REASONS FOR JUDGMENT
1 This is an application by the respondents pursuant to s 31A of the Federal Court of Australia Act 1979 (Cth), ("the Federal Court Act") or alternatively pursuant to O 35A r 3 of the Federal Court Rules, that the proceedings be dismissed. Alternatively they seek an order that the proceedings be stayed. I shall refer in these reasons to the parties as they are described in the proceedings, notwithstanding that the application under consideration has been brought by the respondents.
2 Since that application was brought the applicant has made a number of applications related to the respondents' application. The last was made by the liquidators of the applicant on 27 July 2010 and was the subject of evidence and submissions by the liquidators on 2 August 2010. These reasons also deal with and dispose of that application.
3 The respondents' application was filed on 19 April 2010 and heard on 27 and 28 May 2010, when it was adjourned until 4 June 2010. At that time the trial was set down for hearing on 19 July 2010. On 27 May 2010 the trial was adjourned sine die pending the outcome of this application and other subsequent developments which are discussed below. On 4 June 2010 I reserved judgment on the respondents' application. On 21 June 2010 the application was re-opened at the request of the respondents in order to file further evidence arising after the hearing. The applicant was given leave to put further submissions in relation to the application to dismiss the proceedings and the applicant's liquidators put written submissions.
4 This is the third application of this type filed by the respondents. On 17 September 2009 the respondents filed a notice of motion to dismiss the proceedings if the applicant did not appoint a solicitor within 7 days. On 27 October 2009 a solicitor announced his appearance on behalf of the applicant and a notice of acting was filed on 5 November 2009.
5 On 4 November 2009 the respondents filed an amended notice of motion seeking to dismiss the proceedings or, in the alternative, to stay the proceedings. On 21 December 2009 that application was heard and on 23 December 2009 the notice of motion was dismissed and reasons were given on 15 January 2010: Smart Company Pty Ltd v Clipsal Australia Pty Ltd [2010] FCA 4. Much of the history of the proceedings is set out in those reasons but for convenience and because of the events that have occurred since those reasons and for a better understanding of these reasons, the history will also be summarised again in these reasons.
6 The applicant was incorporated in Western Australia and was involved in the development of various technologies. It developed an electronic control system sold under the brand name "Jeeves" for installation in residential premises. The applicant's products were distributed through the applicant's wholly owned subsidiary Home Systems Plus Pty Ltd (HSP) and through various independent dealer networks.
7 The respondents in these proceedings Clipsal Australia Pty Ltd (CA), Clipsal Integrated Systems Pty Ltd (CIS) and Clipsal Technologies Australia Pty Ltd (CTA) were at all material times manufacturers, wholesalers and distributors of electrical products. All three entities were part of the Clipsal Group of companies and at various times had directors in common. CA was formerly known as Gerard Industries Pty Ltd, and CTA was formerly known as Gerard Industries (No 2) Pty Ltd. CA was a wholly owned subsidiary of CTA. CIS was a wholly owned subsidiary of CTA. CTA was a wholly owned subsidiary of Clipsal Australia Holdings Pty Ltd (CAH).
8 As at May 1995 the respondents had developed and released a product for electronic building automation lighting known as the Clipsal Bus, or C-Bus System. Bus Systems were at the time commonly used systems which enabled signals or data to be transmitted around a network from one device to another via wired or wireless transmission paths. They allowed for electronic control of buildings, such as control of heating, cooling and lighting.
9 The C-Bus system was able to send and receive on, off, and dim signals, and included a PC interface which could be installed by a technician.
10 By May 1995 the applicant had developed its own electronic building control and automation system compatible with Bus networks (the Smart System). The applicant claims the Smart System was capable of controlling devices in buildings to perform functions either on a schedule or upon the occurrence of multiple events or variables. The Smart System enabled devices on different bus networks to interact directly, and was capable of communicating simultaneously to a number of different bus systems using different computer language protocols. It had an end-user interface from which building control could be controlled by an untrained user, and was able to easily accommodate different interfaces. The Smart System was applicable to a number of building control systems, such as heating and cooling, audio visual systems, motion and smoke detection, data networking and security systems. It referred to all of the above functions as "Smart Functionalities". The applicant's definition of the Smart System and the Smart Functionalities is discussed later.
11 The applicant claims that the Clipsal's C-Bus system was less sophisticated and had more limited functionality. For example, it could not make decisions based on multiple events or operate in accordance with a time clock. Therefore electronic functions could not be scheduled, only pre-programmed. The Smart System on the other hand was able to control a number of different functions, as opposed to the C-Bus System which could only enable on, off, and dim settings. The C-Bus System could not be integrated directly with other control systems, and could only be operated by a trained technician. Additionally, the C-Bus system was mainly for use in commercial settings, whereas the Smart System was capable of residential application.
12 The respondents deny that the functionality of its own C-Bus system was as limited as the applicant claims. They also deny the extent of the functionality which the applicant claims for its own system.
13 On 22 May 1995 the applicant and CA entered into a Collaboration Agreement to enable the direct connection of the Smart system to Clipsal's C-Bus system. The applicant claimed that the integration of the Smart system and the C-Bus system gave the C-Bus "Smart Functionalities". These are described in more detail below.
14 On or about 26 September 1996 the applicant, its subsidiary HSP, and CA, entered into a Heads of Agreement (HOA). From 7 September 1999 CIS performed CA's obligations under the HOA. Under the HOA, the applicant and the respondents agreed to pool information for the development of certain products.
15 The scope of the products which were to be developed under the HOA, and the extent to which those products were in fact developed, is the subject of substantial disagreement between the parties.
16 The applicant claims that it owns the intellectual property for numerous products and systems developed by both parties or by the respondents only during the term of the HOA. It claims that licence fees are owed to by the respondent for the continuing sale and distribution of these products and systems.
17 In September 2001 administrators were appointed to the applicant. An administrator may be appointed to a company if the directors are of the opinion that the company is insolvent or likely to become insolvent: s 436A of the Corporations Act 2001 (Cth) ("the Corporations Act"). In December 2001 the applicant entered into a Deed of Company Arrangement pursuant to which a South Australian entity, Smart World Corporation Pty Ltd, purchased all of the applicant's shares. On 28 July 2003 the administration of Smart terminated.
18 On 22 December 2003, CA, CIS and other entities within the Clipsal Group came under the majority ownership and effective control of Schneider Electric SA (Schneider), which was a competitor of the applicant. As a result, on 17 or 18 March 2004, the applicant terminated the HOA.
19 These proceedings have had an unfortunate history due mainly to the applicant's inability to articulate its case with any precision or particularity; the applicant frequently changing solicitors; and the applicant's failure to comply with directions in a timely fashion.
20 Previous judgments in relation to interlocutory applications have recounted the history of the proceedings: Smart Company Pty Ltd v Clipsal Australia Pty Ltd (2008) 249 ALR 388; Smart Company Pty Ltd v Clipsal Australia Pty Ltd [2009] FCA 1253; Smart Company Pty Ltd v Clipsal Australia Pty Ltd [2010] FCA 4. What follows is a summary of that history.
21 The applicant commenced the proceedings on 18 June 2004 in the West Australian District Registry by an application which was accompanied by a statement of claim. Solomon Brothers of Perth were the applicant's solicitors.
22 The directors of the applicant were then Mr Sotirios Portellos and Mr Panagiotis Galanis.
23 On 9 July 2004 Lee J gave leave to the applicant to file an amended application and amended statement of claim by 30 July 2004. The documents were filed on 10 August 2004. On 20 August 2004, Lee J gave the applicant leave to file a further amended statement of claim, following receipt of a request for particulars by the respondents, by 15 September 2004. The further amended statement of claim was filed on 13 October 2004.
24 On 26 October 2004 the respondents sought an order that certain paragraphs of the statement of claim be struck out or, in the alternative, that the applicant give particulars. On 14 December 2004 Lee J ordered the applicant to file a second further amended statement of claim by 14 January 2005. That document was filed on 7 January 2005.
25 On their application of 26 October 2004 and 15 September 2004 the respondents also sought an order pursuant to s 56 of the Federal Court Act, or in the alternative s 1335 of the Corporations Act, that the applicant provide security for the respondents' costs in the amount of $1,978,337.
26 On 14 January 2005 the applicant entered into a funding agreement with a litigation funder, IMF (Australia) Ltd (IMF) to meet the costs of the litigation. IMF provided a guarantee and an indemnity to the respondents in respect of any costs the applicant might be liable to pay to the respondents incurred between the date of the funding agreement and the date of termination of that agreement.
27 On 4 May 2005, the respondents' application of 26 October 2004 was adjourned sine die.
28 On 20 May 2005, as a result of the respondents' complaints and pursuant to a further grant of leave given by Lee J on 4 May 2005, the applicant filed its fifth version of the statement of claim which was the third further amended statement of claim.
29 On 31 October 2005 the respondents filed their defence and the first and second respondents filed a cross-claim. CA and CIS' cross-claim is for an alleged advance paid by the respondents to the applicant which CA and CIS' claim is repayable by the applicant and for damages for a failure by the applicant to pay licence fees. In dollar terms the cross-claim is relatively insignificant.
30 On 5 December 2005 Ms Dorothea Tomazos was appointed as a director of the applicant in addition to Mr Portellos and Mr Galanis.
31 On 23 January 2006 the respondents filed an amended defence and cross claim.
32 On 14 February 2006 IMF gave notice to the respondents that IMF would terminate the funding agreement on 21 February 2006.
33 On 17 February 2006 the respondents applied to have the proceedings transferred to the South Australian Registry.
34 On 23 February 2006 Solomon Brothers ceased to act for the applicant and on 27 February 2006 Gadens Lawyers Perth commenced acting for it.
35 The termination of the applicant's funding agreement on 21 February 2006 led the respondents to reagitate their notice of motion filed on 26 October 2004 seeking security for costs.
36 The application to transfer the proceedings was opposed by the applicant but on 29 March 2006 Lee J made an order transferring the proceedings to the SA Registry: Smart Company Pty Ltd v Clipsal Australia Pty Ltd [2006] FCA 428. The respondents' application for security for costs was adjourned sine die.
37 On 8 June 2006 and again on 17 July 2006 due to the applicant's delay, directions were given in relation to the notice of motion seeking security for costs.
38 On 3 October 2006 orders were made by consent that the applicant provide $850,000 as security for the respondents' costs in four separate tranches with the last payment to be made on 11 May 2007, and an order that the proceedings be stayed in the event of default if the security was not provided within the times prescribed in the order, such stay to continue so long as the default continued. The applicant complied with the orders.
39 At that time, an ASIC search carried out by the respondents indicated that shares in the applicant were held on trust for undisclosed beneficiaries by an entity known as Smart World Enterprises Pty Ltd. The applicant has always declined to disclose the identity of the beneficiary of the trust.
40 On 3 October 2006 Phillips Fox Lawyers were appointed to act for the applicant in place of Gadens Lawyers. On 9 October 2006 their authority was terminated and on 10 October 2006 Cowell Clarke were appointed as solicitors for the applicant.
41 On 8 November 2006 directions were made for a timetable for the filing of further pleadings and for the exchange of lists of documents.
42 On 19 January 2007 Mr Galanis resigned as a director of the applicant and Mr Simon Gerblich was appointed as a director.
43 On 1 February 2007 the applicant filed its reply to the amended defence and a defence to the cross-claim. This was a year after the respondents had filed the pleadings to which the reply and defence were directed. After two and a half years the pleadings were apparently closed.
44 On 26 March 2007 the orders in relation to discovery were varied so as to require the respondents to respond to the applicant's list of categories and, if the parties were not able to agree on categories, to meet by 16 April 2007, to make discovery by 21 May 2007, and to give inspection by 4 June 2007.
45 The respondents were also directed to make any application they were to make to strike out the applicant's reply and defence by 23 April 2007.
46 On 26 April 2007 the respondents filed a notice of motion to strike out certain parts of the applicant's reply and certain parts of the defence to the respondents' cross-claim. In the alternative the respondents sought further and better particulars.
47 The respondents' notice of motion of 26 April 2007 led in due course to the applicant on 12 June 2007 seeking leave to amend the third further statement of claim. In the meantime, further directions were given in relation to discovery.
48 On 8 May 2007 the parties were ordered to make discovery by 28 June 2007 and give inspection by 5 July 2007. Directions were also given in relation to the respondents' notice of motion of 26 April 2007, and that notice of motion was listed for hearing on 12 July 2007.
49 On 10 May 2007 the applicant and respondents filed lists of categories for discovery of documents by the applicant and the respondents, identifying the categories which had been agreed and not agreed.
50 In the respondents' categories for discovery which were not agreed, the applicant requested documentation relating to:
4. The Sale and Purchase Agreement by which Schneider acquired Clipsal ("the Schneider Transaction") with all due diligence reports relating thereto.
5. Documents recording or relating to claims made by Clipsal with respect to Smart Products (including legal advice received by Clipsal) in the context of:
a. The Harvey Norman dispute;
b. The voluntary administration process;
c. The IHG separation litigation (SC of WA 142of 2002); and
d. The Schneider Transaction
51 On 12 June 2007 the applicant filed a notice of motion seeking leave to amend its third further amended statement of claim.
