Ironically Ramset rely upon this circular in support of an argument that from and after its date no person dealing with Ramset could be said to have been misled since they would have had notice of Advanced's claim. The argument ignores the possibility that the circular did not find its way to all customers of Ramset. I reject a submission that Ramset's conduct could not be misleading after the circulation of the warning on the basis that there could be no obligation thereafter upon Ramset to warn customers or users of a matter of which they were aware.
After the warning was circulated Ramset continued to sell clutches.
I am of the view that the failure of Ramset to warn its customers that use of clutches or components in a particular way might constitute an infringement of Advanced's patent, does constitute conduct in trade or commerce which is misleading or deceptive or likely to mislead or deceive users. It does not seem to me to affect the proposition to say, as counsel for Ramset says, that Ramset had no control over how, when and where components were to be used, or over its customers or their activities. So much may be conceded but does not affect the reasonable expectation that arises of a warning. Nor, in my view, does the conduct of Ramset cease to be misleading and deceptive even if the facts are, as they have been proved to be, that no legal action was ever taken against any contractors or others using clutches or components supplied by Ramset.
In these circumstances I would be of the view that an injunction should be granted restraining Ramset (unless with the licence of Advanced) from supplying clutches or anchors of the kind similar to a Frimeda clutch without disclosing that use in the manner set out in the patent would be an infringement of the rights of Advanced as owner of that patent. Since the precise form of the injunction may be the subject of debate, particularly as Ramset is presently in the course of manufacturing a different form of clutch, I would wish to hear submissions on the question of the form of the injunction if the parties do not agree.
The applicants' claim for damages:
It is one thing to hold that Ramset was in breach of s52 of the Trade Practices Act in supplying clutches or anchors without disclosing the potential breach of Advanced's patent. It is another to say that Advanced is entitled to damages arising from that breach.
The first difficulty is that Advanced must bring itself within s82 of the Trade Practices Act. That section would require, in the present case, Advanced to show not merely a loss of sales and resultant profit, but also that any loss it suffered came about by reason of Ramset's misleading and deceptive conduct. In other words, Advanced must show in respect of any loss that that loss was caused by the misleading and deceptive conduct of Ramset.
The evidence does not enable me to reach any such conclusion on the balance of probabilities. There is no direct evidence that any particular purchaser, had that purchaser been told of the potentiality of breach of Advanced's patent, would have purchased from Advanced anchors or other items for use in a face-lift operation. Nor is this a matter of necessary inference.
A prospective purchaser advised of the potentiality of breach of Advanced's patent would have had a number of options. The purchaser might have then approached Advanced and purchased some or all of the supplies required from Advanced. The purchaser might, on the other hand, have decided to take his or her chance and continued purchasing from Ramset. After all, the chances of Advanced taking proceedings against those who were in fact potential customers of Advanced was practically not high. The fact that Advanced took no such action against any person for infringement perhaps demonstrates the magnitude of the risk. Further, a purchaser may have received advice that the patent was not valid. That issue was, after all, quite arguable.
Alternatively, some purchasers might well have accepted that they should use the clutches without remote release or without an extended lever arm. Finally, some customers might well have decided to use a quite different system - there were other systems on the market.
All one can say on the evidence is that it is possible that an unquantifiable number of purchasers would have switched to purchase some, at least, of their supplies from Ramset. However, I am wholly unable on the evidence before me to make any finding as to how many would, on the balance of probability, have done so, or indeed if any would more probably than not have done so.
There are other difficulties in the path of Advanced. While it is true that damages need not be proved with mathematical precision and that the Court will use its best endeavours to arrive at a fair figure (cf Typing Centre of NSW Pty Ltd v Northern Business College Ltd (1989) 13 IPR 627 at 641; Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167 at 182-3) there may come a point, and the present is such a case, when the calculation is just impossible.
First, it would be necessary to determine the number of customers in fact purchasing from Ramset who would, had all the facts been revealed to them, have switched to make purchases thereafter from Advanced. Second, it would be necessary to determine the extent to which those persons would have purchased the whole of their supplies from Advanced rather than merely some of them.
