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[2011] FCA 526
Federal Court of Australia
2011-05-19
Ms J, Foster J
Original judgment source is linked above.
JUDGE: FOSTER J DATE OF ORDER: 19 MAY 2011 WHERE MADE: SYDNEY
AND: HOTPOINT (AUST) PTY LTD (ACN 082 599 086)
JUDGE: FOSTER J DATE OF ORDER: 19 MAY 2011 WHERE MADE: SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1681 of 2006
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 43 of 2007
IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 2056 of 2007
AND: HOTPOINT (AUST) PTY LTD (ACN 082 599 086)
JUDGE: FOSTER J DATE: 19 MAY 2011 PLACE: SYDNEY
REASONS FOR JUDGMENT 1 The applicant has applied to the Court for leave to amend its Statement of Claim in each of the three matters which are before me. In addition, the applicant seeks orders for discovery. The discovery orders claimed by the applicant are predicated upon leave to amend being granted as sought. The applicant also seeks an order vacating the upcoming damages hearing fixed to commence on 20 June 2011. 2 The respondents have consented to the vacation of the 20 June 2011 fixture. For that reason, at the conclusion of the hearing of the applicant's Motions, I vacated that fixture. The respondents' consent to the vacation of that fixture was not dependent upon the outcome of the applicant's Motions. That consent was given for other reasons. 3 The respondents oppose the grant of leave to amend and the making of any consequential orders for discovery.
Background 4 In Bitech Engineering v Garth Living Pty Ltd [2011] FCA 357 (Bitech 2011) delivered on 12 April 2011, at [1]-[13], I said: 1 The applicant is a company incorporated in the Republic of Ireland. It was the patentee of Australian Patent No 621713 for an invention described in the patent as "Apparatus for simulating flames" (the Patent). The essential object of the invention is to achieve a realistic simulation of flames emanating from a simulated combusting log or coal fire. The Patent had application in electric and gas fired domestic room heaters. The patentee made twenty claims in the Patent with Claim 1 being the broadest and most important claim. The Patent expired on 9 February 2010. 2 In late 2006, the applicant became aware that certain models of electric flame effect heaters were being sold by various retailers and suppliers which the applicant believed infringed the Patent. As a result, the applicant instituted five separate proceedings against the suppliers and retailers of the allegedly infringing electric flame effect heaters. 3 I heard four of those five sets of proceedings together and delivered judgment in those proceedings on 26 November 2009 (Bitech Engineering v Garth Living Pty Ltd (2009) 84 IPR 78). The proceedings which were determined by that judgment were: (1) Bitech Engineering v Garth Living Pty Ltd (ACN 111 145 432) and Cohen Nominees Pty Limited (ACN 008 526 994); Garth Living Pty Ltd (ACN 111 145 432) v Bitech Engineering - NSD 1681 of 2006; (2) Bitech Engineering v Bunnings Group Limited (ACN 008 672 179) - NSD 43 of 2007; (3) Bitech Engineering v Flameglow Pty Ltd (ACN 117 672 518); Flameglow Pty Ltd (ACN 117 672 518) v Bitech Engineering - NSD 105 of 2007; and (4) Bitech Engineering v Hotpoint (Aust) Pty Ltd (ACN 082 599 086); Hotpoint (Aust) Pty Ltd (ACN 082 599 086) v Bitech Engineering - NSD 2056 of 2007 4 The applicant was unsuccessful before me as far as its claims for infringement of the Patent were concerned. However, on appeal, the Full Court concluded that the Patent had been infringed and upheld the appeal (Bitech Engineering v Garth Living Pty Ltd (2010) 86 IPR 468). The Full Court also dismissed the Cross-Appeal. As yet, there has been no special leave application to the High Court. The matters were remitted to me by the Full Court for the purpose of dealing with the applicant's claims for damages or, in the alternative, an account of profits. The Full Court did not grant any injunctive relief to the applicant presumably because, by the time that it delivered its judgment, the Patent had expired. 5 Since the four sets of proceedings referred to at [3] above were remitted to me, the applicant has discontinued the whole of the proceeding which it brought against Flameglow Pty Ltd (In Liquidation) (NSD 105 of 2007). Flameglow Pty Ltd (In Liquidation) was placed into liquidation in June 2009. 6 On 28 July 2010, which was the first listing before me after the proceedings were remitted to me by the Full Court, I made orders against each of the respondents in the remaining three sets of proceedings. Those orders were in the following terms: 1. ORDERS that, without prejudice to the applicant's right to seek discovery from [the respondent(s)] on the question of the quantum of pecuniary relief (including for the purpose of making an election as between damages and an account of profits), the first respondent file and serve an affidavit by 8 September 2010 providing full details of: (a) all instances of the hire, sale, supply or other disposal by it or on its behalf of any of: (i) the heaters known at the trial before Foster J as the [there was here inserted the relevant model numbers] heaters; and (ii) any other heater incorporating an apparatus within the scope of Claim 1 of Australian Patent No 621713 (the Patent). (b) the revenue received by it or on its behalf in respect of each such instance of hire, sale, supply or other disposal; (c) the costs incurred by it or on its behalf in respect of each such instance of hire, sale, supply or other disposal; and (d) such overheads as it would contend should be taken into account in the calculation of its profits should the applicant elect for an account of profits, and annexing or exhibiting copies of documents in its possession, custody or power recording or evidencing the above matters. 