52 On 28 June 2007 the applicant lodged its proposed fourth further amended statement of claim (FFASOC).
53 On 12 July 2007 after hearing the parties the following orders were made:
1. The applicant lodge and serve the applicant's proposed fourth further amended statement of claim within 28 days.
2. The hearing of the applicant's notice of motion dated 12 June 2007 to amend its further amended statement of claim be adjourned to 9.30am on 4 September 2007.
3. The applicant pay the respondent's costs of the applicant's notice of motion dated 12 June 2007.
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54 The issue of categories of discovery was put aside pending the application to amend.
55 On 16 August 2007 an order was made by consent that the applicant be granted an extension of time to lodge its proposed FFASOC from 9 August 2007 to 27 August 2007. The hearing of the application was adjourned from 4 September 2007 to 20 September 2007.
56 On 29 August 2007 the applicant provided the parties and the Court with the proposed FFASOC.
57 On 14 September 2007 the respondents filed their objections to the proposed FFASOC.
58 On 19 September 2007 the applicant filed a notice of motion seeking an adjournment of the hearing on 20 September 2007 of the applicant's own notice of motion filed on 12 June 2007 to amend the applicant's statement of claim.
59 On 20 September 2007, because of the applicant's continuing default in addressing the proposed FFASOC the applicant's notice of motion of 12 June 2007 was dismissed. On the same day the applicant made a further oral application for leave to file a further amended statement of claim. The following orders were made:
1. The applicant's notice of motion of 12 June 2007 be dismissed.
2. The applicant pay the respondents' costs of and incidental to the notice of motion.
3. The respondents' oral application for an order that the costs be paid forthwith be reserved.
4. The respondents' notice of motion of 26 April 2007 be adjourned until Wednesday, 7 November 2007 at 9.30am for mention.
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6. The applicant's oral application for leave to file a further amended statement of claim be adjourned to the same date and time for hearing.
60 As a consequence of the oral application mentioned in paragraph 6, the following directions were made:
8. The applicant lodge with the Court and deliver to the respondents any further proposed amended statement of claim by Wednesday, 10 October 2007.
9. The respondents advise any objections to the proposed amended statement of claim by Monday, 29 October 2007.
10. The applicant respond to any notice of objection by Friday, 2 November 2007.
61 In October 2007 the applicant lodged a Change to Company Details Changes to (Members) Share Holdings which showed that the applicant was now wholly owned by Enterprise Global Resources Pty Ltd (EGR) on trust for undisclosed beneficiaries. Mr Portellos was the sole shareholder and director of EGR.
62 On 9 October 2007 the applicant's then solicitors wrote to the Court advising that a notice of motion seeking leave to amend the applicant's third further amended statement of claim together with an affidavit annexing a copy of the proposed FFASOC would be filed and served by 19 October 2007.
63 The applicant's solicitors' were advised by the Court that the existing orders which required the applicant to lodge any proposed amended statement of claim rather than file and serve that document with the Court.
64 On 19 October 2007 the applicant's solicitors again wrote to the Court advising that the proposed FFASOC would not be ready until the following week.
65 On 24 October 2007 the applicant lodged the proposed FFASOC. The applicant had not complied with the directions given on 20 September 2007.
66 Some six months had passed since the respondents had applied to strike out the applicant's reply and defence to cross-claim. More than four months had passed since the applicant had applied to amend its statement of claim.
67 On 31 October 2007 the applicant advised the Court that the parties had agreed that the respondents should provide any objections to the proposed FFASOC by Monday, 5 November 2007, and that directions only be given on 7 November 2007, rather than the hearing of the oral application to amend the statement of claim.
68 As requested by the parties directions were made on 7 November 2007 in relation to the respondents' objections to the proposed FFASOC and for the applicant to reply to those objections by the filing of any further proposed FFASOC by 12 November 2007.
69 On 13 November 2007 the applicant's solicitors lodged a revised proposed FFASOC. However, the respondents again identified objections to that document and, as a result, on 22 November 2007 the applicant forwarded yet another proposed FFASOC in substitution for the document lodged on 13 November 2007.
70 The hearing of the applicant's application to file and serve the FFASOC was set for 27 November 2007 but, because of the applicant's lateness in the provision of the further document, that hearing could not proceed. On that day further directions were made relating to the provision by the applicant of the applicant's proposed FFASOC and the matter was listed for further hearing on 20 February 2008.
71 On 18 February 2008 Clelands Lawyers commenced acting for the applicant in place of Cowell Clarke.
72 On 20 February 2008 the applicant was given leave to file the then version of the FFASOC subject to providing further particulars. Between 12 July 2007 and 20 February 2008 when the order giving leave was made, six versions of that statement of claim had been proposed and considered by the Court.
73 On 7 March 2008 the applicant filed its FFASOC.
74 On 3 July 2008 reasons were published for ordering the applicant to pay the costs of its application for leave to file the FFASOC: Smart Company Pty Ltd v Clipsal Australia Pty Ltd (2008) 249 ALR 388.
75 On 5 September 2008 the respondents filed their amended defence and the first and second respondents' cross claim.
76 On 16 September 2008, the following orders were made by consent:
1. The applicant file and serve any reply to the defence to the fourth further amended statement of claim on or before 12 November 2008.
2. The cross-respondent file and serve any amended defence to the amended cross-claim on or before 12 November 2008.
3. The directions hearing listed for 17 September 2008 be vacated.
77 The applicant did not comply with paragraphs 1 and 2 of the order.
78 On 3 October 2008 Mr Portellos and Mr Gerblich resigned as Directors of the applicant, leaving Ms Tomazos as the applicant's sole director.
79 On 13 November 2008 the applicant sought an extension of time in which to file its reply and defence until 4 December 2008.
80 Mr Britten-Jones, who then appeared for the applicant, explained that his client had not been able to provide its solicitors with complete instructions. He sought an indulgence for the filing of the reply and the defence to the cross claim on the grounds that the solicitors had not been provided with all the necessary material, but that the documents were underway.
81 Mr Sam Doyle who appeared for the respondents said that the respondents would not object to a modest extension of time for the filing of the pleadings if it meant that the pleadings would be appropriately drafted rather than needing to be amended.
82 The extension of time sought was granted, but the applicant was warned that it "ought to understand … that the directions of this court are not optional". The applicant was told that the Court's directions must be complied with.
83 At the hearing of 13 November 2008 the contents of the FFASOC and the way in which the applicant's case was pleaded was raised by Mr Sam Doyle who appeared for the respondents. For an understanding of that submission the FFASOC must be analysed.
84 In the FFASOC the applicant pleads that it is entitled to licence fees for all the products it defines as "Smart Products" which were developed during the term of the HOA by the applicant or the respondents or both. The applicant claims that it is entitled to licence fees for the Smart Products, both during the term of the HOA and since the HOA was terminated.
85 It is pleaded that the Smart Products are those products which were developed for building control and automation with the "Smart Functionalites".
86 Smart Functionalities are defined in paragraph 15 as products capable of:
15.1 controlling devices in a building to perform functions;
15.1.1 on a schedule; and/or
15.1.2 on the occurrence of multiple events, variables and/or parameters;
15.2 causing devices on different Bus Networks to interact directly;
15.3 controlling and/or scheduling building control and automation functions by an end-user via a keypad;
15.4 communicating simultaneously on multiple Bus Networks using multiple protocols; and
15.5 accommodating additional interfaces without requiring a redesign of the Smart system.
87 The applicant identifies two broad categories of Smart Products that contain the Smart Functionalities as defined in paragraph 15 of the FFASOC: Improved Products and Unilateral Products.
88 Eight products are identified as being Improved Products, and they include controllers, keypads, a telephone support option and a C-Bus interface. They are products which the applicant pleaded were developed by the applicant and CA pursuant to the joint collaborative enterprise, and constitute improvements of, and modifications to, the Smart controller and system.
89 Unilateral Products are those which the applicant claims CA developed or procured at various times during the term of the HOA without the applicant's knowledge or consent.
90 Unilateral Products are defined as:
78.1 products for building control and automation with Smart Functionalities;
78.2 products for building control and automation that when (and only when) combined with other products had (together with the products with which was combined) Smart Functionalities; and
78.3 a combination of products (including products referred to at paragraph 60.5) sold as part of a system for building control and automation whereby each product within the system was endowed with Smart Functionalities;
91 In paragraph 60.5 it is pleaded that the Smart Products include:
60.5 any product which was not of itself developed for building control and automation and did not of itself have the Smart Functionalities but which:
60.5.1 was capable of being incorporated into a combination of products for building control and automation;
60.5.2 when so combined, had Smart Functionalities; and
60.5.3 was sold in such a combination.
92 The unilateral products are identified in paragraph 79 and, more particularly, identified in Schedule C of the statement of claim. There are over 600 products in Schedule C.
93 In paragraph 78 of the FFASOC it is pleaded a product may be a Smart Product either because it has all 5 of the Smart Functionalities referred to in paragraph 15 of the FFASOC, or because it has those functionalities when combined with other products, or because it may be attached to a system which has those functionalities.
94 The 600 products referred to in Schedule C are not well particularised. Schedule C does not identify in which of the three categories mentioned in the last paragraph a particular Smart Product lies. It does not identify whether a product is a Smart Product because it alone has the Smart Functionalities, or because it has those functionalities when combined with other products, or because it may attached to a system with Smart Functionalities.
95 Schedule C does not identify how a product fits within one of those 3 categories of Unilateral Product. It does not, for example, identify if a product has two of the five functionalities on its own, but obtains the other three when combined with another product on the list which has two or more of the functionalities.
96 It does not detail how each of the products relate to each other.
97 The applicant claims that CA was obliged to pay to the applicant licence fees at the rate set out in the HOA in respect of all sales and sub-licensing revenues received after termination in respect of the unilateral products and the improved products. The applicant claims that CA has breached the HOA by failing to pay the licence fees.
98 It also claims that CA's development of the unilateral products meant that CA breached a fiduciary duty owed by it to the applicant. It claims that CIS knowingly assisted CA in breach of that fiduciary duty. It further claims that CA holds the intellectual property which has been developed on trust for the applicant. It claims that CA has wrongfully applied for and obtained trademarks.
99 The applicant claims that CA contravened s 52 of the Trade Practices Act 1974 (Cth) (Trade Practices Act) by engaging in misleading and deceptive conduct. It complains that the CIS and CTA were knowingly concerned in those contraventions. The applicant's claim for damages will be addressed separately.
100 The respondents' case is that the definition of Smart Products asserted by the applicant does not appear in the HOA, and cannot be constructed from its terms. The respondents assert that even if the Smart Products were capable of being adequately identified by the FFASOC, the products as defined were not the subject of the HOA.
101 The respondents' case is that the scope of the HOA was far more limited. The respondents plead that the HOA covered a discrete project known as the re-design project which covered a small number of products.
102 The respondents say that they agreed to advance up to $1 million in royalties, most of which was advanced. They say that the royalties advanced were never recouped by sales. The respondents also filed a cross claim for those royalties advanced and not materialised.
103 On 13 November 2008 Mr Doyle argued that the applicant's inability to particularise its claim meant that there were no boundaries to the discovery process. He said that the discovery process would put the parties, but especially the respondents, to extraordinary expense. He estimated that discovery would involve tens of thousands of documents and could cost the respondents millions of dollars.
104 Mr Doyle sought an order that the matter be referred to mediation prior to the respondents embarking upon the discovery process. He also raised for the first time the possibility of the applicant delivering expert reports before the discovery process in order to limit the cost of discovery. Mr Doyle's request that the matter be referred to mediation was opposed by the applicant at least until the parties made discovery. The respondents said that their application to refer the matter to mediation was in order to make the potentially unmanageable discovery process unnecessary.
105 During the hearing the following exchange regarding the respondents' application for mediation took place:
HIS HONOUR: Has any list of documents been given by any party?
MR BRITTEN-JONES: Categories of documents, your Honour, have been put forward by each of the parties. There has been consultation between the parties by which the majority - I think I can say the majority of those categories were agreed. That was, of course, based on the old pleading. But I think that the same formula, in a sense, could apply to the extended claim with respect to products. The idea was not to have every single document with respect to the development of every product. It was only to have some final versions of documents with respect to products and - so there has been some attempts made there, and we'd hope that that process could occur so that informed mediation could take place.
HIS HONOUR: I assume, in a case such as this, the discovery process is going to be very expensive.
MR BRITTEN-JONES: Yes, and ---
HIS HONOUR: It's one reason to have mediation before discovery.
MR BRITTEN-JONES: Well, I think your Honour recognised - well, probably at least 12 months ago, now, when we were talking about this issue of discovery and categories of documents - that it would be best to proceed by way of categories and that is certainly the case.
HIS HONOUR: But it - no, the point I'm making now is not so much how the discovery process will go forward, but it might be better to have mediation in advance of the discovery, because the cost of the discovery is often a useful leverage in settling the matter.
MR BRITTEN-JONES: Yes. I think - with respect, I agree to the concept. The only issue there is whether or not there is a little bit more work with respect to discovery, in the sense of just finishing off the job that had been begun a year ago, could actually ---
…
HIS HONOUR: But your client won't be making anything like the discovery the respondent will be making.
MR BRITTEN-JONES: No, that's true.
HIS HONOUR: The real cost of discovery is on the respondents' part.
MR BRITTEN-JONES: Yes, yes. If we could limit the discovery that is to be made by the respondent, I accept that it would certainly have to be limited discovery.
