University of Sydney v ObjectiVision Pty Limited [2018] FCA 1184 | Case summary

consideration 21 The legal principles applicable to the grant of leave to amend were summarised in some detail in the 2016 decision at [58] - [67] and the parties agree that they are applicable in the present case. I shall apply them here, without repeating them all. In particular, having regard to the matters that the Court must consider in accordance with Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; 239 CLR 175 (Aon Risk), as summarised by Gleeson J in Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Ltd (in liq) [2015] FCA 1098 (Tamaya Resources) at [127]; and endorsed by the Full Court in Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2; (2016) 332 ALR 199 at [125] per Gilmour, Perram & Beach JJ), which include the: (1) nature and importance of the amendment to the party applying for it; (2) extent of the delay and the costs associated with the amendment; (3) prejudice that might be assumed to follow from the amendment, and that which is shown; (4) explanation for any delay in applying for that leave; (5) parties' choices to date in the litigation and the consequences of those choices; (6) detriment to other litigants in the Court; 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. 22 To this may be added the observations in Barnes v Forty Two International Pty Limited [2014] FCAFC 152; (2014) 316 ALR 408 of Beach J said (Siopis and Flick JJ agreeing): [122] Not only were the appellants "entitled" to a pleading by BlueFreeway identifying the head of loss as "loss of opportunity", but they were also entitled to have that head of damage properly particularised (see, for example, David Benson Nominees Pty Ltd v Dicksons Ltd [2005] SASC 97 at [39]-[40] per Besanko J). None of this was done by BlueFreeway. For his Honour to permit BlueFreeway late in the day to put its case based upon the alternative scenario produced an unsatisfactory and inherently unfair state of affairs so far as the appellants were concerned. Pleadings serve "to ensure the basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him…" (Banque Commerciale SA (En Liqn) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 per Mason CJ and Gaudron J). BlueFreeway's further amended statement of claim did not ensure that basic requirement in relation to its alternative scenario. To ensure this basic requirement of procedural fairness, BlueFreeway should have been confined to its pleaded case that did not include this alternative scenario. This was not a case "in which the parties [had] deliberately chosen some different basis for the determination of their respective rights and liabilities" (at 287 per Mason CJ and Gaudron J). How the trial was conducted provides no support for such an inference. [123] In summary, once his Honour had found against BlueFreeway's pleaded causation and damages case, he should have dismissed the proceeding. The alternative scenario had not been pleaded, opened or run. Moreover, to allow it to be advanced for the first time in closing addresses produced inherent unfairness to the appellants. The course of evidence was not conducted on the basis of the alternative scenario. Moreover, the appellants lost the opportunity to call evidence and to appropriately cross-examine on such a scenario… 23 In my view, having regard to all of these considerations and all of the matters raised by the parties, I am firmly of the view that the application for leave to amend should be refused. The reasons for this conclusion include the following. 24 In conducting its cross-claim ObjectiVision chose to put its damages case for breach of contract on two alternative bases; loss of profits and reliance damages. It led the evidence going to both. In that circumstance it was open to it to pursue the latter form of quantification as part of its contract case, having regard to the way that the evidence fell out. By contrast, however, ObjectiVision clearly pinned its colours to the mast for the copyright and breach of confidence claims by insisting during the course of 2017 that it relied only on lost profits as the measure of damages. That led ObjectiVision and Visionsearch to adopt a particular approach to the filing of their evidence and forensic decisions made during the course of the trial. A few examples from the evidence before me in the present application are sufficient to make this point, although I am satisfied that there are likely to be many other acts or omissions in the conduct of the trial and its preparations that the cross-respondents would have considered, had they been notified of the currently proposed matters prior to the hearing. 25 In relation to the new case on "wasted expenditure", there is the potential for a fundamental difference between wasted expenditure arising from the conduct of the business of ObjectiVision as a whole (which is the manner in which the case is put in ObjectiVision's contract case based on the evidence of Mr Eversgerd) and expenditure arising from the development of the copyright work, which is OPERA v 2.3. 26 Mr Bouvier gives unchallenged affidavit evidence on behalf of the University that both the amount and the reasonableness of the expenses incurred by ObjectiVision would have been factual issues that the University would have explored, had the present form of particulars been supplied earlier. In particular, this would have included consideration of a potential division between costs incurred in the development of OPERA v2.3 and the costs in developing hardware such as AccuMap 1 and AccuMap 2 or the reasonableness of any such costs incurred. As Mr Flynn, who appeared with Mr Larish for the University, put it the University did not have an opportunity to consider seeking discovery on the issue, leading lay or expert evidence on the issue or cross-examining witnesses called by ObjectiVision on these subjects. 