The Federal Court has declined to award damages in a successful claim for relief from unjustified threats on the basis that no damages as a result of the threats were proved to have been suffered by the threatened party.

The decision by Justice Dowsett is the latest in the long running saga between Mizzi Family Holdings and its director Paul Mizzi, and Daryl Morellini. Both Mizzi and Mr Morellini had developed a cane billet planter for use by sugar cane farmers, however Mizzi got in first and applied for a patent in respect of the invention. Mizzi alleged that Mr Morellini’s use of his cane billet planter infringed its innovation patent and Mr Morellini cross-claimed for revocation of the patent and relief from unjustified threats.

We reported on the initial decision here, in which the Court held that infringement was not proven and the complaint concerning unjustified threats was upheld. However, the trial judge did not award damages to Mr Morellini in respect of the unjustified threats claim because he believed the claim to have been abandoned. Both parties appealed the decision, and the Full Court of the Federal Court held that the patent was invalid for false suggestion or misrepresentation, and that Mr Morellini had not abandoned his claim. The Full Court therefore referred the matter back to Justice Dowsett to determine the amount of damages payable in respect of the unjustified threats claim.

The actions constituting the unjustified threats

The Court found that Mizzi had caused a notice and an article to be published in a publication entitled Canegrowers. The notice set out information concerning Mizzi’s billet planter, including the patent application number, whilst the article by Terry Hurlock, Mizzi’s patent attorney (entitled “infringement danger”) basically warned sugar farmers of the danger of copying patented inventions. Together, the article and the notice were taken to constitute an unjustified threat. It was also found that Mr Mizzi made a clear allegation of infringement and demanded a royalty from a third party (Mr Girgenti) who had used Mr Morellini’s planter, which constituted a second unjustified threat.

Relevant test when determining claim for damages

In applying the relevant law regarding damages for unjustified threats, the Court confirmed that:

  1. any award must be for damages resulting from the threats; and
  2. the damage suffered may include loss resulting from the termination of negotiations as a result of the threats.

Mr Morellini put on evidence that there were parties within the sugar cane industry interested in manufacturing his billet planter, but those parties were cautious of dealing with him given his dispute with Mizzi. However, Justice Dowsett held that the fact that nothing came of these negotiations could not be attributed to the threats, as they occurred prior to the threats being published. Mr Morellini also claimed that he was prevented from commercially exploiting his invention. According to Justice Dowsett, there was no evidence of Mr Morellini’s capacity to manufacture a product for sale at a profit. Ultimately, according to the judge:

There is no direct evidence that anybody declined to deal with Mr Morellini as a result of the threats. It seems that even before the newspaper article on 5 April 2010, there was a degree of reluctance concerning any such dealings. That reluctance cannot have been attributable to the threats. Mr Morellini has not demonstrated that any adverse effect resulted from either of the threats. The newspaper article may well have been widely read within the sugar industry, but there is no reason to believe that the incident involving Mr Girgenti was a matter of common knowledge. Some people in the industry may have heard of it. In either case such knowledge may have reinforced previous perceptions, but that is largely speculative.

Morellini suffered no damage as a direct result of the threats

Justice Dowsett held that despite the fact that the existence of the dispute with Mizzi reduced Mr Morellini’s opportunity to market his product, there was no clear evidence that without the dispute, Mr Morellini would have successfully commercially exploited his invention. Given that Mr Morellini could not show that any disadvantage was attributable to either or both of the threats made by Mizzi, there was no basis for allowing him any amount by way of damages. In the circumstances, Justice Dowsett held that “although one may speculate about the possible effects of the threats, I see no proper basis for attributing any part of the disadvantage to either or both of them”. Accordingly, he determined that he must reluctantly dismiss Mr Morellini’s cross-claim for damages.

Key lessons

  • Despite being successful in his cross-claim for unjustified threats, Mr Morellini could not prove any damage that flowed, or could reasonably have flowed, from the making of the threats.
  • This case follows the Full Federal Court decision in March 2017 in Australian Mud Company Pty Ltd v Coretell Pty Ltd [2017] FCAFC 44. At trial, the judge awarded just over $1.5 million in damages against Australian Mud Company for relief from unjustified threats, however this award was subsequently overturned by the Full Court, which held that the damage was not sustained as a result of the threats, and dismissed Coretell’s claim for damages with costs.
  • Though making a claim for unjustified threats may be a useful tactic in a proceeding, parties who have not suffered any damage as a result of the threats should think twice about pursuing a claim for damages.
  • Practically speaking, a damages claim is difficult to prove and claimants should consider, at an early stage, whether they are able to prove loss.