FEDERAL COURT OF AUSTRALIA Gold Peg International P/L v Kovan Engineering (Aust) Ltd & Ors [2004] FCA 1601 PRACTICE AND PROCEDURE – applicant seeks leave to amend statement of claim – respondents seek leave to amend defence and to add a cross‑claim – whether it was just to grant leave as sought. Copyright Act 1968 (Cth) Federal Court Rules O 13 r 2 Trade Practices Act 1974 (Cth) Amatek v Botman (1995) 13 ACLC 1729 referred to BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 referred to Burnham v The City of Mordialloc (1956) VLR 239 distinguished Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 referred to Cohen v McWilliam (1995) 38 NSWLR 476 referred to Cropper v Smith (1884) 26 Ch D 700 referred to Dare v Pulham (1982) 148 CLR 658 referred to Empirnall Holdings Pty Ltd v McMahon Paull Partners Pty Ltd (1988) 14 NSWLR 523 refered to Gordon v MacGregor (1909) 8 CLR 316 distinguished Howarth v Adey [1996] 2 VR 535 referred to National Australia Bank Limited v Nobile and Another (1991) 100 ALR 227 referred to Patrick v Capital Finance Pty Ltd [2003] FCA 206 distinguished The Commonwealth v Verwayen (1990) 170 CLR 394 referred to The State of Queensland & Another v J L Holdings Pty Limited (1996-1997) 189 CLR 146 followed GOLD PEG INTERNATIONAL P/L v KOVAN ENGINEERING (AUST) LTD & ORS V429 of 2002 CRENNAN J 8 DECEMBER 2004 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V429 OF 2002 BETWEEN: GOLD PEG INTERNATIONAL PTY LTD APPLICANT AND: KOVAN ENGINEERING (AUST) LTD & ORS RESPONDENT JUDGE: CRENNAN J DATE: 8 DECEMBER 2004 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The applicant has brought proceedings alleging conduct in breach of ss 52 and 53(c) and (d) of the Trade Practices Act 1974 (Cth), breaches of an agreement governing copyright ownership in certain drawings, as between the applicant and the first respondent, and infringement of copyright in certain drawings being artistic works under s 10(1) of the Copyright Act 1968 (Cth). 2 The drawings are of a cooker. The applicant sought leave to amend its pleadings on the eighth day of the proceeding. Two of the applicant's four witnesses have completed their evidence and an expert witness whom the applicant has called has commenced, but not completed, his evidence. The amendments sought include amendments to particulars of an agreement alleged to have been made in 1992, amendments to particulars of copyright infringement and a further allegation of breach of the agreement, being a breach which only came to light during the course of the proceedings. 3 The respondents oppose the application on the grounds that the proposed amendments are late and that there has already been opportunity to plead the case which the applicant seeks to advance. The respondents particularly point to the fact that there have been four prior versions of the statement of claim. Furthermore, the respondents complain that conversations now sought to be relied on as constituting an agreement have not been particularised, nor has an averment that the silence of one party to a conversation constituted agreement. 4 It is also contended by the respondents that the preparation of cross‑examination, particularly in a case such as this where issues of credit are involved, requires careful preparation and the case now sought to be advanced is markedly different from the currently pleaded case. The respondents have prepared witness statements for answering a case based on an oral agreement in 1992, as presently particularised. The case now sought to be advanced is that the agreement between the applicant and the first respondent was made in 1992 constituted by conversations in the period from about 1989 until early 1992. 5 The respondents submit that clarity is needed in respect of the applicant's proposed amended particulars covering copyright infringement. It is asserted that the first respondent is unable to determine which, if any, parts of cookers it may be entitled to make and the respondents therefore seek leave to file and serve an amended defence and cross‑claim, seeking declarations and injunctions in respect of the "Kovan Drawings", a phrase already used in the current defence to describe drawings prepared by, or at the request of, the first respondent during the course of manufacturing cookers for the applicant. 6 The applications by the applicant and the respondents for leave to amend pleadings are made pursuant to Federal Court Rules ('FCR'), O 13 r 2. Rule 2 relevantly provides as follows: " (1) Subject to the following provisions of this rule, the Court may, at any stage of any proceeding, on application by any party or of its own motion, order that any document in the proceeding be amended, or that any party have leave to amend any document in the proceeding, in either case in such manner as the Court thinks fit. (2) All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding, or of correcting any defect or error in any proceeding, or of avoiding multiplicity of proceedings. . . . (7) An amendment may be made even if the effect of the amendment is to add or substitute a new claim for relief or foundation in law for a claim for relief if the new claim for relief (whether by way of substitution for an existing claim for relief or foundation in law or not) or foundation in law: (a) arises out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief by the party applying for leave to make the amendment; . . ." 