University of Sydney v ObjectiVision Pty Limited

[21]

The interlocutory application filed by respondent/cross-claimant (ObjectiVision) on 27 July 2016 (amendment application) be dismissed.
On or before seven (7) days from the date of these orders, ObjectiVision pay $200,000 into an interest bearing account operated jointly by the solicitors for ObjectiVision and the second cross-respondent (Visionsearch) by way of security for Visionsearch's costs incurred to date and in respect of costs to be incurred in relation to Visionsearch's evidence in answer.
The stay of the cross-claim against Visionsearch be lifted upon the making of the payment in order 2.
ObjectiVision pay the University of Sydney's costs of the amendment application and the lift of the stay application assessed at $90,000.
ObjectiVision pay Visionsearch's costs of the amendment application and the lift of stay application in a lump sum amount to be assessed by the Court or agreed.
ObjectiVision pay the amount specified in order 4 into an interest bearing account operated jointly by the solicitors for the University of Sydney and the solicitors for ObjectiVision within twenty-one (21) days.
In default of compliance with order 6, or with any of the steps set out in order 2(ii) - (iv) of the orders made in these proceedings on 18 December 2015, the proceeding against the University of Sydney in respect of the copyright infringement and breach of confidence cross-claims be stayed.
In default of compliance with order 2, or with any of the steps set out in order 3(ii) - (iv) of the orders made in these proceedings on 18 December 2015, the proceeding against Visionsearch in respect of the copyright infringement and breach of confidence cross-claim be stayed.
The solicitors acting for Visionsearch provide an affidavit setting out its estimated lump sum costs likely to be recovered on taxation in respect of each of the amendment application and the lift of stay application within seven (7) days.
ObjectiVision and Visionsearch endeavour to agree on an estimate of costs recoverable on a taxation of Visionsearch's costs in the amendment application and the lift of stay application within fourteen (14) days and, failing which, each file and serve a submission of no longer than two (2) pages (and ObjectiVision file such affidavit as it considers appropriate) within seven (7) days thereafter.
ObjectiVision has leave to serve any proposed amendments to the copyright and misuse of confidential information parts of the third further amended cross-claim within fourteen (14) days. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

[22]

BURLEY J: 1 The applicant (University) commenced these proceedings in April 2014. It alleged that the respondent (ObjectiVision) had acted in breach of certain licence agreements and infringed patents owned by the University. In July 2014, ObjectiVision filed a cross-claim, alleging that the University had wrongly purported to terminate the licence agreements. In May 2015, ObjectiVision filed a second further amended cross-claim (Second Cross-Claim) alleging that the University and the second cross-respondent (Visionsearch) had infringed its copyright and misused its confidential information in the source code of certain software. 2 The present controversy arises from two interlocutory applications filed by ObjectiVision. The first was filed on 27 July 2016 (the amendment application) and seeks leave to file a further amended notice of cross-claim, a fourth further amended statement of cross-claim (Fourth Cross-Claim) and a further amended defence. At the hearing, I was informed by Ms Thomas, who appears as Counsel for ObjectiVision, that the substance of the amendments to the defence reflects amendments made to the Fourth Cross-Claim. Accordingly, it is convenient in these reasons to address the amendments by reference to the Fourth Cross-Claim only. The second interlocutory application was filed on 29 August 2016 (the lift of stay application) and seeks leave for ObjectiVision to pay $200,000 into an interest bearing account by way of security for Visionsearch's costs incurred to date and in respect of costs to be incurred in relation to Visionsearch's evidence in answer. It also seeks that the stay of proceedings against Visionsearch be lifted. The stay arose from the failure of ObjectiVision to comply with orders made by Rares J in University of Sydney v ObjectiVision Pty Limited [2015] FCA 1528 (Security Judgment). 3 For the reasons set out in more detail below, I refuse leave for ObjectiVision to make the amendments sought. I grant leave for it to serve a further version of the draft amendments foreshadowed to the copyright and confidential information case. I allow the lift of stay application and I make various orders concerning the payment of costs and the provision of further security. 4 In the reasons that follow, I provide: (1) a brief outline of the procedural history of the matter; (2) a summary of the current scope of the pleadings and the proposed amendments; (3) a summary of the legal principles relevant to the applications; (4) consideration of the amendment application; (5) consideration of the lift of stay application; and (6) disposition and costs.

[23]

