Issue One: The assessment of damages
22 By way of preface, it is necessary that we make preliminary comments, first upon Nokia's pleading, secondly, upon the Consent Orders and, thirdly, upon the construction and interpretation of court orders.
23 First, the pleading. All that needs to be emphasised are that (i) the manner in which Nokia's four, specified, trade marks were alleged to have been infringed in para 4 of the Statement of Claim was by conduct which contravened s 120(1) of the Trade Marks Act 1995; and (ii) that "manner" of infringement had been particularised in a way that complied with the requirement of O 58 r 18 of the Federal Court Rules, ie "at least one instance" of the type of infringement alleged has been particularised.
24 Secondly, the consent orders. Paragraph 1 of the orders described the importation of the goods containing the offending marks without Nokia's licence or authority as having constituted an infringement of the four Nokia trade marks. A contravention of s 120(1) of the TM Act had thus been found (by consent) and, as provided in para 2 of the orders, a final injunction was ordered. That injunction in substance enjoined Mr Liu, his employees, etc from infringing any of the four marks in the manner proscribed not only by s 120(1) but also by s 120(2)(a) and (b) of the Act. This enlargement of the conduct prohibited by the injunction was, seemingly, in response to evidence of the manner of infringements filed by Nokia in support of its application. What we would emphasise is that the injunction itself was general in its terms. It was not qualified by reference to specific and particularised instances of infringement. We would also note in passing that, in his reasons, the primary judge found other instances of infringement of the Nokia marks beyond that agreed in para 1 of the orders.
25 Paragraph 3 presupposed the very possibility of such further instances. It required Mr Liu to deliver up for destruction all goods to which an infringing mark had been applied, which were in his or his employee's, etc. possession, power, custody or control.
26 Importantly, paras 5 and 6 imposed disclosure and discovery obligations on Mr Liu in respect of his suppliers of, and of his purchases and sales of, infringing items. Those orders were not limited to already proved or found instances of infringement. They were, we would note, relatively characteristic of orders made on an inquiry as to damages.
27 Order 7 presupposed that Nokia "may be able to recover substantial damages" (cf Kerly 19-129) in ordering that Nokia be paid damages to be assessed or, at its option, "the Respondent account for the profits made by him by his infringements of the Nokia Trade Marks".
28 The final matter we would note relates to the formatting of the consent orders themselves. While the finding of infringements by importation in para 1 took the form of a Court "order", it had in substance the character of a declaration. Paras 2 to 4 of the orders fell under the heading:
BY WAY OF FINAL JUDGMENT UNDER PARAGRAPHS 1, 3 AND 4 OF THE APPLICATION HEREIN THE COURT ORDERS BY CONSENT THAT:
The paragraphs in the Application so referred to were the claims for injunctive relief (para 1) and delivery up and destruction (paras 3 and 4). Paragraphs 2 to 4 in the orders reflected these. The remaining substantive consent orders dealt with disclosure and discovery (paras 5 and 6), the assessment of damages (para 7) and costs (para 8). These orders came under the heading:
THE COURT FURTHER ORDERS BY CONSENT THAT:
and, in the case of orders 5 to 6, were clearly intended to be in aid of the alternative claims for relief by way of damages or an account of profits, sought in paras 5 and 6 of the Application.
29 Thirdly, the construction and interpretation of court orders. As the appeal involves what is, in essence, the proper construction of the consent orders, it is necessary that we refer briefly to interpretative principles properly to be applied to court orders. We refrain from any extensive general consideration of this subject. It was not a matter on which submissions have been made by Nokia yet there are clear indications that, as with the interpretation of statutes (see eg CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408) and of contracts (see eg Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at [22]), the "ordinary rules of construction" of orders (cf Repatriation Commission v Nation (1995) 57 FCR 25 at 33-34 (Full Court)) as well are in evolution: see Athens v Randwick City Council (2005) 64 NSWLR 58 at [128]-[140] per Santow JA and [141] per Tobias JA; Siminton v Australian Prudential Regulation Authority [2008] FCAFC 90 at [23].
30 The orders in question are consent orders. Accordingly, all we need note for present purposes are the recent, uncontentious observations of Campbell JA in the New South Wales Court of Appeal (with whom Allsop P and Bastin JA agreed) in Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234 at [109] that:
It is well established that in construction of consent orders evidence of surrounding circumstances is admissible: Rogers v Wentworth (NSWCA, 18 April 1988, unreported), at 18-19 per Hope JA (with whom Samuels JA agreed) at 6-8 per Mahoney JA; S & M Motor Repairs Pty Ltd v Caltex Oil (Aust) Pty Ltd (1988) 12 NSWLR 348 at 387D-E per Priestley and Clarke JJA; Kirkpatrick v Kotis [2004] NSWSC 1265; (2004) 62 NSWLR 567 at 573-5 [39]-[45]; Athens v Randwick City Council [2005] NSWCA 317; (2005) 64 NSWLR 58 at 70 [28] per Hodgson JA (with whom Santow and Tobias JJA relevantly agreed).