7 The model numbers inserted into par 1(a)(i) in proceeding NSD 1681 of 2006 and also in proceeding NSD 43 of 2007 were BH1, BH2, BH4, BH5, BH6, BH7, BH9, BH10 and BH12. In the first of those proceedings, an order in identical terms was also made in respect of the MS-5 heater. The model number inserted in the corresponding paragraph in proceeding NSD 2056 of 2007 was HP1. 8 Subsequently, the applicant elected to claim damages rather than an account of profits from the respondents in the remaining proceedings. 9 On 30 September 2010, I made orders in each of the extant proceedings designed to ready those proceedings for the damages hearing in each case. Included in those orders were orders requiring the parties to give discovery. 10 Subsequently, disputes arose between the applicant, on the one hand, and the respondents, on the other hand, as to the extent to which the respondents were obliged to provide discovery. It became apparent that, at the heart of the parties' disagreement about discovery was a difference of opinion as to whether, in addition to the specific models of heaters which were found by the Full Court to have infringed the Patent, the applicant was entitled to pursue the respondents in respect of other models of heaters which had not to date been considered either by me at trial or by the Full Court on appeal. I considered that there was a question of principle which underlay the parties' dispute concerning discovery. I took the view that the best way of resolving that question of principle was to order in each of the extant proceedings that a separate question be heard separately from and before any further trial of any of those proceedings. Accordingly, on 17 March 2011, I made an order in the following terms in each of proceedings NSD 1681 of 2006, NSD 43 of 2007 and NSD 2056 of 2007: 1. Pursuant to O 29 r 2(a) of the Federal Court Rules, the following question be heard separately from and before any further trial in the proceedings, namely: Whether, upon the basis of the pleadings as they currently stand and in light of the judgments of this Court in Bitech Engineering v Garth Living Pty Ltd [2009] FCA 1393, Bitech Engineering v Garth Living Pty Ltd (No 2) [2009] FCA 1460, Bitech Engineering v Garth Living Pty Ltd [2010] FCAFC 75 and Bitech Engineering v Garth Living Pty Ltd (No 2) [2010] FCAFC 93, it is open to the applicant to claim damages for infringement of its patent being Australian Patent No 621713 in respect of the importation, distribution or sale of electric flame heaters bearing model numbers [there was here inserted the relevant model numbers]. 11 The model numbers covered by the orders which I made on 17 March 2011 were model numbers BH3, BH8, BH11, BH13 and BH14 which the applicant alleged were imported and/or sold by the respondents in proceedings NSD 1681 of 2006 and NSD 43 of 2007 and model number DBL-2000-DZ which the applicant alleged was sold by the respondent in proceeding NSD 2056 of 2007. On 17 March 2011, I also fixed 4 April 2011 as the date for the hearing of that separate question in each case and also the hearing of all other discovery applications which the applicant wished to make. 12 The applicant subsequently abandoned its claims for further and better discovery. The only discovery orders which it now seeks are orders requiring the respondents to give discovery in respect of all other potentially infringing electric flame effect heaters imported, sold or distributed by them during the life of the Patent. 13 These Reasons for Judgment determine the separate questions which I referred to at [10]-[11] above and the applicant's application for appropriate consequential orders for discovery. 5 By the judgment in Bitech 2011, I answered the separate questions ordered to be tried pursuant to the orders which I made on 17 March 2011 in the negative. 6 At [52]-[53] in Bitech 2011, I said: 52 In the present case, the trial and the appeal were both conducted upon the basis of the pleadings. The allegations of infringement pleaded in the Statements of Claim were precise - they confined the scope of the allegations of infringement to those apparatus which fell within the definition of Electric Flame Effect Heaters in the relevant Statements of Claim. 53 In the absence of an application for leave to amend its Statement of Claim in each of the extant proceedings, I am not disposed to allow the applicant to include in the damages stage of the proceedings claims for damages in respect of any of the additional heaters. Nor am I prepared to order the respondents to give discovery in relation to any of the additional heaters, at this stage. I think that to allow such claims in the absence of appropriate amendments to the pleadings in order to raise the case of infringement in appropriately precise terms would be unfair to the respondents and would offend the case management principles with which the Court, parties and practitioners must live (see, in particular, s 37M of the Federal Court of Australia Act 1976 (Cth)). Furthermore, the applicant has not explained why these additional heaters were not included in the definition of "Electric Flame Effect Heaters" prior to the original trial before me. 7 At [56]-[57], I also said: 56 But this does not mean that, in every case, as a matter of course, pecuniary relief will be awarded upon the basis that all proven infringements at the damages hearing will be taken into account, whether or not the subject of any particularisation in the Statement of Claim or the subject of any findings made at the liability hearing. Nor does it authorise the litigation of claims for money in respect of allegedly infringing articles which have not, either before the damages stage of the proceeding or as a preliminary finding at that stage, been held to infringe. 