27 The University gives a concrete example of a different forensic choice which the University might have made had it known of the issues now raised by ObjectiVision by reference to the evidence of Mr Cheng, who gave evidence on behalf of ObjectiVision. In the course of his cross-examination, Mr Cheng said that "AccuMap is 90 per cent software and maybe 10 per cent hardware". Had the University known of ObjectiVision's current case, this answer could have been challenged in cross-examination and lines of cross-examination could have been developed to explore the question further. 28 Mr Bouvier gives evidence that the University may have led additional evidence from Associate Professor Klistorner and Mr Alkimov, witnesses called by the University, relating to the expenses and the division between expenses incurred by ObjectiVision in the preparation of OPERA v 2.3, any impact the prototype redesign may have had, and other expenses. Mr Bouvier also gives evidence that the University would have given consideration to leading expert evidence as to the reasonableness of the expenses incurred by ObjectiVision. I accept this evidence as cogent. 29 In relation to the alternative case proposed based on a notional hypothetical royalty, Mr Cobden SC, who appeared with Ms Thomas for ObjectiVision, submitted that the Court could readily assess the quantum, because the evidence provides a "precisely comparable royalty" for the same bargain. To this end, ObjectiVision submits that, by picking through the correspondence, the quantum of the alternative measure can be calculated. For example, Mr Cobden referred during submissions to an email at court book volume C12 page C10,732 dated January 2010. This email itemised the costs to Biogen of Visionsearch's system, which used the allegedly infringing TERRA software and also some hardware and could, he submitted, be a reliable guide to the value of a notional licence fee. 30 However, as the University points out, the documents upon which ObjectiVision rely appear to have come out fortuitously because they were relevant to some other issue at trial. The University and Visionsearch simply cannot know what other documents might have come out had the issue been squarely put in advance, whether from their own documents or from ObjectiVision's documents. Furthermore, if the amendment had been notified in a timely fashion, then the cross-respondents would likely have called lay and/or expert evidence on the question of a reasonable royalty. Mr Bouvier gives evidence that he is aware of the reasoning of Yates J in Winnegago Industries Inc v Knott Investments Pty LTd & Ors (No 4) [2015] FCA 1327; (2014) FCR 271 (Winnebago), where the applicant claimed damages on the basis of a reasonable royalty for the unauthorised use of its brand name. He is aware that, in assessing a reasonable royalty, the respondents in Winnebago led evidence from the relevant decision maker who would have been responsible for approving the terms of any licence entered; and independent expert witnesses going to the appropriate licence fee that may have been negotiated. He gives evidence that the University would likely have undertaken similar tasks in relation to the appropriate valuation of each of the copyright infringement and breach of confidence claims. I accept this evidence. 31 I accept that in some circumstances the assessment of quantum may involve the Court making a ready assessment of likely loss based on the available information and that in some cases such assessment is something like a "jury question". However, I reject the submission advanced by ObjectiVision that the matters going to quantum to which Mr Bouvier refers may be swatted to one side by making a rough and ready assessment and possibly discounting the quantum sought by a percentage that might take into account such matters as have been raised above, such as the reasonableness of expenses incurred or an allocation of expenses to matters unrelated to the copyright work in suit. Such an approach would be to deprive the University and Visionsearch of the opportunity to conduct their cases in such a way as they consider appropriate. It would supplant the interests of procedural fairness with some sort of expediency based on the fact that it would somehow be sensible to use discount factors in lieu of evidence and in lieu of giving the University and Visionsearch an opportunity to conduct their cases as advised. As noted in Barnes, such an approach would be quite unfair. 32 Further, to adopt such an approach would suggest that this is an example of a case where the Court would permit some imprecision in analysis because the precise quantum of loss cannot be calculated. I do not accept that this is so. In Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 196 ALR 257 Hayne J said: [37] Placer undoubtedly bore the burden of proving not only that it had suffered damage as a result of Thiess Contractors' breach of contract, but also the amount of the loss it had sustained. It goes without saying that it had to prove these matters on the balance of probabilities and with as much precision as the subject matter reasonably permitted. [38] It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be allowed. References to mere difficulty in estimating damages not relieving a court from the responsibility of estimating them as best it can may find their most apt application in cases of the former rather than the latter kind. This case did not invite attention to such questions. Placer sought to calculate its damages precisely. (citations omitted, emphasis original) 33 This is not a case where the plaintiff cannot adduce precise evidence of what has been lost. It is a case where ObjectiVision argues that it is not unfair to preclude the University and Visionsearch from attending to the quantum of loss by adducing precise evidence going to the subject. 