106 There followed an exchange with Mr Doyle:
MR DOYLE: Your Honour's apprehension that this might be an expensive exercise is entirely correct. Indeed, it's going to be an enormously expensive exercise and we're talking in the order, I would expect, tens of thousands of documents from my understanding, not just hundreds or thousands of documents.
HIS HONOUR: Some of them archived?
MR DOYLE: I expect so. I don't have that level of knowledge, but I know it would be an enormous undertaking, and what was embarked upon last occasion was some categories in relation to a claim that, at that stage, was in relation to about 30-odd products. We're now dealing with a claim that's 20 fold that size. If it's not an impossible burden, it's certainly an enormous burden, and we are concerned not to incur that expense if there is any prospect of resolving the matter before that is done. So we - well, my client is keen to pursue mediation if - well, either if my opponent's client would agree or if your Honour were prepared to impose mediation upon the parties.
My client wouldn't have any objection, I don't expect, if it was a case of, "Look, here's, you know, a few dozen or even a few hundred documents we'd like to see before the mediation comes on." We couldn't have any difficulty with that if that was going to shed light on the merits of the matter, but even first of all determining the categories is going to be a process in itself, and we'd like to have a short attendance before your Honour to propose some more innovative or different approaches to discovery in this case with a view to trying to make that process manageable. But even just a category-based approach, even if they were fairly narrow categories in relation to 630-odd products, it's just an enormous exercise that will take many months, and I don't know what the dollars are, but they'll be enormous.
So we're very keen to pursue the possibility of mediation before embarking on that process. And part of the reason for that, as well, is what we intend proposing to your Honour is considering the prospect of experts' reports from the plaintiffs coming before discovery here, and whilst we've responded to a pleading that is at the very general level of 630-odd products, 12-odd functionalities and any permutation or combination is potentially a breach, that that is just an unmanageable case in terms of providing discovery, but also attempting to answer it, we would have thought an expert's report that says, "Well, here really are the key functionalities that we say involve breaches and they're found in these respects in these particular products."
The case just inevitably has to be narrowed at some point, and it would seem that that would happen through experts. I expect the answer will be, "Well, we need to see some of the documents before we can finalise that process." My client would understand and expect that this is not going to be a one expert report, that's the end of the matter, you can't put a supplementary one. But we would have thought understanding the number for plaintiffs (sic) of the applicant's case through its expert reports, then having an informed and focused process of discovery after that with ample opportunity for the applicant to supplement their expert reports in light of material that comes out of discovery would be an appropriate regime in this case.
107 I reached the tentative view that the parties should be ordered to mediate and said to Mr Britten-Jones that if the applicant instead wanted full discovery prior to mediation it might have to provide security for the millions of dollars the respondents estimated it would cost.
108 On 2 December 2008 Clelands Lawyers wrote to the respondents' solicitors requesting further discovery for the purposes of the proposed mediation. The solicitors requested:
1. All documents held by the Defendants concerning the due diligence conducted by the Schneider Group in relation to the sale and purchase of the Clipsal Group in 2003, including:
a. Reports by Norman Waterhouse, Allens Arthur Robinson, PriceWaterhouseCoopers ("PWC") and Allen Gledhill of Singapore, as well as the data room disclosure letter and accompanying list of documents (our client does not seek copies of all documents, merely the list of documents at this stage) in relation to the due diligence conducted in relation to the following transactions:
i. The acquisition of 100% of the Clipsal Australia Business (and its operations in South Africa, India and New Zealand), together with worldwide ownership of the Clipsal brand name, from the founding Gerard family and their 52% partner, a listed Singapore company, Clipsal Industries (Holdings) Limited (since renamed CIH Limited);
ii. Entry into a 50-50 JV with CIH Limited, which operated a similar Clipsal business in Asia, Greater China, and the Middle East pursuant to a long-term exclusive right to use the Clipsal name in these regions; and
iii. An off-market sale of Schneider Electric's 18.7% shareholding in CIH Limited.
b. Sale and purchase agreements in relation to the above transactions.
2. All financial returns and the accompanying financial statements lodged with the Deputy Commissioner of Taxation or any other taxation authority by members of the Clipsal Group in the period 1 July 1995 to 30 June 2004;
3. Financial information from the Schneider Group in relation to sales of its T-Bis and other automation and building control ranges since 1 January 2004 to present; and
4. Copies of the minutes of meetings, and product direction documents, of the Clipsal Group's International Steering Committee from 1 July 1995 to present.
109 On 4 December 2008 the respondents replied, maintaining the same paragraph numbering of the applicant's letter:
1. We act for Clipsal Australia Pty Ltd, Clipsal Integrated Systems Pty Ltd and Clipsal Technologies Australia Pty and not for the Schneider Group. We do not expect that our clients will have any documents in their possession, custody or control responsive to your request in this paragraph. Alternatively, to the extend that any such documents might be in the possession of our clients' former solicitors, Norman Waterhouse, they are likely to be, so far as relevant (if at all), privileged from production. We consider it highly unlikely that any of the documents requested are relevant to any issues arising on the pleadings and therefore invite your client to explain how they might be so that we can obtain our clients' instructions with respect to your request.
2. In relation to your request in paragraph 2, you will be aware that the pleadings define the Clipsal Group of companies as comprising a broader group of companies than those for whom we act, and against whom your client claims in these proceedings. We fail to see how the provision of the financial information requested could be relevant to issues arising on the pleadings. Further, any "financial returns and accompanying financial statements" are likely to show only gross income, revenue, expenses and the taxable income for each entity. We consider that the documents requested will not be probative of any issues in dispute. We again invite your client to explain how they might be relevant or otherwise discoverable.
3. As set out above, we do not act for the Schneider Group and your request therefore relates to documents concerning sales by a third party. In any event, we are instructed that our client has no financial information from the Schneider Group, either in relation to an item or product called "T-Bis", or at all.
4. We are instructed that our client, as presently advised, has no knowledge of any body that exists, or has existed, called the "Clipsal Group's International Steering Committee" or "International Steering Committee". Further, it is not aware of any documents called "product direction documents", nor can it discern the relevance of such documents if they did exist. Please properly identify and clarify the existence of this committee, the nature of the documents requested and indicate, with reference to the Fourth Further Amended Statement of Claim, how your client considers such documentation to be relevant to issues arising on the pleadings.
110 On 4 December 2008 the applicant filed its reply and defence to the cross-claim. The date for filing those documents had been extended on 13 November 2008 until 4 December. The pleadings closed more than four years after the proceedings had commenced. The pleadings have not been amended since that time.
111 On 5 December 2008 the applicant's request for discovery was addressed.
112 It is necessary to have some understanding of how the applicant has put its case on damages having regard to the case pleaded in the FFASOC. The applicant has pleaded its entitlement to damages by reference to the various causes of action upon which it relies:
BREACH OF THE HOA AND DAMAGE
Licence fees on Original and Improved Products
87. Smart is entitled to licence fees on:
87.1 all sales made of; and
87.2 all sub-licensing revenues derived in respect of;
all Original and Improved Products:
87.3 during the term of the HOA, pursuant to the term of the HOA pleaded at paragraph 62.2;
87.4 after termination of the HOA, pursuant to the term of the HOA pleaded at paragraph 85 or alternatively pursuant to the licence pleaded at paragraph 86.
88. In breach of its obligations, Clipsal failed to:
88.1 pay the advance payment of $300,000.00 in or before December 1998 in breach of clause 9.7.2.2 of the HOA;
88.2 account to and pay to Smart the licence fees due on sales of Original and Improved Products or sub-license revenues derived in respect thereof during the term of the HOA;
Particulars
88.2.1 Clipsal was obliged to pay licence fees based on the formula and defined terms in clause 9.1 of the HOA, namely in effect a percentage of the difference between its Net Selling Price and its Supply Price (as defined in clause 3.1.17 of the HOA);
88.2.2 Clipsal instead calculated and paid licence fees based only on the purported Supply Price for all Clipsal sales within the Specified Territories and at a fixed one third rather than at the varying proportions required by clause 9.1 of the HOA;
88.2.3 Smart did not and does not know the amount of Clipsal's Net Selling Price, Total Manufactured Costs, Supply Price, purchase prices or selling costs;
88.3 account to or pay to Smart any licence fees in respect of sales of Improved Products and sub-licensing revenues derived after termination of the HOA.
89. In the premises:
89.1 Smart is entitled to an account by Clipsal of all profits from sales and consideration for sub-licensing rights in respect of the Improved Products;
89.2 Smart is entitled to an order for payment of the licence fees found due;
89.3 alternatively, Smart has suffered loss and damage in the amount of the said licence fees not paid by Clipsal.
Licence Fees on Unilateral Products
90. …
91. Smart is entitled to licence fees on:
91.1 all sales made of; and
91.2 all sub-licensing revenues derived in respect of;
all Unilateral Products:
91.3 during the term of the HOA, pursuant to the terms of the HOA pleaded at paragraph 62.5;
91.4 after termination of the HOA, pursuant to the term pleaded at paragraph 85 or alternatively pursuant to the licence pleaded at paragraph 86.
92. In breach of their obligations, Clipsal have failed to:
92.1 account to and pay Smart any licence fees due on sales of Unilateral Products or sub-licensing revenues derived in respect thereof during the term
92.2 account to or pay Smart any licence fees in respect of sales of Unilateral Products or sub-licensing revenues derived in respect thereof after termination of the HOA.
93. In the premises:
93.1 Smart is entitled to an account by Clipsal of all profits on sales and consideration for sub-licensing rights in respect of the Unilateral Products;
93.2 Smart is entitled to an order for payment of the licence fees found due;
93.3 alternatively, Smart has suffered loss and damage in the amount of the said licence fees not paid by Clipsal.
94. In the alternative, in the event that on the proper construction of the HOA the Unilateral Products are not Smart Products, by reason of their conduct pleaded in paragraph 78, Clipsal are in breach of the following terms of the HOA:
94.1 the terms pleaded at paragraphs 56 and 57;
94.2 the terms pleaded at paragraphs 62.5 to 62.8;
94.3 the term pleaded at paragraph 62.11;
94.4 alternatively each of the implied terms pleaded at paragraph 66.
95. By reason of the matters pleaded at paragraph 94, Smart has suffered loss or damage.
Particulars of loss or damage
95.1 Smart has lost licence fees on:
95.1.1 the sale of the Unilateral Products;
95.1.2 sub-licensing revenues derived in respect of the Unilateral Products;
which Smart would have received if those products had been Smart Products;
95.2 Alternatively Smart has lost:
95.2.1 profits from its own manufacture and/or sale of Smart Products;
95.2.2 licence fees from third parties for the manufacture and/or sale of Smart Products;
95.2.3 profits from developing and expanding Smart Products and manufacturing and selling or licensing the manufacturing and selling of such products.
Minimum Sales
96. In breach of clause 7.2 of the HOA, Clipsal failed to achieve the minimum sales of JV00 required by clause 7.2.
Particulars
See Schedule D attached
97. By reason of the breach, Smart has suffered loss and damage as set out in the particulars to paragraph 96.
CONTRAVENTION OF FIDUCIARY DUTIES
98. By their conduct pleaded at paragraphs 78 and 79, Clipsal breached the Clipsal Fiduciary Duty.
99. …
100. By reason of the matters pleaded at paragraph 98 or alternatively paragraph 99:
100.1 CA and CIS are required to account to Smart for all profits derived by them from Unilateral products;
Particulars
Particulars will be provided after discovery and experts reports.
100.2 CA and CIS have procured a benefit by way of ownership of the IP and UP Intellectual Property and hold those benefits on constructive trust for Smart;
100.3 Smart has suffered loss and damage.
Particulars of loss or damage
100.3.1 Smart has lost licence fees on:
100.3.1.1. the sale of the Unilateral Products which Smart would have received if those products had been Smart Products;
100.3.1.2. sub-licensing revenues derived in respect of the Unilateral Products;
100.3.2 Alternatively Smart has lost:
100.3.2.1. profits from its own manufacture and/or sale of Smart Products;
100.3.2.2. licence fees from third parties for the manufacture and/or sale of Smart Products;
100.3.2.3. profits from developing and expanding Smart Products and manufacturing and selling or licensing the manufacturing and selling of such products.
INTELLECTUAL PROPERTY CLAIMS
113 In respect of this cause of action damages are not sought but the application seeks rectification under the Trade Marks Act 1993 (Cth) and the Designs Act 1996 (Cth) or the Designs Act 2008 (Cth).
TRADE PRACTICES ACT CONTRAVENTION
112. By reason of Clipsal's conduct pleaded at paragraph 110, Smart suffered loss and damage.
Particulars
Smart has lost:
A. profits from its own manufacture and/or sale of Smart Products;
B. licence fees from third parties for the manufacture and/or sale of Smart Products;
C. profits from developing and expanding Smart Products and manufacturing and selling or licensing the manufacturing and selling of such products.
…
117. By reason of the matters pleaded in paragraph 116, Smart has suffered loss and damage.
Particulars
117.1 Smart has lost:
A. profits from its own manufacture and/or sale of Smart Products;
B. licence fees from third parties for the manufacture and/or sale of Smart Products;
C. profits from developing, expanding, manufacturing and selling Smart Products.
114 No further particulars of damage are given in the FFASOC and none to the Court's knowledge have been given.
115 The applicant has at various times, in evidence and from the bar table, estimated its damages as being in the realm of $4 billion, $2 billion or at least several hundred million dollars. Indeed, an expert report of the applicant written by Mr Alexander Reade (which report was ultimately ruled inadmissible) calculated the applicant's losses at $3,988,819,150.10.