57 I do not think that the applicant gains any assistance from its submission that the very precise pleading which it propounded should be regarded as simply an exemplification of at least one instance of infringement. The fact is that the pleading was carefully drawn and confined the case at trial and on appeal to the identified models of heaters. 8 Finally, at [61]-[63], I said: 61. In my view, this is no answer to the difficulties presented by the applicant's approach. Both the Court and the respondents are entitled to know why the additional heaters infringe the Patent. Both the Court and the respondents are entitled to know, in advance of any further trial, the evidence that the applicant intends to adduce in respect of any additional infringements sought to be relied upon. The respondents are entitled to have a fair and reasonable opportunity to meet that case and to meet that evidence. 62. The applicant has not applied to amend any of its Statements of Claim nor has it sought to obtain findings that the additional heaters infringed the Patent before embarking upon the inquiry as to damages. It has always been open to the applicant to attempt to do both of these things. 63. As matters stand at the moment, however, the separate question in each case should be answered: "No". The applicant's applications for discovery orders in respect of the additional heaters are refused. Costs should follow the event. 9 In light of my judgment, the applicant now seeks leave to amend its Statement of Claim in each matter so as to include within the class of infringing apparatus six additional models of electric flame effect heaters. It also seeks to reserve the right to add to the specified additional heaters following discovery and other interlocutory steps. 10 The applicant now accepts that, if leave to amend is granted as sought, there will need to be a determination as to whether the flame effect mechanisms in the additional heaters infringe the Patent and, if so, whether the conduct of the respondents in dealing with those heaters in the manner alleged by the applicant constituted infringement of the Patent. In effect, what would be required is a further hearing on the additional liability questions and a determination of those questions before the commencement of the damages hearing. The applicant also accepts that, if it is permitted to assert an entitlement to claim damages in respect of electric flame effect heaters which are additional to the six heaters intended to be specified in the proposed Amended Statements of Claim, such a reservation will not be permitted by the Court to enure beyond the further liability hearing that would be required.
The Proposed Amendments 11 In proceeding NSD 1681 of 2006, the respondents in which are Garth Living Pty Ltd (Garth Living) and Cohen Nominees Pty Ltd (Cohen), the applicant proposes to amend its Statement of Claim by adding the following to par 2 thereof: 2.4.12 additional heaters bearing other model numbers which incorporate the features pleaded in paragraph 6.1 below (together, the Electric Flame Effect Heaters). Particulars The Applicant contends that the additional heaters pleaded in paragraph 2.4.12 above include the following heaters, but is at present unable to give full particulars and reserves the right to supplement these particulars and reserves the right to supplement these particulars following discovery or other interlocutory steps: (a) Garth Living Electric Flame Effect Heater Reference No. BH3, Fineline 4440187; (b) Garth Living Electric Flame Effect Heater Reference No. BH8, Fineline 4440176; (c) Garth Living Electric Flame Effect Heater Reference No. BH11; and (d) Garth Living Electric Flame Effect Heater Reference No. BH14. 12 The effect of that amendment, if allowed, would be to incorporate within the allegations of infringement of Claims 1, 8 and 20 of the Patent (which allegations are made in paragraphs 8 and 9 of the Statement of Claim) allegations that both the specified additional heaters (Models BH3, BH8, BH11 and BH14) and the unspecified additional heaters infringe the Patent. Those allegations would then be carried forward, as appropriate, into the pleaded allegations of infringing conduct (paragraphs 12, 12A, 12B, 13 and 14 of the Statement of Claim). Amendments to the same effect are sought in proceeding NSD 43 of 2007 in which Bunnings Group Limited (Bunnings) is the only respondent. 13 In proceeding NSD 2056 of 2007, in which Hotpoint (Aust) Pty Ltd (Hotpoint) is the only respondent, similar amendments are sought. The only material difference between the amendments sought in proceedings NSD 1681 of 2006 and NSD 43 of 2007 and those sought in the Hotpoint proceeding is that the electric flame effect heaters the subject of the amendments are different. In the Hotpoint proceeding, the specified additional heaters are: (a) Hotpoint Electric Fireplace Model No DBL-2000-DZ; and (b) Hotpoint Electric Fireplace Model No DBL-2000-MS5. 14 In the Hotpoint proceeding, when the trial on liability took place before me, only one electric flame effect heater had been pleaded as infringing the Patent (Claims 1, 8, 12, 14 and 20). 15 I shall refer to the models of electric flame effect heaters described as models BH3, BH8, BH11, BH14, DBL-2000-DZ and DBL-2000-MS5 together as the specified additional heaters.