PROCEDURAL HISTORY 5 The statement of claim was filed on 16 April 2014 and the amended statement of claim was filed on 18 June 2014 (statement of claim). ObjectiVision filed its statement of cross-claim on 28 July 2014. Justice Rares initially ordered that all questions arising in the proceedings concerning contracts be heard and determined before and separately from questions concerning patent infringement. After the Second Cross-Claim was filed, his Honour ordered that all questions concerning copyright infringement and confidential information should be determined with the contract issues (separate question). 6 On 13 November 2015, the University served its evidence in support of its claim. On 2 February 2016, ObjectiVision served a statement of its principal, Arthur Cheng, being its evidence in answer. On 4 May 2016, the University confirmed that it did not intend to file any evidence in reply on its claim. Accordingly, the evidence in relation to the University's claim was complete by 4 May 2016. 7 The pathway for the preparation of the evidence in relation to ObjectiVision's cross-claim has been less straightforward. 8 The cross-claim was first amended on 1 September 2014, further amended on 13 November 2014 and on 22 May 2015, Rares J gave leave to file the Second Cross-Claim. That document added the claims for copyright infringement and misuse of confidential information and introduced Visionsearch into the proceedings. Those representing the University were concerned as to the adequacy of the pleading of the Second Cross-Claim and, after a series of requests for particulars, on 17 August 2015 ObjectiVision served its proposed third further amended cross-claim (Third Cross-Claim). The University was not satisfied that the pleading was adequate, but nevertheless consented to the filing of that document on 21 September 2015 with the University reserving its position as to the adequacy of the pleading. 9 On 7 December 2015, Rares J heard interlocutory applications filed by the University and Visionsearch seeking security for costs of the cross-claims (insofar as they concerned the claims for copyright infringement and misuse of confidential information). As some of his Honour's reasoning has been relied upon in the present applications, extracts of it are set out below (Security Judgment): 20. The above background provides a context in which the applications for security have been brought and resisted. There is no dispute that ObjectiVision, in its current financial position, would not be able to pay an order for costs of any substance. Its financial report for the year ended 30 June 2014 shows that it had an operating loss of $111,000 and, in the preceding financial year, an operating loss of nearly $140,000. That report also showed that the company paid consultants fees in each year of about $150,000 and received income of nearly $100,000 in each year. There is no explanation in evidence as to exactly what ObjectiVision did or is doing to earn or expend those moneys. Other evidence suggests that its registered office is a mere postal address and is not occupied by it. Mr Cheng is still the substantive owner of ObjectiVision. … 37. The evidence does not satisfy me that these proceedings will be stultified if security for costs is ordered. I accept that each amount of security sought by both the University and Visionsearch is a very significant sum. However, Mr Cheng's late provision of information, as put into evidence by Mr Mattock on information and belief only today, indicates first that Mr Cheng and his wife are both funding this litigation and have some resources. However, Mr Cheng and his wife have not put forward any statement of their assets and liabilities, nor have they offered any guarantee of ObjectiVision's liability if it could not meet any ultimate order for costs. … 46. While I am satisfied that the confidential information and breach of copyright claims that ObjectiVision wishes to bring are bona fide and cannot be viewed as claims without substance, I am not satisfied that an order for security will stultify those claims or operate in a way that is unfair. In my opinion, the lack of evidence from Mr Cheng and the late attempt to raise some unwillingness of him and his wife to expose themselves beyond a further $200,000 by way of security demonstrates that he and his wife are likely to stand to gain from the pursuit of this litigation. However, they are not prepared to wear the consequences of doing so other than through the provision of a limited amount of security that they are prepared to offer and, then, only on the terms that they are prepared to put forward. 47. For these reasons, in my opinion, each of the University and Visionsearch is entitled to security for their costs of the copyright and confidential information claims part of the cross-claim. … 54. Doing the best I can, I consider that it is appropriate to order ObjectiVision to pay into accounts operated by its and, respectively, the University's and Visionsearch's solicitors, the following sums as follows (i.e. the same amount for each of the University and Visionsearch) as security for costs: (a) $200,000, on or before 22 January 2016; (b) $30,000, within 28 days of each of the University and Visionsearch respectively serving its expert reports; (c) $120,000, in respect of preparation for trial not less than 60 days before the date fixed for the commencement of the trial; (d) $100,000, not less than seven days before the date fixed for the commencement of the trial. 55. Thus, ObjectiVision will need to provide security for costs in a total sum of $450,000 for each of the University and Visionsearch (i.e. a total of $900,000). I will also order that in default of compliance with any of the steps for the provision of security, that the proceedings be stayed thereafter until further order. I will order that any party can apply to review the amounts of security at any time since the shape of the litigation may change. ObjectiVision must also pay the costs of the two interlocutory applications for security for costs. 10 Orders reflecting these reasons were then made. At the same time, his Honour ordered (subject, of course, to any stay) first, that on or before 21 December 2015, the University and ObjectiVision provide discovery of documents relevant to the copyright and confidential information aspects of the cross-claim and secondly, that on or before 18 December 2015 ObjectiVision serve its lay and expert evidence in support of the Third Cross-Claim. 11 In December 2015, ObjectiVision asserted in correspondence that it had served its lay and expert evidence going to the cross-claim save for that relevant to the question of damages. During the course of the present application Counsel for ObjectiVision confirmed to me that that remained ObjectiVision's position. 12 After the security for costs hearing, but before security was provided, the University proceeded to finalise documents to be provided on discovery (Critical Documents), completed its reviews of the extensive evidence served by ObjectiVision and otherwise prepared to be in a position to answer ObjectiVision's evidence upon the payment of security. 13 On 21 January 2016, ObjectiVision paid the first tranche of security for the University's costs of $200,000 into its then solicitors' trust account. As a result, those representing the University commenced preparing its evidence in answer. According to the evidence in the present applications, this involved a substantial amount of work and included the preparation of the evidence of eight witnesses, some of which is now complete and others which are nearly complete. Very substantial amounts of time have gone into the preparation of this material. 14 On 9 February 2016, the University served the Critical Documents on ObjectiVision in response to the Court's earlier discovery orders. 15 On 12 February 2016, the parties attended a directions hearing at which the then solicitor for ObjectiVision confirmed that it had no funds to provide security for Visionsearch's costs. The representative said (emphasis added): I do appreciate, your Honour, if my client is able to obtain funding for that aspect of the claim… it may have an effect on the timetable and we would let your Honour know and the parties know if that - as soon as it became available. At this stage, there is no funding in that respect. 16 The representative then requested that the Court set the matter down for final hearing in mid-2016. A timetable was set down to enable the proceedings to be ready for a final hearing on the separate question by the end of August 2016, when the Court indicated that it was likely to have available time to hear the matter. 17 The directions then made included an order that by 11 March 2016, ObjectiVision file and serve any independent expert evidence that it intended to file in relation to damages in support of its cross-claim. 18 On 23 March 2016, ObjectiVision's solicitors filed a notice of ceasing to act. On 6 April 2016, Allens Linklaters (Allens) filed a notice of acting for ObjectiVision. 19 On 29 April 2016, Allens notified King & Wood Mallesons (KWM), the solicitors for the University, that in light of the content of the Critical Documents, their client was considering making an amendment to the third further amended statement of cross-claim to "take account of new factual matters raised" by the Critical Documents. On 12 May 2012, Allens foreshadowed a possible claim for misleading and deceptive conduct arising out of the Critical Documents. 20 On 24 May 2016, Allens sent an email to Rares J's associate which said, inter alia: … we think it is appropriate to inform the Court that the respondent is close to finalising arrangements with a litigation funder which would enable it to provide security for Visionsearch's costs in accordance with the Court's orders of 18 December 2015. 21 A directions hearing was subsequently conducted on 6 June 2016, during which ObjectiVision's solicitor notified the Court, first, that a proposed fourth further amended statement of claim was "at least halfway there" and seeking a month in which to finalise the document, and secondly, indicating that litigation funding was still being sought for ObjectiVision and that it was hoped that a favourable result would be achieved by 5 July 2016. 22 As a consequence, orders were made directing that ObjectiVision serve its proposed Fourth Cross-Claim by 20 June 2016 and that the University indicate whether it consented to the amendments by 27 June 2016. 23 The current proposed Fourth Cross-Claim was served on 23 June 2016. At that point KWM slowed down its work on the evidence in answer based on the contents of the Third Cross-Claim and diverted its attention to addressing the proposed amended claim. On 30 June 2016, KWM indicated that their client opposed the amendments. On 7 July 2016, Allens responded to the University's solicitors as follows: Our client remains in ongoing discussions with potential litigation funders. While our client is hopeful that a funding arrangement will be in place before the next directions hearing on 20 July 2016, there is a possibility that arrangements will not be finalised before then. We will provide an update early next week but foreshadow now that if a short further period of time is required to finalise the arrangements, our client may seek a short adjournment (something we hope, should it be sought, might be agreed as between the parties). 24 The University did not consent to an adjournment. However, ObjectiVision did not adhere to the directions that the Court made on 6 June 2016 requiring it to file and serve its application for leave to amend its pleading by 13 July 2016. Instead, on 19 July 2016, Allens served an affidavit sworn by its solicitor which indicated, in effect, that ObjectiVision remained in discussion with four potential funders, one earlier funder having rejected its advances. The solicitor estimated that at least three more weeks would be needed to secure "a final decision regarding funding from the four potential funders". 25 A further directions hearing was held on 20 July 2016. On that occasion I refused ObjectiVision's request for an adjournment of the matter for three weeks pending the securing of funding. I directed that the matter stand over for one week to enable the parties to propose a timetable taking the separate question up to a hearing date. 26 On 22 July 2016, the solicitors for the University served a draft short minutes of orders which, in effect, proposed; (a) that the University serve the balance of its lay and expert evidence in answer on the cross-claim and any further discovery by the end of August 2016 (just over 5 weeks); (b) that the parties respective computer source code experts confer and prepare a joint statement by 28 September 2016 (approximately 10 weeks); (c) that ObjectiVision serve any additional lay evidence in reply by 28 September 2016 together with any further discovery; (d) that the proceeding be listed for final hearing in March 2017 with an estimate of four weeks. 27 On 26 July 2016, the day before the scheduled directions hearing, ObjectiVision filed the amendment application together with a supporting affidavit from Mr Wiseman sworn on 26 July 2016. In [34] of that affidavit, Mr Wiseman confirmed that ObjectiVision had thus far been unsuccessful in securing litigation funding. 28 At the directions hearing on 27 July 2016, orders were made setting out a timetable for evidence and submissions on the amendment application, with the hearing of the amendment application to take place on 16 September 2016. 29 On 15 August 2016, Allens informed the solicitors for the University and Visionsearch that it held $200,000 in trust from ObjectiVision by way of a first tranche of security for Visionsearch's costs. 30 On 22 August 2016, ObjectiVision filed its interlocutory application seeking that the stay of the proceedings against Visionsearch be lifted.

[26]

Breach of Contract 35 By its Third Cross-Claim, ObjectiVision broadly alleged; that by the terms of the Licensing Agreement, the University had conferred upon ObjectiVision an exclusive licence to exploit a method covered by one of the Patents; that ObjectiVision then undertook the development of the AccuMap 1 product and marketed it and sold it until about April 2005; that from April or May 2005, ObjectiVision ceased commercialising AccuMap 1 and, with the University's knowledge and approval, began the development of AccuMap 2; that in February 2008, the University gave notice to ObjectiVision of an alleged breach of clause 7.3 of the Licensing Agreement for failure to meet minimum performance criteria prescribed in the Variation Agreement and purported to terminate the exclusivity of the licence; that by reason of its approval of ObjectiVision's plans to cease marketing AccuMap 1 and develop AccuMap 2, the University had represented to ObjectiVision that it would not enforce the minimum performance criteria and was satisfied with ObjectiVision's plans and accordingly that the University was estopped from relying upon ObjectiVision's failure to meet the minimum performance criteria. 36 The Third Cross-Claim went on to allege; that from August 2008 until 19 January 2011, the University had acted in a manner contrary to ObjectiVision's rights as an exclusive licensee, by demonstrating a product in competition to the AccuMap Products to a company called Opto Global Pty Ltd and, after January 2011, granting Visionsearch a licence; that the Heads of Agreement were entered into in January 2010 after a mediation between the parties and provided for the reinstatement of ObjectiVision's exclusive licence for a period; that the University had acted in breach of express and implied terms of the Heads of Agreement and also of a Consultancy Agreement entered into on or about 8 March 2010 and a Training Services Agreement entered on or about 9 August 2010. Significantly, ObjectiVision alleged that the University had acted in breach of the Heads of Agreement by failing or refusing to consent to ObjectiVision entering into a third party funding agreement whereby a majority of the shares in ObjectiVision were sold to Hamisa Investments Pty Ltd (Hamisa). 37 On or about 4 September 2000 the University, ObjectiVision and other shareholders entered into a written agreement governing their relationship (Shareholders' Agreement). The cross-claim further alleged; that in breach of the terms of the Shareholders' Agreement, Professor Klistorner, one of the named inventors on the Patents, had, in about July 2010, met with a company called Biogen and was asked whether he could supply "mfVEP devices" to them; that ObjectiVision could have supplied the AccuMap 1 device to Biogen or developed the AccuMap 2 device for the purposes of supplying that device to Biogen; that the University had failed to co-operate and use its best endeavours to ensure that ObjectiVision successfully carried on its business and to be just and faithful in its activities in dealings with ObjectiVision and the business of ObjectiVision. These and other matters pleaded were alleged to give rise to breaches of the Shareholders' Agreement.