116 Notwithstanding it is no part of the applicant's pleading, the applicant puts its damages claim on the following assumptions.
117 On 22 December 2003 Schneider acquired Clipsal's electrical wiring devices and installation systems business (EWDIS) which the applicant has asserted without any proof includes that part of the respondents' C-Bus business. The applicant has claimed that it is entitled to prove its damages by reference to the price paid by Schneider for the EWDIS business.
118 The applicant has continued to maintain that its damages may be measured by the price paid by Schneider for EWDIS even though no reference to the EWDIS business is made in the FFASOC, and even though the respondents assert that the totality of the products in the statement of claim comprise much less than 5% of the EWDIS business.
119 Mr Britten-Jones said that the applicant requested discovery of the documents relating to the transaction by which Schneider acquired the EWDIS business.
120 On 5 December 2008 when asked how that transaction would bear upon the applicant's claim, Mr Britten-Jones said:
MR BRITTEN-JONES: It's actually not something that would be relevant to the - necessarily to the pleadings but it is something that's relevant to the quantification, an easy quantification, of the value of my client's claim. In other words, if my client has a claim over all of the intellectual property and products associated with the home automation arm of Clipsal and that was, in effect, valued and sold as at 2003 pursuant to that Schneider transaction, then that will give my client some idea without the need to trek through the process of applying a formula to sales of smart products, which is the other way of doing it, without the need to do that, it would give my client some idea of the quantification of its claim. So it really goes to the quantification of the claim.
121 Mr Doyle addressed Clelands' letter of 2 December 2008 which sought discovery of the due diligence report conducted by Schneider in relation to the sale and purchase of the Clipsal Group and Mr Britten-Jones' request for those and other documents. He said that the request for those documents was not relevant to any issue raised on the pleadings. However, his instructing solicitors had written seeking further information in an endeavour to understand how the documents might be relevant.
122 The question of the applicant's request for mediation was considered and an order was made referring the proceedings to mediation and the Honourable John von Doussa QC was appointed mediator. The mediation was to take place in mid March 2009.
123 On 18 December 2008 Mr Simon Gerblich was reappointed as a director of the applicant, and Mr Dean Clift was newly appointed as a director.
124 On 4 March 2009 the applicant wrote to the respondents requesting the further discovery which it had sought on 2 December 2008 for the purpose of the mediation.
125 On 4 March 2009 the respondents replied:
As your request for documents as set out in your letter dated 2 December 2009 is far broader than is required by your client for the purposes of calculation of quantum in this matter, our client declines to provide the documents as requested,
126 No further request was made by the applicant prior to mediation.
127 The mediation was conducted on 17 March 2009 but failed.
128 On 26 March 2009 the respondents sought to relist their application for security for costs on the basis that the applicant's inability to articulate its claim meant it should provide further security.
129 On the same day the respondents wrote to the applicant inviting it to agree to a regime in which the experts' reports were to be filed prior to the respondents making discovery. Relevantly the letter stated:
Discovery
In view of the vastly increased scope of your client's fourth further amended statement of claim (FFASOC) over its previous iteration, and the recent indications that you have given in relation to the form and magnitude of the discovery that your client intends to seek1, it is clear that our clients' costs implications of discovery are potentially enormous. Indeed, such implications have been raised by our clients' counsel and acknowledged by Justice Lander on at least one occasion.2 As you are aware, the significant costs of our clients' discovery stems, in part, from the fact that your client's claim now relates to some 650 products, whereas previously it was 31 products. Notwithstanding that your client's current claim is framed somewhat differently from its predecessor, given the significant level of discovery required for even 31 products, we project that the discovery of documents in relation to 650 products will be exponentially larger.
To this end, we propose that discovery not only be limited or modified, but also that it be postponed until after the provision of your client's expert reports, for reasons set out below.
Expert reports
In our view, the next appropriate procedural step is for your client, before discovery, to file its experts reports identifying precisely which products, of those claimed, fall within the paragraph 60 (FFASOC) definition of "Smart Products" by reference to the various criteria set out therein (including an expert evaluation of whether the products claimed in the FFASOC replicate the functionality of the original Smart Products).
By so doing, the scope of our clients' discovery might thus not only be confined to those products properly falling within the definition of the "Smart Products" as determined by your client's experts, but also will be able to be focused upon the particular characteristics of the products that are relevant to a determination of whether or not the products do fall within that definition.
Given that two of your client's present directors have only very recently been appointed and that all three appear to have had no involvement with the products during the terms of the Heads of Agreement (in contrast to our clients), we suggest that the involvement of your experts at this stage of proceedings may assist in limiting the process of discovery to a more manageable one.
Although your client might contend that expert reports cannot be provided until such time as our client has made discovery this is not the case. The issue of expert determination of functionality and application are matters which can proceed largely independently of the kind of discovery your clients have sought hitherto.
We accept that discovery following from the provision of expert reports might throw up some additional information that might require further consideration by your client's expert(s) and (assuming proper cause is shown) our clients would not object to any supplementary report(s) required to deal with the information arising out of discovery.
Further, the proposal for discovery that our clients have in mind also is not intended to foreclose the possibility of additional discovery (or a second tranche of discovery) should proper cause be made out. They are simply concerned to ensure that the first tranche of discovery is brought within manageable boundaries.
If, contrary to the proposal set out in this letter, or for any other reason, our clients are required to make full discovery before your client files its experts' reports, we advise that we will necessarily require additional security for costs and will apply for such at the earliest opportunity.
Please indicate, at your earliest convenience, if your client agrees with the next procedural steps as set out above.
______________________
1 For example, your request for us to produce the kinds of documents referred to in your letters dated 2 December 2008 and 5 March 2009.
2 See, for example, pages 7 & 8 of the transcript of the hearing on 13 November 2008.
130 On 1 April 2009 the respondents applied orally for an order that the applicant provide an expert report on liability prior to the parties making discovery.
131 Mr Doyle submitted that the suggestion of an expert report ahead of discovery was an alternative to the respondents pursuing further particulars of the case they had to meet. The respondents contended that the applicant should provide an expert report on liability before discovery because that report would assist to inform the parties of the scope of discovery. Mr Doyle contended that the applicant's FFASOC did not contain proper particulars but the respondents wished to avoid any further pleading arguments but needed at the same time to have a better understanding of the applicant's case. Mr Doyle said:
MR DOYLE: That there be expert reports first and we openly acknowledge and accept that there may well need to be some focused discovery after that and the possibility of supplementary reports but that is, in our submission, going to result in a very large time and money saving - and particular in a situation, as your Honour would understand, where we're the party that carried the burden of discovery in this case, it's not a mutual exercise. And, as your Honour would know from our foreshadowed security application, we are seriously concerned about money we spend, in effect, going down the drain and not being recoverable.
132 The applicant said that it had already retained an electrical engineer to offer an opinion in relation to the functionality of the products referred to in Schedule C of the statement of claim. The applicant's counsel was told that the applicant should identify the assumptions which it wished the expert to make for the purpose of the expert's opinion.
133 An indication was given of the directions which might be made. The applicant would provide to the respondents the assumptions which the applicant wished its expert to make; the documents which the applicant intended to provide to the expert for the purpose of the opinion; the products which the applicant claims have a Smart functionality in themselves; the products which only have a Smart functionality when used with any other products; and would identify the opinion which was to be sought for the purpose of the proceedings.
134 The hearing was adjourned for seven days to allow the parties to get instructions.
135 On 8 April 2009 the hearing resumed and the applicant's solicitor said that Mr Britten-Jones who had appeared for the applicant was no longer retained "because in the opinion of the managing director of the Smart Company Mr Britten-Jones had not been adhering to the client's instructions and his services are no longer required as a result of that". The applicants' solicitor sought an adjournment so that Mr Blue QC, who was then retained but who was not available, could put an argument on this issue. The application was refused.
136 The applicant was ordered to provide within 28 days any assumptions it would ask the experts to make; the documents which the applicant would provide to the expert; identification of each of the products said to have a Smart functionality either by itself or in combination with other products; and the opinion it sought. This regime was implemented in order to provide some definition to and articulation of the claim.
137 The orders made on 8 April 2009 were:
1. The applicant provide to the respondents within 28 days the following:
1.1 the assumptions which the applicant would ask any expert to make;
1.2 the documents which the applicant would and could provide that expert by reference to each of the products identified in paragraph 79.1 of the Fourth Further Amended Statement of Claim (FFASOC) and insofar as relevant, Schedule C thereof;
1.3 identification of each of the products which is said to have a Smart functionality by itself;
1.4 identification of each of the products which is said to have a Smart functionality only when used in combination with any product, and in that class identify whether, and if so which of those other products have a Smart functionality by themselves;
1.5 when a product is by itself or in combination with some other product said to have a Smart functionality, identification of the Smart functionality by reference to paragraphs 15 and 16 of the FFASOC;
1.6 the opinion which is sought for the purposes of the proceeding.
138 On the same day directions were given for the filing of evidence and written submissions in relation to the applicant's application for further security for costs.
139 On 22 April 2009 Tindall Gask Bentley commenced acting for the applicant in lieu of Clelands Lawyers and filed a notice to that effect.
140 On 12 May 2009 the applicant sought an extension of time in which to comply with the orders of 8 April 2009. Mr Duggan, who then appeared for the applicant, assured the Court that the draft of the assumptions was in near a final form, and that an expert had been identified. The application was allowed and the applicant was granted an extension of time of 14 days until 26 May 2009.
141 During the hearing the following exchange with Mr Duggan took place in relation to the applicant's continuing delay:
MR DUGGAN: …There is obviously a prejudice caused by, if it turns out to be a conduct or pattern of delay because it's the non-prosecution of a matter and your Honour, we'd hate for that to happen and certainly while I'm involved, obviously the strongest possible instructions are, you've got to get on. Once you've filed proceedings, you've got to get on with it, got to move towards the trial date.
HIS HONOUR: Well, as you say again, Mr Duggan. I'm not criticising you or your present instructors but the history of the matter has shown a reluctance on your client to take any practical view of how this litigation ought to be conducted and rather to run a Rolls Royce case, at a very slow speed without at any time being able to precisely identify what your case is. That's the history of this matter. That's why your client is facing another application for security, I think, and that's why the unconventional order was made on the last occasion in relation to experts' reports, so as to get the matter moving. Your client just keeps talking about it, not doing it and it's got to come to an end. You either get on with the case or you don't. It's been going too long now. What's it, when was it started? Five years ago and your pleading is just in shape and we haven't had discovery. You can't run litigation of this size at that pace.
MR DUGGAN: Yes. Well, I'll make sure my instructing solicitors convey those remarks to my client.
142 The applicant did not comply with the order as extended. In a letter dated 27 May 2009 but received by the respondents on 4 June 2009, the applicant's solicitor provided the respondents with the brief, which contained the assumptions on which the expert's opinion on liability was to be based and the opinion sought. Those assumptions first came to the Court's attention in an annexure to the affidavit of Stephen McNamara, solicitor for the applicant from 5 November 2009, sworn on 29 April 2010:
Assumptions
May 1995 Smart Products
19. Assume that as at May 1995 the Smart range of products comprised the products referred to in Attachment A [this is schedule A to the FFASC]. These products are referred to as the "May 1995 Smart Products".
20. We attach various technical documents in relation to the May 1995 Smart Products (Attachment B). Assume that the descriptions of the May 1995 Smart Products in the technical document are accurate.
May 1995 C-Bus Products
21. Assume that as at May 1995 the C-Bus range of Clipsal Products was limited to the products referred to in Attachment C [these are the products listed at paragraphs 8 and 9 to the FFASC]. These products are referred to as the "May 1995 C-Bus Products".
22. We attach various technical documents in respect of each of the May 1995 C-Bus Products (Attachment D). Assume that the descriptions of the May 1995 C-Bus Products in the technical document are accurate.
Attachment E Products [the Improved Products]
23. We attach a list of products (Attachment E) [these are the products listed at paragraph 74 to the FFASC].
24. We attach the trade catalogues in the public domain in respect of each of the products listed in Attachment E (Attachment F). Assume that the descriptions of the Attachment E products in the trade catalogues are accurate. We do not have all of the technical documents in respect of these products which are not in the public domain.
Attachment G Products [Unilateral Products]
25. We attach a list of products/systems. (Attachment G) [this is schedule C to the FFASC].
26. We attach the trade catalogues in the public domain in respect of each of the products/systems listed in Attachment G (Attachment H). We do not have the technical documents in respect of these products/systems which are not in the public domain. Assume that the descriptions of the Attachment H products in the trade catalogues are accurate.
27. We attach a scheduled (Attachment I) which divides the Attachment G products/systems into the following limbs:
a. Limb 1:
i. A product for building control and automation with some or all of the following functionalities:
1. controlling devices in a building to perform functions:
a. on a schedule; and/or
b. on the occurrence of multiple events, variable and/or parameters;
2. causing devices on different bus networks to interact directly;
3. controlling and/or scheduling building control and automation functions by an end-user via a keypad;
4. communicating simultaneously on multiple bus networks using multiple protocols;
5. accommodating additional interfaces without requiring a redesign of the system.
b. Limb 2:
i. A product for building control and automation that when (and only when) combined with other products has (together with the products with which it is combined) the functionalities described in paragraphs 27(a)(i)(1)-(5) above.
c. Limb 3:
i. A product which:
1. was capable of being incorporated into a combination of products for building control and automation;
2. when so combined, had some or all of the functionalities described in paragraph 27(a)(i)(1)-(5) above; and
3. was sold in such a combination.
