Wimmera Industrial Minerals Pty Ltd v Iluka Midwest Ltd

Wimmera Industrial Minerals Pty Ltd v Iluka Midwest Ltd - [2002] FCA 653 - FCA 1998 case summary — Zoe

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BACKGROUND 1 The applicant ("WIM") is the patentee of two patents in suit in this proceeding: Australian Standard Patent No 639 089 for an invention entitled "Production of Synthetic Rutile" and Australian Petty Patent No 649 946 for an invention entitled "Production of Synthetic Rutile". The inventors named in the patents are Dr Michael Hollitt, Dr Ian Grey and Mr Anthony (Tim) O'Brien. Dr Grey is employed by CSIRO. The application was filed on 30 June 1994. By letter dated 22 December 1995 WIM's solicitors wrote to CSIRO's solicitors seeking permission to interview Dr Grey in connection with the proceeding. In follow‑up correspondence WIM's solicitors confirmed that they wished to speak to Dr Grey about "factual matters" relating to work he had carried out for WIM, including matters relating to the patent arising from that work. They said they did not wish Dr Grey to disclose any confidential information arising from work he had done for the respondent. The respondent was formerly known as RGC Mineral Sands Limited. Depending on the temporal context I will call the respondent either RGC or Iluka, and sometimes RGC/Iluka. On 20 March 1996 WIM's solicitors received a letter from RGC's solicitors in which it was pointed out that CSIRO personnel, including Dr Grey, had been retained by RGC in 1994 to provide expert technical assistance for the purpose of the proceedings. On 7 June 1996 WIM's solicitors wrote to CSIRO's solicitors expressing concern that WIM's confidential information, in CSIRO's hands generally, and in Dr Grey's in particular, was at risk of disclosure to RGC by CSIRO employees who were assisting it in the proceedings. After further correspondence, on 15 October 1996 WIM's solicitors received a letter from CSIRO's solicitors advising that in view of the existence of a dispute between WIM and RGC about their respective interests in Dr Grey, CSIRO would no longer make him available to WIM or RGC. Between then and 18 July 2001 the issue of Dr Grey's assistance to either side seems to have been dormant. On that date WIM's solicitors received a letter from Iluka's solicitors stating that Iluka wished to reinstate its retainer of Dr Grey to provide assistance on certain technical matters relevant to the proceedings, including matters arising from Dr Grey's prior work for Iluka and aspects of the prior art. On the same day CSIRO's solicitors said they proposed to allow Dr Grey to assist Iluka unless restrained by a court from doing so.

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MATERIAL IN SUPPORT OF APPLICATION 3 WIM's solicitor, Mr Goatcher, swore an affidavit in which he exhibited correspondence passing between his firm, CSIRO's solicitors and Iluka's solicitors in relation to the dispute about Dr Grey. Mr Goatcher swore a second affidavit in which he described another proceeding between the same parties arising out of the filing of a Patent Application by RGC claiming a process for the enhancement of synthetic rutile ("the SREP Application"). WIM filed a Notice of Opposition to the grant of the SREP Application on the basis that RGC had obtained the invention by means of the unauthorised use of confidential information belonging to WIM, which WIM had disclosed to third parties on a confidential basis. A hearing in relation to the SREP Application took place in March and April 2000 before a Delegate of the Commissioner of Patents. Mr Goatcher exhibited that part of the transcript of proceedings recording Dr Grey's cross‑examination, and in reliance thereon claimed that Dr Grey had conceded that he had in the past disclosed to RGC confidential information belonging to WIM. 4 Dr Hollitt swore an affidavit in which, amongst other things, he described the work he and Dr Grey had done for WIM. Dr Hollitt was employed by WIM between 1987 and 1996. From 1992 to 1996 he was WIM's General Manager. He said that WIM, a wholly owned subsidiary of CRA/Rio Tinto, was responsible for the proposed commercial development of a new business based on zirconium and titanium mineral resources. WIM did not itself maintain experimental laboratories. That work was referred to outside research bodies, including CSIRO. In the case of commercially sensitive WIM research, the outside research was done on the basis of confidentiality clauses in WIM's Standard Conditions. In relation to major projects, specific consultancy agreements were entered into which contained confidentiality clauses. 