7 The applicant supports the application for leave to amend on the basis that amending the particulars of an agreement made in 1992 and already pleaded, merely follows what has emerged in the oral evidence during the course of the hearing. Next, it is submitted that some of the proposed amended particulars merely seek to treat certain terms of the agreement as implied as a matter of law. Thirdly, the applicant has offered to recall relevant witnesses for further cross‑examination should that be needed to ensure fairness to the respondents as a result of any amendments. 8 The applicant noted that the addition of an extra allegation of breach of the agreement was not strongly complained about (paragraph 15 of the statement of claim). Finally, it was submitted that the proposed amended particulars of copyright infringement have the effect of confining the ambit of the case, thus facilitating the efficient disposition of the balance of the proceeding (paragraph 22 of the statement of claim). 9 The applicant relies on the statements of principles to be found in The State of Queensland & Another v J L Holdings Pty Limited (1996-1997) 189 CLR 146 ("Queensland v JL Holdings") in particular at 155 per Dawson, Gaudron and McHugh JJ: "Justice is the paramount consideration in determining an application such as the one in question. Save in so far as costs may be awarded against the party seeking the amendment, such an application is not the occasion for the punishment of a party for its mistake or for its delay in making the application. Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties." Current statement of claim 10 Relevantly, the applicant pleads in a second further amended statement of claim, an agreement made in 1992 between the applicant and the first respondents. Particulars are sought to be added to extend the conversations constituting the agreement from conversations "in or about 1992" to conversations "in the period from about 1989 until early 1992" (paragraph 11 of the statement of claim). 11 In relation to the same agreement, it is also sought to add an alternative particular that the parties' agreement was signified by Mr Miller, a principal of the respondent, by silent acceptance. In this regard the applicant relies on Empirnall Holdings Pty Ltd v McMahon Paull Partners Pty Ltd (1988) 14 NSWLR 523. (Paragraph 11 of the statement of claim.) 12 Thirdly, it is sought to include two terms of the agreement already pleaded as terms to be implied as a matter of law: BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337. (Paragraph 11 of the statement of claim.) 13 The respondents, also in reliance on Queensland v JL Holdings, submit that the attainment of justice must be the paramount consideration when dealing with late amendments. The respondents rely on cases in which late amendments were refused, which include Burnham v The City of Mordialloc (1956) VLR 239 at [241]; Gordon v MacGregor (1909) 8 CLR 316 at [321]; and Patrick v Capital Finance Pty Ltd [2003] FCA 206 ("Patrick"). The cases are distinguishable if only because amendments were sought after the close of evidence. See also The Commonwealth v Verwayen (1990) 170 CLR 394 at 456. The respondents sought to emphasize that the attainment of justice merely involves both parties being given a reasonable opportunity to place before the court the issues they wish to litigate: Cohen v McWilliam (1995) 38 NSWLR 476 at 502. In this context they relied on a passage in the judgment of Tamberlin J. in Patrick at [10]: "The conduct of a lengthy complex commercial proceeding, such as the present may, as the case is prepared and progresses, involve fine assessments as to what documentary or oral evidence ought to be adduced and as to whether or not to cross‑examine a witness. If it is thought desirable to cross‑examine then decisions need to be made and instructions obtained and to the nature and extent of the cross‑examination. In the effective presentation of a case these matters are decided by the specific issues raised in the pleadings. If there are substantial variations in the issues raised then the way in which the case is conducted may be significantly different. Often, but not always, at the close of proceedings, to permit significant amendments that raise issues which, practicably, cannot be effectively addressed, may cause substantial injustice to the other parties. This principle is of particular significance in the present case where the application to amend is sought at the close of evidence in circumstances where extensive amendments were permitted prior to and after the commencement of the hearing." 14 Where late amendments have been refused the grounds appear to me not so much that the amendments are late, or even very late, but rather that as a result of the lateness, consequential prejudice to the other party is incapable of remedy: see for example, National Australia Bank Limited v Nobile and Another (1991) 100 ALR 227; following Cropper v Smith (1884) 26 Ch D 700. 