FEDERAL COURT OF AUSTRALIA SNF (Australia) Pty Ltd v CIBA Specialty Chemicals Water Treatments Limited [2011] FCA 794 Citation: SNF (Australia) Pty Ltd v CIBA Specialty Chemicals Water Treatments Limited [2011] FCA 794 Parties: SNF (AUSTRALIA) PTY LTD (ACN 050 056 267) v CIBA SPECIALTY CHEMICALS WATER TREATMENTS LIMITED, CIBA (AUSTRALIA) PTY LTD (ACN 005 061 469) and THE COMMISSIONER OF PATENTS File number: VID 710 of 2011 Judge: DODDS-STREETON J Date of judgment: 15 July 2011 Catchwords: PRACTICE AND PROCEDURE – Application for leave to appeal – Leave granted Legislation: Federal Court of Australia Act 1976 (Cth) s 24(1A) Federal Court Rules O 52 r 10(2) Cases cited: Carr v Finance Co of Australia Ltd (1981) 34 ALR 449 cited Construction, Forestry, Mining and Energy Union v Radisich [2010] FCA 1004 cited Luck v University of Southern Queensland (2009) 176 FCR 268 cited Welsh v Digilin Pty Ltd [2008] FCA 78 cited Date of hearing: Heard on the papers Date of last written submissions: 15 July 2011 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 22 Solicitor for the Applicant: Mr Tony Watson, Middletons Solicitor for the Respondents: Mr John Lee, Griffith Hack IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 710 of 2011 BETWEEN: SNF (AUSTRALIA) PTY LTD (ACN 050 056 267) Applicant AND: CIBA SPECIALTY CHEMICALS WATER TREATMENTS LIMITED First Respondent CIBA (AUSTRALIA) PTY LTD (ACN 005 061 469) Second Respondent THE COMMISSIONER OF PATENTS Third Respondent JUDGE: DODDS-STREETON J DATE OF ORDER: 15 JULY 2011 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Leave be granted to the applicant/cross respondent to appeal the orders and declarations made by Justice Kenny on 9 June 2011 in this proceeding. 2. The applicant/cross-respondent file and serve any notice of appeal within 7 days of these orders. 3. Costs reserved. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 710 of 2011 BETWEEN: SNF (AUSTRALIA) PTY LTD (ACN 050 056 267) Applicant AND: CIBA SPECIALTY CHEMICALS WATER TREATMENTS LIMITED First Respondent CIBA (AUSTRALIA) PTY LTD (ACN 005 061 469) Second Respondent THE COMMISSIONER OF PATENTS Third Respondent JUDGE: DODDS-STREETON J DATE: 15 JULY 2011 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 In the proceeding on 15 July 2011, I granted leave to appeal from the orders of Kenny J made on 9 June 2011 that: 4. The cross-respondent pay the cross-claimant damages (including additional damages, if any) to be assessed, or, at the election of the cross-claimant, an account be taken of the cross-respondent's profits. 5. An enquiry, including appropriate discovery, be held to quantify the damages, or subject to the cross-claimant's election, to take an account of profits, referred to in Order 4. 6. Order 4 and Order 5 be stayed: a. for 21 days from the date of this Order; or b. if an application for leave to appeal is filed within 21 days, until the hearing and determination of any appeal or until further order. 2 My reasons for granting leave are set out below. 3 Leave was sought by the applicant's notice of motion filed on 30 June 2011 pursuant to O 52 r 10(2) of the Federal Court Rules, with the consent of all parties save for the Commissioner of Patents. 4 The applicant ("SNF") and the first and second respondents (collectively, "CIBA") filed and served written submissions in support of the application and I excused the parties from attendance at a hearing of the application. 5 Leave to appeal may not be properly granted on the basis of the consent of the parties. As Rares J (with whose reasoning Graham J agreed) stated in Luck v University of Southern Queensland (2009) 176 FCR 268 ("Luck") (at 292): The Parliament provided in s 24(1A) of the Federal Court of Australia Act that an appeal from an interlocutory judgment of a single judge of the court shall not be brought unless another judge or the court gives leave. The grant of leave to appeal is a jurisdictional condition that depends on the court or a judge being satisfied that it is appropriate. Jurisdiction does not derive from consent of parties. It is important that the basis on which the court's power to deal with a matter in its appellate jurisdiction be identified. If leave to appeal is required, the court must be satisfied that the primary judge's decision is sufficiently doubtful to warrant the grant of leave and that substantial injustice would result if leave were refused: Bienstein v Bienstein (2003) 195 ALR 225 at [29] per McHugh, Kirby and Callinan JJ. 6 The background to the application was as follows. 7 The proceeding arose out of an application filed by SNF alleging that CIBA: (a) had made unjustified threats of patent infringement against SNF which had caused SNF losses; and (b) sought revocation of the four innovation patents held by CIBA ("the CIBA Patents"). 8 CIBA filed a cross claim alleging that SNF had infringed the CIBA Patents. 9 On 24 October 2008, the Court ordered that issues of liability and quantum be determined separately pursuant to O 29 of the Federal Court Rules. On 16 January 2009, Tracey J made orders to the effect that the parties were to provide discovery limited to the issues of liability. The trial in relation to issues on liability was conducted in March 2010. Final judgment in relation to all issues on liability was handed down by Kenny J on 6 May 2011 ("the judgment"). Issues in relation to damages remain to be determined. 10 Final orders giving effect to the judgment were made on 9 June 2011 ("the liability orders"). The liability orders provided, inter alia, that: 4. The cross-respondent pay the cross-claimant damages (including additional damages, if any) to be assessed, or, at the election of the cross-claimant, an account be taken of the cross-respondent's profits. 5. An enquiry, including appropriate discovery, be held to quantify the damages, or subject to the cross-claimant's election, to take an account of profits, referred to in Order 4. 6. Order 4 and Order 5 be stayed: a. for 21 days from the date of this Order; or b. if an application for leave to appeal is filed within 21 days, until the hearing and determination of any appeal or until further order. 11 The draft notice of appeal filed by SNF is based on numerous grounds, including the alleged erroneous construction of the claims, the alleged erroneous findings on novelty (including the primary judge's failure to find that the relevant patents were anticipated by prior disclosure of all relevant integers in other patents, by prior publications or by a prior act which made publicly available all the integers), the allegedly erroneous acceptance of certain expert evidence, the alleged erroneous finding that the inventions claimed in the patent involved an innovative step, the alleged erroneous finding that the claims were not invalidated by lack of a sufficient description, the alleged erroneous finding that the patent was not invalid for lack of a fair basis, the alleged erroneous finding that the claims were useful and therefore valid, and the alleged erroneous failure to order that the respondents pay the costs associated with certain allegations. 12 SNF submitted that the primary judge erred in a number of critical matters including: (a) having correctly found that the term "rigidification" which appears in the claims of the CIBA Patents, is not a term of art and has an ordinary meaning of "to become rigid, set or inflexible", Justice Kenny erred in adopting the interpretation of that term given by Dr Farrow, the expert witness whose evidence was filed by CIBA, which was not an interpretation consistent with the specifications of the CIBA Patents; (b) having identified the characteristics of the skilled addressee of the patents, Justice Kenny erred in adopting the interpretation given to "rigidification" proffered by Dr Farrow in circumstances where Dr Farrow had not himself been found to be a skilled addressee, and nor had Dr Farrow's opinion on the interpretation of the term "rigidification" been provided as an opinion as to how skilled addressees would construe this term; (c) Justice Kenny erred in finding that prior art documents identified by SNF, including International Patent No.'s WO 01/92167 A1 and WO 96/05146 did not disclose all the integers of the claims of the CIBA Patents and therefore did not anticipate the patents for the purpose of determining novelty; (d) by reason of having wrongly construed the interpretation of the term "rigidification" as used in the CIBA Patent claims as excluding the processes of settling and sedimentation, Justice Kenny erred in not finding that the claims of the CIBA Patents were anticipated by prior art documents and prior act evidence submitted by SNF; (e) Justice Kenny erred in finding that the performance of the processes described by the CIBA Patents by a skilled addressee would require no more than "routine trial and error" on the basis of the evidence of Dr Farrow who was not found to be a skilled addressee or to have given his expert opinion as to how a skilled addressee would have interpreted the patents; and (f) Justice Kenny erred in finding that the claims of the patents were not invalid for lack of fair basis in that there was no real and reasonably clear disclosure of the point at which polymer should be added, or the dosage of polymer, "during transfer". 8. It is SNF's submissions that the above matters raise sufficient doubt in relation to the correctness of the Judgment to warrant it being reconsidered by the Full Court of the Federal Court of Australia. 13 In relation to the substantial injustice which would be incurred if leave to appeal were refused, SNF made the following submissions, with which CIBA concurred. 9. SNF submits that the refusal of leave to appeal the orders made by Justice Kenny on 9 June 2011 arising from the Judgment at this stage of the proceeding, prior to the determination of damages of an account of profits, would result in significant injustice to SNF and to CIBA. 10. If leave to appeal the decision of Justice Kenny were not allowed then the parties would be required to complete all the work required to enable the determination of quantum. The parties would incur significant costs including: (a) the legal costs associated with discovery, preparing evidence, trial preparation and the hearing in relation to quantum; and (b) time and effort spent by employees of the parties themselves in relation to discovery, preparing evidence, trial preparation and the hearing in relation to quantum. 11. If Justice Kenny's decision is ultimately overturned on appeal, then SNF will have suffered substantial injustice in that: (a) it will have incurred the above substantial legal costs unnecessarily and will only recover a portion of those legal costs; (b) it will need to have employees work on tasks for a large number of hours in relation to discovery, preparing evidence, trial preparation and the hearing in relation to quantum (c) it will not be compensated by money for the large number of hours which its staff will be required to spend in relation to discovery, preparing evidence, trial preparation and the hearing in relation to quantum; (d) it will have to pay the damages assessed to CIBA, which if ultimately ordered to be repaid, will not attract any interest for the period SNF has not had the use of the money. 14 The parties submitted, and I accepted, that leave to appeal was required because the judgment was interlocutory on the basis of the test endorsed by Gibbs CJ in Carr v Finance Co of Australia Ltd (1981) 34 ALR 449, where his Honour observed that the test for determining whether a judgment is final or not is whether the judgment or order appealed from, as made, finally determines the rights of the parties. In the present case, the parties submitted that the judgment was an interlocutory decision as it dealt only with the issues of liability and did not determine the issue of quantification of the cross-claimant's claim for damages or an account of profits derived from or caused by the cross-respondent's exploitation of the patent. 15 Section 24(1A) of the Federal Court of Australia Act 1976 (Cth) provides: An appeal shall not be brought from a judgment referred to in subsection (1) that is an interlocutory judgment unless the Court or a Judge gives leave to appeal. 16 The policy basis for the requirement that an appeal from an interlocutory judgment requires leave was discussed by Rares J in Luck as follows at 292: These are important considerations going to the administration of justice by the court not merely in this matter but generally: DÉcor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398–400 per Sheppard, Burchett and Heerey JJ. As they said, the Parliament evinced a policy in s 24(1A) of the Federal Court of Australia Act against the bringing of interlocutory appeals except where the court, acting judicially, finds reason to grant leave. And, their Honours pointed out that when the court comes to exercise that discretion on a particular application, it has to have regard to the important distinction to be observed between an interlocutory decision given on a point of practice or procedure and an interlocutory decision determining a substantive right, where leave will be more readily granted: DÉcor 33 FCR at 399–400; see also Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177 per Gibbs CJ, Aickin, Wilson and Brennan JJ. Generally, unless some control is kept by the court over the former category of interlocutory proceedings, litigants with considerable resources or litigious dispositions could at will transfer all exercises of discretion in interlocutory applications from a judge exercising the Court's powers summarily to dispose of litigation that ought never to have been instituted into substantive claims before a Full Court. Of course, each case must depend upon its own circumstances. Moreover, when the Court considers the question of the grant of leave to appeal, it will be attentive to the substantive context in which the primary judge determined the matter. 17 The present application is relatively unusual, because it seeks leave to appeal from a substantive judgment on liability from which an appeal would ordinarily lie as of right, but (due to the order that liability and quantum be determined separately) is interlocutory. 18 The considerations relevant to a grant of leave to appeal an interlocutory decision must be balanced in the present context. 19 As Collier J stated in Welsh v Digilin Pty Ltd [2008] FCA 78 at [8]: Previous decisions of this Court indicate that issues that are relevant as to whether a decision is attended by sufficient doubt to warrant reconsideration include the following: — a decision may be of "sufficient doubt" where a contrary position is reasonably arguable (Tamberlin J in Johnston v Cameron [2002] FCAFC 251 at [65]) or the view taken by the trial judge is debatable (Davidson v Fesl [2005] FCAFC 183 at [22]) — leave to appeal is not necessarily granted simply because the reviewing court does not agree with every aspect of the trial judge's reasons (Energex Ltd v Alstom Australia Ltd [2005] FCAFC 215 at [65]) and — leave is more readily granted where substantive issues, rather than points of practice, are at issue (Rivera v United States of America [2004] FCAFC 154 at [13], M111 of 2003 v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 97 at [8]). 20 In Construction, Forestry, Mining and Energy Union v Radisich [2010] FCA 1004, McKerracher J stated that the tests for leave of sufficient doubt and whether substantial injustice would result "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 balancing of considerations" (at [17]). 21 In the present case, I was satisfied that, for the reasons given by the parties, a refusal of leave would result in substantial injustice to all relevant parties. Further, as the authorities recognise, leave to appeal will be more readily granted in relation to a decision determining substantive rights. The grant of leave does not depend on the consent of the parties. It was nevertheless, in my opinion, highly relevant to satisfaction that the requisite degree of doubt attended the decision below, that CIBA (while joining issue with the proposed grounds of appeal, which it will contest) consented to and supported the application, and asserted that a grant of leave was appropriate. 22 I therefore ordered, in accordance with the proposed minutes of consent orders that: 1. Leave be granted to the applicant/cross-respondent to appeal the orders and declarations made by Justice Kenny on 9 June 2011 in this proceeding. 2. The applicant/cross-respondent file and serve any notice of appeal within 7 days of these orders. 3. Costs reserved. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dodds-Streeton. Associate: Dated: 15 July 2011