5 Dr Hollitt said he worked closely with Dr Grey in the course of the confidential projects. Much of the information he shared with Dr Grey is still confidential to WIM. Dr Grey was the main team member from CSIRO. Dr Hollitt ensured that Dr Grey was fully briefed in relation to the background and objectives of the research. This method of work required Dr Hollitt to have a great degree of trust in Dr Grey and to be assured of the strict maintenance of confidentiality in what was being disclosed. One matter discussed was the strategic benefit that could be derived from the way in which WIM's various zircon and titanium minerals upgrading projects complemented each other. These discussions were also aimed at identifying potential markets and competitors that might be interested in sublicensing technology from WIM. Accordingly, part of the discussions focused on the perceived commercial merit of various process alternatives. This led Dr Grey to have a good knowledge of what aspects of titania upgrading technology WIM regarded as important. Reports from other research organisations were routinely sent to Dr Grey for his opinion. Several of these reports are directly referable to the present proceeding because they involve process variants or steps relating to WIM's Hybrid Process. These reports are particularly confidential. 6 Dr Hollitt then described other confidential work Dr Grey had done for WIM that was related to the Hybrid Process ‑ drafting patent applications, strategic and technical developments planned by WIM, the commercial merits of process alternatives, the potential for WIM's processes to be used to solve problems experienced by other players in the industry, confidential technical results and data, and confidential technical information and reports provided by other research organisations. Dr Grey was also involved in discussions with Dr Hollitt directed to obtaining advice from Dr Grey for incorporation into Dr Hollitt's communications with WIM's patent attorneys in relation to aspects of WIM's patent application. Dr Grey commented on Dr Hollitt's draft Hybrid provisional specification. The sole purpose of these communications was to incorporate Dr Grey's comments into Dr Hollitt's instructions to the patent attorneys. Dr Grey was named as one of the inventors. He gave advice on the draft of the complete patent specification. 7 Dr Hollitt said that prior to July 1992 he was aware that Dr Grey had done research work for RGC in the past. He did not know or believe Dr Grey was doing or had done work of a kind that would give rise to a conflict of interest with WIM. He understood that Dr Grey's work for RGC had been research into fundamental chemistry rather than new process development work. When he discovered in July 1992 of the possibility that Dr Grey had been involved in the transfer of information from a WIM project to an RGC project, he terminated all further instructions to Dr Grey and CSIRO's Mineral Products Division.

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Paragraph 1(a) relief 22 Iluka contends that the restraint sought in par (a) of the notice of motion can only be supported on the basis of the alleged duty of loyalty owed by Dr Grey, and that cases dealing with the solicitor‑client relationship, where the solicitor's status gives rise to the full range of fiduciary obligations, do not apply to other relationships such as that between WIM and Dr Grey. Iluka also contends that no such duty exists in the present case, because it would be inconsistent with the contractual arrangements between the parties. 23 Iluka questioned the account given by Dr Hollitt in his affidavit in support of the motion (which is summarised in pars 4 to 6), claiming it gave a misleading impression of his and Dr Grey's respective roles in the work Dr Grey did for WIM by downplaying Dr Hollitt's qualifications and contributions and exaggerating those of Dr Grey. Illuka's counsel had proposed to cross‑examine Dr Hollitt on parts of his affidavit in the light of a statutory declaration he had made in the SREP Application before the Delegate. However Iluka agreed that in order to save court time, Dr Hollitt would not be cross‑examined, and instead Iluka should be at liberty to put before me a comparison of the two documents and make submissions about the differences between them and the significance of those differences. It is clear, as Iluka submits, that the declaration is the template for the affidavit, and that certain passages from the declaration have been excised in the course of converting it into an affidavit, and new material added. The two documents before me were marked up so as to show the deletions and additions. The following matters appear from a comparison of the two documents: (a) For reasons given in earlier paragraphs of his declaration Dr Hollitt pointed out that "Consequently, I have acquired a great deal of specialised knowledge in areas associated with the chemistry, process and engineering constraints, and economics of zircon and titanium mineral processing systems". This passage is omitted from the affidavit, as are three of the matters from which the consequence is said to