15 The respondents relied on the fact that the applicant in this case has had many opportunities already to plead and present its case in respect of the agreement in question as follows: "5 July 2002 In its statement of claim dated 15 July 2002, Gold Peg alleged that it entered into an agreement with Kovan, which was partly evidenced in writing, partly oral, and partly to be implied. Insofar as the agreement was oral, it was alleged to be constituted by conversations in June 1998, 19 April 2001, 29 November 2001, 11 December 2001, 18 January 2002 and 10 April 2002. Insofar as the agreement was implied it was alleged to be implied from the course of dealing between the applicant and the first respondent, but also to give business efficacy to such dealings. 8 November 2002 On 8 November 2002, Gold Peg filed and served an amended statement of claim, in which it alleged that the Agreement was partly oral, and partly to be implied. Insofar as the agreement was oral, it was alleged to be constituted by a conversation in or about 1991. Insofar as the agreement was implied it was alleged to be implied from the course of dealing between the applicant and the first respondent, but also to give business efficacy to such dealings. 24 January 2003 On 24 January 2003, Gold Peg's solicitors sent the respondents' solicitors a draft further amended statement of claim, in which Gold Peg alleged that the Agreement was entirely oral, and was constituted by a conversation occurring in March 1992. 6 June 2003 On 6 June 2003, Gold Peg filed and served a second further amended statement of claim, in which Gold Peg alleged that the Agreement was constituted not by one conversation in March 1992, but by various conversations in 1992. The term referred to in paragraph 11(e) was alleged to be implied to give business efficacy to the matters the subject of the oral agreement." 16 In the context of this chronology it needs to be noted that Mr Miller swore his affidavit on 15 April 2003 and he swore that he assented to certain terms of the agreement pleaded, on behalf of the first respondent, by gesture while remaining silent (paragraph 11 of the statement of claim). Amendments proposed for paragraphs 15 and 22 require no further elaboration. 17 The respondents complained that if the amendment were allowed, to extend the time during which conversations which constitute the agreement occurred, the respondents could suffer a prejudice not compensable by way of costs or an adjournment. This is because Mr Smith and Mr Miller have already been cross‑examined on the basis of the case as pleaded and that the proposed amendment would oblige the respondents' counsel to virtually cross‑examine on the previous cross‑examination. Perhaps even more importantly it was submitted that in the course of the case, strategic decisions have been made by the respondents which cannot easily be reversed for the purposes of continuing this proceeding. For example, Mr Smith has given evidence already in respect of conversations from 1989 and prior to 1992 to which no objection has been taken. Senior counsel for the respondents contends that he would have reacted differently to this evidence had the particulars now sought to be advanced governed the case the respondents had to meet: Dare v Pulham (1982) 148 CLR 658 at 664. In this context, he emphasised that the respondents' case in respect of this aspect of the proceeding is one which will turn, to a significant extent, on the issue of Mr Smith's credit in respect of conversations which occurred twelve years ago (on the current state of the pleadings) or going back fifteen years (on the proposed amended particulars). While this submission was directed most of all to the amendment of particulars specified in paragraph 10 above, it was also directed to the other proposed amendments to paragraph 11 of the statement of claim. Thus is it put that the trial ought to be aborted if the amendment is allowed: Howarth v Adey [1996] 2 VR 535. It is fair to describe this as the respondents' most significant objection to the proposed amendments because in relation to the period during which the conversation occurred, the respondents identify a prejudice to them which is not compensable by costs or adjournment. All the other proposed amendments, including the balance of amendments to paragraph 11, are compensable by an order for costs, directions for particulars or other interlocutory steps, as required and any necessary adjournment. 18 It was noted by the respondents that there was no evidence of any particular excuse being proffered by the applicant for the late amendment which it was urged militated against the grant of leave: Queensland v J L Holdings at [17] per Kirby J; Amatek v Botman (1995) 13 ACLC 1729 at 1732. 19 The applicant, in reply, distinguished Patrick's case as a long and complex case where an amendment was sought after all the evidence had closed, alleging new facts to support new causes of action being new allegations of fraud. Furthermore, the applicant urges that there is nothing in the proposed amendments in this proceeding which cannot be dealt with by way of further cross‑examination and accordingly leave to make them should be granted on condition that witnesses will be recalled as necessary. 