28. Do not assume the accuracy of the identification process performed by us in Attachment I. We ask you to perform the same sorting process yourself in respect of the Attachment G products/systems set out below.
143 The opinions sought were set out in the same brief. They were as follows:
1. What are the typical features and components of a system which performs building control and automation?
2. What were the features and functional capabilities of the May 1995 Smart Products, both on an item by item basis, and as part of a system?
3. What were the features and functional capabilities of the May 1995 C-Bus Products, both on an item by item basis, and as part of a system?
4. Compare and contrast the May 1995 Smart Products with the May 1995 C-Bus Products, including identifying the extent to which they were compatible with each other.
5. Compare and contrast the May 1995 Smart Products with the Attachment G products, identifying where possible the extend to which you consider the Attachment G products were an improvement or modification of the May 1995 Smart Products.
6. In respect of each of the Attachment G products/systems, do you consider that it is a product for building control and automation with some or all of the following functionalities:
a. controlling devices in a building to perform functions:
i. on a schedule; and/or
ii. on the occurrence of multiple events, variables and/or parameters;
b. causing different devices on different bus networks to interact directly:
i. controlling and/or scheduling building control and automation functions by an end-user via a keypad;
ii. communicating simultaneously on multiple bus networks using multiple protocols;
iii. accommodating additional interfaces without requiring a redesign of the system?
7. In respect of each of the Attachment G products/systems in respect of which you answer no to question 6, do you consider that it is a product for building control and automation that when (and only when) combined with other products has (together with the products with which it is combined) the functionalities described in question 6 above?
8. In respect of each of the Attachment G products/systems in respect of which you answer no to questions 6 and 7, do you consider that it is a product which:
a. was capable of being incorporated into a combination of products for building control and automation;
b. when so combined, had some or all of the functionalities described in question 6 above; and
c. was sold in such a combination?
144 On 23 June 2009 the respondents' application of 26 March 2009 for further security for costs was heard. At that time the parties were told that they should proceed on the basis that the trial would commence in May 2010.
145 On that occasion Mr Solomon appeared for the applicant. During that hearing Mr Solomon was told that the applicant was attempting to run a "Rolls Royce case at its own speed" which the applicant had to recognise was no longer appropriate. The applicant had to move swiftly.
146 During the hearing Mr Solomon said that the applicant had provided the assumptions which were to be the basis of the expert's opinion to the respondent, but had not received any comment from the respondents on the proposed assumptions. Mr Ben Doyle, who appeared for the respondents, replied:
MR DOYLE: Your Honour, the position as we had understood it was that the assumptions were to be prepared with a view to the applicant's expert then indicating which, if any, documents it would require by way of discovery in the first tranche. As my friend indicated, we have been provided with assumptions. We haven't been provided with the identity of the expert, and I don't know whether the expert has been briefed. But we don't see that there is really any role for us to provide comments. It is the applicant's case.
HIS HONOUR: Yes.
MR DOYLE: And we would expect - and I think my friend agrees - that they shouldnow go ahead and brief the expert, if the expert isn't already briefed, and an application for discovery can be brought in due course, and no doubt that will be explored in correspondence before we trouble your Honour about it.
HIS HONOUR: I think then, Mr Solomon, your client ought to proceed with that ---
MR SOLOMON: Yes.
147 On that day the following orders were made:
1. The part of exhibit DT3 to the affidavit of Dorothea Tomazos sworn on 8 June 2009 which identifies a customer of the applicant and its addresses be forbidden from publication.
2. Paragraphs 10 and 15 of exhibit DT1 to the affidavit of Dorothea Tomazos sworn on 18 June 2009 be forbidden from publication.
3. The reference made in Dorothea Tomazos' oral evidence to the customer in Greece be forbidden from publication.
4. The contents of exhibit B, the Sale and Purchase Agreement, be forbidden from publication.
5. Judgment be reserved.
148 On 7 July 2009 the parties were advised in writing that the trial would commence in May 2010, the intention being to give the parties a year to get their cases ready for trial. The applicant commenced these proceedings on 18 June 2004. Five years had passed when the parties were advised that the trial would commence in 12 months' time. The applicant had had sufficient time in which to get its case ready.
149 On 20 July 2009 the respondents' solicitors wrote to the applicant's solicitors:
As we understand it, you are in the process of briefing an expert to provide his or her opinion on the matters laid out in the brief provided to us on 4 June 2009. If that expert requires recourse to further documents which may be in the respondents' power, possession or custody in order to provide that opinion, it is anticipated that those documents will form the first "tranche" of discovery (absent any dispute as to relevance etc).
Although there is no formal timetabling in place at present in relation to discovery and experts reports, we are concerned to progress the matter given that it has now been listed for trial. Please let us know when you expect to be in a position to request further material, if any, in order for your expert's report to be prepared.
150 On 5 August 2009 the respondents wrote again to the applicant's solicitors:
We refer to our letter dated 20 July 2009, to which we have received no response. We anticipate that the matter will be listed for further directions in early September after Lander J returns from leave and ask that you consider the matters raised below to ensure that the parties are properly prepared to progress the matter at that hearing.
---
Given that your client's brief was finalised by 4 June 2009, by the time the matter is next heard, your client's expert will have had some three months to consider what materials they require to complete their report. Any request for technical materials should be made prior to the next directions hearing, and as far as possible in advance to give our client time to review it.
151 On 3 August 2009 Tindall Gask Bentley ceased to act for the applicant, but were not replaced by any other solicitors and as a consequence the applicant became unrepresented. Because the applicant was a corporation it could not carry on the proceedings without a solicitor unless the Court gave leave: Federal Court Rules O 4 r 14(2). No leave was sought.
152 On 17 September 2009 the respondents filed the notice of motion, mentioned previously in [4], seeking an order dismissing the proceedings if a solicitor were not appointed within 7 days.
153 On 7 October 2009 on the return of that notice of motion no legal practitioner appeared for the applicant. A director of the applicant who was in Court informed the Court that DLA Phillips Fox had been retained to act for the applicant. The following orders were made:
1. The respondents file any further evidence upon which they seek to rely in support of the notice of motion of 17 September 2009 within 7 days.
2. The applicant file any evidence it may be advised in opposition to the notice of motion within 14 days.
3. The notice of motion be heard on Tuesday 27 October 2009 at 10.15am.
154 On 27 October 2009 Mr McNamara of Commercial & General Law appeared for the applicant and said that DLA Phillips Fox had advised that it could not appear because of a conflict of interest and that he was considering whether to act for the applicant. He sought an adjournment of 14 days in order to allow the applicant and him to consider their positions. The respondents advised that they intended to amend their application in the notice of motion to seek further relief. The application was adjourned and the following orders were made:
1. If the respondents seek to amend their notice of motion, they provide the amended notice of motion to the applicant:
(a) by providing a copy to Mr McNamara of Commercial & General Law;
(b) by serving Ms Tomazos at her email address; and
(c) by serving the applicant at the applicant's registered office.
2. The applicant pay the respondents' costs of today's attendance.
3. The proceeding be adjourned to Monday, 9 November 2009 at 1.45pm (Adelaide time).
155 On 4 November 2009 the respondents filed an amended notice of motion in which they sought orders dismissing the proceedings, or in the alternative staying the proceedings unless the applicant filed a notice of appointment of solicitor and the applicant provide evidence of its capacity and desire to progress the matter to trial.
156 On 5 November 2009 Commercial & General Law filed a notice of acting. It filed a second notice on 9 November 2009 and a third notice on 10 November 2009.
157 Mr Stephen McNamara who was the solicitor who had the care and conduct of the matter said in an affidavit sworn on 27 April 2010 that at the time of filing the Notice of Acting he was instructed that:
31.1 Mr Seeger Snowden, a technical expert had been retained in July 2009 and that a set of assumptions settled by senior counsel had been provided to the expert;
31.2 financial experts Sothertons Chartered Accountants had been retained;
31.3 lay witness statements had been drafted and the major witness statements had been settled by counsel;
31.4 senior counsel was available to conduct the trial which had been set down to commence on the 31st May 2010; and
31.5 the hard copy file was not available as it was being retained by Smart's former solicitors in this matter but that all documents, pleadings and other matters the subject of the claim were available electronically.
158 On 9 November 2009 the respondents' application for further security for costs was dismissed and the respondents were ordered to pay the applicant's costs of the application: Smart Company Pty Ltd v Clipsal Australia Pty Ltd [2009] FCA 1253.
159 On the same day the following orders were made:
1. The proceeding be set down for trial on all issues on 31 May 2010 with an estimated duration of 12 weeks.
2. The applicant file and serve its expert evidence in relation to the assumptions provided to the respondents under cover of letter dated 4 June 2009 by Friday, 4 December 2009.
3. The parties seek to agree a form of discovery protocol in accordance with the Federal Court Practice Note 17 by Friday, 4 December 2009.
4. The parties exchange the categories of discovery each party requests from the other by Friday, 4 December 2009.
5. Any dispute as to the categories of discovery, if not resolved, be heard on Monday, 14 December 2009 at 8.45am.
6. The parties make discovery in accordance with those categories by Friday, 22 January 2010.
7. The applicant file and serve a list of the witnesses to be called at trial and an outline of the evidence of each witness upon which the applicant proposes to rely at trial by Friday, 12 February 2010.
8. The applicant file and serve any further expert evidence upon which it proposes to rely by Friday, 12 February 2010.
9. The respondents file and serve any experts reports upon which they propose to rely by Friday, 26 March 2010.
10. The respondents file and serve a list of witnesses to be called at trial and an outline of the evidence of each witness upon which they propose to rely by Friday, 26 March 2010.
11. The applicant's solicitors serve on the respondents' solicitors a draft index for the proposed Court book including documents to be tendered by Friday, 9 April 2010.
12. The parties' solicitors consult as to the content of the Court book and agree a final form of the Court book by Friday, 16 April 2010.
13. The applicant's solicitors serve the respondents' solicitors and file for the use of the Judge a paged and indexed Court book comprising the current pleadings and one copy of each of the proposed exhibits by 30 April 2010.
14. The applicant pay the respondents' costs of the notice of motion filed on 17 September 2009 as amended by the notice of motion filed on 4 November 2009.
160 The applicant did not object to the making of any of those orders.
161 On 17 November 2009 Mr McNamara emailed Mr Kennett, solicitor for the respondents, requesting copies of product literature and brochures for Smart products sold by HSP and a list of the CIS product range for each year since the inception of the company.
162 On 18 November 2009 Mr Kennett wrote to Mr McNamara noting the history since 20 July 2009. He wrote:
1. On 1 April 2009 there was initial debate before the Court as to the process whereby your client's expert report on functionality would be provided prior to discovery, on the basis that any specific documents required by him to prepare his report would be requested from us. Formal orders were made on 8 April 2009.
2. On 4 June 2009, the assumptions to be provided to your expert were provided to us.
3. On 20 July 2009, we wrote to your client by its former solicitors asking when you expected to be in position to request further material for your expert (if any). We received no reply.
4. On 5 August 2009, we again wrote to your client advising that any request for technical materials should be made prior to the directions hearing. We received no response to that letter.
5. On 17 September 2009, we served on your client our client's notice of motion of the same date, which attached a schedule of directions allowing your client until 16 October 2009 to provide its expert report.
6. By reason of your client's change of solicitors, that date was extended to 4 December 2009.
Your client has been aware of the regime in place for expert reports for nearly 6 months. No request for documents has been formulated before now.
163 Mr Kennett attached a schedule of documents in response to the first request for product brochures, but noted that all trade product guides for the period from 1995 to 2003 had previously been provided to the applicant more than 5 years before, on 28 September 2004. He also said that on 22 November 2007 the applicant had been provided with further trade product guides.
164 Mr Kennett said that the respondents did not consider that a list of the CIS product range was relevant to the liability of the respondents for the purpose of the liability report in relation to the products identified in Schedule C of the FFASOC.
165 On 24 November 2009 Mr McNamara wrote in response to Mr Kennett's letter stating that the applicant had expected the respondents to comment on the assumptions of 4 June 2009 and had only realised at the hearing of 23 June 2009 that they would not be commenting on those assumptions. He said in that letter that the information relevant to the assumptions and copies of relevant documents were provided to the expert in July 2009 "and the expert has been working through the various documents since that time". In paragraph 4 of his letter Mr McNamara stated:
4. The information the expert has sought does not relate to the Original Smart Products as set out in the FFASOC. Rather, it relates to the peripheral devices which formed part of the suite of Smart Products which were being sold by Home Systems Plus ("HSP") both prior to and after signing of the HOA. These include OEM devices which HSP had sourced and distributed bundled together with the Original Smart Products in product offerings. We attach a copy of the HSP Price List for September 1996 ("Enc 1."). The information requested includes product documentation for the following product numbers, as referred to on the attached list:
• JV06 - Keypad; JV21 -
• X10 Powerline Tx; JV25 - Temperature Sensor;
• JV29 - Battery Backup;
• V100 X10 Appliance Module;
• JV101 - X10 Light Module;
• JV102 - Powerline I/F TS523;
• JV103 - Wall Dimmer Module;
• V104 - Wall Switch Module;
• JV105 - Modular JV21 Cable;
• JV106 - FJ131 Mount Jack;
• JV107 - Modular JV30 Cable;
• JV110 - Filter Coupler;
• JV111 - X10 Cabling Tester;
• JV112 - Universal Module; J
• V113 - Signal Blocking Filter (60A);
• JV114 Maxi Controller for Lighting;
• JV115 - Key Chain Remote Controller;
• JV116 - 15Plus Wireless Remote Controller;
• JV117 - Smart RF Repeater;
• JV118 3 Unit RF Wall Switch;
• JV200 - Reed Switch;
• JV202 - PIR,
• JV203 - Ceiling 350 degree PIR;
• JV204 - Dual Mode PIR;
• JV205 - Smoke Detector;
• JV206 - External Siren with Cover;
• V207 - Sonalert Buzzer;
• JV208 - Internal Screamer;
• JV211 - Ewatherproof Strobe;
• JV212 - Isolated Converter RS232 to RS485 and
• JV213 - RS-485 Repeater.