[30]

The new misleading and deceptive conduct claim 43 The new claim for misleading and deceptive conduct relies on three alleged representations which are pleaded as follows: 31.1 In negotiating and executing the Heads of Agreement, the University represented that, upon execution of the Heads of Agreement: (a) ObjectiVision would have a worldwide exclusive licence to exploit the Invention and the Improvements until the end of the Exclusivity Period (as defined in the Heads of Agreement) (the exclusive licence representation); and Particulars (i) Heads of Agreement, clause 1.1. (ii) Licensing Agreement, clause 3.1. (iii) Supplemental Licence Agreement. (b) The University would consent to a third party acquiring a majority shareholding in ObjectiVision, or being granted a sublicense to exploit the Invention and the Improvements, if the third party had the resources required to commercialise the Accumap 2, and the University would not withhold its consent unreasonably (the third party consent representation). Particulars (i) Heads of Agreement, clause 1.6. 31.2 In negotiating and executing the Heads of Agreement the University represented that during the Exclusivity Period, the University would honour its obligations pursuant to the Licensing Agreement, the Supplemental Licence Agreement and the Shareholders' Agreement, including its obligations: (a) to honour ObjectiVision's exclusive license to exploit the Invention and the Improvements: Particulars (i) Heads of Agreement, clause 1.1. (ii) Licensing Agreement. (iii) Supplemental Licence Agreement. (b) to cooperate and use its best endeavours to ensure that ObjectiVision successfully carried on its business: Particulars (i) Clause 5.1(a) of the Shareholders' Agreement. (c) not to use ObjectiVision's Confidential Information (as defined in the Shareholders' Agreement) in a way which damaged or was reasonably likely to damage ObjectiVision: Particulars (i) Clause 5.1(b) of the Shareholders' Agreement. (d) not to delay unreasonably any action, approval, direction, determination or decision required of the University: Particulars (i) Clause 5.1(c) of the Shareholders' Agreement. (e) to give approvals or make decisions required of the University in good faith and in the best interests of ObjectiVision: Particulars (i) Clause 5.1(d) of the Shareholders' Agreement. (f) to be just and faithful in its activities with ObjectiVision and other shareholders: Particulars (i) Clause 5.1(e) of the Shareholders' Agreement. (the continuing cooperation representations). 44 The pleading alleges that the three representations identified above were as to future matters and were ongoing and were not withdrawn, corrected, or qualified throughout the Exclusivity Period. It goes on to state that in reliance on the representations, ObjectiVision "agreed to and executed the Heads of Agreement" and conducted its affairs on the basis that its exclusive rights were confirmed, did not sue for breach of the Licensing Agreement, the Supplemental Licensing Agreement or the Shareholders' Agreement, continued to develop the AccuMap 2 product and sought and found a third party investor to fund the commercialisation of that product. The pleading goes on to allege that the representations were misleading or deceptive in respects that I discuss in further detail below. 45 By reason of the matters so pleaded, ObjectiVision contends that the University contravened the terms of the Trade Practices Act and Australian Consumer Law and that as a result thereby suffered loss and damage.

[31]

Copyright 46 The proposed amendments to the copyright claim in the Fourth Cross-Claim which are the subject of opposition fall into three categories. 47 First, the term "OPERA" is amended to be given an inclusive definition such that the University is concerned that ObjectiVision is attempting to move beyond version 2.3 of the source code of that software to other versions. As I have noted in [38] above, version 2.3 is the version that was supplied on discovery to the University, and the only version that has been the subject of evidence. The concerns arise from proposed amendments to [63] and [64] of the Third Cross-Claim. The University's concern is compounded by a pleading in [64A], which provides that the authors of OPERA (as pleaded) made each of six other versions of that software prior to the creation of version 2.3. 48 Secondly, that ObjectiVision is also attempting to expand its case by adding [67A] and [70A], which are as follows (underlining added): 67A. Further, or in the alternative to paragraphs 60 to 64D above, OPERA, including more particularly OPERA version 2.3, contains a number of proprietary algorithms which underpin key functionalities and diagnostic routines of OPERA. A selected number of these are listed in Confidential Annexure A (together, ObjectiVision Algorithms). Particulars (i) OPERA 2 Software Design Document dated 24 July 2003; (ii) Expert report of Robert Zeidman, filed 20 November 2015 at pages 32-93 under section IV(B)6(a) to (k) and IV(B)7(a) to (q). … 70A. Further or in the alternative, at various times from July 2007 until at least April 2011, the University reproduced, in whole or in substantial part, the ObjectiVision Algorithms, by reproducing TERRA. Particulars (i) TERRA source code located on DVD produced by the University of Sydney pursuant to orders of Justice Perry of 9 October 2014 in proceedings NSD 2433 of 2013. (ii) See the 'Confidential Particulars'. (iii) Expert report of Robert Zeidman, filed 20 November 2015 [pages 39-93 and Exhibits C-AL]. 49 It will be seen that [67A] continues to refer inclusively, and not exhaustively, to OPERA ("including more particularly OPERA version 2.3") but also raises the spectre that "a number of proprietary algorithms" may be said to be separate copyright works. Paragraph 70A appears to allege that the University infringes, by reproducing in whole or in part, the so-called "ObjectiVision Algorithms". A similar allegation is made in [71A], [72], [73] - [75] and, in relation to allegations against Visionsearch, in [78A], [82] and [83]. 50 Thirdly, that by including compendious references in the particulars to "Expert report of Robert Zeidman… at pages 32-93" in numerous paragraphs (see, for example, [67A.(ii)] quoted above) the scope of the claim is confounded, not clarified. 51 During the course of oral argument, Counsel for ObjectiVision indicated that the amended pleading is intended to plead only version 2.3 of OPERA, and that the reference to the proprietary algorithms was not intended to signify that further copyright works were relied upon but rather to particularise the specific or most important files which ObjectiVision says have been copied. Further, Counsel indicated that it was not the intention of the copyright pleading or the amendments to rely on each of the algorithms as separate works. 52 Those concessions were helpful insofar as they reduced the amount of controversy in the current application. However, no draft revised version of the copyright pleading was offered. Accordingly, the appropriate course is to disallow the proposed amendments noted above and to direct that in the event that ObjectiVision wishes to persist in its amendments a draft revised version be supplied expeditiously.

[32]

Confidential Information 53 The breach of confidence case pleaded in the Third Cross-Claim makes cross references to the OPERA source code as pleaded in the copyright case, and alleges that that software constitutes the relevant confidential information. The substantial criticism made of the proposed Fourth Cross-Claim arises from amendments made to [84] which, in the amended version, is as follows (underlining added): 84. By reason of paragraphs 16 to 22, 60 to 67A of this 4FASOC [Fourth Further Amended Statement of cross-claim], the OPERA program is confidential to, and a trade secret of, ObjectiVision. Particulars The information that is confidential to, and a trade secret of, ObjectiVision is the whole of the OPERA program, with the exception of the third party products and utilities pleaded in paragraph 64(c) above, together with all underlying design documentation for OPERA v2.2 and v2.3 (the Confidential Information). 54 The first criticism made is that by virtue of the cross references made in [84], the confidential information case is affected by the same ambiguities as the copyright case concerning the proper identification of the copyright work. 55 The second criticism is that the underlined words in the Particulars to [84] significantly expand the confidential information case in a manner which had not been contemplated in the previous pleading. 56 At the hearing of the interlocutory application, Counsel for ObjectiVision indicated that it would not press the amendment insofar as it introduced the words "together with all underlying design documentation for OPERA v2.2 and v2.3", as underlined above. Counsel for ObjectiVision also indicated that she did not understand that it was intended for the amendment to pick up a wider definition of the OPERA software than that which had applied to the copyright case. 57 It is apparent from these concessions that further surgery is required to be done to the draft amendment to the Confidential Information case. I propose to make a similar direction to that which I foreshadowed in relation to the copyright infringement case above.