flow. (b) Passages in the declaration dealing with Dr Hollitt's involvement in business strategy, marketing, and mine and business planning do not appear in the affidavit. (c) The affidavit contains information not appearing in the declaration about an advisory group set up by WIM, consisting of personnel from research organisations who discussed projects at a strategic level and in which Dr Grey played a key role. The discussions were aimed at identifying potential markets and competitors who might be interested in sublicensing technology from WIM. (d) The declaration records that Dr Hollitt explained in detail to WIM's main contacts (naming four of them including Dr Grey) the process and objectives of WIM's work, expecting them to communicate the information to other team members, and that this required Dr Hollitt to have a great degree of trust in the researchers and to be confident in the strict maintenance of confidentiality. The comparable passage in the affidavit mentions only Dr Grey and the confidence reposed in him. (e) Material in the declaration recording Dr Hollitt's contribution to the relevant research area does not appear in the affidavit. Instead the affidavit concentrates on the assistance provided by Dr Grey and CSIRO in the progress of the project. 24 On the basis of the contrast between the two documents, Iluka contends that the truth about Dr Grey's involvement with WIM is to be found in the declaration. He was part of a team that did work which led to the invention in suit, and this involved him coming into possession of information that at the time was confidential and some of which remains confidential. The claim in the affidavit that Dr Grey had a strategic or commercial role should, it was submitted, not be accepted. In particular, it was submitted that I should reject the contention in WIM's written submissions that

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CONFIDENTIAL INFORMATION ‑ PARAGRAPH 1(B) OF MOTION 25 I accept WIM's submission that there is no reason in principle why the obligation of confidentiality should be confined to any particular class or classes of service providers. While all but one of the cases referred to in par 9 involve solicitors, who are perhaps the paradigm repositories of confidential information, and about whose potential disclosures, whether intentional or not, courts are especially sensitive, Prince Jefri concerned a firm of accountants and Pradhan concerned a liquidator. The nature of the service provided by the repository of the confidential information is but one of the circumstances of the case. The relationship between the parties, the nature of the information and the circumstances in which it was imparted, are more important than the label attached to the service. I need not pursue this matter further because Iluka accepts that the information in question is confidential. 26 Before WIM's motion was filed on 31 July 2001 Iluka had made clear that it did not intend to seek to elicit from Dr Grey any confidential information. See the letters referred to in pars 19 and 20. After the filing of the motion and the affidavits in support, Iluka offered the more extensive undertaking set out in par 21, and said it was prepared to consider any drafting issues. At that stage WIM's solicitors had not particularised the information sought to be protected. This they did about a week before the date fixed for the hearing of the motion. In its outline of submissions filed on 26 March 2002 Iluka said that if the Court thought the undertaking already offered did not adequately cover the matters set out in the particulars, it was prepared to amend it as necessary. WIM was tardy in providing the particulars, and Iluka's offer to match its undertaking with the particulars was made within a reasonable time after it received them. In addition Iluka proposes that CSIRO's solicitors be present at any interview Iluka may have with Dr Grey. Iluka urged me to accept its undertaking in lieu of granting the relief sought by WIM. The offering of such an undertaking is relevant to whether there is in truth a risk of irreparable injury to WIM, and bears on the balance of convenience and the exercise of my discretion in all the circumstances. See Spry, The Principles of Equitable Remedies 6th ed (2001) at 478‑479 and Meagher, Gummow and Lehane, Equity: Doctrines and Remedies 3rd ed (1992) at 596‑597. 27 WIM submitted that Iluka's undertaking should not be accepted because in the course of providing assistance to Iluka there is a real risk that Dr Grey may unconsciously or inadvertently disclose part of WIM's confidential information. It pointed to the list of topics upon which Mr Fitzpatrick, Iluka's solicitor, said Dr Grey's assistance is required. He said that assistance is necessary to

