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Vehicle Monitoring Systems Pty Limited v SARB Management Group Pty Ltd trading as Database Consultants Australia - [2024] FCAFC 155 - FCAFC 2024 case summary — Zoe
The applicant pay the first and second respondents' costs of the application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
THE COURT:
[2]
Introduction
This is an application for leave to appeal from costs orders made in Vehicle Monitoring Systems Pty Limited v SARB Management Group Pty Ltd trading as Database Consultants Australia (No 11) [2024] FCA 456 ('judgment' or 'J'). The relevant background appears in the judgment and the decision of the Full Court in SARB Management Group Pty Ltd T/A Database Consultants Australia v Vehicle Monitoring Systems Pty Limited [2024] FCAFC 6 per Burley, Jackson and Downes JJ ('FC judgment'). We adopt the defined terms from these decisions.
Before addressing the application, we observe that the discharge of the judicial responsibility to give reasons is an essential characteristic of this Court, albeit that any reasons must be adequate: see Kitchen v Director of Professional Services Review [2023] FCAFC 160 at [35]-[39] per Charlesworth, Sarah C Derrington and Downes JJ.
With that qualification, the Court may consider tailoring the extent of its reasons to the significance of the issue which is before it, bearing in mind the need to ensure that judicial resources are being efficiently utilised. Such an approach is aligned with the observations in UBS AG v Tyne [2018] HCA 45; 265 CLR 77 at 93-94 [38] per Kiefel CJ, Bell and Keane JJ.
Where this Court sits as an intermediate appellate court and in an appropriate case, its reasons can be confined to those issues which are necessary to decide to dispose of the appeal and without restating uncontentious statements of legal principle from earlier decisions. As observed by Kiefel CJ, Gageler and Keane JJ in Boensch v Pascoe [2019] HCA 49; 268 CLR 593 at 600-601 [7] (with whom the other members of the Court agreed at 629-630 [101]):
…The principle that an appellate Court should confine itself to determining only those issues which it considers to be dispositive of the justiciable controversy raised by the appeal before it is so much embedded in a common law system of adjudication that we have no name for it. In some other systems, it is known as "judicial economy". Judicial economy promotes judicial efficiency in a common law system not only by narrowing the scope of the issues that need to be determined in the individual case but also by ensuring that such pronouncements as are made by appellate Courts on contested issues of law are limited to those that have the status of precedent.
Another matter relevant to the extent of the reasons which are provided turns on the fact that the application is for leave to appeal from a costs order. No appeal lies of right from such an order: Federal Court of Australia Act 1976 (Cth) s 24(1A); see also Harvard Nominees Pty Ltd v Dimension Agriculture Pty Ltd (in liq) [2023] FCAFC 140; 299 FCR 224 at 226-227 [6]-[13] per Colvin, Stewart and Feutrill JJ. The legislative purpose of the leave requirement is to ensure that the exercise of the Court's appellate jurisdiction is not weighed down by the determination of interlocutory disputes. Whilst it is common on leave applications for the merits of the proposed appeal to be considered, that same legislative purpose is relevant to the extent of the Court's duty to give reasons for its decision. Were extensive reasons given in relation to each proposed ground of appeal, the purpose underlying the leave requirement would be undermined.
The present application has each of these features. It involves no question of law and turns on the application of established and uncontroversial principles to primary facts which are not in dispute. Further, it involves an application for leave to appeal on a question of practice and procedure. With these matters in mind, we turn to the substance of the application.
[3]
The costs decision below
Following the FC judgment, the question of whether the original costs orders made by the primary judge should be varied was remitted to the primary judge. The original costs orders made by the primary judge appear at J [9]. The parties made submissions to the primary judge as to the costs orders which should now be made, which are summarised at J [13]-[18]. By their respective submissions to the primary judge, each of the parties:
addressed whether the original costs orders should be varied;
addressed the costs order which should be made for the period prior to, and post, the dates of Calderbank offers made by each of SARB and CoM.