We would add that in Kirkpatrick v Kotis [2004] NSWSC 1265, Campbell J (as he then was), after reviewing Australian and English authority, expressed the view (at [45]) that the surrounding circumstances which can be used to construe a consent order "are those which can be used to construe a contract": see also Athens, at [28].
31 The particular consent orders in this matter were not accompanied by, and did not give expression to, reasons for judgment: on the significance of reasons in construing court orders, see Athens, at [129] ff. Nonetheless, as is apparent on their face, the orders draw meaning both from the Application and Statement of Claim filed in the proceedings and from evidence filed in support of the proceedings. As we will indicate below, they also are informed by well accepted practices adopted in trademark infringement litigation. These last, in our view, constitute part of the "factual matrix", the "objective setting" or, to use the contemporary interpretative formula, the "context" (cf Ho v Grigor [2006] FCA 417 at [29]) in which the consent orders are to be construed.
32 The question of construction raised, though not formulated by Nokia as such, is whether para 1 of the consent orders was intended merely to instantiate an act of infringement, ie the importation of the goods later seized, or was expressed as a limitation upon the scope of the assessment of damages contained in order 7.
33 It has been a long established practice in intellectual property proceedings to split the determination of liability for infringement and, if appropriate, the grant of injunctive relief on the one hand, and the award of relief by way of damages or (at the injured party's election) an account of profits on the other: see eg A G Spalding & Bros v A W Gamage (1913) 30 RPC esp at 400; affd (1915) 32 RPC 273; LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 3) (1996) 36 IPR 293; and see generally Kerly's Law of Trade Marks and Trade Names, Ch 19 (14th ed, 2005). The present consent orders reflect that practice. The practice itself has in some degree influenced, and has led to accepted understandings about, the proper function of, and the limits to, the two stages of a split proceeding.
34 In trademark infringement proceedings in this country, for example, the liability stage is focussed on establishing the fact and manner of infringement(s) of the applicant's mark(s) and, where appropriate, the award of injunctive relief prohibiting such infringing conduct. It is not directed to the proof of each and every instance of infringement which, at the second stage of the proceedings, would justify the award of damages or an account of profits. So it is that O 58 r 18 of the Federal Court Rules requires that in trademark infringement proceedings:
… particulars of the infringement must specify the manner in which the trade mark is alleged to be infringed and must give at least one instance of each type of infringement alleged.
As we have noted, the present Statement of Claim gave two such particularised instances.
35 Establishing the manner of infringement (though not necessarily all the instances of such infringement) will, in turn contrive both the type of act(s) prohibited by such injunctive relief as may be granted and/or the scope of any order made as to the assessment of damages (or an accounting for profits made) on account of such past act(s).
36 The link between the manner of infringement found - and often enjoined - and the subsequent award of relief by way of damages (or an account) is reflected in the notion that:
the scope of the inquiry as to damages corresponds to that of the injunction
See National Broach and Machine Co v Churchill Gear Machines Ltd [1965] 1 WLR 1199 at 1204-1205; or as put in Kerly (at 19-131):
The proper form of an order for an inquiry as to damages occasioned by the infringement of a mark is, therefore, what damage (if any) has the claimant sustained by reason of the acts, repetition of which is restrained by the judgment.
See also the form of the orders in A G Spalding 30 RPC at 400.
37 The reason an applicant is not required to establish at the liability stage all the instances of infringement which may have given rise to loss is essentially an expedient one, given the purpose behind the common practice of splitting intellectual property proceedings. It was explained by Harman LJ in National Broach (at 1204-1205) in relation to an inquiry as to damages in a breach of confidence case:
It was the plaintiffs' initial complaint that the defendants had, in breach of the agreement, made use of confidential information in the form of drawings supplied by the plaintiffs for the purpose of the licence only. This was a matter in contest right up to the first day of the trial, when the defendants admitted that they had made use of the plaintiffs' drawings and submitted to an injunction which is the initial relief in Cross J's order. Cross J, however, when he came to the inquiry into the damages arising out of this breach, limited it to damages arising out of drawings of which particulars had been delivered under paragraph 15 of the statement of claim. The particulars enumerated something like 100 of such drawings and were put forward as instances on which, for the purposes of the trial, the plaintiffs proposed to rely. The plaintiffs sought to reserve the right to add to the instances and claimed relief in respect of wrongful user of drawings "whether particularised or not." Cross J, however, limited the inquiry to the drawings already so particularised. In my judgment, this is not in accordance with the practice in actions of this nature. It is only in patent actions that the rules (Ord 53A, r 12) specifically direct that instances only shall be given, but a similar practice prevails in trade mark and passing-off actions where, in my experience, the scope of the inquiry as to damages corresponds to that of the injunction granted - see A G Spalding & Brothers v A W Gamage Ltd - and it seems to me that it would unduly lengthen the trial of this kind of action for a plaintiff to be obliged to give in advance details of every instance of wrongful dealing on which he intends to rely on the inquiry.