JUDGMENT No. 4.b44,.% NOT FOR DISTRIBUTION CATCHWORDS PRACTICE AND PROCEDURE - pleading - particulars ~ specific discovery. Federal Court Rules 0.15 r.8 PERCEPTUAL DEVELOPMENT CORPORATION v VERSI PTY LTD, DONALD LEE ZIMMERMAN and WINIFRED CAROLINE ZIMMERMAN No. WAG 78 of 1987 FRENCH J. PERTH 17 AUGUST 1988 ————, eescosed eee oe ween oer > we et, eee IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION BETWEEN: No. WAG 78 of 1987 PERCEPTUAL DEVELOPMENT CORPORATION Applicant and VERSI PTY LTD First Respondent and DONALD LEE ZIMMERMAN Second Respondent and WINIFRED CAROLINE ZIMMERMAN Third Respondent MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 17 AUGUST 1988 WHERE MADE: PERTH THE COURT ORDERS THAT: A. On the Respondents' motion filed 26 July 1988:- 1. The respondents have leave to amend the defence in accordance with the minute filed on 26 July 1988. The respondents have leave to amend their further and better particulars of defence in accordance with the minute filed in Court on 17 August 1988. Piling and service of the Minutes stand as filing and service of the amended pleading and particulars. eens 2. The respondents are to pay the applicant's costs of the motion and any costs thrown away in any event. The applicant do on or before 31 August 1988 file and deliver further and better particulars in answer to request ll(g) in the respondents' request dated 18 May 1988. On the applicant's motion filed 15 July 1988:- 1. Paragraph 5(£)(i) of the re-amended defence is. struck out. All words after and including "or alternatively" up to and including "the licensing agreement" in paragraph 7 of the re~amended defence are struck out. The respondents are to plead their positive case in answer to paragraphs 6A and 11B of the re-amended statement of claim. The respondents will have leave to file and deliver a further amended defence on or before 7 September 1988. The respondent will have leave to file and deliver substituted particulars of the amended defence on or before 14 September 1988. No order as to the costs of the motion, but the respondents are to pay the applicant's costs thrown away by reason of the further amendments to the defence or particulars. The applicant is to file and deliver any reply by 28 September 1988. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. a Pion deal Ines IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION wee ww No. WAG 78 of 1987 BETWEEN: PERCEPTUAL DEVELOPMENT CORPORATION Applicant and VERSI PTY LTD First Respondent and DONALD LEE ZIMMERMAN Second Respondent and WINIFRED CAROLINE ZIMMERMAN Third Respondent CORAM: FRENCH J. 17 August 1988 EX TEMPORE REASONS FOR JUDGMENT ON MOTIONS TO AMEND DEFENCE AND TO STRIKE QUT PARTS OF DEFENCE AND PARTICULARS Before the Court today are two motions, one brought by the respondents and the other by the applicant in relation to the respondents' defence and particulars of the defence. The first motion seeks leave to amend the defence and particulars in accordance with minutes filed on 26 July 1988 and on 17 August 1988. Having heard argument on that motion, I am satisfied that there is no reason why the amendments should not be allowed, subject to the more general attack on the pleadings and particulars brought under the applicant's motion. The wo cmc at pom toa ayn an er en lose emge wane Me ee ee ee 2. respondents also seek the provision of further and better particulars in answer to their request filed 23 May 1988 and an order for specific discovery. Particulars of Passing Off - Question 11(g) I am satisfied that the applicant should give further and better particulars in answer to question 11(g) in the respondents' request relating to the allegation of passing off. It is central to that allegation that the manner in which the passing off is said to be effected should be specified, so that the respondents know whether they face a case of explicit misrepresentation, or implicit misrepresentation by reason of get-up labelling or some other combination of conduct on their part. I will order that further and better particulars be delivered in answer to question 11(g). Particulars of Damages - Question 13 Iwill not require the applicant to provide further particulars of damages immediately, but the respondents have liberty to apply on that question. They are plainly entitled to receive a better indication of the basis of the applicant's claimed damages than they have to date, but I accept that that is a process which may have to await the assembly of evidence including answers to interrogatories, ST ieee: s tex teeta cmeteniaten ied Other Particulars Sought So far as the other particulars sought are concerned, the requests are drawn widely and in a common form that displays an adherence to convention coupled with a failure to consider precisely what elaboration of the pleadings is necessary. In my opinion, notwithstanding the wide form of the requests which raise their own risks and difficulties, the particulars that have been provided are sufficient for the purpose. The respondents are not entitled to a detailed account of how the applicant proposes' to conduct its case. Specific Discovery As to