The primary judge vacated the original costs orders and made the orders which are the subject of the application for leave to appeal, which are that VMS and Balance are jointly and severally liable for:
SARB's costs on a party and party basis of the application prior to 15 March 2021 and of the application and cross-claim on an indemnity basis from 15 March 2021;
CoM's costs on a party and party basis of the application prior to 19 March 2021 and of the application and cross-claim on an indemnity basis from 19 March 2021.
The primary judge also ordered that SARB pay VMS's costs on a party and party basis of the notice of cross-claim prior to 15 March 2021.
The significance of the dates referred to in these orders is that they were the dates on which each of SARB and CoM made the relevant Calderbank offers referred to above: J [16]-[17]. The content of those offers, and their resemblance to the effect of the judgment and that of the FC judgment, is addressed at J [19]-[23].
[4]
Costs pre-Calderbank offers
By its submissions below, VMS introduced the notion of a costs order which it claimed reflected the percentage of its success on the application: J [18], [25]. The primary judge rejected an approach which involved assessing costs by reference to the result on separate issues, as he was entitled to do by reference to existing Full Court authority: J [26], [30]. No error has been shown in this regard.
Instead, the primary judge had regard to what he described as the 'dominant feature of the application', being the infringement claim with respect to PV3: J [26], [64]. In this regard, we note that SARB had admitted infringement of 14 claims of the first patent and 26 claims of the second patent in relation to PV1 and PV2 (being prior versions of the vehicle detection systems which had operated for a limited period: J [2] and [3]) and PV3 was the version of the system which was the subject of the successful appeal by SARB to the Full Court, and was found not to infringe as reflected in the FC judgment.
As the primary judge was best placed to characterise the dominant feature of the liability trial which was heard over several days and which resulted in a judgment of approximately 180 pages, we give strong deference to his Honour's finding in this regard: see, generally, Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93; 261 FCR 301 at 316-318 [45]-[53] per Perram J, with whom Markovic J agreed.
Further, by ordering that costs in relation to the application should be awarded to SARB and costs in relation to the cross-claim should be ordered to VMS, the primary judge's orders reflected the fact that neither party had enjoyed general success in relation to its claim against the other. His Honour's orders were therefore reflective of the usual rule that costs follow the event. There was no error in such an approach.
Contrary to the submissions by VMS on this application, including its complaint as to lack of procedural fairness, the primary judge was not required to alert the parties to the form of orders which he was proposing to make which differed from that proposed by the parties, and nor was he required to seek submissions about that proposed form of order. Since the Court has an absolute discretion in relation to costs (albeit one that must be exercised judicially), it is inherent that the Court is not bound to adopt one or other of the party's contentions. The parties (by their lawyers) would be aware of this. The situation in relation to competing costs contentions is similar to that which obtains in relation to valuation evidence. In that domain, it is accepted that in the case of competing valuations, the Court is not bound to accept one of several competing valuations but may arrive at its own view by making adjustments: In the Marriage of Borriello (1989) 97 FLR 211 at 222 per Nicholson CJ, Murray and Strauss JJ. As the Full Court pointed out in that case, that conclusion is consistent with the High Court's decision in Commonwealth v Milledge (1953) 90 CLR 157.
Applying the same reasoning, while there was commonality between the costs order sought by VMS and the CoM with respect to the pre-19 March period, there was no 'agreement' between these parties that such an order be made, as VMS contends, and nor was any consent order proffered to the primary judge to that effect (as could have been done had any such agreement existed). In any event and because of the absolute discretion held by his Honour, the primary judge would not have been obliged to make any such proposed consent order, and was not required to alert the parties to the form of orders which he was proposing to make and to seek submissions about that proposed form of order.
VMS submits that the primary judge failed to take certain matters into account, including, for example, VMS's success on the application. However, that fact is explicitly considered at J [64], and we otherwise do not accept that the primary judge failed to take into account, or give sufficient weight, to the findings in the liability judgment.
