct words by Mr. Meyers, saying that he would take action, does not involve in my view that no threat within the meaning of s.121(1) was made: cf. Luna Advertising Co. Ltd. v. Burnham & Co. (1928) 45 R.P.C. 258, at p.260; Willis & Bates Limited v. Tilley Lamp Co. (1943) 61 R.P.C. 8, at p.11; C. & P. Development Co. (London) Limited v. Sisabro Novelty Co. Limited (1953) 70 R.P.C. 277, at p.282. I am of the opinion that what Mr. Meyers said to the officers of Farmers was sufficient to indicate to them that if the goods were not withheld from sale Farmers would be infringing rights belonging to Mr. Meyers' company for which subsequently Farmers would be legally liable to his company and that Mr. Meyers did threaten Farmers with an action or proceeding for infringement within the meaning of s.121(1). It was not suggested, nor could it have been suggested, that the defendant could satisfy the court that the acts in respect of which proceedings were threatened would constitute an infringement of a patent or an infringement of rights within the provisions of s.121(1)(a) or (b). Accordingly the threats were unjustified."

[15]

misunderstands the nature of the statutory cause of action and the operation of the onus on the respondent to negative the allegation that the threats are unjustifiable by establishing the circumstances in either (a) or (b) of s. 129 of the Act. Because the market for this type of equipment in the coal industry is limited and because the threats have been made to all potential buyers, the impact of the threats is potentially very damaging. Further, the letter of 13 January must be placed in the context of express threats of proceedings for infringement in September, November and December 1994 which led to the undertaking being given on 16 December 1994. The reservation in that undertaking was "to notify persons of any pending patent application in respect of its training idler and the possible consequences of infringement". The letter of 9 January 1995 arguably goes substantially beyond that reservation and therefore is not saved by s.131 of the Act. On the material before me it is not possible to determine the strength of any possible argument of justification. The expert evidence is divided as to whether the product sold by the applicant would infringe the claims of the invention claimed in Patent Application 645150 or Petty Patent 658110. Because of the nature of the market and the difficulty in obtaining evidence that purchasers would have dealt with the applicant but for the threats of the respondent, I am not persuaded that damages alone would be an adequate remedy. The conduct of the respondent has been to attempt to force the applicant out of the market or substantially limit its market share by threats and there is nothing on the material to persuade me that the respondent will not continue such conduct pending trial. The balance of convenience is in favour of making an order for interlocutory injunctive relief. I turn to the notices of motion filed by the respondent. The statement of charge filed on 17 February 1995 by the respondent in conjunction with its notice of motion for contempt, alleges :- "(i) By its Notice of Motion, Statement of Charge, and Affidavit of MICHAEL DAVID PERRY, all filed herein on or about the 3rd day of February, 1995 the Applicant has alleged:- `that the Respondent is in breach of an undertaking given to the Court on behalf of the Respondent by its Counsel on or about the 16th December, 1994 as particularised in paragraphs 1, 2 and 3 of the Applicant's Statement of Charge'; (ii) No such undertaking was given to the Court by the Respondent or its Counsel either on the 16th December, 1994 or at any other time."

[16]

It is clear that no undertaking was offered by the respondent to the court, although it would appear that an undertaking was offered inter partes in the precincts of the court and this fact communicated to the court. The respondent contends that to allege that an undertaking was given to the court when that was factually incorrect and to attempt to enforce it by contempt proceedings was itself "contempt in the face or hearing of the court, or alternatively contempt in connection with proceedings in the court." In my view the matters complained of do not satisfy the description of "contempt in the face or hearing of the court", whether one adopts a restrictive or an expansive view of those phrases (see European Asian Bank AG v. Wentworth (1986) 5 NSWLR 445 at 453-458; Miller at pp.99-100). The dissenting view of Laskin J in McKeown v. R [1971] 16 DLR (3d) 390 at 408 that anything which is within the knowledge of the court without the need for the calling of further evidence occurs "in the face or hearing of the court" is not a position with authoritative or widespread acceptance in Australia. It is submitted by the respondent's counsel that the conduct complained of was a contempt in connection with legal proceedings because the legal representatives of the applicant were attempting to obtain a result in the proceedings different from that which would follow in the ordinary course. In support of such a contention counsel referred to Ex parte Bellanto Re Prior (1963) 63 SR (NSW) 190 at 199. The decision in Bellanto was concerned with a verbal exchange between a barrister and a judge in the course of cross-examining a witness in a criminal trial before a jury. It was a case of an alleged contempt in the face of the court. The court (Herron ACJ, Sugarman and Ferguson JJ) said (at 199) :- "The question always is, in such a case as the present, did the barrister's conduct tend to interfere with the course of justice? Was he attempting to obtain a result of legal proceedings different from that which would follow in the ordinary course?"