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WIM submitted that pursuing topic (c) with Dr Grey would involve examining the ingredients of the Hybrid Process and seeking to identify differences between them and the SREP Process. This, it was said, involves understanding the claims of the patent in suit and what the specification conveys and denotes, and how it is to be construed. Iluka's representatives would be interrogating the draftsman of the specification as to how one should understand the claims, and about aspects of the specification and whether they reach areas that are to be found in the SREP Process. This line of questioning was likely to cause Dr Grey to impart, albeit unintentionally or unconsciously, matters that are within his knowledge only by reason of the work he has done for WIM. Mr Archibald described the scenario in which Dr Grey will be placed at an interview or conference ‑ "it's the likely candour and the forthcoming nature of the scientific mind that tend to exacerbate the problem and the risks". 28 WIM submitted that topic (d) would involve a consideration of whether common general knowledge extended into areas that are claimed by the patents in suit. In substance a discussion of topic (d) would see Dr Grey, one of the inventors, discussing with the party challenging the invention whether the claims in the specification are inventive or non‑inventive. It was said it was likely that Dr Grey, in discussing the margins of common general knowledge, might reveal vital elements of the work that founds the invention claimed by the hybrid patents. Common general knowledge will not be discussed in a vacuum but in the context of the patents in suit and what they reveal and how they were achieved. Pursuing that topic, it was said, could well involve revelations by Dr Grey of confidential material, either because it would tumble out despite endeavours to hold it back or by way of unconscious revelation. 29 In responding to WIM's submissions about topic (c), Iluka's counsel pointed to a later affidavit by another Iluka deponent in which the words "and the differences between the SREP Process and the Hybrid Process" are omitted. He confirmed that Iluka does not wish to ask Dr Grey about those differences. Counsel for WIM's response was that the omission of the last limb of topic (c) does not reduce the practical risk arising from the exercise. It was said that the only relevance of addressing the features of the SREP Process is to identify features which differentiate it from the Hybrid Process. The deletion of the words from topic (c) will not alter the course of the questioning or discussion with Dr Grey. The focus will inevitably be the same whether the differences are articulated or not. 30 In connection with unintentional or unconscious disclosure WIM relied on passages in Dr Grey's cross‑examination in the SREP Application before the Delegate which it was submitted show that Dr Grey is not good at keeping the information of one client separate from that of another, and had previously disclosed WIM's confidential information in response to questioning by RGC's counsel. It was said that this demonstrates that he would find it "impossible to segment those elements of the intertwined amalgam of information stored in his brain" that are confidential to WIM, and confine his disclosures to Iluka to information and knowledge sourced otherwise than in the course of his relationship with WIM. 31 Since the transcript is a confidential exhibit, I will simply say that my reading of the relevant passages causes me to accept the Delegate's view of Dr Grey's "admissions". The Delegate's decision was not in evidence. However WIM did not object to Iluka's quotation of passages from the decision, or dispute that those passages accurately recorded what the Delegate had said. I propose therefore to take the Delegate's observations into account. Referring to one of the passages, the Delegate said:

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34 The lapses, such as they were, do not lead me to conclude that Dr Grey cannot be trusted to observe confidentiality when questioned by Iluka. There are several contributing reasons for this conclusion: · My own assessment of the cross‑examination, admittedly limited to the written word, is that the lapses were either not by Dr Grey or were of a minor nature, resulting, as Dr Grey's "confessions" indicated, from a lack of awareness of the extent to which the obligation of confidentiality extended. · Dr Grey readily agreed with counsel's suggestions that in a technical sense he should have remained silent or left the room when a matter involving WIM came up. · He was, at times, too ready to concede impropriety on his part, for example when he "took full responsibility" when he was unaware of a lapse committed by someone else. · The Delegate, who had the benefit of seeing Dr Grey give evidence and was fully immersed in the SREP Application as a whole, made an assessment of the lapses that essentially accords with my own ‑ any disclosure