Given that our request did not relate to documents which are indeed already within our client's possession, we dispute the payment of any photocopying of this material. Kindly provide us with the relevant product information as a matter of urgency.
5. As regards the list of CIS products: CIS took over the sale of Smart Products from HSP. The expert has requested the list in order to be able to assess the evolution of the product range and is very relevant to the case at hand. The list at Schedule C of the FFASOC was an attempt made by our client at the insistence of your counsel and without the benefit of discovery and under the assurance that all product guides had been provided to our client. Schedule C provides a clear guide to the expert as to our client's assessment of what falls within the definition of "Smart Product". Schedule C cannot however be allowed to detract from the expert's assessment of what, in his mind, falls within the definition of a Smart Products particularly given that CIS was established for the specific purpose of distributing the C-Bus and Minder range of products and replaced HSP in the performance of this role.
6. Further our expert has indicated that he requires samples of the C-Bus range pre-May 1995. Please provide these.
7. As you are aware, there are certain other documents which are of relevance to this matter and have involved expert assessments of the products under dispute (please see attached ENC.2) [ENC.2 was not attached to the affidavit.]
8. Of the due diligence reports previously requested: the due diligence report of PriceWaterhouseCoopers relates, inter alia, specifically to confirmation of the net assets, namely the intellectual property of Clipsal's EWDIS/Smart Product business. The financial data requested in the attached letter ENC 2 remains of significant relevance to the preparation of expert reports.
166 The requests in paragraphs 4-7 in the letter form the basis of a later application by the applicant for orders for discovery.
167 Paragraph 8 of the letter suggests that the respondents had previously requested a due diligence report authored by Price Waterhouse Coopers on behalf of Schneider at the time of Schneider's acquisition of the respondents' EWDIS business.
168 On 25 November 2009 Mr Kennett wrote to the applicant's solicitor complaining of the delay by the applicant in providing the expert's report. He wrote:
1. In relation to the matters set out in paragraphs 1 to 3 of your correspondence, without necessarily accepting the position was as you have described it (see the comments of Lander J and your counsel, Mr Solomon, on 23 June 2009 at page 145 of the transcript), the fact is that:
this process commenced with the making of orders on 1 April 2009, over seven months ago;
your client's expert has had some five months, subsequent to our indication that we did not propose to comment on the assumptions (on 23 June 2009) to determine what further material is required;
by letter dated 20 July 2009, we invited your client to request any further material that might be required by your client's expert in order to undertake his initial review.
With respect, the recent retention of your firm does not explain delays by the expert. We note that you have not responded to our invitation to provide copies or evidence of your expert's request (in accordance with the course frequently adopted in modern litigation).
169 In response to paragraph 5 of Mr McNamara's letter of 24 November 2009 he wrote:
Schedule C to the FFASOC is not a "guide" to your expert, or open-ended in any other sense. Our clients, your client, and the Court have expended significant resources to determine precisely the scope of your client's claim. On the face of the pleading, your client's claim (in respect of "Unilateral Products") is restricted to the products now claimed in Schedule C.
In this respect, we refer you to the dispute between the parties which began with your client's reply, which referred generally to "Smart Products" (beyond the scope of those listed in the TFASOC). This precipitated our clients' motion to strike out the reply dated 26 April 2007 and culminated in numerous attempts to amend the statement of claim to identify the products the subject of the claim with particularity, ending with the filing of the FFASOC on 7 March 2008.
The following documents in particular set out the history of the parties' positions in relation to the identification of the "Smart Products" and the requirement that they be identified in a precise, definitive and exhaustive fashion:
our clients' Outline of Argument dated 27 June 2007, in particular paragraphs 7-24 and 38-52;
our clients' Objections to the Proposed Fourth Further Amended Statement of Claim dated 14 September 2007, in particular paragraphs 13-22;
our clients' Objections to the Proposed Fourth Further Amended Statement of Claim dated 5 November 2007, in particular paragraphs 2-10;
We enclose copies for your convenience. Your client's counsel Mr Blue QC stated at the hearing before Lander J on 20 February 2008 that all of our client's concerns in relation to the particularisation of the "Unilateral Products" had been addressed.
While, of course, our clients cannot prevent you from seeking an opinion from your client's expert on whichever matters you see fit, we note that:
your client's own letter of instructions to its expert does not trespass beyond the Schedule C products; and
we will resist any attempt to run a case at trial, whether based on any expert report or otherwise, which trespasses beyond the pleadings.
…
5. In relation to the matters raised in paragraphs 7 and 8 of your letter, you are now requesting financial information in relation to the value of components of our clients' businesses. That was an illegitimate request in the context of the mediation, and it is totally irrelevant to the expert report you are presently seeking. We refer you to our letter dated 4 December 2008 in response to your request for financial documentation relating to the Schneider Group, which sets out our response in detail.
If we have misunderstood the basis upon which you say those reports are relevant, we invite you to identify the relevant paragraphs of the pleadings, and the expert report in respect of which you say the information is required.
170 Mr Kennett referred to the history of the parties' positions in relation to identification of the "Smart Products" and the requirement that they be identified in a precise, definitive and exhaustive fashion.
171 On 27 November 2009 Mr Kennett wrote to the applicant's solicitor enclosing a draft discovery protocol and a schedule of categories of discovery upon which the respondents' solicitor sought comment.
172 On 2 December 2009 Mr McNamara replied by email commenting on the form and headings of categories to be used. He then wrote:
I also put you on notice that I will be asking this matter be brought on for directions in relation to the time table set by the Court, as our expert has had to leave for overseas on 25th Nov and will not return until the end of January 2010.
173 The applicant did not comply with the direction to file its expert report on liability by 4 December 2009.
174 On 4 December 2009 the respondents' solicitors Mr Kennett sent two letters to the applicant's solicitor in response to Mr McNamara's email of 2 December 2009.
175 The first letter dealt with that aspect of the email concerning categories of discovery and requested that Mr McNamara more fully explain his position in relation to categories of discovery. Mr Kennett then wrote:
Would you kindly clarify your position as a matter of urgency, given that it will be necessary for the matter to be resolved on 14 December 2009 if it cannot be resolved by consent before that time. This means that any dispute must be crystallised within a very short period, in order that his Honour can be advised, in advance of that hearing, of the nature of the dispute.
176 The second letter dealt with Mr McNamara's comment that the expert retained would not be available until the end of January 2010. Mr Kennett wrote:
With respect to your client's expert, we understand your email to mean that your client will not serve its expert report on us today, contrary to the orders of Lander J made on 9 November 2009 ("Orders") and that we will not be provided with any expert report until after the end of January 2010.
You indicated on 2 December 2009, for the first time, that your expert left the country on 25 November 2009, notwithstanding that you wrote to us on 24 November 2009 setting out documents purportedly requested by your expert for the finalisation of his report. We note that we have not had any response to our letter of 25 November 2009 in relation to those documents.
This is of serious concern to our clients and may jeopardise the trial date.
Your client should immediately have the matter brought back before his Honour, and, while it is a matter for your client, we consider that some explanation should be provided for your client's expert's absence, and when your client was first informed of same.
As presently instructed, our clients do not consent to any variation to the timetable, and our clients reserve their position in relation to paragraph 4 of their amended notice of motion filed on 4 November 2009.
177 On 8 December 2009 Mr McNamara wrote to Mr Kennett agreeing with the draft discovery protocol contained in Mr Kennett's letter of 27 November 2009, and attaching the applicant's proposed categories of discovery.
178 Mr Kennett responded on the same day. Amongst other objections, the respondents objected to a category titled "Documents evidencing other contractual arrangements or enquires with third parties after 1996 for development of products with building control and automation" because he said it appeared to refer to products outside those specified in the FFASOC. The FFASOC related only to the Unilateral Products or systems with the Smart Functionalities identified in paragraph 79.1 and listed in Schedule C, rather than all products with building control and automation.
179 The respondents also objected to discovery of any share sale agreement by Schneider to shareholders of Clipsal, or discovery of "Due diligence documents carried out by PWC on sale to Schneider" on the basis that they were not relevant to any issue raised on the pleadings.
180 The respondents objected to a request for documentation on "Financial data from Clipsal from 1996 to current" as being too broad a request, especially when relevant sales data had been agreed discoverable.
181 In an affidavit sworn on 8 December 2009 Mr McNamara stated that the applicant would at the next directions hearing seek the following orders:
24.1 To extend the time for filing and serving the Expert Report until the 1st March 2010;
24.2 Orders consequential to the extension of time to file and serve the Expert Report; and
24.3 for an order that the Respondent provide copies of the documents referred to in paragraph 18 hereof.
182 Paragraph 18 said:
18. I seek an order that the Respondent provide to the Applicant copies of the following documents:
18.1. Documents relating to the peripheral devices which formed part of the suite of Smart Products which were being sold by Home Systems Plus ("HSP") both prior to and after signing of the HoA. These include OEM devices which HSP had sourced and distributed bundled together with the Original Smart Products in product offerings. The information requested includes product documentation for the following product numbers:
• JV06 - Keypad; JV21 -
• X10 Powerline Tx; JV25 - Temperature Sensor;
• JV29 - Battery Backup;
• V100 X10 Appliance Module;
• JV101 - X10 Light Module;
• JV102 - Powerline I/F TS523;
• JV103 - Wall Dimmer Module;
• V104 - Wall Switch Module;
• JV105 - Modular JV21 Cable;
• JV106 - FJ131 Mount Jack;
• JV107 - Modular JV30 Cable;
• JV110 - Filter Coupler;
• JV111 - X10 Cabling Tester;
• JV112 - Universal Module; J
• V113 - Signal Blocking Filter (60A);
• JV114 Maxi Controller for Lighting;
• JV115 - Key Chain Remote Controller;
• JV116 - 15Plus Wireless Remote Controller;
• JV117 - Smart RF Repeater;
• JV118 3 Unit RF Wall Switch;
• JV200 - Reed Switch;
• JV202 - PIR,
• JV203 - Ceiling 350 degree PIR;
• JV204 - Dual Mode PIR;
• Jv205 - Smoke Detector;
• JV206 - External Siren with Cover;
• V207 - Sonalert Buzzer;
• JV208 - Internal Screamer;
• JV211 - Ewatherproof Strobe;
• JV212 - Isolated Converter RS232 to RS485 and
• JV213 - RS-485 Repeater.
18.2. the due diligence reports effected in relation to the acquisition of 100% of the Clipsal Australia business (and its operations in South African (sic) India and New Zealand), together with worldwide ownership of the Clipsal brand name, from the founding Gerard family and their 52% partner, a listed Singapore company, Clipsal Industries (Holdings) Limited (since renamed CIH Limited) (the "Schneider Transaction") in so far as these relate to:
18.2.1. the definition of Clipsal's electrical wiring devices and installation systems ("EWDIS");
18.2.2. an analysis and confirmation of the intellectual property list or asset portfolio related to Clipsal's EWDIS business;
18.2.3. any expert report conducted on the items included in the EWDIS asset portfolio;
18.2.4. information related to all licensing and sub-licensing agreements related to Clipsal's EWDIS business;
18.2.5. financial information and breakdowns relating to the respondents' sales of the EDWIS (sic) products worldwide;
18.3. copies of all ISC product strategy and technology roadmaps from September 1996 to the current time;
18.4. details of the products which the respondents consider to be part of the C-Bus range of products as per the Cope Affidavit as well as the products which were under development since September 1996 which products may not necessarily have been commercialised by the respondents and therefore are not to be found in any trade product guide; and
18.5. samples of the C-Bus range pre-May 1995.
These documents reflected the request made by Mr McNamara in his letter to Mr Kennett of 24 November 2009. No notice of motion was filed seeking the orders.
183 In relation to paragraph 24.1, Mr McNamara said that in or about July 2009 the applicant had retained Mr John Seeger-Snowdon, a technical expert, to provide an expert's report on the set of assumptions which had been "agreed to by the parties to this action". Mr McNamara first had contact with Mr Seeger-Snowdon on 12 November 2009 when he telephoned him to advise him of the date upon which Mr Seeger-Snowdon's report had to be filed. Apparently Mr Seeger-Snowdon told Mr McNamara in that conversation that he would not be able to provide a meaningful report by 4 December 2009 but might be able to provide such a report by the end of that month. He told Mr McNamara that the delay was partly caused by the close down of the Melbourne University with which Mr Seeger-Snowdon was associated for the Christmas break. In those circumstances it would be difficult for him to obtain administrative services.
