Tamawood Limited v Habitare Developments Pty Ltd

Counsel for the Second and Fifth Respondents: The Second and Fifth Respondents were given leave not to appear

Counsel for the Third and Fourth Respondents: The Third and Fourth Respondents were given leave not to appear

Counsel for the Sixth , Seventh and Eighth Respondents: The Sixth , Seventh and Eighth Respondents did not appear

Counsel for the Ninth Respondent: Mr AM Musgrave

Solicitor for the Ninth Respondent: Barry.Nilsson Lawyers

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION NSD 2504 of 2007

AND: HABITARE DEVELOPMENTS PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) (ACN 122 935 497)

BLOOMER CONSTRUCTIONS (QLD) PTY LTD (ACN 071 344 100)

EIGHT MARCH PTY LTD (ACN 099 315 787) (AS TRUSTEE OF THE EIGHT MARCH DISCRETIONARY TRUST)

FIRST PRIORITY DEVELOPMENTS PTY LTD (ACN 098 329 465) (AS TRUSTEE OF THE FIRST PRIORITY DISCRETIONARY TRUST)

JUDGE: COLLIER J DATE OF ORDER: 15 OCTOBER 2013 WHERE MADE: BRISBANE

The interlocutory application filed 28 May 2013 be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION NSD 2504 of 2007

AND: HABITARE DEVELOPMENTS PTY LTD (ADMINISTRATORS APPOINTED) (RECEIVERS AND MANAGERS APPOINTED) (ACN 122 935 497)

BLOOMER CONSTRUCTIONS (QLD) PTY LTD (ACN 071 344 100)

EIGHT MARCH PTY LTD (ACN 099 315 787) (AS TRUSTEE OF THE EIGHT MARCH DISCRETIONARY TRUST)

FIRST PRIORITY DEVELOPMENTS PTY LTD (ACN 098 329 465) (AS TRUSTEE OF THE FIRST PRIORITY DISCRETIONARY TRUST)

JUDGE: COLLIER J DATE: 15 OCTOBER 2013 PLACE: BRISBANE

REASONS FOR JUDGMENT 1 In Tamawood Limited v Habitare Developments Pty Ltd (Administrators Appointed) (Receivers and Managers Appointed) (No 3) (2013) 101 IPR 225; [2013] FCA 410 I made extensive findings as to liability, the background to which is set out in detail in that decision. On 28 May 2013 the ninth respondent in the substantive proceeding, Mondo Architects Pty Ltd ACN 085 992 990 ("Mondo") filed an interlocutory application seeking the following orders: 1. Pursuant to r 16.53 the ninth respondent is granted leave to file a second further amended defence in the terms of the draft second further amended defence exhibited to the affidavit of Richard John Leahy sworn on 28 May 2013. 2. The second further amended defence of the ninth respondent be filed on 21 June 2013. 3. The parties' costs of and incidental to this application be their costs in the cause. 2 This interlocutory application is opposed by the applicant to the substantive proceeding, Tamawood Limited ACN 010 954 499 ("Tamawood"). The other respondents do not oppose the interlocutory application. 3 In my view the application for leave to file a second further amended defence should be refused.