The Conduct of the Applicant 16 In early May 2006, the applicant's Australian distributor became aware that a Garth Living electric flame effect heater Model No DBL-200A-MS5 was being sold by a retailer in the A.C.T. That information was passed on to the applicant. A sample of that model heater was purchased on 12 May 2006 by an agent of the applicant's Australian distributor. 17 In early June 2006, the applicant instructed its UK solicitors to advise it in relation to potential infringements of the Patent in Australia by Bunnings and by the "Good Guys" retail chain. The two models of electric flame effect heaters under consideration at that time were the MS-5 heater and the BH1 heater. The BH1 heater was marketed by Garth Living as part of a range of heaters. Many heaters in that range had the prefix "BH". 18 At about the same time, that is to say, in early July 2006, the applicant also instructed DLA Phillips Fox in Australia. 19 Trap purchases of various other models of electric flame effect heaters were made between early August 2006 and December 2006. A further trap purchase was made in June 2007. No further trap purchases were made after June 2007. 20 Proceeding NSD 1681 of 2006 was commenced on 1 September 2006. In the Statement of Claim filed at the commencement of that proceeding, only two models of electric flame effect heaters were expressly referred to in the pleading. These were Model No MS-5 and Model No BH1. By a Further Amended Statement of Claim filed on 5 April 2007, the form of which was first notified in January 2007, an additional eight models from the Garth Living range were added to the list of infringing heaters. The list of infringing heaters in that version of the Statement of Claim in proceeding NSD 1681 of 2006 was the list which the applicant took to trial before me in late 2008 and is the same list as was taken to trial in proceeding NSD 43 of 2007 in which Bunnings was the sole respondent. 21 At the trial, and on appeal to the Full Court, the applicant relied upon expert evidence directed to each of the ten electric flame heaters which were expressly referred to in its Statements of Claim in proceedings NSD 1681 of 2006 and NSD 43 of 2007. A sample of each of those models was tendered in evidence. 22 In similar vein, in proceeding NSD 2056 of 2007, in which Hotpoint is the sole respondent, only one model of heater was expressly referred to in the Statement of Claim as infringing the Patent (viz Model No HPDBL2HY). Model No DBL-2000-DZ and Model No DBL-2000-MS5 were not expressly referred to in the Statement of Claim in proceeding NSD 2056 of 2007 and were not the subject of any findings of infringement made by the Full Court. 23 No attempt was made by the applicant to prove that any of the specified additional heaters infringed the Patent. No samples of those heaters were tendered in evidence. No trap purchases were made of samples of those additional heaters, with the exception of Model No BH13. 24 On 4 August 2006, before the commencement of proceeding NSD 1681 of 2006, Mr Tulley, who was the UK lawyer at DLA Piper in charge of advising the applicant, sent an email to Mr Naughton, who is now the Chief Executive of Business Development of Glen Dimplex, a company incorporated in the Republic of Ireland, which is the parent of the applicant. In 2006, Mr Naughton was a senior executive of the applicant who was responsible for managing the issues concerning the alleged infringements of the Patent in Australia. In his email to Mr Naughton, Mr Tulley said: Whilst we might be able to make a general claim for infringement of all fires with the same flame effect engine based on the one model we have, we would soon have to go into detail to specify which models we are saying infringe so if it is possible to source a sample of each model that we think infringes that would be best. 25 This email was sent in response to a specific request for advice made by Mr Naughton to Mr Tulley in which Mr Naughton asked whether samples of all of the alleged infringing items should be purchased or whether one product could be "… extrapolated to the rest of the range". 26 In an email sent on 29 October 2006 by Mr Naughton to Mr Corry, who was, at that time, also an executive employed by the applicant, Mr Naughton said: One issue that has bothering me for the a while is the fact that a complete range of infringing products are being sold by Bunnings/Garth in Australia but we have only focused on one model, the DBL 2000A-MS5; this is the top fire on the attached letter I sent to Sean at the beginning of the summer, but as you can see they have a much more extensive range. At the outset I asked Stephen about this and he said we should only focus on one product and use it as a representative example. I am concerned that everyone is focusing on only one model and not the entire range and if I was a retailer this was the case and I would assume the rest of the range was not at fault. I have mentioned this to Sean a couple of times and he doesn't seem concerned but I would appreciate if you would put my mind at ease. I had two samples of each model purchased a few months ago as exhibits; these samples are still in Australia in Hagemeyer's warehouse. Regards, 27 On 31 October 2006, this email was forwarded to Mr Chatterton, who was, at that time, an associate employed by DLA Piper in the UK. In response, Mr Chatterton advised Mr Corry and Mr Naughton that, because the applicant had sought an injunction restraining Garth Living and Cohen from (amongst other things) "otherwise infringing" the Patent and also sought an order for the delivery up of all infringing items, the relief claimed by the applicant would extend to all infringing heaters whether or not they were specifically referred to in the Application or in the Statement of Claim. Mr Chatterton said that he would raise this matter with DLA Phillips Fox. 28 Mr Tulley swore that, as far as he could recall, there was no subsequent discussion involving executives of the applicant, lawyers from DLA Piper or lawyers from DLA Phillips Fox about the issue canvassed in the email sent by Mr Chatterton to Mr Corry on 31 October 2006. 29 The product list published by Garth Living in mid June 2007 included the nine BH models of electric flame effect heaters expressly referred to in par 2.4 of the Amended Statement of Claim filed in proceeding NSD 1681 of 2006 as well as models BH3, BH8, BH11, BH13 and BH14 which are part of the group of heaters now sought to be added to the list of infringing items by the amendment which the applicant seeks. 