There is an assumption underlying Advanced's case that purchasers of anchors for use with clutches with extended lever arms and remote release would buy all their supplies from the one supplier irrespective of price. However, the evidence before me certainly did not show that this invariably or even usually was the case. Some items, such as ferrules, shims, bondbreakers and chamfer strips were clearly available generally for purchase from vendors other than either Ramset or Advanced. Customers might well be expected to purchase these items from whichever source offered the best price. No doubt purchase of all requirements from one supplier involved greater convenience. But such analysis as was possible from Advanced's own accounting records made it clear that not all customers of Advanced could have purchased all their supplies from Advanced and that there must have been considerable leakage in sales of components.
Third, it is clear that those customers who received from Advanced the circular which Advanced sent to its customers, to which reference has already been made, could not be said to have been thereafter misled as a result of the non-disclosure by Ramset as and from the date of the circular. While it is clear that a circular was sent only to customers of Advanced and so would not necessarily have been received by all customers of Ramset, there is no way on the evidence to determine which customers of Ramset were not customers of Advanced. Consequently there is no way on the evidence to determine which customers of Ramset, not being customers of Advanced, would have switched their purchases to Advanced if full disclosure had been made to them. This problem merely compounds the other issues, to which reference has already been made.
Next, the calculation of loss, even if all these matters were known, depends upon assumptions most of which were not proved by the evidence. The difficulties may shortly be illustrated.
Advanced's initial damages claim proceeded on the assumption that Advanced's loss could be calculated by starting either with the number of wall brace inserts or the number of lifting inserts sold. It was assumed that there could then be calculated the number of panels lifted, the average size of these panels and from there the number of ferrules per panel, the number of shims, the number of ferrule chairs etc. Underlying this calculation was the thesis, which is unacceptable, that every purchaser of anchors would have purchased from Advanced, if full disclosure had been made, all of its requirements and thus a calculable number of ferrules, shims and ferrule chairs, as well as wall braces, wall brace inserts, lifting inserts etc.
The assumptions made on behalf of Advanced did not stand up well to analysis, as the cross-examination of Mr Davis, the Managing Director of Advanced, demonstrated. In particular the results of calculations which Mr Davis advanced in evidence, allegedly from his company's records, bore no resemblance at all to such of those records tendered during the course of the hearing.
The starting point of Mr Davis' initial calculation was the figure of 52 500 said to have been the number of wall brace inserts sold by Advanced in the years 1989 to 1993. When asked to identify the source of this figure, Mr Davis said that it had been obtained from invoices which he had personally analysed at the time of preparing his affidavit. Mr Davis referred to a "myriad of working papers" which had been necessary to perform the calculations and said on oath that he believed that those working papers were in his office. Although there was plenty of opportunity for them to be produced and indeed Mr Davis was requested so to do, they never were. Mr Davis accepted the possibility that the working papers could have been destroyed. However, he could not recall having done so.
This line of cross-examination, pursued also in respect of other figures said to represent sales by Advanced, severely affected Mr Davis' credit. I have reached the conclusion that the figures which Mr Davis asserted as representing sales by Advanced of components can simply not be relied upon.
Another assumption questioned in the course of cross-examination was the number of panels which Mr Davis estimated had been constructed where four inserts were used as compared to the number of panels where eight inserts were used. Clearly the mix of panels would be relevant to the calculation of the number of inserts that would be used.
Mr Davis initially calculated fifteen ferrules per panel, but under cross-examination conceded that the figure of seven or eight was a possibility, particularly as the figure depended upon whether a particular construction had ferrules both at the top or the bottom. This, in turn, depended upon whether there was a pin connection or whether a cantilever was used. Although, if this were the only matter, I would have adjusted the figures by accepting a figure of seven or eight as an average number of ferrules, to make this finding does not take the matter much further.