184 Two days later, on 14 November 2009, Mr Seeger-Snowdon contacted Mr McNamara and advised him that he now intended to go to Europe on 25 November 2009 and would not return until the end of January 2010. Because of other Court commitments which he had it would not be possible for him to complete the report by 4 December 2009 or even by the end of 2009. He told Mr McNamara that even if he worked on the report whilst in Europe he would not be able to complete it until 12 February 2010 and only then if he were provided with further documents and had the opportunity to inspect installations of the applicant's and respondents' systems.
185 Mr McNamara said that he was unable to arrange a suitable time to meet with Mr Seeger-Snowdon. On 23 November 2009 Mr McNamara provided Mr Seeger-Snowdon with a draft affidavit which Mr Seeger-Snowdon signed but did not swear before a person authorised to take oaths. Mr McNamara said that Mr Seeger-Snowdon had advised him that he had been working on the expert report continuously since receiving the brief in July 2009. Insofar as the document was Mr Seeger-Snowdon's, Mr Seeger-Snowdon said in that document:
6. I have been working on the expert report as and when I have been able to since being retained in July of 2009. I have been provided with a large number of documents by the Plaintiff which I have been systematically going through and have requested further documents from the Plaintiff, some of which I believe are in the possession of the Defendants. For the expert report to be meaningful requires me to look at the product description and in some instances the electronic and design drawings for products and components of over 50 individual items. I also require in some instances to inspect the actual hardware and inspect installations of both the Plaintiff's products and those installed by the Defendants.
7. I am informed and verily believe to inspect some of the installation sites that I need to inspect for the purposes of the report I will need to travel to a number of different States of Australia, all of which will take time.
8. I am presently working on other matters for other clients and on the 25th November 2009 I leave Australia for overseas and do not return until the 26th January 2010. Whilst I am overseas I can continue to work on the report but only at a limited level. Further during the months of December and January I am unable to access full office facilities and support. This will slow down the completion of the Report.
9. Given the nature and extent of the report that I am required to deliver, knowing the resources that are available to me and knowing that I have to test and view items and look at those items from a systems perspective not only from the assumptions provided to me by the Plaintiff but also from the claims of the Defendants I realistically think I will not have a meaningful report available until the end of February 2010.
186 Mr McNamara said that the expert report could not be written by different people, nor could Mr Seeger-Snowdon enlist the assistance of others in various aspects of the report. He said:
It is a report that has to be commenced and completed by one person and it necessarily takes time.
187 Mr McNamara referred to a copy of the publication made by PriceWaterhouseCoopers in May 2004 which set out the details of the due diligence it undertook for the takeover of the respondents by Schneider. He said:
From current Schneider publications it appears that the products and systems the subject of the due diligence carried out by PriceWaterhouseCoopers are the same as those being looked at by the applicant's expert Mr John Seeger-Snowdon and although the expert's task is more limited than that of the PriceWaterhouseCoopers' team, the time taken by this team gives some indication of the amount of time which is necessary for the completion of the expert report.
188 Mr McNamara said that the further documents Mr Seeger-Snowdon required to complete his report were set out in paragraph 18 of Mr McNamara's affidavit (extracted above).
189 Mr McNamara also addressed counsel's availability and said that Mr Blue, who had been retained by the applicant as Senior Counsel, was not aware that the matter had been set down for hearing on 31 May 2010 until he received a copy of the orders of 9 November 2009.
190 Mr McNamara said that Mr Blue had said that he had never been consulted on this date, and would not be able to accept the brief because he would be overseas on that date. Mr McNamara stated that the applicant was unaware of Mr Blue's unavailability but understood that Mr Blue had been contacted by its former solicitors. Mr Blue would be available in October and November 2010.
191 On 8 December 2009 proceedings were commenced in the Supreme Court of South Australia by Tindall Gask Bentley, the applicant's former solicitors, seeking to wind up the applicant for the applicant's failure to pay Tindall Gask Bentley's fees incurred in acting for the applicant in these proceedings.
192 On 13 December 2009 the respondents' solicitors provided to the applicant's solicitors and the Court minutes of order which the respondents said they would seek at the directions hearing on 14 December 2009:
1. Pursuant to Order 35A, rule 3(1)(a) of the Federal Court Rules, the amended application be either:
(a) dismissed; or, alternatively
(b) permanently stayed as to the whole of the relief claimed by the applicant, with costs.
2. In the alternative to paragraph 1 herein, the amended application be stayed subject to a right of the applicant to apply for leave to reinstate the proceeding, on the basis that:
(a) any application by the applicant for leave to reinstate the proceeding must be supported by affidavit evidence exhibiting the expert report of Mr John Seeger-Snowdon and deposing to the status of the applicant's trial preparation and the applicant's capacity and desire to undertake the necessary steps required in order to progress the matter to trial without causing significant prejudice to the respondents orderly preparation for trial;
(c)(sic) if, by 12 February 2009, the applicant has not obtained leave to reinstate the proceedings, the amended application shall stand dismissed, or alternatively, permanently stayed.
3. Such further or other order as this Court may deem fit.
193 These orders represented a variation on the amended notice of motion of 4 November 2009. The order sought in the amended notice of motion requiring the applicant to proceed by way of a legal practitioner was deleted and a proposed order was added requiring any application to remove any stay be accompanied by further evidence of Mr Seeger-Snowdon's expert report.
194 On 14 December 2009, the orders sought by the applicant in paragraph 24 of Mr McNamara's affidavit of 8 December 2009, were also addressed.
195 Mr McNamara was asked whether his client sought any orders in relation to discovery, as had been requested in his letter to the respondents of 24 November 2009 and referred to in paragraph 18 of his affidavit of 8 December 2009.
HIS HONOUR: Are there any other orders you're seeking?
MR McNAMARA: No, your Honour, I was looking for an order with respect to some additional documents to be provided which I've set out in paragraph, I think, 18 of my - - -
HIS HONOUR: Are there any other orders you're seeking, Mr McNamara?
MR McNAMARA: No, I'm not going to seek those orders, your Honour. I think the expert can provide the report without those documents.
HIS HONOUR: You don't want any orders for discovery?
MR McNAMARA: Not at this stage, your Honour. There are already orders made, you Honour. What I'm suggesting is that the applicant make discovery - - -
HIS HONOUR: What orders are you seeking, Mr McNamara?
MR McNAMARA: The only one I seek, your Honour, is an extension with respect to the provision of the expert's report.
196 The hearing of 14 December 2009 had been listed pursuant to paragraph five of the orders of 9 November 2009, which directed that any dispute as to categories of discovery be heard at that date. Thus, Mr McNamara had ample notice that any issue as to categories of discovery was to be considered at that hearing.
197 At that hearing the respondents recognised that the applicant's default in relation to the delivery of the expert report had not occurred at the time of the filing of the respondents' amended notice of motion of 4 November 2009. The applicant was entitled to notice of the further amended application in case it wanted to put on evidence in relation to the proposed orders provided by the respondents on 13 December 2009. The following orders were made:
1. The applicant file and serve any affidavits upon which it seeks to rely in opposition to the respondents' application for the orders sought in the proposed minutes of order of 14 December 2009 by Thursday, 17 December 2009.
2. The respondents file and serve any affidavits in reply by Friday, 18 December 2009.
3. The respondents' application for the orders sought in the proposed minutes of order of 14 December 2009 and the applicant's application for an extension of time to serve the applicant's expert report be listed for hearing on Monday, 21 December 2009 at 10.00am.
198 On 16 December 2009 Ms Thanissorn, a solicitor in the employ of the respondents' solicitors, swore an affidavit exhibiting the correspondence which had passed between the parties between 9 December and 16 December relating to the categories of documents which the parties asserted were relevant in relation to discovery.
199 On 18 December 2009 one of the applicant's directors, Dorothea Tomazos, swore an affidavit in which she said that she had been in contact with Mr Seeger-Snowdon from time to time since July 2009 but was not aware at any time prior to 14 November 2009 that Mr Seeger-Snowdon would be absent from Australia after 25 November 2009. She had been made aware on 12 November 2009 that Mr Seeger-Snowdon could not provide a report by 4 December 2009 and not before the end of December 2009. She said:
11. On 14th November 2009 Mr. McNamara contacted me to discuss that he'd been advised by Mr Seeger-Snowden and I verily belief to be true that Mr Seeger-Snowden was going to Europe on the 25th November 2009 and was not returning until the end of January 2010 and with the other Court commitments he had up until the time of his departure there would be no possible way he could have the report completed by the 4th of December 2009.
12. At no time prior to 14th November 2009 was I aware that Mr. Seeger-Snowden would be overseas from 25th November 2009. During a conference telephone call involving Mr Seeger-Snowden, Mr McNamara and myself on the 12th day of November 2009, Mr. McNamara advised Mr. Seeger-Snowden of date in the Court time table for this matter for the provision of his Expert Report. Mr Seeger-Snowden advised us and I verily believe that he would not be able to provide a meaningful report by the 4th December 2009 but that he might be able to complete such a report by the end of December 2009. Mr. Seeger-Snowden's overseas travel and incumbent delay in finalising his report beyond the end of December 2010 was totally unexpected and beyond the control of the Applicant.
200 She said Mr Seeger-Snowdon had been working on the report continuously since July 2009.
201 Importantly she said in that affidavit that the applicant would be in a position to make discovery by 22 January 2010. Moreover she said, in order to ensure that an expert's report was provided by 1 March 2010, the applicant would undertake to obtain a second expert report in addition to that of Mr Seeger-Snowdon. She said she believed that the applicant's previous solicitors had informed Mr Blue of the hearing dates in May 2010. She said that whilst the applicant would benefit from Mr Blue's availability, the applicant would brief other counsel in order that the matter could proceed on 31 May 2010.
202 On 21 December 2009 I heard the applicant's request for an extension of time for filing its expert report and the respondents' notice of motion seeking either an order dismissing or an order staying the proceedings.
203 During the hearing of 21 December 2009 the respondents contended that the applicant's failure to comply with the Court's orders to provide the expert reports by 4 December 2009, and the consequential change to the timetable and likely trial commencement, was the "final straw" that should lead to an order dismissing the proceedings. The respondents relied upon the applicant's history of delay and the 'amorphous and unmanageable' nature of the applicant's pleaded case. In the alternative the respondents contended that the proceedings should be stayed until the applicant had obtained an expert's report and satisfied the Court of the applicant's preparation and its capacity to progress the proceedings to trial without prejudicing the respondents. The respondents contended that the stay should be in the nature of a self-executing order that would lead to the dismissal of the proceedings if the applicant had not satisfied the conditions by 12 February 2010.
204 Mr McNamara said that the applicant's expert report on quantum could be provided by 1 March 2010. The respondents expressed their doubts as to how the quantum report could also be ready by 1 March 2010 particularly when the report involved the calculation of sales of a still unidentified number of products over 10 or 15 years, where the information for those calculations was not in a form which enabled the ready calculation of those sales.
205 The applicant confirmed that it would be able to provide the report by that date, "subject to getting some documents from the respondents". Mr McNamara said that the applicant required some documents from the respondents including copies of the accounts for CIS and a copy of the due diligence report in respect of the takeover of Clipsal by Schneider. The following exchange occurred:
HIS HONOUR: Have you asked for them?
MR McNAMARA: We have previously asked for them, you Honour, and were told that they're not relevant.
HIS HONOUR: Have you pressed that?
MR McNAMARA: Well, I've only been involved for eight weeks your Honour, so I haven't - - -
HIS HONOUR: I'm not criticising you, Mr McNamara.
MR McNAMARA: I haven't asked for it again, your Honour, but it has been asked for.
HIS HONOUR: So those documents have got to be made available to you, but your expert will still be able to do it by 1 March?
MR McNAMARA: That's what we're told, your Honour. Can I just move on from that, your Honour?
206 Later, Mr McNamara said:
MR McNAMARA: …in respect to the series of documents that have been requested and in respect to quantum because we don't have those but apart from that, your Honour, we are agreeing with what your Honour said, we probably don't require any further documents from the respondents.
207 After some discussion as to which categories of documents the applicant did require in respect to quantum, Mr McNamara said:
MR McNAMARA: What we are specifically after, your Honour, are the documents that were requested in the letters; the accounts with respect to Clipsal Integrated Services and the due diligence report from PriceWaterhouseCoopers and subject to seeing what they've got in them that should be sufficient for the requirements of the applicant, your Honour.
….
MR McNAMARA: Well, again, your Honour, certainly the applicant does not require general discovery, and what we're saying is that if the applicant makes discovery first, then the discovery required by the respondents, in my submission, would be limited to the documents that have been requested in paragraph 18 of my affidavit, and the documents relating to quantum.
HIS HONOUR: The documents related to?
MR McNAMARA: Quantum, which are the CIS accounts and documents on which they relate to rely upon and the due diligence reports from PricewaterhouseCoopers.
HIS HONOUR: Do you have the due diligence report?
MR McNAMARA: No, your Honour, we only have a ---
HIS HONOUR: The reference to it?
MR McNAMARA: A reference to it, and a copy of an article or pamphlet put out by PricewaterhouseCoopers.
HIS HONOUR: You're after - you only want discovery of the documents in paragraph 18 of your affidavit?
MR McNAMARA: Yes, your Honour.
HIS HONOUR: Pricewaterhouse due diligence report?
MR McNAMARA: Yes, your Honour, and the Clipsal Integrated Services accounts, and the primary documents, which they were put together.