specific discovery, this is governed by 0.15 1.8 of the Federal Court Rules which provides:- "Where, at any stage of the proceeding, it appears to the Court from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for a belief that some document or class of document relating to any matter in question in the proceeding may be or may have been in the possession, custody or power of a party, the Court may order that party - {a) to file any affidavit stating whether that document or any document of that class is or has been in his possession, custody or power and, if it has been and is not then in his possession, custody or power, when he parted with it and what has become of it; and (b) to serve the affidavit on any other party." rere ewer " eee oe 4. The respondents seek specific discovery of what is described as "source books, research papers, text books, bibliography reference material and published or unpublished works relevant to the "Irlen Technology"" and rely in so doing upon the affidavit of discovery sworn by Mrs Irlen on behalf of the applicant and in particular para.5 of that affidavit which reads:-— "I am in consultation with the applicant's solicitors as to what reference material and published works need to be listed as part of the applicant's discovery. The present list of documents is the list which I _ can specify at the moment. The applicant will seek orders for exchange of expert evidence. As may be necessary all reference material to which I will be referring will then be listed in a supplementary affidavit." The mention in para.5 of the affidavit of discovery of reference material does not indicate that that is necessary relevant material of a discoverable character in the power or possession of the applicant, and Mr Stevenson says that his instructions are that there is no such additional material. In the circumstances, I am not satisfied that grounds have been established, in terms of 0.15 r.8, for an order for particular discovery and on that aspect the respondents' motion fails. Applicants' Strike Out Motion The principal debate concerned the applicant's motion which seeks to strike out certain paragraphs of the amended defence and particulars, and an order that further and better particulars be delivered. Mr Stevenson for the applicant, was eo a7 ¢ 7 8 oe nye 5. content to deal with this motion on the basis of the defence and particulars as amended and, without objection, widened his attack on certain aspects of the pleadings beyond those of which notice was given. In order to expedite the disposition of this matter today, I allowed him to do that and have dealt with his objections on that basis. It is convenient to proceed by dealing with each impugned paragraph of the re~amended defence seriatim. Paragraph 2.2 This paragraph pleads to para.2 of the re~amended statement of claim which alleges:- "2(1) The First Respondent is a company incorporated in and according to the laws of Western Australia on 15 December 1986. On 19 January 1987 the Second and Third Respondents obtained control of the First Respondent and were appointed directors thereof. (2) On 30 March 1987 the Second Respondent resigned as a director of the First Respondent but continues to take part in the management of the First Respondent and is personally concerned in the carrying on of business by the First Respondent as pleaded in paragraphs 11 to 14(c) below. (3) The Third Respondent is the wife of the Second Respondent. She continues to be a director of that corporation, and is personally concerned in the management and business of the First Respondent." In answer to 2(2) above, the re~amended defence pleads in 2.2:- we ee ee eee char sepeteiatapaicadtin tendearteaiiied te ere een ~o wel 6. "2.2 The Respondents admit that the Second Respondent resigned as a Director of the First Respondent on 30 March 1987 but otherwise deny paragraph 2(2) of the Re-~Amended Statement of Claim and say that the Second Respondent is, and was at all material times, a consultant to the First Respondent." The applicant's objection seems to be that a false issue is raised by the assertion that the second respondent is and was at all material times a consultant to the first respondent. In my opinion it is a proper response to the plea in para. 2(2). Some suggestion was made that it might link over to a later intention that an agreement in question imposed a restraint of trade on the second respondent, but I am unable to see any such linkage. So far as the objection to 2.2 of the re-amended defence is concerned, it will be dismissed. Paragraph 3 This paragraph pleads in answer, inter alia, to 6A of the re-amended statement of claim which says:- "6A. Prior to the licensing agreement pleaded in paragraph 8 none of the Respondents had used or applied or taken any steps towards developing any techniques or technologies the same as or similar to the Irlen Technology". Paragraph 3 is a simple denial of that anda number of other paragraphs of the re-amended statement of claim. By that denial it implicitly sets up a positive case that the respondents had used or applied or taken some steps towards developing techniques a _ rn -_ _ , 7. or technologies the same as or similar to the Irlen Technology. However, this implicit, positive case is not pleaded. The respondents say that all they want to do is put the applicant to proof in relation to the pleading in 6A and that in any event it is their consistent contention that the technology in question is not co-extensive with the Irlen Technology so-called in the statement of claim. It seems to me that the applicant is entitled to know the positive case of the respondents in relation to this denial. The denial by itself is insufficient and for that reason I would require the respondents to expand their pleading in para.3 to assert the true response to para.6A. That does not require a striking out order, but rather a direction that an amended defence embodying such a plea be delivered. Paragraph 4 This is a plea to para. 8 of the re-amended statement of claim which alleges that:- "8. By an agreement (hereinafter called "the Licensing agreement") made 24 January, 1986 between the Applicant and the Second Respondent, the Second Respondent was granted a licence for the use within Australia of the Irlen Technology on the terms and conditions contained therein." Paragraph 4 denies para.8 but goes on to say that by an agreement made 24 January 1986 between the applicant and the second respondent the second respondent was allowed to utilise "the technology" referred to in the licensing agreement on the terms Lae moyenne we ee pe and conditions therein contained. The point of difference between the respondents and the applicant raised by this plea is as to the characterisation of the subject matter of the agreement, that is a reference to "the technology" rather than to "the Irlen Technology" and to that extent it properly sets up the respondents' own case and is not embarrassing and the objection to it will be dismissed. Paragraph 5 Paragraph 5 responds to para.9 of the re-amended statement of claim which sets out various terms of the licensing agreement relied upon by the applicant. Certazn of the sub-paras. (a) and (e) of 9 are admitted, whereas (b), (c), (d) and (£) are denied. The defence goes on to plead the respondents' own characterisation of the terms of the licensing agreement which are put in issue by their denials. That is not an embarrassing plea. It might be that it could have been more elegantly expressed, but in the circumstances I am not prepared to strike out 5(c), (d) and (e). Sub-paragraph 5(f£) goes further to assert that cl.4 of the licensing agreement insofar as it purports to restrain the second respondent from using the technology referred to in the licensing agreement is umenforceable and it sets up two grounds for that unenforcibility. The first is pleaded as follows:- pe et pr te we nnn ee er ne a ee om pe et ot ear} 9. "(i) By reason of section 45 of the Trade Practices Act, 1974 in that it has the purpose, or would have or be likely to have the effect, of substantially lessening competition." That plea is, in my opinion, insufficient. It does not plead an important material fact, namely the relevant market. The competition in question in s.45, is competition in a market (s.45(3)). As it stands para.5(f£)({i) is defective and should be struck out. I will, however, give the respondents leave to amend if they wish to persist with the s.45 defence. 5(£)(ii) is an allegation that clause 4 is an unreasonable restraint of trade and certain particulars of that unreasonableness are set out, namely that the technology in question is not a trade secret, is not confidential to the applicant and is within public knowledge. In my opinion that plea, is not on the face of it, embarrassing or otherwise amenable to be summarily struck out. There may be a case for the argument that further and better particulars of the basis upon which it is said to be unreasonable restraint of trade should be provided, however having regard to the general proposition that once a clause is properly characterised as a restraint of trade, the onus rests upon the proponent of the restraint to show that it is reasonable. I am not prepared at this time to direct further particulars as to the basis upon which the second respondent makes his case in that regard. He does, however, run the risk of an argument at trial that in the absence of further particulars he is not entitled to argue the points of scope, geographical Spor eae "3 10, application and time. At the moment on the face of the pleading, it is not, in my opinion, able to be struck out. Paragraph 7 This paragraph responds to para.10 of the re-amended statement of claim, which pleads that pursuant to the provisions of clause 4 of the licensing agreement, the second respondent's rights to use the frlen Technology and Irien Lenses were determined on 25 January 1987 when the applicant did not renew or extend the licensing agreement. Subject to a plea which again raises the issue of "the technology" which was properly the subject matter of the agreement, the parties seem to be ad idem on termination. For some reason, however, the respondents have asserted that the agreement was terminated in the alternative by reason of the