34 If the proposed amendments were allowed, then there is in my view no doubt that the University and Visionsearch would be severely prejudiced. The evidence in the proceedings has closed. Witnesses have been called, cross-examined and discharged. Forensic decisions have been made along the way. After hearing 25 days of submissions and evidence, it would be too much to permit the case to be re-opened, or for witnesses to be recalled. Put another way, in my view there is a substantial prospect that the University and Visionsearch would have conducted their cases differently had the amended particulars been supplied at the outset and that as a result of the lateness of the proposed amendment, the prejudice to those parties is incapable of remedy. 35 I accept that it is important to ObjectiVision's case for breach of confidence and copyright infringement for the proposed amendments to be allowed. However, it is to be noted that ObjectiVision's case for breach of contract is based on the same loss. That case was pleaded and has been fully argued. Furthermore, ObjectiVision does not submit that these causes of action lack utility in the event that the proposed amendments are not allowed. No doubt that is because it considers there to be utility in the non-pecuniary aspects of these claims. 36 Having regard to the other factors identified as relevant in Aon Risk, I note that the delay in bringing the proposed amendments is inordinate. That delay is not to be judged only from the time when ObjectiVision perceived that it could no longer advance a case based on lost profits after it had sought to lead the evidence of Mr Aroy, but rather from the time when it should first have pleaded its entire case based on wasted expenditure and loss of royalty, being in June 2017. That was not at a point early in the proceedings, but some two years after ObjectiVision had first pleaded its cross-claim. It is by then that ObjectiVision was directed to supply proper particulars of its damage. There is no reason why it could not have pleaded a case such as is presently advanced at that time, in the alternative, if it wished do to so. In this regard I note that no evidence has been adduced by a legal practitioner or client explaining the reason for that delay. To the extent that ObjectiVision implicitly relies on the loss of the opportunity to advance its case based on lost profits as an explanation, I reject it. That circumstance does not go to the root of the failure, which was a failure to plead the alternative case well in advance of the trial. To the extent that the fate of the Aroy evidence does explain the delay, it does not excuse it. It was a predictable outcome and the prejudice to the University and Visionsearch outweighs the strength of the explanation. 37 During the course of argument, I was not addressed at length on the delay that would arise if the amendments sought are allowed. In part that is no doubt because the significant prejudice to the University and Visionsearch lies in the manner in which the case has already been conducted. In my view, it is not in the interest of the administration of justice to revisit the existing evidence, the question of discovery and the calling of new evidence in order to accommodate this late amendment application. 38 Before concluding, I should record the fact that the University and Visionsearch submit that another reason for rejecting the proposed amendments is because they are futile. They submit, in summary, that damages for infringement of copyright or breach of confidence are not to be calculated by reference to principles analogous to those applicable for breach of contract, where the loss of a bargain may form the basis for a claim. There may be strength in that submission. However, given the view that I have taken above, it has been unnecessary for me to decide this point. 39 In the result, the interlocutory application must be dismissed with costs. In his evidence Mr Bouvier gives an estimated breakdown of the total costs incurred by the University in responding to the application and presenting arguments in support of its position. The total costs are $31,250, which he estimates should be discounted to take into account recoverable costs to $21,525. ObjectiVision does not challenge this estimate, which I find to be reasonable. 40 The University submits that rather than extend the amount of security by the value of the costs, the costs should be payable forthwith. There is force in this submission. Furthermore, in the circumstances of this case, which has involved a meandering run of amendments on the part of ObjectiVision, in my view it is appropriate that the costs of this application be payable forthwith. Visionsearch's costs should similarly be paid forthwith, the quantum to be taxed if not agreed. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Burley.

University of Sydney v ObjectiVision Pty Limited

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