[33]

The Amendment Application 58 Section 37M of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act) provides: 37M The overarching purpose of civil practice and procedure provisions (1) The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes: (a) according to law; and (b) as quickly, inexpensively and efficiently as possible. (2) Without limiting the generality of subsection (1), the overarching purpose includes the following objectives: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. (3) The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose. (4) The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings: (a) the Rules of Court made under this Act; (b) any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court. 59 Section 37N of the Federal Court Act provides: 37N Parties to act consistently with the overarching purpose (1) The parties to a civil proceeding before the Court must conduct the proceeding (including negotiations for settlement of the dispute to which the proceeding relates) in a way that is consistent with the overarching purpose. (2) A party's lawyer must, in the conduct of a civil proceeding before the Court (including negotiations for settlement) on the party's behalf: (a) take account of the duty imposed on the party by subsection (1); and (b) assist the party to comply with the duty. … 60 Leave to amend an originating application is to be considered under rule 8.21 of the Federal Court Rules 2011 (Cth) (Federal Court Rules) and leave to amend a statement of claim under rule 16.53. By rule 16.53, unless rule 16.51 applies, a party must apply for the leave of the Court to amend a pleading.

[34]

Relevant case law 61 The applicable principles are well established. The Court's powers in rules 8.21(1) and 16.53 are broad. Consideration of whether to grant leave to amend must be undertaken in accordance with the overarching purpose set out in subsection 37M(1) of the Federal Court Act: Australian Competition & Consumer Commission v Jutsen (No 2) [2010] FCA 982 at [12]; Suzlon Energy Ltd v Bangad (2011) 196 FCR 259 at [19]; University of Sydney v ResMed Limited (No 5) [2012] FCA 232 at [14]; Bowen Energy Limited v 2KD Drilling Pty Ltd [2012] FCA 275 at [8]. 62 The onus is on the party seeking leave to amend to persuade the Court that such leave should be given: Dye v Commonwealth Securities Limited (No 2) [2010] FCAFC 118; (2010) 63 AILR 101 at [17]. 63 The principles articulated by the High Court in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 (Aon) apply to matters in this Court: Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261 (Cement Australia) at [43]. A Full Court of this Court in Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2; 332 ALR 199 at [125] (Tamaya) recently approved the following statement of the primary judge (Gleeson J at [127]) of relevant matters that the Court is to consider: (1) The nature and importance of the amendment to the party applying for it: Aon at [102]; (2) The extent of the delay and the costs associated with the amendment: Aon at [102]; (3) The prejudice that might be assumed to follow from the amendment, and that which is shown: Aon at [5], [100] and [102]; (4) The explanation for any delay in applying for that leave: Aon at [108]; and (5) The parties' choices to date in the litigation and the consequences of those choices: Aon at [112] and Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 (Luck) at [44]; (6) The detriment to other litigants in the Court: Aon at [93], [95] and [114] and Luck at [44]; and (7) Potential loss of public confidence in the legal system which can arise where a court is seen to accede to applications made without adequate explanation or justification: Aon at [5], [24] and [30]. 64 The weight to be given to the considerations identified in Aon, individually and in combination, and the outcome of the balancing process, may vary depending on the facts in the individual case: Cement Australia at [51]. 65 Parties must have a sufficient opportunity to identify the issues they seek to agitate: Aon at [94], [98] and [112]. At [94] and [98], the plurality said, relevantly: [94] … Where a party had had a sufficient opportunity to plead his or her case, it may be necessary for the court to make a decision which may produce a sense of injustice in that party, for the sake of doing justice to the opponent and to other litigants. [98] …what is a "just resolution" is to be understood in light of the purposes and objectives stated. 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. [Rule 21 of the Court Procedures Rules 2006 (ACT)(which has now been repealed, but was equivalent to section 37M of the Federal Court Act)'s] reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore 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. 66 In Wotton v State of Queensland [2015] FCA 910 (Wotton) at [56] and [57], Mortimer J said, relevantly: [56] … the focus of the overarching purpose is on the just resolution of disputes. In complex, novel and seriously contested litigation… a "just" resolution invariably involves resolving tension between the competing interests of and prejudices to the parties, and tension with the interests of other litigants in the Court whose proceedings depend to a greater or lesser extent on the current proceeding being heard and determined so as to "make room" for other proceedings. [57] The familiar passage in Aon… at [111] - [112] is an important aspect of resolving those tensions: An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend ... 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. (emphasis in original) 67 Significantly, the Court will consider whether the proposed amendments disclose a reasonable cause of action, or whether they have a tendency to cause prejudice, embarrassment or delay in the proceeding: Research in Motion Ltd v Samsung Electronics Australia Pty Limited (2009) 176 FCR 66 at [21] to [22]; Wotton at [59].

[36]

Misleading and deceptive conduct 72 The University submits that the misleading and deceptive conduct amendments should not be allowed. It submits that there are several problems with the pleading such that the grant of leave would be futile, as the amendments would be struck out, or they do not satisfy their requirements set out in the Federal Court Rules for proper pleading. Furthermore, the proposed pleading was served on 26 July 2016, well after the evidence in the cross-claim had been filed by the University and in circumstances when ObjectiVision had earlier agitated for a hearing of the cross-claim (see [16] above). The late amendment was not accompanied by an adequate explanation for the delay. The University further contends that if leave were granted, the progress of the proceedings towards trial would be considerably slowed, many additional witnesses would have to be interviewed many years after the events described in the pleading and the University would suffer prejudice in the form of additional cost, delay and the stress of litigation. Visionsearch substantially adopts the University's submissions. 73 ObjectiVision contends that the misleading and deceptive conduct pleading proposed is properly pleaded and adequate particulars have been given. It submits that the representations are made entirely "on the face of the Heads of Agreement… except to the extent that the Heads of Agreement does not explicitly refer to the Shareholders' Agreement". It submits that a contractual term may be misleading or deceptive and cites in support Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 (Campbell) at [35] (French CJ). 74 ObjectiVision further contends that the reason why it has only now pleaded the case is because it did not receive the Critical Documents until 10 February 2016. Prior to that date it was not aware of the misconduct of the University. Furthermore, it contends that the University, by KWM, made several incorrect or misleading statements to it about the timing of the University's pursuit of the opportunity to supply mfVEP machines to Biogen. The affidavit evidence in support of the amendments consists of affidavits sworn by Mr Andrew Wiseman. As noted, Allens became the solicitors for ObjectiVision in April 2016. Mr Wiseman points to correspondence from KWM which, ObjectiVision submits, indicates that the University mislead ObjectiVision about its earlier involvement with Biogen. Since receiving the Critical Documents, ObjectiVision has not delayed extensively but filed its proposed amendment on 26 July 2016. 75 The University contends, supported by the affidavits of its solicitor Mr Bouvier, that if the misleading and deceptive conduct amendments are allowed, the University will have to investigate factual matters concerning the negotiation of the Heads of Agreement in January 2010 and the performance of that agreement in 2010. This will involve interviewing at least 11 witnesses, many of whom are no longer University employees. The University points to the prejudice of diminished recollection; Tamaya at [90] and [91]. The University submits that as the pleading raises "freedom to operate" questions within the context of the breadth of the exclusive licence conferred under the Heads of Agreement, additional expert evidence will be required going to the scope of the exclusive licence where the licence provides for that scope by reference to "the invention" as claimed in the Patents. This will involve issues of patent construction and breadth which will call for technical evidence that otherwise would have not arisen in the controversy until after the separate question had been heard.