[19]

That is not the present case. If there is any ground for complaint it must be on the basis that there has been an abuse of the process of the court by the doing of an act which involves either a falsehood intended to deceive the court or the misuse of the process thereby prejudicing other persons (see Borrie and Lowe at p.310). It is not merely that a proceeding is an abuse of process that gives rise to a contempt of court. Rather, it is the bringing of a feigned issue so as to conceal its true nature from the court (R v. Weisz; Ex parte Hector MacDonald Ltd [1951] 2 KB 611 at 620) or to suppress or give false facts (R v. B (1971) 20 FLR 368). The decision of the Full Court of Western Australia Supreme Court in R v. B would support the conclusion that the suppression or giving of false facts must be deliberate and amount to a wilful false act before the conduct constitutes contempt (see Jackson CJ at 370 and Burt J at 377; see also Borrie and Lowe at p.311). The statement of charge against the applicant merely alleges that the applicant states an undertaking was given to court when in fact no undertaking was given. By itself that is insufficient. If it is alleged against the applicant that it deliberately filed the notice of motion, statement of charge and material in support to wilfully mislead the court by knowingly giving false facts, namely by stating that an undertaking was given to the court when no such undertaking was given, the failure to properly state the charge is fatal to the proceeding, for the court will not act unless there is a specific charge, distinctly stated, and an opportunity to answer given (Doyle v. The Commonwealth of Australia (1985) 156 CLR 510 at 516; Coward v. Stapleton (1953) 90 CLR 573 at 579-580). In the present case Mr Perry was not, nor was it sought that he be, cross-examined on his affidavit as to the basis upon which he deposed that the undertaking was given to the court, let alone on the basis that he was a party to an attempt to knowingly mislead the court. On the hearing, notwithstanding the allegations that the undertaking was given to the court, no attempt was made to argue that the undertaking had in fact been given to the court. Rather, as appears earlier in these reasons, it was sought to argue that the undertaking was given inter partes on 16 December 1994 at court in these proceedings and was therefore enforceable by action for contempt. An argument which failed and one incidentally which the respondent submits was doomed to failure because it was not pleaded and particularised in the statement of charge. The respondent's remedy was not for contempt but to have the applicant's motion for contempt struck out or stayed as an abuse of process because it was misconceived and not maintainable or not brought bona fide. The respondent's notice of motion for contempt will be dismissed. The respondent by notice of motion filed 20 February 1995 has sought an injunction to restrain the applicant from allegedly infringing Australian Petty Patent No. 658110 pending trial. The alleged infringement is the supply or offer to supply by way of sale a conveyor belt tracking frame known as "Beltracker: Mark II". The respondent relies upon the evidence of Mr Claude Paul Anese, its patent attorney, and Mr Dudley Roach, a mechanical engineer, to make out a serious question to be tried of infringement of the petty patent. Mr Anese expressed the view that the "Beltracker: Mark II" possessed both a slewing means and a tilting means within the meaning of claim 1 of the Petty Patent. Mr Roach deposed that both the "Beltracker: Mark II" and the respondent's product the "Blacktracker" employ the same principle to correct tracking problems. The applicant relies upon an affidavit of Mr Trevor Dredge, a patent attorney and Bachelor of Applied Science, deposing that the "Beltracker: Mark II" has neither a slewing nor tilting means within claim 1 of the Petty Patent. The applicant also relies on a report of Dr Duncan Gilmore, a mechanical engineer prepared for Uni-Quest wherein Dr Gilmore expressed the opinion that "Beltracker: Mark II" has no independent tilting means within the meaning of Claim 1. There is therefore a significant dispute on the issue of infringement. Although a serious question to be tried has been established, there remains the question of the balance of convenience. The strength of the respondent's claim for infringement and the weight to be given to it are neutral. There is eminently qualified opinion in favour of each side. The respondent contends that if it succeeds the applicant is a "$2.00 company" without assets. In consequence it alleges that any award of damages or account of profits is unlikely to be satisfied and therefore an award of damages would be an inadequate remedy. If it cannot recover damages it argues that it will not receive an adequate return on the $300,000.00 plus invested in research and development of the tracking system. On the respondent's figures, thirty percent (30%) of its turnover and fifty percent (50%) of its profit as at September 1994 came from sales of the "Blacktracker" product. However, the respondent submits that since that time sales have fallen off dramatically because of the sale by the applicant of the allegedly infringing product. The lost sales suffered by the respondent appear to be attributable to a number of factors. Firstly, that the applicant in September 1994 was a selling agent of the respondent and was responsible for generating the sales; secondly, that Mr Perry was the sales representative of the respondent and also generated the sales; thirdly, that the respondent terminated supply of its product to the applicant and Mr Perry in September 1994 for reasons unrelated to any alleged infringement of the patent application; and fourthly that consequent upon such terminations, the respondent