of information was technical, reflecting a naivety, if not ignorance, in industrial property matters. · As a result of the cross‑examination Dr Grey is now well aware of how careful he needs to be in answering questions and holding discussions with Iluka. · I would expect that Dr Grey will be instructed as to the ambit and seriousness of confidentiality requirements, so that when in doubt about a WIM‑related topic, he will decline to comment. · I accept, as did WIM's counsel, that there is no fear of entrapment of Dr Grey by Iluka's lawyers, and that WIM is concerned solely about unintended or unconscious lapses. · It is proposed that CSIRO's solicitors will be present at any meeting between Iluka's lawyers and Dr Grey, and will be able to establish a regime for dealing with privileged and confidential material. 35 In the circumstances detailed in par 34 I am not persuaded by the transcript lapses that I should not accept Iluka's undertaking as sufficient to meet WIM's concerns. If CSIRO is prepared to be involved in the manner contemplated by Iluka, appropriate provisions can be inserted in a draft confidentiality undertaking to be brought into court for consideration. CSIRO has an interest in the preservation of privileged and confidential information obtained by its researchers. Many of the reasons set out above also cause me to conclude that WIM's fears (recorded in pars 27 to 29) are sufficiently accommodated by Iluka's undertaking. In light of the undertaking I do not think there is a "real" risk of disclosure (in the sense described in the cases listed in par 9) or of irreparable injury to WIM in Iluka consulting with Dr Grey in the manner proposed. In this connection I refer in particular to the matters appearing in the fifth, sixth and eighth dot points in par 34. The balance of convenience favours accepting the undertaking rather than enjoining Iluka in the manner appearing in par 1(b) of the notice of motion. Dr Grey performed much work for RGC before he was consulted by WIM. To grant WIM the relief sought would enable it to confer with Dr Grey for the purposes of the proceeding but preclude Iluka from doing so, despite its earlier and equally intense involvement with Dr Grey. That would be unfair, and can be avoided by accepting Iluka's undertaking. I refer again to the fifth, sixth and eighth dot points in par 34. In deciding, in the exercise of my discretion, to accept the undertaking in lieu of granting the injunction, I have taken into account the fact that Iluka has at all times offered a confidentiality undertaking. That its form and content has developed over time is due to WIM's tardiness in identifying the confidential information in question and not because of any reluctance on Iluka's part to offer an undertaking that meets WIM's legitimate concerns. Conclusion 36 For the reasons contained in pars 25 to 35 WIM is not entitled to the relief sought in par 1(b) of its notice of motion.

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This source of the conflict of interest was repeated in WIM's solicitors' letter of 25 October 1996. By letter of 29 October RGC's solicitors sought an explanation of the duty alleged to be owed by Dr Grey in his capacity as a co‑inventor. WIM's solicitors declined to provide an explanation. See their letter of 7 November. After the confidentiality issue came back to life in mid 2001, Iluka's solicitors again invited an explanation of the juridical basis of the duty said to be owed by Dr Grey over and above the duty not to disclose confidential information. Again the response, on 19 July, was that Dr Grey's position as an inventor of the patent in suit made it impossible for him to be retained to assist Iluka in its opposition to that patent. On 20 July Iluka, in addition to offering an undertaking that Dr Grey would not be asked to disclose any confidential information, said he would not be asked to express any views on the validity of the patent in suit. This appears to have been a response to WIM's claim that Dr Grey could not, as an inventor of the patent, assist Iluka in opposing it. 43 At no stage during the exchange of correspondence, nor on the hearing of the present motion, was any authority offered by WIM for the proposition that as a co‑inventor of the patent in suit Dr Grey owed a duty of loyalty to WIM that travelled beyond the obligation of confidence. WIM's claim, at least in its solicitors' correspondence, is that Dr Grey's status as a co‑inventor disables him from assisting Iluka in its opposition to the patent. This claim is adequately met by par (b) of Iluka's undertaking ‑ he will not be asked about "his views, opinions or thoughts on the invention claimed" in the patents. That would preclude seeking Dr Grey's views as to whether the patents in suit, or other WIM patents, involve an inventive step or are novel over the prior art. No property in a witness 44 In Harmony Shipping Co SA v Saudi Europe Line Ltd [1979] 1 WLR 1380 ("Harmony Shipping") the Court of Appeal had to decide whether an expert witness who had been consulted by one side and had given his opinion to that side can thereafter be consulted or subpoenaed by the other side to give his opinion on the facts of the case. Lord Denning MR first considered the case of a witness of fact. His Lordship said (at 1384):