[38]

General problems with the pleading 77 First, the amended pleading has been brought very late in the day. In February of this year, ObjectiVision had sought a hearing date for the cross-claim in August. Evidence has been filed by the parties in relation to the contract claim. 78 Secondly, the manner in which the misrepresentation case is pleaded indicates that there is a very substantial overlap between the contracts entered into by the parties and the misrepresentation case. Indeed, the misrepresentations arise exclusively from the terms of contracts between the parties. The misleading and deceptive conduct case proposed relates to the contract claim. 79 There is authority for the proposition that where representations do no more than mirror contractual terms, it may be that the appropriate consequences stemming from a breach of those terms is damages for breach of contract rather than a claim under the Trade Practices Act or the Australian Consumer Law; Concrete Construction Group v Litevale Pty Limited [2002] NSWSC 670; (2002) 170 FLR 290 (Mason P) at [152], [167] - [169]. The position as pleaded in the present case is identified by Allsop J (as he then was) in McGrath; in the matter of Pan Pharmaceuticals Ltd (in liq) v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2; 165 FCR 230 (McGrath) at [138], where his Honour said (emphasis added): I do not think that the comments of the majority of the High Court in Effem Foods Pty Ltd (t/as Uncle Ben's of Australia) v Lake Cumberline Pty Ltd (1999) 161 ALR 599 at [34] or of Tamberlin J at first instance assist. The representation there asserted, arising from the entry into the contract, was quite different. Nothing said in Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 at 233-241; Wright v TNT Management Australia Pty Ltd (t/as Comet Overnight Transport) (1989) 15 NSWLR 679; Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189; or Adelaide Petroleum NL v Poseidon Ltd [1988] ATPR 49,695 (40-901) requires any different conclusion. Without setting any artificial constraints on the operation of ss 51A and 52 and the balance of Div 1 of Pt V, it is appropriate to say that the divining of representations from the making of contractual promises and the entry into contracts is a task to be approached with caution and with an eye to all the facts and not by reference to implying representations mechanistically from equivalent promises: see Concrete Constructions Group v Litevale Pty Ltd (2002) 170 FLR 290 at [156]-[168] per Mason P. 80 Analysis of the proposed pleading indicates that ObjectiVision does seek to divine representations from contractual promises in a mechanistic way. No facts beyond the entry into the contract are pleaded as the basis for the representation. This is the very approach that was the subject of criticism in McGrath, and which has been repeated in a number of other cases; Lane Cove Council v Michael Davies & Associates and Others [2012] NSWSC 727 at [42] - [48]; Raphael Shin Enterprises Pty Limited v Waterpoint Shepherds Bay Pty Limited [2014] NSWSC 743 at [83] - [87]. 81 In Coles Supermarkets Australia Pty Ltd v FKP Limited & Anor [2008] FCA 1915 at [68], [69] Gordon J said: [68] In Futuretronics at 239, Ormiston J "expressed [his] doubts whether a contractual promise of itself carries with it any representation as to fact or conduct" actionable by reason of s 51A. His Honour explained the issue (at 238-39) in the following terms: It is hard to believe that normally any promisee with ordinary contractual rights would… describe himself as having been deceived or misled [based on the mere acceptance of a promise]. It is only when it becomes apparent that the promise cannot be enforced, because, for example, it is either unenforceable or the promisee's rights are valueless or diminished, that one may return to the original promise to inquire whether that promise was of so little substance that it can be concluded that the promisee was indeed misled or deceived in the first place, at the time of his acceptance of the promise. Thus it may then be seen that the promisor originally had no intention to perform his promise or that he originally had no capacity or ability to perform it. … It would seem on the authorities that, at the least, a contractual promise would amount to an implied representation that the promisor then had an intention to carry out that promise. If it can be shown that he had no such intention, he would be guilty of misleading or deceptive conduct. Likewise it would seem that such a representation connotes a present ability to fulfil that promise which, if shown to be untrue at the time of making, would likewise characterise the implied representation as misleading or deceptive. [69] As this passage reveals, an express contractual promise or representation will constitute an actionable implied representation under s 52 of the TPA only if the party making the promise or representation had no intention or capability of carrying it out at the time it was made (ie the promisor had no reasonable grounds for making the promise). The questions which then arise are (1) what is the contractual promise in this case and (2) did the respondents have the intention and ability to carry it out at the time it was made? 82 In this regard, it is to be noted that whilst the opening words to [31.1] and [31.2] of the Fourth Cross-Claim plead "In negotiating and executing the Heads of Agreement...", no particulars are given of any such negotiations. ObjectiVision's submissions disavowed any reliance on matters extraneous to the contract. Accordingly, the pleaded case does not appear to rise above the terms of the contract as the basis for the representations made. 83 ObjectiVision relies on Campbell. However, the passage relied upon does not assist it. It is true, as French CJ said at [35], that the circumstance that a representation is the subject of a contractual warranty does not, as a matter of law, exclude the making of it from the purview of the statutory prohibition against misleading or deceptive conduct. However, no contractual warranty is relied upon here. At [36] his Honour emphasised that a warranty of present fact may be characterised as misleading or deceptive conduct simply because it involves the making of a false statement, and a warranty as to a forecast of performance may fall within the category of a statement as to a future matter. However, as noted below, the three representations relied upon involve representations as to a legal state of affairs (the existence of an exclusive licence, the promise to not unreasonably withhold consent to a third party acquisition, the promise to continue to abide by the contract) none of which would fall within the class identified in French CJ's observations. 84 The above analysis indicates that the marginal utility in advancing the misleading and deceptive conduct claims in addition to the contract claims presently advanced is likely to be minimal or non-existent. It is difficult to perceive the amendments as being of importance to ObjectiVision's case (Aon at [102]). I am reinforced in this view by my examination of the specific representations pleaded, which is set out in detail below. 85 Thirdly, the explanation for the delay in bringing forward the amended pleading is unconvincing. Allens has only recently begun representing ObjectiVision, and Mr Wiseman's involvement commenced in March 2016. Naturally enough he is unable to give evidence as to what ObjectiVision knew before that date. Whilst submissions were made to the effect that ObjectiVision did not or could not be aware of the matters concerning the University's involvement with Biogen before 2010, I am not able to infer that from the correspondence alone. Further, I am not prepared to conclude, as ObjectiVision urged, that the University mislead ObjectiVision as to Associate Professor Klisterner's involvement with Biogen. The letter from KWM dated 4 February 2013, upon which ObjectiVision primarily relied, was specifically directed to "involvement with Biogen after mid-2010". It was responding to a lengthy and detailed letter from Gilbert & Tobin which complained (amongst of number of things) that since the mediation (in January 2010) the Professor had been engaged in the development of mfVEP technology. KWM's response as to the Professor's involvement was that "… in relation to the matters now complained of" his relationship with Biogen began in mid-2010. I do not find that response, qualified as it was, and in the context of the correspondence as a whole, to be misleading. 86 Fourthly, I accept that if the amendments are permitted it is likely that the University will need to interview a significant number of witnesses addressing matters going back to January 2010. It is also likely that the question of the breadth of the invention will be explored in the context of the "freedom to operate" debate (see [31.6] and [31.7], quoted below, as examples where it is likely to arise). This is likely to undermine the basis upon which preparation has proceeded to date whereby issues concerning the construction of the Patents have been separated from other issues.