HIS HONOUR: What, accounts for what?
MR McNAMARA: Well, for the ---
HIS HONOUR: Since 2003?
MR McNAMARA: Since it would commence, your Honour, which I think was about ---
HIS HONOUR: Since it's commencement?
MR McNAMARA: Yes, your Honour.
HIS HONOUR: The primary document supporting the accounts?
MR McNAMARA: Yes, your Honour.
HIS HONOUR: Otherwise you waive any obligation for the respondents to make discovery.
MR McNAMARA: Yes, your Honour.
208 Mr Doyle contended that the damages must be calculated in accordance with the FFASOC and therefore the documents sought, especially those relating to due diligence, were not relevant. He said that his instructing solicitors had written advising the applicant's solicitor that the documents which were sought bore no resemblance to the nature of the case that was put against the respondents. In particular, he said the due diligence report related simply to the transfer of the entire business and was also not relevant.
209 Consistent with their argument for a procedural regime to limit discovery and their argument concerning the relevancy of the documents, the respondents sought that certain categories of discovery requested by the applicant be carved out, specifically the documents in categories 8.3, 8.4. 9.2 and 11.3 of Schedule 1 of Exhibit 4 of the affidavit of Riya Thanissorn of 16 December 2009.
210 Exhibit 4 was the List of Discovery Categories exchanged between the parties. Category 8.3 and 8.4 were part of the 'Outcome of Co-operative Development under HOA' category. Category 8.3 was in the sub category 'Documents relevant to the timing of the design of Schedule B (Amended Defence) documents and was described as the 'Final scope of works (Design Requirement Specification)'. Category 8.4 was described as 'Contracts or licensing agreements in relation to the products'. Category 9 related to 'Unilateral Developments of Products by Clipsal', and 9.2 was described as 'Core Design Documentation for the Unilateral Products as catalogued in Schedule C to the FFASOC'. Category 11.3 was relevant to the sub category 'Documents relevant to the calculation of Smart's claim for licence fees in respect of the Unilateral Products and/or their claim for an account of profits' and was described as 'Summary financial spreadsheet identifying all Schedule C (FFASOC) product sales by date, territory and customer..'.
211 Mr Doyle said that those categories related to the product design documentation and the financial documentation. He argued that if the expert went about the quantum exercise in a certain way, some of their financial records would be irrelevant and not discoverable. Similarly, if the expert reporting on liability narrowed the claim down to 50 products, then there would be no need to discover much of the product documentation relating to the 650 plus products claimed. He argued that approach was consistent with the regime that had been implemented, namely, the filing of the expert reports before discovery in order to make the process manageable.
212 The following exchange with Mr McNamara took place:
HIS HONOUR: Very well. Now, Mr McNamara, what do you say about Mr Doyle's propositions in relation to the order for discovery?
MR McNAMARA: Your Honour, we're of the view that this needs to get under way and ---
HIS HONOUR: I don't think there's any dispute about that.
MR McNAMARA: - - - the documents we've asked for in paragraph 18 of my affidavit of 8 December, your Honour, we think we're on the sort of periphery of what's required so we're happy to proceed and give discovery pursuant to the categories that have now been put before the court. There may be some requests made of the respondent, your Honour, with respect to the expert's report with respect to quantum but we will just proceed, your Honour, and we just ask for liberty to apply if we need to come back.
HIS HONOUR: I've given you liberty to apply on 12 hours notice; the intent of that being that either party may apply on very short notice.
MR McNAMARA: Yes, realistically, your Honour, we just need to get underway and if there are holes in what's being put before the court we'll have to come back but I don't believe there will be, as I said we're really tempering with the edges.
213 Paragraph 18 of Mr McNamara's affidavit of 8 December 2009 is described in [182] above. Importantly, Mr McNamara said that those documents were "on the sort of periphery of what's required so we're happy to proceed and give discovery pursuant to the categories that have now been put before the Court".
214 Witness statements were addressed and Mr McNamara said that the applicant was in a position to provide witness statements by 12 February 2010.
215 On 23 December 2009 Mr McNamara wrote to Mr Tim Cousins seeking to retain him to provide a second Technical Expert Report should Mr Seeger-Snowdon not be able to provide a report by 1 March.
216 On 23 December 2009, after indicating that written reasons would be given later, the following orders were made:
1. The respondents' application for an order:
(a) dismissing the applicant's amended application as to the whole of the relief sought; or
(b) permanently staying that proceeding;
be dismissed.
2. The time within which the applicant has to comply with paragraphs 2 and 8 of the orders made on 9 November 2009 be extended to 1 March 2010.
3. There be no order as to costs of the respondents' application or the applicant's application.
4. The parties have liberty to apply on 12 hours' notice.
5. Paragraph 6 of the orders made on 9 November 2009 be amended such that the applicant make discovery in accordance with the agreed categories by Friday, 22 January 2010.
6. The respondents make discovery in accordance with the agreed categories by Monday, 22 February 2010 except for the documents in categories 8.3, 8.4, 9.2 and 11.3 of Schedule 1 of Exhibit 4 to the affidavit of Riya Thanissorn sworn on 16 December 2009.
7. The directions hearing be adjourned to 10.00am on 16 February 2010.
217 In January 2010 Mr Seeger-Snowdon advised the applicant that because of his commitments in Europe he would not be able to complete the technical expert report by 1 March 2010, which was the timeframe set by the Court on 23 December 2009.
218 On 12 January 2010 Mr Tim Cousins was retained by the applicant to complete a technical report.
219 Neither the Court nor the respondents were made aware that Mr Seeger-Snowdon would not be providing an expert's report.
220 On 15 January 2010 reasons were delivered for the orders made on 23 December 2009: Smart Company Pty Ltd v Clipsal Australia Pty Ltd [2010] FCA 4. In my reasons I said:
57 The applicant's conduct of the proceeding has not been entirely satisfactory. It has, for reasons unexplained, changed its solicitors on numerous occasions and changed its counsel. The failure to have continuity in the applicant's legal representation has meant that the matter has been unnecessarily protracted. It has sought and obtained indulgences in relation to directions given from time to time because it has been unable to comply with those directions. It took about two years and six versions of the fourth further amended statement of claim before the applicant could articulate the case which it wished to present at trial.
58 The applicant's conduct has meant that the hearing of the proceeding has been delayed.
59 Both parties, however, have made the mistake of arguing about issues and not seeking the resolution of those issues by the Court. The failure by the parties after 18 months to have agreed upon the categories of document which would inform the discovery to be given by the parties is inexcusable. The parties should have returned to the Court seeking the Court's direction as to the categories of document that would inform the discovery.
60 The applicant's failure to have legal representation between 3 August 2009 and 6 November 2009 meant that the proceeding did not progress at all during that period, and for that the applicant is solely accountable. The applicant has not provided the reasons why Tindall Gask Bentley ceased to act for it and why it did not appoint other solicitors immediately to progress the proceeding.
61 However, the immediate concern is the failure by the applicant to comply with the order to provide its expert's report on liability by 4 December 2009.
221 On 19 January 2010 the respondents wrote to my associate stating that because of the orders made extending the time for filing of the applicant's expert report, they would not be ready for trial on 31 May 2010. The directions hearing which had been set for 16 February was brought forward to 29 January 2010 to determine when the trial should commence.
222 On 22 January 2010 the applicant made discovery by serving on the respondents' solicitors an affidavit of Dorothea Tomazos and a compact disc which contained a schedule of the applicant's discovered documents.
223 On 29 January 2010 the commencement of the trial was adjourned until 19 July 2010 so as to allow the respondents time to respond to the applicant's expert reports. The following orders were made:
- The proceeding be set for trial on Monday, 19 July 2010 at 10.15am to continue to 1 October 2010 or earlier completion, with the exception of the week beginning Monday, 6 September 2010.
- The directions hearing listed for Tuesday, 16 February 2010 at 10.00am be vacated and a directions hearing be held on Thursday, 4 March 2010 at 9.30am (Adelaide time).
224 On 1 February 2010, following a request by the respondents' solicitors, copies of the applicant's discovery documents were provided to the respondents.
225 On 15 February 2010 the respondents wrote to the applicant seeking production of its list of witnesses. In paragraph 7 of the orders of 9 November 2009 the applicant had been ordered to provide a list of witnesses and an outline of the evidence of each witness upon which the applicant intended to rely by 12 February 2010.
226 On 16 February 2010 the applicant's solicitor wrote to the respondents' solicitors stating that he understood that the applicant had until 1 March 2010 to file such a list. His email said:
It was my understanding from the directions on the 23rd December that the matters in items 7 and 8 of the Orders of the 9th October 2009 (sic) (including the provision of witness lists) were extended to the 1st March 2010 in line with the report required from the expert witness as to technical aspects of our client's claim.
On that basis we are aiming to deliver it to you sometime toward the end of next week. If this will cause you any embarrassment please advise and I will endeavour to have it to you earlier.
227 On 17 February 2010 the respondents' solicitors replied and referred to the parts of the transcript of the hearing of 21 December 2009 in which the applicant's counsel stated that its witnesses' statements would be provided by 12 February 2010. They wrote:
With respect, your email misstates, or reflects a misunderstanding of, the orders made on 23 December 2009. On that occasion, the only variations to the orders of 9 November 2009 related to paragraphs 2, 6 and 8; paragraph 7 remained unchanged.
This is consistent with your submissions to the Court on 21 December 2009. On that occasion, you repeatedly submitted that your client was in a position to file and serve its list of witnesses and witness statements by 12 February 2010. For example, at page 37, line 34 of the transcript of that hearing, the following exchange took place:
HIS HONOUR: But you've got to provide your witness statements first.
MR McNAMARA: Yes, your Honour, we're in a position to ---
HIS HONOUR: By 12 February.
MR McNAMARA: We're in a position to do that, your Honour.
Later, at page 40, line 5, the following exchange took place:
MR McNAMARA: … the witnesses and witness reports required by the applicant can be met in the timeframe that your Honour has already set down.
HIS HONOUR: Well, no. You have already said that your forensic accountant can't report by 12 February.
MR McNAMARA: Sorry, I was talking about the witness reports ---
HIS HONOUR: Apart from ---
MR McNAMARA: --- apart from the expert's, your Honour, we say can be met with in the timeframe …
Later still, at page 44, line 31, you stated that your client "is well underway with respect to witnesses" and at page 47, line 24, you stated:
So the things that needed to be attended to are witness statements which have to be prepared and my submission is that they are already underway …
At no time between 23 December 2009 and 12 February 2010 did you notify us that the position had changed such that your client would not be able to comply with paragraph 7 of the 9 November 2009 orders.
Our clients require that your client remedy this default immediately. Should your client fail to do so, we anticipate that our clients will instruct us, at short notice, to seek to have the matter listed. Our clients reserve their rights in respect of the default.
228 On 18 February 2010 the applicant's solicitors emailed the respondents' solicitors stating that the applicant would "have its witness list to you on Monday" (being 22 February 2010).
229 On 19 February 2010 the respondents' solicitors emailed the applicant's solicitors reminding the applicant that the applicant was required to file not only a list of witnesses, but "an outline of the evidence of each of the witnesses upon which the applicant proposes to rely at trial by Friday, 12 February 2010".
230 On 22 February 2010 pursuant to the orders of 23 December 2009 the respondents made discovery in accordance with the categories agreed between the parties.
231 On the same day the applicant served a list of witnesses, 10 days after the date specified in the orders. The list of witnesses did not include an outline of their evidence. The list was in the following form:
Name Evidence Relating Inter-Alia To Role
1 Clift, Dean Ongoing development of Smart Managing Director of The Smart Company Pty Ltd
2 Cousins, Tim Expert Report Tim Cousins & Associates
3 Filsell, David Background which may include but is not limited to paragraphs 6 to 32, 56 to 65, and 113 to 115 of the FFSOC General Manager of Home Systems Plus, involved with The Smart Company Pty Ltd and Smart Suburbs Pty Ltd
and Defence thereto
4 Fitzpatrick, Paul Background which may include but is not limited to paragraphs 6 to 65, 72 to 79, 85 to 115 of the FFSOC and Defence thereto Previous Director of Marketing, The Smart Company Pty Ltd
5 Mittnacht, David Background which may include but is not limited to paragraphs 6 to 65, 72 to 79, 85 to 115 of the FFSOC and Defence thereto Chief Systems Architect, The Smart Company Pty Ltd
6 Portellos, Sotirios Events up to and including the voluntary administration of SmartWorld Corporation, the Deed of Company Arrangement, events during the period 2001 to 2004 including termination of the Heads of Agreement, including but not limited to paragraphs 70 to 71 and paragraphs 82 to 84 of the FFSOC and Defence thereto Previous director of The Smart Company Pty Ltd
7 Reade, Alex Expert Report Sothertons
8 Richards, David General industry background SmartHouse Magazine
9 Rohrlach, Robert Background which may include but is not limited to paragraphs 6 to 65, 72 to 79, 85 to 115 of the FFSOC and Defence thereto Previous Managing Director of The Smart Company Pty Ltd, previous director of IHG Limited, Smart Suburbs Pty Ltd and other affiliates
10 Sheedy, Des Background including but not limited to paragraphs 33 to 54 of the FFSOC and Defence thereto Director of Primaries of WA
11 Tomazos, Dorothea Background and ongoing development of Smart Director of The Smart Company Pty Ltd