second respondent's election exercised in letters of 27 October 1986 and 20 January 1987. Given the common ground that they have on the facts of termination, it seems to me that' the plea in the alternative raises a false issue and ought to be struck out and I will so direct but that only relates to all words after "or alternatively" in para.7 of the re-amended defence and up to and including "the licensing agreement". Paragraph 8 There is here a denial of a negative assertion contained in para.11B of the re-amended statement of claim. The assertion rN one gras meee we tee te ee em ee a oper 11. in 11B is that save for such rights as flowed from the licensing agreement whilst it was current, the respondents had no right to use the Irlen Technology. This is simply denied in para. 8. The denial raises a positive case and I think the positive case should be pleaded. Again, I will require the respondents to bring in some additional pleading of their case in relation to para.1i1(b). That disposes of the questions that arise under the amended defence. Mr Stevenson has also attacked certain aspects of the particulars. I don't propose now to canvass those in any detail. The respondents have indicated through their counsel that they will bring in a substituted statement of particulars. I said in argument that certain aspects of the way in which the matters relied upon to negative confidentiality are set out in 1(5) of the particulars are unsatisfactory. Sub-~paragraph (4d) seems to have no bearing on the question of confidentiality and as to (e), there 1s difficulty in understanding just what it means. The answers to 1(5) carry over into para.3(1) which incorporates them. If it is intended on the part of the respondents to rely upon particular incidents of disclosure as negativing confidentiality, then those incidents should be set out in a reasonably coherent fashion. That is not to say that' the particulars are necessarily to be limited to things which happened on specified dates but their proper form should follow some kind of list or chronology. 12. The last particular debated relates to the respondents' contention that the technology the subject of the action is not properly capable of being owned by the applicant. Whilst in one sense that raises a question of law, it might be said that there are specific attributes or characteristics of the thing called "the technology" or "the Irlen Technology" that render it incapable of ownership at law. To the extent that that raises factual issues I think the respondents should indicate what those attributes are. On the other hand if their assertion goes no further than that the technology as described by the applicant is incapable of ownership at law, then that may well be a_ sufficient plea, but given that they seem to think they are talking about two different things, one side talking about "the Irlen Technology", the other about "the technology", the prudent course would be to specify those characteristics so that the Court and the parties know properly the basis upon which that plea is advanced. In accordance with these reasons the Orders I make are as follows:- A. On the Respondents' motion filed 26 July 1988:- 1. The respondents have leave to amend the defence in accordance with the minute filed on 26 July 1988. 2. The respondents have leave to amend their further and better particulars of defence in accordance with the minute filed 1n Court on 17 August 1988. 3. Filing and service of the Minutes stand as filing and service of the amended pleading and particulars. 4. The respondents are to pay the applicant's costs of the motion and any costs thrown away in any event. Pe wee 13. The applicant do on or before 31 August 1988 file and deliver further and better particulars in answer to request 11(g) in the respondents' request dated 18 May 1988 On the applicant's motion filed 15 July 1988:- i. 2. Paragraph 5(£)(i) of the re-amended defence is struck out. All words after and including "or alternatively" up to and including "the licensing agreement" in paragraph 7 of the re-amended defence are struck out. The respondents are to plead their positive case in answer to paragraphs 6A and 11B of the re-amended statement of claim. The respondents will have leave to file and deliver a further amended defence on or before 7 September 1988. The respondent will have leave to file and deliver substituted particulars of the amended defence on or before 14 September 1988. No order as to the costs of the motion, but the respondents are to pay the applicant's costs thrown away by reason of the further amendments to the defence or particulars. The applicant is to file and deliver any reply by 28 September 1988. 14. I certify that the preceding thirteen (13) pages are a true copy of the Ex Tempore Reasons for Judgment of his Honour Justice French. Associate: bw Rowe Date: ca Ss & Counsel for the Applicant: Mr M.J. Stevenson Solicitors for the Applicant: Jackson McDonald Counsel for the Respondents: Mr S.G. Leslie Solicitors for the Respondents: Phillips Fox Date of Hearing: 17 August 1988 Date of Judgment: 17 August 1988 —3 tle teen tatane ——— neneC Ane . a or