Proposed second further amended defence 4 The reason for Mondo's application is explained in the affidavit of Mr Richard Leahy, solicitor for Mondo, sworn 28 May 2013. In summary, Mr Leahy deposed that: Mondo filed an amended defence dated 19 August 2011. The solicitors for Mondo understood at all times after 19 August 2011 that the defence of innocent infringement had been pleaded. All subsequent conduct of the proceedings, including the trial, was on that basis. Following my orders of 26 September 2011, the parties conferred to prepare a document setting out issues for determination at the trial. In correspondence between the legal representatives for Tamawood and Mondo, Tamawood's lawyers disputed that the innocent infringement by Mondo was an issue in the trial on the basis that it had not been pleaded. Mondo's lawyers claimed that the defence had been pleaded by Mondo. In the Joint Statement of Issues tendered and marked as exhibit 69(M) in the proceeding, the relevant issue for determination was described as follows: Applicant's version of issue: Have the Second and Fifth Respondents made out the defence of innocent infringement under s. 115(3) of the Copyright Act 1968. Has the Ninth Respondent pleaded such a defence and if pleaded, has it made it out. Ninth Respondent's version of issue: Have the Second and Fifth Respondents, and/or the Ninth Respondent, made out the defence of innocent infringement under s. 115(3) of the Copyright Act 1968. Mondo claims that it was clear from oral submissions made during the course of the hearing that Tamawood was aware that Mondo considered that innocent infringement had been pleaded in its defence, that Mondo was leading evidence at trial in respect of innocent infringement, and that Tamawood had the opportunity to lead evidence in response. 5 The amendments proposed by Mondo to its defence are as follows: In paragraph 16 - a new sub-paragraph (g) as follows: Further, and in the alternative, by reason of the facts pleaded in this paragraph the ninth respondent was not aware, and had no reasonable grounds for suspecting, that copyright subsisted in the Conondale Drawings and that, by operation of section 115(3) of the Copyright Act 1968 the plaintiff is not entitled to any damages against the ninth respondent in respect of any infringement but is only entitled to an accounts [sic] of profits. In paragraph 23D - a new sub-paragraph (g) as follows: Further, and in the alternative, by reason of the facts pleaded in this paragraph the ninth respondent was not aware, and had no reasonable grounds for suspecting, that copyright subsisted in the Dunkeld Drawings and that, by operation of section 115(3) of the Copyright Act 1968 the plaintiff is not entitled to any damages against the ninth respondent in respect of any infringement but is only entitled to an accounts [sic] of profits. In paragraph 34 - a new sub-paragraph (e) as follows: Further, and in the alternative, by reason of the facts pleaded in this paragraph the ninth respondent was not aware, and had no reasonable grounds for suspecting, that copyright subsisted in the Hazen Drawings and that, by operation of section 115(3) of the Copyright Act 1968 the plaintiff is not entitled to any damages against the ninth respondent in respect of any infringement but is only entitled to an accounts [sic] of profits. In paragraph 73 - a new sub-paragraph (h) as follows: Further, and in the alternative, by reason of the facts pleaded in this paragraph the ninth respondent was not aware, and had no reasonable grounds for suspecting, that copyright subsisted in the Torrington Drawings and that, by operation of section 115(3) of the Copyright Act 1968 the plaintiff is not entitled to any damages against the ninth respondent in respect of any infringement but is only entitled to an accounts [sic] of profits. In paragraph 81 - a new subparagraph (f) as follows: Further, and alternatively, the plaintiff is not entitled to any damages against the ninth respondent in respect of any alleged infringement but is entitled only to an account of profits in respect of the infringement, as provided for by Section 115(3) of the Copyright Act, by reason of the fact that the ninth respondent has established that, at the time of the alleged infringements, the ninth respondent was not aware, and had no reasonable grounds for suspecting that the acts alleged to constitute the infringement were in fact an infringement of the copyright in respect of each of the drawings the subject matter of the allegation of infringement.

Submissions of the parties 6 In summary, Mondo submits that it ought be given leave to amend its defence because, in summary: It is entitled to apply for leave to amend at this stage of the proceeding pursuant to r 16.53 of the Federal Court Rules 2011 (Cth) ("Federal Court Rules"). Tamawood permitted Mondo to raise the issue of Mondo pleading innocent infringement in the Joint Statement of Issues. Tamawood took the opportunity to cross-examine witnesses on this issue, in particular Mr Speer, Mr O'Mara and Mr Sweeney. Tamawood has provided no evidence of prejudice. No further evidence would need to be led in relation to the issue. Observations of the High Court in Banque Commerciale SA en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 296-7 are directly on point. The Court has already made extensive findings in relation to the conversation between Mr Sweeney, Mr Speer and Mr O'Mara on 21 June 2006 ("the June conversation"), upon which Mondo seeks to rely in its defence of innocent infringement. Mondo's prospects of success in respect of this defence are good. 7 Tamawood opposes the interlocutory application because, in summary: The principles in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 warrant dismissal of the interlocutory application. Mondo had every opportunity to properly plead a defence based on s 115(3) of the Copyright Act 1968 (Cth) ("Copyright Act") but did not do so. The Joint Statement of Issues did not replace the pleadings. In any event it is clear that Tamawood did not consider that Mondo had pleaded a defence pursuant to s 115(3) of the Copyright Act. It follows that Tamawood did not somehow accede to Mondo being entitled to raise a defence of innocent infringement. It is clear that Mondo chose to run the risk of not seeking to amend its defence. It is now nearly two years since the hearing, and it is too late for Mondo to ask the Court and the parties to revisit this issue. No explanation has been given by Mondo as to why it did not amend its defence prior to or during the hearing. In relation to the issue of prejudice, Tamawood does not accept that it will be unnecessary for the Court to have any further hearings. The Court has delivered its judgment, and the parties are entitled to finality in respect of that decision.