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49 The Court went on to consider the factors to be taken into account in determining whether any particular item of information falls within the implied term so as to prevent its disclosure after the employment has ceased. They were · whether the nature of the employment was such that the employee habitually handled confidential material · the nature of the information itself ‑ trade secrets and material which, while not strictly a trade secret, is of such a highly confidential nature as to require comparable protection · whether the employer impressed on the employee the confidentiality of the information · whether the relevant information can be easily isolated from other information which the employee is free to use or disclose. 50 What Faccenda Chicken makes clear is that an employee's general duty of loyalty (good faith and fidelity) ceases upon the termination of his or her employment and is replaced by an implied term relating to non‑disclosure of especially confidential information. Ordinary confidential information can be disclosed after the employment ceases. In the absence of terms to the contrary in the contract of retainer, I do not see why an independent contractor should be subject to any more onerous obligation after the retainer has come to an end. Thus, if a duty of loyalty exists during the retainer, in the absence of contractual provision it will not survive its termination. The duty of loyalty may well be replaced by an implied term of the type considered in Faccenda, and the considerations to which the Court of Appeal referred will be helpful in determining the confidences that survive the termination. The distinction between the two classes of confidential information, and the difficulty in some cases of drawing the line, is not material in the present case because of Iluka's general undertaking as to confidential information. The implied term 51 WIM's counsel said that the implied term basis for relief (see par 14) was "perhaps in some respects intertwined with the second", that is to say the duty of loyalty. Although a term based on Butt v M'Donald is to do all such things as are necessary to enable the other party to have the benefit of the contract, for the purposes of the present case WIM formulated it in several different ways: · an obligation not to deprive WIM of the benefit accorded by the contract, namely the availability of an advantageous rutile process resulting from Dr Grey's work · an obligation not to place knowledge gained in or for the purposes of the retainer at the disposal of Iluka, a party having a contrary interest in the subject matter of the retainer · an obligation on Dr Grey not to place his knowledge at Iluka's disposal to assist in undermining the patents in suit. Given that the terms in clauses 6 and 7 of the Consultancy Contract did not survive its termination, substantially the same implied terms would not do so. Further, the first and third formulations of the implied term significantly overstate what it is that Iluka wants to do in relation to Dr Grey. Iluka's undertaking shows that it does not intend to ask Dr Grey to assist it in undermining the patents, or to ask him questions the answers to which will deprive WIM of the availability of the rutile process resulting from his work. See par 21. Even if terms are to be implied to the effect of these formulations, Iluka's proposal would not involve any breach. The second term restates the loyalty ground which has been rejected. Public policy 52 If clauses 6 and 7 of the Consultancy Contract survived the termination of the contract, and were, on their true construction intended to disable CSIRO/Dr Grey from assisting Iluka in the preparation of its case in the proceeding, they would be contrary to public policy and void for the reasons given by Lord Denning in Harmony Shipping. The other members of the Court of Appeal did not consider this issue. However the commentators have cast no doubt on the correctness of his Lordship's observations (see par 45), which accord with the general principle that any contract which impedes the due course of justice is against public policy. See Collins v Blantern (1767) 2 Wils 341. Obviously a term that is contrary to public policy would be implied neither by law nor from the facts. Conclusion 53 For the reasons contained in pars 37 to 50 WIM is not entitled to the relief sought in par 1(a) of its notice of motion.

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