effectively had no-one selling its product. That is, the immediate cause of the respondent's loss was its own conduct. All the applicant did was to find a supplier of frames to which it attached its own survey rollers and then supplied the completed product into the market vacated, albeit temporarily, by the respondent. The respondent also alleges that its loss of market share to the applicant was caused by use of confidential information by its former employee Mr Perry to approach its clients and undercut it on price. There is no evidence to support this allegation. The respondent either itself or through associated companies, has other product ranges available which it sells and which generate up to half of its income. Further, the applicant submits, the respondent holds patents in overseas countries and can sell and does sell the product overseas. In these circumstances the continued trading of the applicant entails no risk that the respondent will cease trading or suffer irreparable harm. On the other hand, the applicant relies on sales of the "Beltracker: Mark II" for ninety percent (90%) of its business. If an injunction is granted the applicant will be put out of business and Mr Lewis will lose a substantial part of his superannuation which he has invested in the business. If the applicant goes out of business, that will impact seriously on Austbelt Splicing Systems (International) Pty Ltd ("Austbelt") of Mackay which is the manufacturer and supplier of the frames to the applicant. Austbelt is not a party to these proceedings and has not been sued for infringement of the petty patent by the respondent. There is a real risk, it is submitted, that if the applicant were closed down it could not re-open and effectively re-enter the market. There is no doubt that the respondent wishes to force the applicant out of business and out of the market at the earliest opportunity. Because of the limited market for the product the respondent says that it would be "commercial suicide" to attempt to restrain the end users of the "Beltracker Mark II" from using that product. In those circumstances the respondent submits that its only effective remedy is to force the applicant out of the market by obtaining a court order. In the final analysis the risk of irreparable damage to the applicant swings the balance of convenience against granting the injunction. As the decision in Air Express Ltd v. Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249 demonstrates, it is not sufficient to submit that any loss consequent upon the failure of the business will be covered by an undertaking as to damages. There would remain real questions as to whether but for the injunction the applicant would have survived having regard to its low capitalisation, and, as to the quantification of the value of the business which failed, including its prospects for the future. There is nothing to prevent the respondent from competing in terms of marketing, price and product, to win back market share and there is nothing to suggest that the respondent will entirely lose its market for the sale of its product. On the material there is evidence of replacement parts being sold for conveyor belt tracking systems already in place which include systems with frames supplied by the respondent. The applicant by its directors has undertaken to keep records of all sales to enable the respondent, should it succeed in the proceedings, to make an election between an award of damages and an account of profits. The respondent's continuing ability to trade in the belt tracking product and others, both in Australia and overseas, and the maintenance of records in respect of such sales as the applicant may make of the competing system are factors weighing against the making of an order. The potential consequences of damage to the applicant and through it Austbelt and companies and persons associated with it by the making of an order, outweigh any potential damage to the respondent by not making such an order. The respondent's application for an interlocutory injunction is dismissed. I will hear the parties on costs. On the notice of motion filed 3 February 1995 THE COURT ORDERS THAT :- UPON the applicant giving the usual undertaking as to damages :- 1. The respondent by itself its servants or agents or otherwise be restrained, pending determination of the applicant's claims, from threatening a person or persons by means of circulars, advertisements or otherwise with infringement proceedings or similar proceedings concerning any patent arising out of Australian Patent Application No. 645150 in respect of the acquisition and use by the addressee of the threat of a conveyor belt tracking system other than a system supplied by the respondent or the manufacture or supply by the addressee of the threat of such a system in competition with the respondent. 2. The notice of motion be otherwise dismissed. On the notice of motion filed 16 February 1995 THE COURT ORDERS THAT :- 1. The notice of motion be dismissed. On the notice of motion filed 20 February 1995 THE COURT ORDERS THAT :- UPON the applicant undertaking to keep records of all sales of "Beltracker: Mark II" conveyor belt tracking systems, the cost of all such sales to the applicant and the profit, if any, on such sales pending the hearing and determination of the respondent's cross-claim for infringement of Australian Petty Patent No. 658110, 1. The notice of motion be dismissed. I certify that this and the preceding twenty-one (21) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper. Date: 5 October 1995 Associate Counsel for the Applicant: Mr C. Carrigan Solicitors for the Applicant: Xavier Kelly & Co. Counsel for the Respondent: Mr T. Somers Solicitors for the Respondent: MacDonald & Michel Date of Hearing: 2 March 1995 Place of Hearing: Brisbane Date of Judgment: 5 October 1995