[39]

Problems with the exclusive licence representation pleading 87 A number of difficulties are apparent from examination of the details of the pleading. 88 First, [31.1] of the Fourth Cross-Claim commences with the words "In negotiating and executing the Heads of Agreement, the University represented that, upon execution of the Heads of Agreement:…". No particulars are given of any negotiations. No allegation arises from the reference to negotiations and no communications by or on behalf of the University are identified. The pleading in this respect is inadequate to inform the respondents of the nature of the case that they have to meet; Federal Court Rules rule 16.41. It appears from the pleading that no allegation is made in relation to "negotiating" the Heads of Agreement. That amendment would, if allowed, be liable to be struck out. 89 Secondly, the pleading of the exclusive licence representation lacks internal logic such that I would in any event refuse leave to amend. The representation is pleaded to be that ObjectiVision "would have a worldwide exclusive licence to exploit the Invention… until the end of the Exclusivity Period". Clause 1.1 of the Heads of Agreement and Clause 3.1 of the Licence Agreement are given as particulars for the making of the representation. 90 There is no dispute that the Heads of Agreement, in terms, reinstated the worldwide exclusive licence of the Invention (see [31] of the Third Cross-Claim, which is admitted by the University). Accordingly, the express terms of the Agreement satisfy the representation. 91 That then begs the question as to how the University can be said to have engaged in misleading and deceptive conduct when it had conferred the Exclusive Licence that it represented that it would? 92 In this respect, [31.6] of the Fourth Cross-Claim pleads: The exclusive licence representation was misleading or deceptive in that the University did not have reasonable grounds to represent that ObjectiVision would have a worldwide exclusive licence to exploit the Invention… during the Exclusivity Period… 93 However, Clause 1.1 of the Heads of Agreement conferred just such a licence. The pleading does not identify representational conduct any different to the contractual rights so conferred. Having been so conferred, the logic of this aspect of the Cross-Claim is unclear. The representation was that an exclusive licence would be granted; that licence was granted in terms. If the pleading seeks to raise a misrepresentation case that goes beyond the premise that the University would offer a contractual term, then it does not say so, and the pleading is embarrassing as it does not set out what beyond the contractual term was said to amount to misleading or deceptive conduct. 94 Thirdly, the six different circumstances identified in [31.6] upon which it said that the Exclusive Licence Representation is misleading or deceptive do not assist. They are (emphasis added): (a) Since at least about April 2009, the University had been communicating with Biogen Idec (Biogen) regarding an opportunity to supply to Biogen mfVEP machines that would exploit the Invention and the Improvements [particulars are then given of emails dated between 5 April 2009 and 1 June 2009]; (b) At the time of negotiating and concluding the Heads of Agreement, the University intended to continue to pursue the opportunity to supply to Biogen mfVEP machines that would exploit the Invention and the Improvements, and it in fact did so [particulars are given of emails dating from 5 July 2010 to 25 August 2010]; (c) The University proceeded on the basis that it was entitled to develop and supply mfVEP machines to Biogen… because it considered Objectivision's licence to exploit the Invention… to be limited to the "field of use" of "measurement of the human visual field". The University did not inform ObjectiVision that it considered that ObjectiVision's licence was so limited, in circumstances where the University was aware that ObjectiVision considered that its licence was not so limited…[particulars are given of documents dated from 12 October 2006 until 2 December 2013]; (d) The University also proceeded on the basis that it had the "freedom to operate" necessary to supply Biogen with mfVEP machines, because it considered that the mfVEP machines could be constructed without exploiting the Invention or the Improvements, or because of certain prior art in the public domain before the priority date of the 276 Patent. The University considered but chose not to seek a Patent Attorney's advice about those issues and did not disclose to ObjectiVision that it considered that it had such "freedom to operate" [particulars are given of emails dating from 25 July 2010 to 5 November 2010]; (e) Since about December 2008 the University had been in discussions with Opto Global regarding a license of the right to exploit the Invention and the Improvements, including for the purpose of supplying mfVEP machines to Biogen [particulars are given of documents dated from 16 December 2008 until 17 December 2009]; (f) From at least August 2010, University representatives met to discuss the possibility of a third party being engaged to build the mfVEP machines to be supplied to Biogen. Those discussions eventuated with parties associated with the University (Coles and Peterson) incorporating Visionsearch to license the Invention and the Improvements and supply mfVEP machines to Biogen [particulars are given of documents dated from 25 August 2010 until 5 August 2011, and an undated document titled "Biogen Project Structure"]. 95 ObjectiVision makes no allegation that there was a representation made by the University that it would not negotiate, communicate with or discuss the supply of mfVEP licences with third parties during the Exclusivity Period (as that term is defined in the Heads of Agreement). Nor does it allege that there was a representation by the University that it would notify ObjectiVision in the event that it did engage in negotiations. It plainly would not be a breach of a term of an exclusive licence to negotiate (or, still less, discuss) conferral of a licence upon a third party that might arise beyond the scope of or upon the cessation of that licence. 96 In my view, these "circumstances" of alleged misleading and deceptive conduct do not rise to establish the falsity of the representation pleaded. 97 In its written outline of submissions in reply, ObjectiVision submitted: ObjectiVision's case is that, by agreeing to "reinstate" ObjectiVision's exclusive licence for the term of the Exclusivity Period, the University did not merely represent that the [sic] ObjectiVision would have certain enforceable legal rights - it represented that it would honour those rights so that ObjectiVision would have an exclusive licence in an actual, practical sense, not merely a hollow legal one. 98 For present purposes, I can see no distinction between the existence of a legal right, as conferred by the Agreements, and a legal right in "an actual, practical sense, not merely a hollow legal one". Certainly no distinction is pleaded in the current form of the Fourth Cross-Claim.

[40]

Problems with the third party consent representation 99 The third party consent representation is that, in negotiating and executing the Heads of Agreement, the University represented that upon execution of the Heads of Agreement it would consent to a third party acquiring a majority shareholding in ObjectiVision, or being granted a sub-licence to exploit the "Invention and Improvements", if that third party had the resources required to commercialise the AccuMap 2, and the University would not withhold its consent unreasonably ([31.1(b)] of the Fourth Cross-Claim). The representation arises, according to the particulars supplied, solely from the express terms of Clause 1.6 of the Heads of Agreement. In this context the problem identified in [88] above concerning the reference to "negotiating" applies equally. 100 Further, clause 1.6 of the Heads of Agreement provides: … ObjectiVision will obtain written consent from the University prior to entering into an agreement to allow a Third Party to acquire a majority shareholding in ObjectiVision or grant a sublicense. The University will provide its consent in circumstances where the Third Party has the resources required to commercialise the Accumap 2 product and will not withhold its consent unreasonably. 101 The factual debate that arises here is whether the University unreasonably withheld its consent. It supplied a contractual promise that it would not unreasonably withhold it. Given that the contractual promise was given, it seems to me to be irrelevant whether or not the University had reasonable grounds to make the representation. It is hard to see how this argument rises above the already pleaded case that the University acted in breach of Clause 1.6 of the Agreement. No basis for it to do so is pleaded. 102 In addition, there are also a number of difficulties with the particular bases upon which it is said that such conduct arises. Paragraph 31.7 alleges that the third party consent representation was misleading or deceptive in that the University did not have reasonable grounds to give it in the following circumstances: (a) The University's preferred outcome was for ObjectiVision to default on its obligations pursuant to the Licensing Agreement and the Supplemental Licence Agreement so that those agreements would terminate [particulars given are to an email from Greg Fernance dated 10 September 2008]; (b) [Paragraph 31.6 is repeated]; (c) The University did not cooperate with ObjectiVision's efforts to obtain third party investment from Matrix Capital (Matrix) [particulars given cross-reference to a later paragraph of the pleading which refers to ObjectiVision consulting with the University regarding Matrix from 8 February 2010 to 2 July 2010]; (d) The University unreasonably refused to consent to Hamisa Investments Pty Ltd (Hamisa) acquiring a majority shareholding in ObjectiVision in the circumstances pleaded in paragraphs 46 to 48 [of the Fourth Cross-Claim, which refer to an agreementbetween ObjectiVision and Hamisa dated 18 January 2011, and draft documents relevant to that agreement provided by correspondence dated 26 November 2010 until 18 January 2011]; (e) When the University refused to consent to Hamisa acquiring a majority shareholding in ObjectiVision, it had already commenced discussions about the possibility of a third party (not associated with ObjectiVision) being engaged to build the mfVEP machines to be supplied to Biogen [particulars are given of emails dated 25 August and 13 December 2010]; (f) It can be inferred from the matters pleaded in paragraphs 31.7(a) to (e) that at the time of executing the Heads of Agreement, the University did not intend to consent to a third party acquiring a majority shareholding in ObjectiVision…; (g) Further and alternatively to paragraph 31.7(f), it can be inferred from the matters pleaded in paragraphs 31.7(a) to (e) that the University did not maintain an intention throughout the Exclusivity Period to consent to a third party acquiring a majority shareholding in ObjectiVision… 103 First, the fact that the University had a "preferred outcome" ([31.7(a)]) cannot amount to misleading or deceptive conduct. Secondly, the repetition of [31.6] in [31.7(b)] does not of itself establish such conduct - see [95], [96] above. Thirdly, the allegation that the University did not cooperate with ObjectiVision to obtain third party investment from Matrix [31.7(c)] does not establish that the University did not have reasonable grounds to represent at the time that the alleged representation was made that it would consent to a third party acquiring a majority shareholding. The same may be said of [31.7(d)] and [31.7(e)]. 104 The primary ground, apparently, upon which it is said that the third party consent representation amounted to misleading or deceptive conduct arises from [31.7(f)]. There it is alleged that at the time of executing the Heads of Agreement it can be inferred from [31.7(a)] - [31.7(e)] that the University had no intention to grant its consent. However, the fact is that as at the date of the execution of the Heads of Agreement, the University did signify its intention to provide the consent. It did so by a properly executed agreement. It is difficult to see how the representation can be said to be false in the face of the Heads of Agreement. 105 Further, the conduct pleaded in [31.7(f)] asserts that at that time, the University did not intend to consent to a third party acquiring a majority shareholding. ObjectiVision here introduces a condition of mind on the part of the University. However, no proper particulars within Federal Court Rules rule 16.43 are provided. The University relies upon the decision of Dowsett J in Lee v Westpac Banking Corporation [2015] FCA 467 which, at [25], conveniently set outs the requirements that must be satisfied: It follows that a party pleading the imputed knowledge of a company must identify in its pleadings: • any agent, officer, employee or other person whose relevant knowledge the pleader seeks to attribute to the company, identifying such knowledge and otherwise complying with the requirements of r 16.43 of the Rules; • the basis for imputing such knowledge to the company by reference to each person's "closeness" and "relevance" to the company in question, again complying with r 16.43; and • if the party seeks to aggregate the knowledge of two or more employees, the basis for so doing. 106 The pleading satisfies none of these requirements. 107 In addition, [31.7(g)] pleads that it can be inferred that "the University did not maintain an intention throughout the Exclusivity Period…". Again, for the reasons identified above, this pleading does not satisfy the requirements of the Rules.

