Element Six Technologies Ltd v IIa Technologies Pte Ltd

• Jurisdiction: Singapore
• Judge: Valerie Thean J
• Judgment Date: 22 July 2020
• Neutral Citation: [2020] SGHC 140
• Court: High Court (Singapore)
• Hearing Date: 30 March 2020
• Docket Number: Suit No 26 of 2016
• Plaintiff Counsel: Alvin Yeo SC, Daniel Chan, Vivian Seah, Daryl Kwok (WongPartnership LLP) (instructed), Chan Kwok Chuan Jason, Pang Sze Ray Melvin, Nicholas Tong Wei Jie and Ong Eu Jin (Amica Law LLC)
• Defendant Counsel: Tony Yeo Soo Mong, Meryl Koh Junning, Yeo Javier, Chiew Jing Yi and Loo Fang Hui (Drew & Napier LLC)
• Subject Matter: Civil Procedure,Costs,Principles
• Published date: 25 July 2020

Valerie Thean J:

These grounds of decision deal with costs for Element Six Technologies Ltd v IIa Technologies Pte Ltd [2020] SGHC 26 (the “Judgment”) in Suit No 26 of 2016 (“S 26/2016”).

Background

I highlight here the key facts relevant to the issue of costs. The plaintiff (“E6”), incorporated in the United Kingdom (“UK”), designs, develops, and manufactures synthetic diamond products. E6 owns Singapore Patent No 115872 (“SG 872”) and Singapore Patent No 110508 (“SG 508”). The first is a patent for the manufacture of synthetic diamond using chemical vapour deposition (“CVD”); the second is a patent to convert a coloured single crystal CVD diamond to another colour under suitable heat treatment conditions, a process referred to as annealing. The defendant (“IIa”), a Singapore company, deals in the manufacture of CVD diamond products and the colour treatment of diamonds. E6 contended that three Samples (referred to as “Sample 2”, “Sample 3”, and “Sample 4” respectively, and collectively as the “Samples”) that originated from IIa infringed SG 872. Samples 2 and 4 were CVD diamond optical applications, while Sample 3 was a pink CVD diamond gemstone, which E6 contended infringed SG 508 as well. IIa’s response was a threefold denial: first, it denied that the Samples originated from them; second, even if they did, the Samples were manufactured using IIa’s confidential process; and third, it counterclaimed that SG 872 and SG 508 were invalid.

In the Judgment, I found that IIa was responsible for manufacturing all three Samples. On the counterclaim for revocation, I found that SG 872 was valid while SG 508 was not. IIa’s confidential process did not withstand scrutiny. E6 was able to show that IIa had used SG 872 to manufacture the Samples, while the result on SG 508 was not conclusive in view of my finding as to its anticipation by prior art. Therefore, infringement was made out on SG 872 while the invalidity of SG 508 functioned as a defence to any infringement of SG 508.

IIa’s offer to settle

I consider IIa’s offer to settle (“OTS”) as a preliminary matter. IIa contended that O 22A r 9(3) of the Rules of Court (Cap 322, R 5, 2014 Rev Ed) (“ROC”) applied on the basis of the OTS it served on E6 on 3 March 2017. The material terms of the OTS are as follows:¹ 1. The Plaintiff discontinues its claim against the Defendant in these proceedings and the Defendant discontinues its counterclaim against the Plaintiff in these proceedings. 2. Each party to bear its own costs in these proceedings up to and including the date of this Offer to Settle. The Plaintiff is to pay the Defendant costs, to be agreed or taxed, for the period from the day after the date of this Offer to Settle onwards.

In order for the costs implications under O 22A r 9 of the ROC to follow, a valid OTS must be an offer to settle that has “some semblance of reasonableness”: Wyno Marine Pte Ltd (in liquidation) v Lim Teck Cheng and Others [1998] SGHC 340 at [9], and should be “a serious and genuine offer” which contains “an element which would induce or facilitate settlement”: Man B&W Diesel S E Asia Pte Ltd and another v PT Bumi International Tankers and another appeal [2004] 3 SLR(R) 267 (“Man B&W Diesel”) at [8]. What would constitute such a serious and genuine offer must depend on the circumstances and issues of the case: Man B&W Diesel at [10].

In my view, IIa’s OTS was not a serious nor genuine offer aimed at compromise. The substance of the OTS was for E6 to cease its claim entirely, on the basis that IIa would not pursue its defence and counterclaim to revoke the patents which E6 was claiming IIa had infringed. Tongue-in-cheek, it offered a return to the status quo prior to the commencement of the action, with nothing gained from the litigation. The OTS effectively asked E6 to capitulate with nothing obtained or achieved. As the Court of Appeal recognised in Man B&W Diesel at [14], a common feature of the offers to settle across cases where both local and foreign courts have refused to grant indemnity costs “is … that in each instance the offeror effectively expected the other party to capitulate”. IIa would thereafter continue what E6 perceived as its commercial exploitation of E6’s patents, with no cost to itself and with no compensation to E6 to allow that conduct to continue.

Further, even if the OTS was an offer within the bounds of O 22A, in order for O 22A r 9(3) to apply, the defendant must show that “the plaintiff [has obtained] judgment not more favourable than the terms of the offer to settle”: O 22A r 9(3)(b) of the ROC. IIa made two arguments in its attempt to establish that E6 has not obtained a more favourable judgment.

First, IIa argued that if E6 had agreed to the OTS, E6 would have kept both SG 508 and SG 872 on the register, which was more favourable than the outcome of S 26/2016 at trial, which was that SG 872 was valid and was enforced while SG 508 was revoked. However, the purpose of a patent is the protection it affords. Although SG 508 was revoked, E6 succeeded in relation to SG 872 and obtained important consequential orders for itself, namely: an injunction, an order for delivery up and/or destruction of any infringing articles, and an inquiry into damages or an account of profits. In contrast, if the OTS had been accepted, both SG 872 and SG 508 would have been effectively unenforceable against IIa.

Second, IIa argued that if E6 had accepted the OTS, it would only have had to pay IIa’s costs from 3 March 2017 up to the date of acceptance. IIa cited Chan Sek Keong CJ’s decision in CCM Industrial Pte Ltd v Uniquetech Pte Ltd [2009] 2 SLR(R) 20 at [41]–[42] for the proposition that the court should take into account the duration in which the plaintiff could have accepted the OTS and the benefits that could have accrued in that time. This argument was misconceived. E6, having substantially succeeded in the suit, was not in danger of having to pay IIa’s costs. Further, IIa’s argument was rather circular. Order 22A r 9(3)(b) refers to the situation where a plaintiff “obtains judgment not more favourable than the terms of the offer to settle” at a moment in time prior to the issue of costs being determined, since it is the very issue of costs that O 22A r 9(3) regulates. The “judgment” referred to in O 22A r 9(3)(b) does not include any decision on costs, since there would not have been any such “judgment” at the time O 22A r 9(3)(b) is considered.

IIa’s OTS was, therefore, irrelevant to the issue of costs.

Costs of the suit

E6 won on all issues save for the validity of SG 508. It relied on the adopted by the Court of Appeal in Tullio Planeta v Maoro Andrea G [1994] 2 SLR(R) 501 (“Tullio Planeta”) as stated in Re Elgindata Ltd (No 2) [1992] 1 WLR 1207 (“Re Elgindata (No 2)”). I refer to this as the Tullio approach in these grounds of decision. It therefore argued that it was the overall winner and was entitled to costs with a 15% discount to reflect the fact that SG 508 was revoked. It further asked for costs on an indemnity basis, because of IIa’s unreasonable conduct.²

IIa, on the other hand, advocated an issue-based approach. While it asked for “a single costs order”, premised on its having won the validity argument on SG 508, it first contended in its written submissions that it should obtain 50% of its costs,³ then in oral argument contended that costs should be apportioned in equal parts between E6 and itself, with each side paying 50% of the costs to the other. At a point, it appeared to suggest, taking the two suggestions into consideration, that no order on costs should be made at all.⁴

I held that E6 should receive costs of the whole action on the standard basis. My decision may be explained by reference to these issues, which are related: whether the issue-based approach or the Tullio approach was applicable in the present case; the conduct of IIa, arising out of which E6 asked for indemnity costs, and that of E6, which was also relevant to the issue of costs; and the importance of proportionality and reasonableness of the parties’ conduct in the court’s exercise of its discretion on costs.

What is the appropriate approach to apply? E6’s approach

E6 argued that costs should follow the event and, as the overall successful party in this part of S 26/2016, it should be awarded its costs in the suit so far. This argument was based on the principles summarised in Re Elgindata (No 2) (and cited in Tullio Planeta at [24]):

… The principles on which costs were to be awarded were (i) that costs were in the discretion of the court, (ii) that costs should follow the event except when it appeared to the court that in the circumstances of the case some other order should be made, (iii) that the general rule did not cease to apply simply because the successful party raised issues or made allegations that failed, but that he could be deprived of his costs in whole or in part where he had caused a significant increase in the length of the proceedings, and (iv) that where the successful party raised issues or made allegations improperly or unreasonably the court could not only deprive him of his costs but could also order him to pay the whole or part of the unsuccessful party’s costs. The fourth principle implied, moreover, that a successful party who neither improperly nor unreasonably raised issues or made allegations which failed ought not to be ordered to pay any part of the unsuccessful party’s costs … [emphasis added]

E6 recognised that it had, however, failed in terms of the validity of SG 508, and conceded that it could be deprived of its costs in relation to that issue, and it proposed a 15% discount accordingly. This was consistent with the third principle stated in Re Elgindata (No 2) ([11] supra), that a successful party “could be deprived of his costs in whole or in part where he had caused a significant increase in the length of the...