Other aspects of Mr Davis' calculations bordered on the ludicrous. His initial calculations assumed that for each job for which clutches were used there would be the sale of one hand sprayer and two Burke bars. It is true that a hand sprayer and Burke bars would be used for each job, but each of the items in question was reusable and, in practice, each was used over and over.
The calculation of fifteen ferrules and fifteen ferrule chairs for each panel lifted in no way correlated with the actual sales figures of Advanced which were available for the period 1 July 1992 to 1994. Based upon Mr Davis' assumptions, it could be expected that 80,000 ferrules would have been sold. Actual sales were something in the order of 11,488. Similar discrepancies were revealed in the number of ground brace inserts estimated to be sold.
Any calculation of Advanced's loss would also have to take into account the likely sale price of the various components, had the sales been available to Advanced. Mr Davis' calculations assumed sales at list prices. He maintained, initially, that, except in the case of a small number of named customers, he did not give discounts. Later, cross-examined by reference to Advanced's records, Mr Davis conceded that Advanced regularly discounted from the prices said to be list prices. The evidence makes it virtually impossible to determine the prices which Advanced would have sold at. In consequence it is impossible to calculate the amount of profit which has been lost.
These difficulties led Mr Davis to attempt a different method of calculation of damages, raised by counsel for Advanced in written submissions after evidence had finished. These submissions commenced with sales from records in evidence of anchors and wall brace inserts. Thus, in a period 1 July 1988 to 22 November 1994, 106,103 anchors were sold and, in the same period, 47,879 wall brace inserts. As it was said the evidence disclosed that two inserts were required for each tilt-up face-lift panel, the average number of inserts per panel was 4.43, as a matter of mathematics. Calculations were made of the number of shims, ground brace inserts, bondbreakers, ferrules, ferrules chairs and hand sprayers sold by Advanced for each insert. The submissions then proceeded to assume (and it was said that the assumption was reasonable) that in making sales of anchors or inserts Advanced would have sold and hired associated products, at least at the same rate at which it sold and hired such products on its own sales. Reference was made to some evidence which was said to corroborate the approach. Ultimately, calculations were produced of what was said to have been Advanced's lost profit in each year.
These figures were not available at the time of the trial, they were not the subject of any cross-examination and counsel for Ramset properly protested an attempt at a late stage to make a totally new case on damages.
In any event, there still remained the initial difficulties of causation, to which reference has already been made, which the figures gloss over altogether.
The claim for loss of goodwill can shortly be dealt with. Goodwill can be described as an intangible asset representing the value of repeat custom. It may generally be accepted that valuers will calculate goodwill by reference to sales and profitability. The argument that the goodwill of Advanced has suffered as a result of the conduct of Ramset, proceeds on the underlying premise that there has been an identifiable loss of sales as a result of Ramset's conduct. Unless lost sales can be calculated, loss of goodwill is equally incalculable. Further, to allow both loss of profit on sales and loss of goodwill seems to me to involve a double counting.
The only reliable evidence at all of goodwill came from Mr White, a partner in a leading accounting firm, who was called for Ramset. However, given the difficulty of determining loss of profit in the first place, Advanced, in my view, has not made out a case for loss of goodwill, even if no element of double counting were involved.
Finally, I should mention that no separate attempt was made to calculate damages, if any, suffered by Burke. In any event, the claim by that company suffers the same difficulty as that brought by Advanced, in that causation has not been proved.
Costs:
There remains for consideration the question of costs. Advanced has been successful in showing that Ramset breached the provisions of s52 of the Trade Practices Act. It has failed in its patent case. It has succeeded in obtaining an injunction but failed in its damages case. These circumstances require, I believe, brief submissions to be made as to how the costs should fall.
I would accordingly direct that the matter be listed at a date convenient to counsel for short submissions as to costs and also as to the form of injunctive relief to be granted. I would direct the applicant to file and serve draft
short minutes of order to give effect to my reasons which can be the subject of debate when the matter is next listed.
I certify that this and the
preceding forty-seven (47) pages
are a true copy of the Reasons
for Judgment herein of his Honour
Justice Hill.