[43]

THE LIFT OF STAY APPLICATION 116 The lift of stay application was filed eight months after ObjectiVision was required to make its first payment of $200,000 as security for the costs of Visionsearch, for costs incurred to date and in respect of costs to be incurred in relation to Visionsearch's evidence in answer (security for costs' order 3(i) in the orders of Rares' J dated 18 December 2015). 117 Since ObjectiVision failed to makes that payment, the proceedings against Visionsearch have been stayed (order 5 in the orders of Rares' J dated 18 December 2015) but the proceedings against the University have continued. 118 ObjectiVision seeks to explain its default in an affidavit of its solicitor, Mr Andrew Wiseman sworn on 26 August 2016 where he said: 4. I am instructed that ObjectiVision did not comply with order 3(i) because it did not have the funds to do so. Current Funding Position 5. At paragraph 5 of my affidavit sworn on 22 August 2016, I stated that: On or about 12 August 2016, $200,000 was received into Allens' trust account, which I was instructed was to be held by Allens by way of security for Visionsearch's costs. 6. I am instructed that a third party group (not shareholders in ObjectiVision) has provided ObjectiVision with bridge litigation funding, on a confidential basis, with the aim of funding the conduct of the proceedings until litigation funding is in place. 119 ObjectiVision submits that it is in the interests of justice that the copyright and confidential information claims proceed against Visionsearch. It submits that circumstances since the stay came into effect have materially changed in that the security of $200,000 is now able to be provided. It has filed its evidence-in-chief going to those claims and it submits that the prejudice suffered by the University and Visionsearch, if the stay is lifted, will involve time, cost and inconvenience which is of a lesser order than the prejudice ObjectiVision will suffer if the stay is not lifted. 120 The University and Visionsearch submit that the explanation given by ObjectiVision is inadequate and falls far short of the candour required for the Court to exercise its discretion as required by Aon at [103], and ought to have come from Mr Cheng, a shareholder and the Chief Executive Officer in ObjectiVision. They submit that Mr Wiseman's explanation does not account for the delay at all, it does not explain the source of $200,000 and it does not explain why it is "confidential" or what is meant by "bridge litigation funding". 121 The University submits that the paucity of explanation leaves the Court in a position of being unable to assess whether further security for costs will be available, or whether further delays or defaults will be likely. Indeed it submits that there is no certainty that ObjectiVision will be in a position to conduct the cross-claim at all. 122 The University also submits that it may be inferred from the materials provided that the only reason why ObjectiVision came up with $200,000 for security was "tactical" and was to avoid its amendment application from being defeated because, absent Visionsearch, ObjectiVision's claim against the University suffered a structural defect as it did not include a necessary party. 123 Visionsearch estimates that it will take between 128 and 135 days for it to prepare its expert evidence in answer to the copyright and confidential information aspects of the cross-claim, assuming that the amendment application is dismissed. This will necessarily occasion a delay in the hearing of the proceedings. 124 The University points to this delay and complains that the Patents expire between 2019 and 2021 and that delay in hearing its case inhibits its ability to license the Patents. The University also points to the prejudice necessarily occasioned by the continuation of the litigation itself; Carey v Freehills [2014] FCA 788 at [66]. 125 The University and Visionsearch submit that in exercising any discretion, the Court should consider the potential inability of a cost award to compensate them for the delay and costs incurred; for example, O'Neil v T D Williamson Aust Pty Ltd [2008] VSC 398 at [120]. There is, they submit, a substantial risk that ObjectiVision will not comply with any costs' orders given; (1) the findings of Rares J in the Security Judgment at [20], [21] and [46]; (2) that until August 2016, ObjectiVision could not provide security because it "did not have the funds to do so"; (3) that there is no evidence to suggest that the financial position of ObjectiVision has materially altered since the Security Judgment; and (4) for several months ObjectiVision has sought to obtain litigation funding without success. In light of these matters, there is no assurance that ObjectiVision will comply with any further security orders.

[44]

Consideration of the lift of stay application 126 As noted above, the decision to grant leave to lift the stay is discretionary and will be governed by the considerations identified in section 37M of the Federal Court Act. The following matters weigh in the balance and lead me to conclude that I should grant the leave sought, subject to conditions. 127 First, the confidential information and breach of confidence claims that ObjectiVision brings were found by Rares J to be bona fide and claims not without substance (Security Judgment at [46]). 128 Secondly, these claims are proceeding against the University, evidence has been filed, and the proceedings are approaching readiness for trial. There is considerable inefficiency in depriving ObjectiVision of the opportunity to advance them against Visionsearch in the same proceedings. 129 Thirdly, the claim against the University has not yet been set down for hearing. The University has yet to serve the balance of its lay and expert evidence and several other stages in the preparation of the matter for trial are required. These include the preparation of a joint expert report. Given the considerable size and complexity of the proceedings, and its current state of readiness, the matter is unlikely to be listed for final hearing in the first half of 2017. 130 Fourthly, I note that Visionsearch estimates that it will take 128 to 135 days for its evidence in answer to the statement of Mr Zeidman to be prepared. That estimate was given at a point in time before the University had prepared its evidence, in circumstances where it was envisaged that the University and Visionsearch would prepare its evidence in answer in parallel. As it happens, the University has now nearly completed its responsive expert statements, which are to be given by Professor Zobel and Dr Dart. In these circumstances, it is undesirable for Visionsearch to proceed as if that work had not been undertaken. No doubt there is a convergence of interest between the University and Visionsearch such that economies can be achieved in the preparation of Visionsearch's evidence. Duplication between experts is undesirable, wasteful and time consuming. I expect that the cross-respondents will cooperate to minimise its occurrence with the consequence that the estimate (and consequent delay) will be significantly reduced. 131 Fifthly, ObjectiVision has offered an explanation for failing to comply with the security for costs direction. It has been simply stated as the fact that ObjectiVision did not have the money to pay it. The explanation is unsatisfactory insofar as, whilst it offers a root cause for the non-compliance, it does not supply any explanation for the almost eight month delay in obtaining money from another source. One might have expected to receive evidence going to the steps taken to secure funding by ObjectiVision so that the Court could assess the diligence with which it approached the matter. ObjectiVision answers these criticisms by contending that it did not wish to provide a more complete explanation because to do so would expose it to a waiver of privilege in communications with potential funders. However, regardless of the question of privilege, I regard it to be incumbent upon ObjectiVision to supply an adequate explanation. The explanation given provides no level of confidence that funding for security for costs will be available to be paid beyond the $200,000 currently available to Visionsearch. Indeed, it is apparent from the chronology recited above that ObjectiVision has at least notionally been seeking funding since at least May 2016 and, I infer, probably since well before then. No funding has yet been obtained. 132 My concerns as to the likely availability of further funds provide a basis for my view that ObjectiVision should be required to give further security for costs to each of the University and Visionsearch and that the cross-claim should be stayed in the event that such security is not provided on time. It might be appropriate to order that unless the Court otherwise orders, the cross-claim against that party be permanently stayed. However, I have not heard argument on the question of a permanent stay and the respondents did not seek one. Accordingly, for present purposes I note that, whilst it is appropriate to lift the stay once the presently required security for costs is paid (and the delay occasioned by the default is tolerable, if highly undesirable, within the context of the proceedings as a whole), there is no material upon which the Court might be confident that further funds will be obtained. If they are not, or if they are delayed, then a repetition of the delay experienced since February 2016 should not be permitted. 133 I am not prepared to draw the inference that the University and Visionsearch asked me to draw, to the effect that the availability of the $200,000 was "tactical" and calculated for ObjectiVision's forensic advantage. 134 Sixthly, the University and Visionsearch point to the effect of delay in reducing the availability of the Patents and also the prejudice necessarily occasioned by the continuation of the litigation. I accept that these factors are relevant. It might be noted that neither the University nor Visionsearch sought to strike out the proceedings brought against Visionsearch as a result of failure on the part of ObjectiVision to prosecute its case. Absent that step, neither party could have concluded that the claim against Visionsearch was at an end. Perhaps more significantly, in the context of the litigation as a whole, regrettable though the delay is, it is not such that in my view ObjectiVision should be shut out of its claims. 135 Finally, the University and Visionsearch contend that costs awards cannot fully compensate them for the prejudice that they have occasioned by reason of ObjectiVision's non-compliance with the security order. In the present case, balancing the competing interests that I have identified above, in my view appropriate costs orders provide a measure of recompense which, taken with the other considerations that I have identified, satisfy the justice of the situation.