VMS also submits that the primary judge failed to take into account or give sufficient weight to the costs associated with CoM's innocent infringement defence, which was not pressed in closing submissions, and that CoM adopted SARB's submissions in relation to infringement. However, as CoM submits, the evidence relevant to the innocent infringement defence was the same evidence led by CoM in relation to additional damages, being an issue on which it succeeded, and so the first complaint is without substance. As to the second complaint, VMS made submissions on that issue to the primary judge in the course of his Honour considering the remitted costs question. That the primary judge did not advert to that submission in the judgment does not mean that it was not taken into account or ascribed appropriate weight: see, generally, Kitchen at [38]. Thus, the second complaint is also without substance.
[5]
Costs post-Calderbank offers
The primary judge identified the elements of each of the offers at J [19]-[21], which are not challenged by VMS. The primary judge also made other findings about the offers which are not challenged: see J [22]-[23]. The primary judge's summary of the relevant principles to be applied were not in dispute below or in this Court, and are summarised at J [28]-[31].
The submissions made by VMS to the primary judge are recorded at J [34]-[41]. Many of the same submissions were made to this Court on this application.
At J [49], the primary judge found that the Calderbank offers are effective. At J [52] and [53], the primary judge found that the offers contained an adequate explanation of SARB's and CoM's respective positions and the bases upon which the offers were made. At J [54], the primary judge found that the offers are expressed in sufficiently clear terms. No error has been shown in any of these passages of his Honour's reasons, and the primary judge's assessment of the reasonableness of the offers is an evaluative judgment to which we give due deference.
At J [55]-[58], the primary judge considered the interplay between the two offers and found that CoM's Calderbank offer was contingent on SARB's offer being accepted: see J [57]. Thus, contrary to the submissions by VMS, the primary judge did take into account the contingent nature of the offer by CoM.
At J [60] and [62], the primary judge found that VMS's claim for additional damages is unlikely to exceed SARB's offer as to costs, and that VMS' rejection of the offers was unreasonable. Again, this was a matter which required an evaluative judgment to be made in relation to which the primary judge enjoyed a distinct advantage. We again defer to the primary judge's assessment for the reasons explained above by reference to the discussion in Moroccanoil.
Further and contrary to the submissions by VMS:
there is no general principle that the rejection of a Calderbank offer will not be unreasonable if the case is at least reasonably arguable;
the effect of the FC judgment is not just that the primary judge erred, but that this error was apparent when the plain words of the claims were considered;
the primary judge did not assess the question of unreasonableness with the benefit of hindsight in the manner contended by VMS. Rather, when the reasons are construed as a whole, the primary judge assessed the reasonableness of the offers at the relevant time but taking into account the apparent error as referred to in the FC judgment;
when the Calderbank offers were made, VMS had all necessary information available to be able to assess the reasonableness of accepting the offers.
VMS complains about the primary judge's characterisation of the alleged infringement by PV3 as being the dominant feature of the trial. For the reasons already given, that complaint is without merit.
VMS submits that it was not in a position to assess the commercial significance of abandoning its claim that PV3 infringed because its responsible officers had been refused access to the volumes and dates of supply of PV1, PV2 and PV3. However, VMS' solicitors and counsel and representatives of Balance had access to the confidential information. It follows that VMS did not need its officers to be granted access to confidential material to commercially assess the significance of abandoning its claims in relation to PV3.
Finally, VMS submits that SARB's offer did not explicitly provide for dismissal of the cross‑claim for invalidity. However, that submission must be rejected as it ignores the clear meaning of the sentence in the offer, being 'for the purposes of settling these proceedings, our client accepts the validity of the two patents in suit.'
[6]
Conclusion
For these reasons, we refuse leave to appeal as we are not persuaded that the judgment is attended by sufficient doubt to warrant reconsideration by the Full Court. Further, and for the same reasons, even if error by the primary judge had been demonstrated as alleged by VMS, we would not have made a different costs order to that made by the primary judge.
I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justices Perram, Downes and O'Sullivan.
Parties
Applicant/Plaintiff:
Vehicle Monitoring Systems Pty Limited
Respondent/Defendant:
SARB Management Group Pty Ltd trading as Database Consultants Australia