20 Weighing, as carefully as I am able to, the competing factors in relation to exercising the discretion to grant leave to amend, in accordance with the established principles in Queensland v J L Holdings, I accept the respondents' argument that the applicant has had many opportunities to plead its case in relation to the specific particulars of conversations constituting the agreement. Further late change in those particulars has the capacity to cause prejudice to the respondents which cannot be assuaged by costs or an adjournment, having regard to strategic decisions taken during the course of the hearing to date. An aborted hearing would be a drastic step which would occasion serious prejudice to the applicant. It seems to me justice can be attained on this application without taking such a drastic course. In any event, the applicant has pleaded that conversations constituting terms of the agreement occurred "in or about 1992" and the evidence falls to be assessed under that particular. 21 As to the balance of the amendments in relation to paragraph 11 of the statement of claim, I accept the applicant's submissions and regard the proposed amendments as governed by established principles to which I have already referred. The points sought to be raised are arguable and their inclusion will not occasion any prejudice to the respondents which cannot be assuaged by costs and any necessary directions and/or adjournment. 22 In relation to amendments covering an additional particular of breach of the agreement to be added to paragraph 15 of the statement of claim, I accept the applicant's arguments in support of the grant of leave. I will however, permit the respondents to seek any particulars in respect of any of the amendments for which leave is granted. In relation to paragraph 22 of the statement of claim the proposed further particulars of infringement which have the effect of narrowing the matters in dispute, will be allowed, in accordance once again with established principles. Any prejudice to the respondents can be assuaged by the conditions of the grant of leave. The proposed amended defence and cross‑claim 23 The applicant has opposed the grant of leave in respect of the amended defence and cross‑claim, primarily on the basis that a new issue has been raised which has the capacity to require considerable additional evidence at this late stage of the proceeding. Furthermore, refusal of leave would not preclude the respondents from pursuing this aspect of the proposed cross‑claim at a later date. 24 The particular paragraph attracting this submission is paragraph 3 which claimed that the applicant/cross‑respondent threatens and intends to infringe copyright subsisting in the "Kovan Drawings", which designation I have already described. Some indications were given during the course of argument that the parties could give consideration to having any question of the cross‑respondent's manufacture of cookers in accordance with the "Kovan Drawings" heard at a later occasion rather than in the present proceeding. Having regard to the fact that findings in the present proceeding may result in there being no necessity to further pursue that aspect of the cross‑claim that seems a practical course. While there was no formal consent registered in respect of that proposal I note it as relevant to the exercise of my discretion in favour of the respondents because this distinguishes the position from a case such as Patrick's case where a new case is sought to be dealt with as part of the proceeding. The amendments proposed will be allowed by applying the principles to which reference has been made, on the basis that prejudice to the applicant can be obviated by separate hearing of allegations of any actual (as distinct from threatened) infringement of the "Kovan Drawings" and postponement of any interlocutory steps in respect of such a hearing. 25 In accordance with these reasons leave will be granted to the applicant to amend the statement of claim in accordance with its proposed statement of claim except for the addition of the words "in the period from about 1989 until early 1992" to the particulars to paragraph 11. To the extent that it is sought to further cross‑examine any witness as a result of the permitted amendments, the leave would be conditional on the recall of witnesses for those purposes. To the extent that the applicant has already agreed to further particularise the proposed amended particulars of infringement, the grant of leave is conditional on the provision of those further particulars. 26 To the extent that either party requires time in order to undertake further interlocutory steps as a result of the amendments in respect of which leave is granted, the leave will be conditional on adjournment of the further hearing as reasonably required. I direct the parties to bring in proposed minutes of order in accordance with these reasons for judgment, such minutes to cover all directions as necessary, including a direction for a further case management conference. At that time I will give the parties the opportunity to make submissions on costs. I certify that the preceding twenty‑six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Crennan. Associate: Dated: 8 December 2004 Counsel for the Applicant: Colin Golvan SC Dr Staniforth Ricketson Solicitor for the Applicant: Middletons Lawyers Counsel for the Respondent: David Collins SC Andrew McClelland Solicitor for the Respondent: Brian Ward & Partners Date of Hearing: 19 November 2004 Date of Judgment: 8 December 2004