30 In an affidavit sworn for the purposes of the present application, Mr Tulley said that, whilst he had had some experience of patent litigation in the UK, he was not aware of Australian practice in respect of such litigation. In particular, he did not know whether the courts in Australia would permit damages to be recovered in respect of models of heaters which had not been the subject of specific findings of infringement at the liability stage of the proceedings and did not turn his mind to the question in 2006 or 2007. 31 Mr Tulley and other witnesses testified that the applicant had never made a conscious decision to exclude the specified additional heaters or, indeed, any other heaters from the Australian litigation. 32 Mr Naughton said: 11 At the time the statements of claim in of the present proceedings were filed (and later amended in proceeding NSD 1681 of 2006), Bitech did not have available to it any samples of the Garth branded heaters having model numbers BH3, BH8, BH11 and BH14 and the Hotpoint branded heaters having model numbers DBL-2000-DZ (and/or HPDBL 2DZ) and DBL-2000-MS5 (and/or HPDBL 2MS) (together, the Additional Models). 12 Bitech did not intend, by filing (or amending) the statements of claim in the form in which it did, to exclude from the scope of the relief claimed in these proceedings the Additional Models, or any other electric flame effect heater which possessed the features of claim 1 of the Patent even though distributed under a different model number. 13 Bitech did not intend, by filing (or amending) the statements of claim in the form in which it did, to abandon any claim to relief in relation to the Additional Models, or any other electric flame effect heater which possessed the features of claim 1 of the Patent even though distributed under a different model number. 14 Bitech always intended that it would pursue a claim for pecuniary relief in these proceedings in relation to the Additional Models should it succeed on issues of liability based on the evidence filed prior to the hearing in October 2008. 15 Bitech expected that the Respondents would file affidavits in accordance with the terms of the disclosure orders made by the Court on 28 July 2010 and that those affidavits would include details of any sales by the Respondents of the Additional Models and any other electric flame effect heater which possessed the features of claim 1 of the Patent. 33 Mr Conaghan, who was the partner at DLA Phillips Fox who managed the Australian litigation at the Australian end, said: 7 I refer to paragraph 5 of the 25 August 2006 Letter. It was my belief at the time, as the Applicant's legal representative who was required to certify to the Court that each allegation in the pleading had a proper factual and legal basis for being made, that it was appropriate to have to hand physical samples of any alleged infringing heater which was to be referred to in the Statement of Claim so as to be able to be satisfied that it fell within the scope of the claims of the Patent. 34 Mr Conaghan also said: 14 I have reviewed the Court's reasons for judgment in these proceedings dated 12 April 2011. I accept that the Court has found that the Statement of Claim in each proceeding effectively limits the Applicant's claim for pecuniary relief to the particular models of heaters referred to. However, I did not intend or believe at the time I prepared the Statements of Claim that they would have this effect. 15 To the contrary, I intended and believed that the Applications and Statements of Claim in each proceeding would together be sufficient to enable the Applicant to claim relief in respect of all infringing models of heaters sold by the Respondents in due course, should the Applicant be successful on issues of liability, which I expected would be dealt with separately from and before issues of quantum in accordance with the usual practice in intellectual property cases. 16 I expected that, should the Applicant be successful on issues of liability, the Respondents would then be obliged to disclose all examples of heaters falling within the scope of the claims for the purposes of any hearing on damages, and the Applicant would then be able to claim damages in respect of such infringements. In this regard, I had in mind the approach I understood to be adopted in cases involving claims of infringement of patent and other intellectual property rights, which would allow for the matter to proceed in this way. 17 I also expected that the Respondents would maintain all documents and other evidentiary materials relating to such infringements during the course of the proceedings, given the breadth of the relief that was sought in the Application in each proceeding. 35 In an endeavour to support the proposition that the applicant had an arguable case in respect of the specified additional heaters, Mr Naughton also said: 19 As explained above, since Bitech began manufacturing and selling Optiflame Fires over 20 years ago and became the market leader, the only material variation in the flame effect apparatus has been the option of incorporating either moving ribbons or a rotating spindle of reflective material, either of which are features in claim 1 of the Patent. Taking the BH3, BH8, BH11, BH13 and BH14 models as an example, the fact that those models are presented as part of the same range of flame effect heaters makes it very likely, in my experience, that they contain the same type of apparatus for simulating flames. In my experience, the internal apparatus for simulating flames is the same within a given range and the casings and other external features which differentiate particular models are added for cosmetic or aesthetic reasons. 20 I cannot envisage any reason why a new entrant to the market would want or need to introduce a range of heaters that incorporated different flame effect apparatus. This is particularly so where the products are sourced from the same factory or the same manufacturer. In such circumstances, it does not make commercial sense for different models to incorporate different apparatus, or to produce a flame effect by different means. That would require additional investment in tooling and disruption in the factory for the construction of the additional products, and thereby increase costs. 21 For these reasons, it is very likely in my opinion that the BH3, BH8, BH11, BH13 and BH14 models and the DBL-2000-DZ model incorporate the same type of apparatus for simulating flames as the other models sold by the Respondents, as described in the Court's reasons for judgment dated 26 November 2009.