Consideration 8 It is not in dispute that, in considering whether to exercise its discretion to grant leave to Mondo to amend its defence pursuant to r 16.53 of the Federal Court Rules, the principles explained by the High Court in Aon Risk Services are relevant. These principles include the following: It cannot be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs. There is an important public interest in the proper and efficient use of public resources. The resources of the Court are finite, and amendment to pleadings should not be permitted where they waste the time and resources of the Court and other parties. It is incumbent on the party seeking leave to amend pleadings to explain any delay in making such application, and why the matter was allowed to proceed to trial in its existing form. Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re-pleading, when delay and cost are taken into account (at [102]). The nature and importance of the amendment to the party applying are key considerations. A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate (at [112]). 9 Applying these principles to the case before me, and having regard to the submissions made by Tamawood and Mondo, I am satisfied that leave to amend Mondo's defence ought be refused. 10 First, prior to the substantive hearing there were several years of interlocutory steps leading up to the trial, including numerous Court attendances and several iterations of the statement of claim and defences of the respondents (including the further amended defence of Mondo filed two months prior to the substantive hearing). Notwithstanding this, Mondo did not rely upon innocent infringement pursuant to s 115(3) of the Copyright Act as a defence. It cannot be said that Mondo did not have ample opportunity to amend its defence to include innocent infringement prior to the hearing. 11 Second, it is clear that, during the course of the trial, Tamawood had made known its position - both to the Court in oral submissions, and to Mondo in correspondence - that Mondo had not pleaded innocent infringement as a defence. The Joint Statement of Issues filed towards the end of the trial (exhibit 69M) clearly demonstrates the differing views of the parties in respect of whether Mondo had so pleaded. An application by Mondo even at that stage to amend its defence to resolve any doubts concerning this aspect of the defence could have been made to the Court. No such application was made. It must follow that, at the conclusion of the trial, Mondo was prepared to leave in dispute the question whether it had pleaded innocent infringement, for determination by the Court. Indeed, this was clear from closing oral submissions of Counsel for Mondo (transcript 16 November 2011 p 45 ll 28-39). 12 Third, I am not satisfied that this is a case where the pleadings were in any way superseded by the manner in which the case was conducted. In support of its application Mondo relies on a number of cases including Banque Commerciale, Gould v Mount Oxide Mines Ltd (in Liq) (1916) 22 CLR 490 and Dare v Pulham (1982) 148 CLR 658. So, for example, Mondo refers to the following observations of Dawson J in Banque Commerciale at 296-297: It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings. It is incumbent upon the trial judge to see that the pleadings or particulars are amended so that the record reflects the proceedings as they have been conducted, but his failure to do so will not result in the invalidity of those proceedings… 13 Relevantly, in Gould at 517 Isaacs and Rich JJ said: Undoubtedly, as a general rule of fair play, and one resting on the fundamental principle that no man ought to be put to loss without having a proper opportunity of meeting the case against him, pleadings should state with sufficient clearness the case of the party whose averments they are. That is their function. Their function is discharged when the case is presented with reasonable clearness. Any want of clearness can be cured by amendment or particulars. But pleadings are only a means to an end, and if the parties in fighting their legal battles choose to restrict them, or to enlarge them, or to disregard them and meet each other on issues fairly fought out, it is impossible for either of them to hark back to the pleadings and treat them as governing the area of contest. There is abundant authority for this, even if the matter were required to rest on authority only… 14 Similarly, in Dare v Pulham Murphy, Wilson, Brennan, Deane and Dawson JJ observed at 664: Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it (Gould and Birbeck and Bacon v. Mount Oxide Mines Ltd. (In liq.) (1916) 22 C.L.R. 490 at p. 517); they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial (Miller v. Cameron (1936) 54 C.L.R. 572 at pp. 576-7); and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court. Apart from cases where the parties choose to disregard the pleadings and to fight the case on issues chosen at the trial, the relief which may be granted to a party must be founded