[45]

DISPOSITION AND COSTS 136 For the reasons set out above, I dismiss the amendment application and allow the lift of stay application. This leaves the question of costs to be resolved. 137 The University submits that, in respect of the unsuccessful amendment application; (1) it should have its costs of, occasioned by and incidental to the application; (2) the costs should be paid in a lump sum in accordance with the assessment given by Mr Bouvier in his affidavit; and (3) the lump sum should be payable into security to the University's benefit within seven (7) days of judgment. Visionsearch makes a similar application, although it has not, as I understand it, provided a lump sum estimate of its costs. 138 The University submits that the language of (1) is necessary because the application to amend has resulted in substantial inefficiencies, resulting in costs for which it should be compensated. It further submits that the Court should increase the amount of security required to include these costs. 139 ObjectiVision makes no submission addressing costs in the event that its amendment application failed, as it did. However, it did submit that if the cross-respondents wished to vary the amount of security, they should bring a separate application before the Court to do so. In my view, that is not an efficient way to proceed. ObjectiVision has been on notice since the Bouvier affidavits were filed that the University sought security for any costs that ObjectiVision might be required to pay. It was given ample opportunity to respond to that material, either in submissions or by way of affidavit material. 140 In my view, it is appropriate for ObjectiVision to pay the cross-respondents' costs of the amendment application. I am not satisfied that it should be required to pay the costs occasioned by and incidental to that application. I also consider that it is appropriate for ObjectiVision to provide security for these costs in a lump sum. In my view, there remains considerable doubt that ObjectiVision will be in a position to fund its cross-claim. As noted above, the explanation provided for its default in the security for costs' order provides no particular basis upon which it may be considered likely or probable that it will. It remains speculative as to whether or not litigation funding will be provided. In these circumstances, it is appropriate to provide a measure of protection for the respondents in respect of costs of the current applications. 141 Further, there is considerable force in the University's submission that there is no guarantee that the cycle of default in provision of security, delay in the progression of a case then later payment, will not be repeated. Having granted the indulgence of a lift of the stay to ObjectiVision on this occasion, in my view a clear signal should be sent that it is time for the cross-claim to proceed without further delay, as I note in [132] above. 142 Turning to the question of costs of the lift of stay application, I note that ObjectiVision has been successful in its application. Even so, the University and Visionsearch submit that it is usual for the parties seeking an indulgence to pay the costs of doing so; Golski v Kirk (1987) 14 FCR 143 at 157, especially where the party resisting the indulgence sought does so properly; GAIN Capital UK Limited v Citigroup Inc (No 3) [2016] FCA 582 at [8] and [14]. 143 In answer, ObjectiVision repeats its contention that a formal application should be brought seeking security. ObjectiVision says: In considering what costs orders to make in relation to the applications, the Court would take into account the burden of those amounts in light of ObjectiVision's funding position and would not assume that the University is naive to the tactical advantages of the orders that it seeks. 144 In my view, the University has a legitimate interest in ensuring that its claim is progressed to finality with some expedition. It also has a legitimate interest in ensuring that costs orders in its favour, and security for costs orders in its favour, are met. It is appropriate that ObjectiVision pay the costs of the application to lift the stay. As a result of the stay, the litigation has been delayed by at least eight months with the consequential delay in the University's claim being heard. The explanation for its delay was threadbare, and the University and Visionsearch had a substantial basis to oppose it. As matters remain, whilst I am satisfied that the stay should be lifted, considerable uncertainty attends the progression of the cross-claim. In these circumstances, I consider it to be consistent with the overarching purpose set out in section 37M of the Federal Court Act to order that in the event that security for costs is not paid, as ordered, the cross-claim against the party in respect of whom the default is made should be stayed.

[47]

Form of Orders 149 It is possible to make the following orders immediately: (1) The interlocutory application filed by the respondent/cross-claimant (ObjectiVision) on 27 July 2016 (amendment application) be dismissed. (2) On or before seven (7) days from the date of these orders, ObjectiVision pay $200,000 into an interest bearing account operated jointly by the solicitors for ObjectiVision and the second cross-respondent (Visionsearch) by way of security for Visionsearch's costs incurred to date and in respect of costs to be incurred in relation to Visionsearch's evidence in answer. (3) The stay of the cross-claim against Visionsearch be lifted upon the making of the payment in order 2. (4) ObjectiVision Pty Ltd pay the University of Sydney's costs of the amendment application and the lift of the stay application assessed at $90,000. (5) ObjectiVision pay Visionsearch's costs of the amendment application and the lift of stay application in a lump sum amount to be assessed by the Court or agreed. (6) ObjectiVision pay the amount specified in order 4 into an interest bearing account operated jointly by the solicitors for the University of Sydney and the solicitors for ObjectiVision within twenty-one (21) days. (7) In default of compliance with order 6, or with any of the steps set out in order 2(ii) - (iv) of the orders made in these proceedings on 18 December 2015, the proceeding against the University of Sydney in respect of the copyright infringement and breach of confidence cross-claims be stayed. (8) In default of compliance with order 2, or with any of the steps set out in order 3(ii) - (iv) of the orders made in these proceedings on 18 December 2015, the proceeding against Visionsearch in respect of the copyright infringement and breach of confidence cross-claim be stayed. (9) The solicitors acting for Visionsearch provide an affidavit setting out its estimated lump sum costs likely to be recovered on taxation in respect of each of the amendment application and the lift of stay application within seven (7) days. (10) ObjectiVision and Visionsearch endeavour to agree on an estimate of costs recoverable on a taxation of Visionsearch's costs in the amendment application and the lift of stay application within fourteen (14) days and, failing which, each file and serve a submission of no longer than two (2) pages (and ObjectiVision file such affidavit as it considers appropriate) within seven (7) days thereafter. (11) ObjectiVision has leave to serve any proposed amendments to the copyright and misuse of confidential information parts of the third further amended cross-claim within fourteen (14) days. 150 Otherwise, I will direct that the parties endeavour to agree to such other directions as are appropriate for the further conduct of the proceedings (including any additional orders that they consider arise from my reasons) and provide a draft, setting out the areas of agreement and disagreement, to my associate by 24 October 2016. I will list the matter for further directions at a date convenient to the parties in the week of 24 October 2016. I certify that the preceding one hundred and fifty (150) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Burley.

University of Sydney v ObjectiVision Pty Limited - [2016] FCA 1199 - FCA 2016 case summary — Zoe

At a glance

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Judgment (47 paragraphs)

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Legislation Cited (5)

Cases Cited (29)

Cited By (8)