The Respondents' Evidence 36 The respondents asserted that none of them now had possession of any of the specified additional heaters and that they did not have a full set of manuals in respect of those heaters. The evidence revealed, however, that some documentation relating to the specified additional heaters was in the hands of one or more of the respondents. 37 The respondents said that the late inclusion of additional heaters at this stage of the proceedings would prejudice them because they could not fairly meet the applicant's contentions that the specified additional heaters infringed the Patent in the absence of having access to samples of the heaters and access to operating manuals and other documentation relating to those heaters. For Hotpoint this was very likely going to be impossible.
The Applicant's Submissions 38 Counsel for the applicant submitted that: (a) The applications for leave to amend should be viewed in their context. The three sets of proceedings with which I am currently dealing involve claims of patent infringement. Where certain types of alleged infringement have not been particularised and so have not been the subject of findings at the liability stage, additional questions of infringement may be dealt with as preliminary questions either prior to or at the hearing of the inquiry as to damages. The applicant was not obliged to track down and examine, prior to the liability hearing, every single model of electric flame effect heater which it alleged infringed the Patent. I did not hold otherwise in Bitech 2011 (see [40]-[43] in Bitech 2011); (b) At all relevant times in 2006, 2007 and 2008, the applicant and its lawyers all believed that the proceedings as constituted by the Applications and Statements of Claim in the form in which those documents existed at the trial before me were sufficient to enable the applicant to claim pecuniary relief in respect of all infringing heaters in due course as part of the damages hearings; (c) At no time did the applicant intend to abandon any claim of infringement in respect of the additional models of electric flame effect heaters which it now seeks to include as infringing items in the proceedings by means of the proposed amendments; (d) There is no suggestion on the part of the respondents that they would have conducted the trial before me or the appeal in the Full Court any differently had the additional claims of infringement been included in the proceedings prior to the original hearing on liability; (e) A refusal of leave to amend will lead to substantial injustice being suffered by the applicant because, amongst other things, if it is compelled to commence fresh proceedings in order to raise its claims of infringement in respect of the additional models of electric flame effect heaters, it may be confronted with defences from the respondents of res judicata or Anshun estoppel. These defences could not be raised in the present proceedings if leave to amend were granted; (f) Although some delay in the final disposition of the proceedings may possibly be occasioned by reason of the amendments, such delay should not weigh heavily in the balance against the grant of leave to amend given the history of the matter to date and the relatively small delay likely to be occasioned by reason of the amendments; and (g) The proposed amendments will not cause any prejudice to any of the respondents which cannot be substantially remedied by an appropriate order for costs.
The Respondents' Submissions 39 Counsel for Garth Living, Cohen and Bunnings submitted that: (a) The proposed amendments do not adequately articulate the case which the respondents will have to meet; (b) The proposed amendments are futile because the applicant has led no evidence to establish even a prima facie case that the apparatus contained in the additional heaters the subject of the amendment infringed the Patent; (c) The applicant has not given a credible explanation as to why it did not seek leave to amend its pleadings much earlier and certainly before the trial on liability before me; and (d) Substantial prejudice will be occasioned by the respondents which cannot be compensated by an award of costs if leave to amend is granted. 40 Counsel for Hotpoint adopted the submissions made on behalf of the other respondents. In addition, Counsel contended that, if leave to amend were granted, there would be further substantial delay in the final resolution of the proceedings. Counsel also submitted that the cost and complexity of procedural matters raised by the applicant in support of its vigorous and single-minded pursuit of pecuniary relief had become entirely disproportionate to any potential or likely award of damages. Counsel submitted that the interests of justice and adherence to the overarching purpose of the civil practice and procedure provisions of the Court set out in s 37M of the Federal Court of Australia Act 1976 (Cth) require that leave to amend should be refused. It was also submitted on behalf of Hotpoint that, given the passage of time since the commencement of the proceeding brought by the applicant against it, its relationship with the Chinese manufacturer of the electric flame effect heaters sold by it which the applicant alleged infringed the Patent had become strained and was no longer workable. This additional factor was likely to visit significant prejudice upon Hotpoint in meeting any fresh allegations of infringement because it would not have the cooperation of the manufacturer of the infringing items.
Amendment 41 In AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, the High Court clarified and explained the principles which govern the exercise of the Court's discretion to grant leave to amend a pleading. Consideration of such an application involves the exercise of a discretionary power. The party seeking leave to amend has no entitlement to raise all arguable cases subject to payment of costs by way of compensation (AON at [111] per Gummow, Hayne, Crennan, Kiefel and Bell JJ). All matters relevant to the exercise of the power should be weighed (AON at [111]). The fact of substantial delay and wasted costs and the demands of case management will be important in the Court's consideration of the amended application (AON at [111]). 42 In the present case, Counsel for the applicant fairly summarised the relevant principles articulated by the High Court in AON as follows: (a) An award of costs to compensate the other party for the inconvenience of the trial dates being vacated as a consequence of the amendment to the pleadings is not a panacea (AON at [5], [100]); (b) The Court should recognise any ill-effects of resultant delay upon the parties to the proceedings and the effects on other litigants who are also seeking a resolution to their proceedings (AON at [101]); (c) The nature and importance of the amendment to the party applying for the amendment cannot be overlooked (AON at [102]); (d) The exercise of the discretion requires an explanation to be given where there is delay in applying for amendment. The party seeking amendment will need to bring the relevant circumstances to the Court's attention, so that they may be weighed against the effects of any delay (AON at [102]-[103]); (e) The nature of the amendment requires consideration, including whether it introduces new and substantial claims (AON at [104]); (f) An inference drawn by the Court that the raising of new claims not previously agitated is because of a deliberate tactical decision not to do so militates against the grant of leave to amend pleadings (AON at [4]); (g) There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead its case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates (AON at [102]). Issues of case management in the judicial system are not to be disregarded - the resolution of disputes serves the public as a whole, not merely the parties to the proceedings (AON at [5]-[6], [113]); and (h) The timing of the application for amendment is a salient issue, and limits will be placed upon the ability of parties to effect changes to their pleadings, particularly if litigation is advanced (AON at [106], [112]); 43 I think that the applicant's submissions accurately reflect in summary form the relevant principles articulated in the judgments of the High Court in AON and I propose to address the present application with those principles in mind. 44 In the evidence led by the applicant in support of its applications for leave to amend, there are clear statements made by several of the deponents of affidavits read and relied upon in support of those applications to the effect that: (a) The applicant did not intend to abandon or exclude from its claims any of the additional heaters it now seeks to have included within those claims; and (b) The applicant always intended to pursue claims for pecuniary relief in respect of all infringing heaters even if those heaters were not expressly referred to in the Statements of Claim and even though it had not expressly reserved the right to pursue such claims at the damages stage of the proceedings. This was the understanding of the applicant and its Australian lawyers as to the usual practice in intellectual property cases. 45 The applicant suggested that the conclusions which I reached in Bitech 2011 did not conform to the understanding that both the applicant and its Australian lawyers had as to the relevant law and practice in Australia. 46 None of the deponents of the affidavits read and relied upon by the applicant in support of its applications for leave to amend was cross-examined. The evidence which I have summarised at [16]-[35] and at [44] above was not challenged. 47 Nonetheless, I have some reservations as to whether events really unfolded in the way that the applicant would now have me accept. It is clear, for example, that a decision was made in late 2006 not to make any more trap purchases of BH heaters in the Garth Living range. It is also clear that, in early 2007, a decision was made by the applicant to refer specifically in its Statements of Claim to all infringing heaters of which it was then aware and which it expected or hoped to be able to prove had infringed the Patent. No reservation was made in the pleadings to the effect that the applicant would seek pecuniary and other relief at a later stage in respect of other heaters not expressly referred to in the Statements of Claim. These circumstances tend to support the view that, by early 2007, the applicant had decided to go to trial with only those infringements which had been specifically pleaded and not to worry about other potential infringements. 48 The evidence shows that these decisions were taken at a point in time after the August 2006 and October 2006 emails in which the applicant's executives and lawyers canvassed the very question of whether relief could ever be claimed in the proceedings in respect of unspecified heaters. 49 The questions raised by Mr Naughton in his 29 October 2006 email were passed on by Mr Chatterton to DLA Phillips Fox. Mr Chatterton expressed his views on the matter. However, the evidence before me suggested that the Australian lawyers never gave a definitive answer to these questions. Mr Chatterton appears to have thought that all infringing heaters, whether or not expressly referred to in the Statements of Claim at the liability trial, could be the subject of the applicant's claims for pecuniary relief at the damages stage. 50 Despite the reservations to which I have referred at [47]-[48] above, the evidence led by the applicant designed to explain why the additional heaters had not been specifically mentioned in the Statements of Claim long ago was unchallenged and I am disposed to accept it. That evidence constitutes an explanation for the applicant's failure to include the additional heaters in the pleadings which it took to trial. 51 There can be no doubt that the proposed amendments are important to the applicant. I do not think that allowing the amendment in the present case will detrimentally affect other litigants seeking trial dates. The damages hearing was going to be adjourned in any event and would not have been refixed for hearing until late this year at the earliest. There is going to be sufficient time for all necessary additional interlocutory steps to be carried out without causing further delay in the ultimate disposition of the proceedings. 52 Counsel for the respondents could not identify any irremediable prejudice to their clients which could not be substantially remedied by an award of costs. It is true that the respondents may no longer have many (or perhaps any) operating manuals in their possession and may no longer have any samples of the additional heaters in their possession. The precise impact on any future trial of these matters is not at all clear. It may also be the case that the applicant's pursuit of the respondents in respect of the additional heaters may turn out to be an exercise which did not justify the expense of doing so. If that is the case, the additional burdens imposed upon the respondents should be able to be remedied by special costs orders. At this stage, these matters have not been investigated and it is too early to tell whether the respondents' apprehensions are well-founded. 53 The present case is rather unusual. The effect of the findings which I have made as to the decisions taken by the applicant concerning its pleadings and claims for relief and the reasons for those decisions is that the applicant genuinely and reasonably but mistakenly believed that it could recover damages or seek an account of profits at the second stage of the proceedings in respect of electric flame effect heaters which it contends infringed the Patent but which had not been specifically referred to in its pleadings, had not been the subject of any express reservation in those pleadings and had not been the subject of any findings of infringement in the Full Court. In this sense, the applicant made a deliberate forensic decision not to specifically refer to the additional heaters in the pleadings which it took to trial. But it only did so because it believed that the relief which it would obtain, should it succeed in proving infringement, would extend to all infringing heaters whether or not specifically referred to in the pleadings. It was only when I delivered the judgment in Bitech 2011 that the applicant appreciated that it may have been wrong about these matters. 54 Having weighed all of the relevant considerations, I have come to the view that I should allow the amendments which the applicant seeks. It has explained its failure to propound any case in respect of the additional heaters until now and the injustice that would be visited upon the applicant in the event that I disallowed the amendments far outweighs any inconvenience that might be caused to the respondents. I do not consider that case management issues are of any particular significance in the present case. The June 2011 dates had to be vacated in any event. Those dates will be used by the Court for other matters. 55 I am not persuaded that there is any defect in the form of the proposed amendments. Any perceived difficulties can be addressed by the provision of further and better particulars. Counsel for the applicant acknowledged this and indicated that any proper request for further and better particulars would be promptly answered in good faith and appropriately by the applicant and its lawyers. 56 Further, I do not think that the amendments are futile. I refrain from commenting on the weight to be accorded to Mr Naughton's views as to the appropriateness and persuasiveness of the way in which he says that the applicant might prove that the additional heaters infringe the Patent. All I need say at the moment is that there is sufficient material before me to satisfy me that the applicant has an arguable case in respect of those heaters and that the proposed amendments are not futile.
Discovery 57 The respondents relied upon evidence which suggested that they no longer have in their possession, custody, control or power any samples of the additional heaters nor do they have operating manuals and other documentary materials in relation to all of those heaters. There is some ambiguity as to whether the respondents have some documentary materials relating to the additional heaters. 58 I do not think that these assertions made on behalf of the respondents should carry much weight in my consideration of whether discovery should be ordered. It may well be that, after due search is made and great care is taken to comply with any orders for discovery which I propose to make, very little by way of documentary material and no samples of the additional heaters will be forthcoming. However, these are matters which will need to be addressed in the respondents' verified Lists of Documents and do not constitute good reasons for refusing discovery at the present time. 59 Apart from the matters to which I have referred at [57] above, the respondents did not advance any other particular reasons for refusing the discovery orders which have been sought. There was no real contest as to the form of those orders. 60 In the circumstances, I will make orders for discovery substantially in the form of the orders sought by the applicant.
Costs 61 The applicant seeks a significant indulgence. The respondents were entitled to oppose the Court granting the indulgence sought by the applicant. Even though I have ultimately acceded to the applications made by the applicant, the respondents acted quite properly in resisting the making of the amendments sought and the consequential discovery orders sought by the applicant. I do not think that the respondents were required to consent to the orders sought by the applicant in the three Notices of Motion with which I am currently dealing. 62 In those circumstances, I am presently inclined to the view that the appropriate order for costs is that the applicant should pay the respondents' costs of and incidental to the Notice of Motion filed by the applicant on 20 April 2011 in each of the matters with which I am currently dealing. However, the appropriateness of making such an order may well be influenced by the future conduct of the proceedings and the nature and extent of any success ultimately achieved by the applicant, especially in relation to the additional heaters. 63 For these reasons, I propose to reserve for future consideration the costs of the applicant's Motions. 64 There will be orders accordingly. I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.
Bitech Engineering
Garth Living Pty Ltd
(2009) 239 CLR 175
(2009) 84 IPR 78
(2010) 86 IPR 468