on the pleadings (Gould and Birbeck and Bacon (1916) 22 C.L.R., at pp. 517, 518; Sri Mahant Govind Rao v. Sita Ram Kesho (1898) L.R. 25 Ind. App. 195 at p. 207). But where there is no departure during the trial from the pleaded cause of action, a disconformity between the evidence and particulars earlier furnished will not disentitle a party to a verdict based upon the evidence. Particulars may be amended after the evidence in a trial has closed (Mummery v. Irvings Pty. Ltd. (1956) 96 C.L.R. 99 at pp. 111, 112, 127), though a failure to amend particulars to accord precisely with the facts which have emerged in the course of evidence does not necessarily preclude a plaintiff from seeking a verdict on the cause of action alleged in reliance upon the facts actually established by the evidence (Leotta v. Public Transport Commission (N.S.W.) (1976) 9 A.L.R. 437 at p. 446; 50 A.L.J.R. 666 at p. 668). 15 In this case, however: While a Joint Statement of Issues for decision is a valuable tool for the assistance of the Court, the parties agreed in the body of the Joint Statement of Issues itself that the issues set out therein did not replace the pleadings. I do not accept Mondo's submission that Tamawood in any fashion acceded to the proposition that Mondo had pleaded innocent infringement as a defence. In particular: o It is clear that while there were communications between the parties where Mondo contended that it was pleading the defence of innocent infringement, Tamawood never acceded to this point. o I am not persuaded that any of the oral submissions of Senior Counsel for Tamawood to which Mr Leahy adverts in his affidavit sworn 28 May 2013 support the proposition that Tamawood accepted Mondo had pleaded innocent infringement as a defence. o Indeed it appears that during cross-examination of Mr Raymond Sweeney of Mondo during the trial, no questions were put to Mr Sweeney by Counsel for Tamawood concerning any innocent infringement of copyright by Mondo. o It is clear that the reason for there being two "versions" of the issue concerning innocent infringement and Mondo was that Tamawood maintained its position that Mondo had not pleaded this defence, whereas Mondo took the opposite view. I do not accept that evidence concerning the June conversation was relevant only to a defence of Mondo based on innocent infringement, such that the parties clearly chose to disregard the pleadings and fight the case on issues chosen at the trial. Rather, it is clear that this evidence was relevant in the context of pleadings already before the Court, in particular: o the common design claims of Tamawood in, for example, paragraphs 19J, 20U, 31J, and 55J of the Third Further Amended Statement of Claim; and o Mondo's cross-claim against Mr Peter Speer and Mr Shane O'Mara dated 15 August 2011, which was referable almost entirely to issues arising from the June conversation. 16 Fourth, contrary to Mondo's submissions I am not persuaded that, should I grant leave to Mondo to amend its defence, no new evidence would be required. Rather: I accept Tamawood's submission that it would have conducted its case differently had innocent infringement been pleaded by Mondo, in particular in respect of the merits of any such claim by Mondo. Similarly, I accept Tamawood's submission that, were leave given, it would be relevant for Tamawood to raise the question whether reasonable steps were taken by Mr Sweeney following the June conversation to ensure that Tamawood's copyright was not infringed, including for example the procuration of independent legal advice. 17 To that extent I am satisfied that Tamawood would be prejudiced by the need to revisit its case against Mondo in respect of the question of innocent infringement if leave were given. 18 Fifth, the final hearing is an event long past. The decision of Mondo to make application to - further - apply to amend its defence only following delivery of judgment requires proper explanation. In my view, no satisfactory explanation has been provided. 19 Finally, the trial (including closing submissions) occupied more than two weeks of hearing time. I am satisfied that the parties were given every opportunity to put their case. Finality in litigation is highly desirable: Commonwealth Bank of Australia v Quade (1991) 178 CLR 134 at 141; Fox v Percy (2003) 214 CLR 118 at [29]; Plaintiff S157/2002 v Commonwealth (2003) 211 CLR 476 at [176]. All matters of liability have been determined in this proceeding. 20 Tamawood submits that public confidence is undermined if parties who have had a fair opportunity to present their case decide, after the delivery of reasons, that they would like to re-litigate issues already determined or change the parameters of the dispute after reasons for judgment have been delivered. I agree. Inevitably, greater delays, greater costs, and the further use of the Court's resources to the exclusion of other litigants would follow from any grant of leave in these circumstances. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier.