Federal Court of Australia Australian Mud Company Pty Ltd v Globaltech Corporation Pty Ltd (No 2) [2020] FCA 1806 File number: NSD 1089 of 2016 Judgment of: BESANKO J Date of judgment: 16 December 2020 Catchwords: PRACTICE AND PROCEDURE — election between damages and an account of profits — where applicants entitled to be fully informed before being required to elect between damages and an account of profits — whether the applicants will be in a position to make a meaningful and informed election between damages and an account of profits after being given the opportunity to seek further interrogatories or categories of discovery — whether unreasonable for the election to be postponed in the circumstances Cases cited: Dr Martens Australia Pty Ltd v Bata Shoe Company of Australia Pty Ltd [1997] FCA 505; (1997) 75 FCR 230 LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 3) (1996) 70 FCR 436 Norm Engineering v Digga Australia (No 3) [2007] FCA 953; (2007) 73 IPR 77 Division: General Division Registry: New South Wales National Practice Area: Intellectual Property Sub-area: Copyright and Industrial Designs Number of paragraphs: 9 Date of hearing: 1 December 2020 Counsel for the Applicants: Ms P Arcus Solicitor for the Applicants: Gilbert + Tobin Counsel for the Respondents: Mr A Fox Solicitor for the Respondents: Griffin Hack ORDERS NSD 1089 of 2016 BETWEEN: AUSTRALIAN MUD COMPANY PTY LTD (ACN 009 283 416) First Applicant REFLEX INSTRUMENTS ASIA PACIFIC PTY LTD (ACN 124 204 191) Second Applicant AND: GLOBALTECH CORPORATION PTY LTD (ACN 087 281 418) First Respondent GLOBALTECH PTY LTD (ACN 086 012 393) Second Respondent order made by: BESANKO J DATE OF ORDER: 16 DECEMBER 2020 THE COURT ORDERS THAT: 1. By 15 December 2020, the Respondents provide written answers to the interrogatories set out in Annexure A to these orders. 2. On or before 4:00 pm AEDT on 10 March 2021, the Applicants file and serve any affidavits, including any expert evidence, on which they intend to rely in support of a claim for damages, and expressly subject to their election to do so. 3. On or before 4:00 pm AEDT on 10 March 2021, the Respondents file and serve their affidavits, including any expert evidence, accounting for their profits from the sale, hire or disposal of the Orifinder Tools. 4. The Respondents pay the Applicants' costs thrown away in relation to the preparation and filing of the interlocutory application dated 26 November 2020 and the affidavit of Christopher Edmund Duvall Williams sworn 26 November 2020. 5. The proceeding be listed for a case management hearing at 9:00 am (Adelaide time) on Friday, 12 March 2021. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. Annexure A Interrogatories A. Definitions The following definitions apply to these interrogatories. Financial Statement Interrogatory Documents means the financial statements of Globaltech identified in the list of discovery documents affirmed by Gordon Henderson Stewart on 3 October 2019 and in the list of discovery documents affirmed by Khaled Hejleh on 17 December 2019, being certain documents discovered by the Respondents pursuant to category 1 of the orders for discovery dated 5 September 2019. General Ledger Interrogatory Documents means the general ledger documents identified in the list of discovery documents affirmed by Gordon Henderson Stewart on 3 October 2019 and in the list of discovery documents affirmed by Khaled Hejleh on 17 December 2019, being certain documents discovered by the Respondents pursuant to category 1 of the orders for discovery dated 5 September 2019. Hejleh Affidavit means the affidavit of Khaled Hejleh affirmed on 25 January 2019 pursuant to the orders of Besanko J dated 14 December 2018. Orifinder Tools means the core sample orientation tools developed and sold under the names "Orifinder V5" or "Trucore" or parts thereof. Globaltech means the first and/or second respondent [and any related bodies corporate within the meaning of the Corporations Act 2001 (Cth)]. B. Interrogatories 1. In respect of each Financial Statement Interrogatory Document, identify: (a) the amount of the 'Rental Income' and 'Sales Income' (listed under the heading 'Sales') attributed to the Orifinder Tools; (b) the quantities of Orifinder Tools relating to the 'Rental Income' and 'Sales Income'; and (c) the amount of the 'Royalties' (listed under the heading 'Other income') attributed to the Orifinder Tools. 2. In respect of the Hejleh Affidavit, identify: (a) how the total quantities of Oritools V5 and Oripads V5 set out in paragraph 13 of the Hejleh Affidavit were calculated; (b) whether all of the Oritools V5 and Oripads V5 set out in paragraph 13 of the Hejleh Affidavit were sales of those tools and, if not, which ones were not sales and what was the nature of those supplies; and (c) the proportion of the total quantities of Oritools V5 and Oripads V5 set out in paragraph 13 of the Hejleh Affidavit that were supplied by Globaltech to overseas customers. 3. In respect of each General Ledger Interrogatory Document, identify: (a) the account name and number of any account listed in the General Ledger that relates to the Orifinder Tool; (b) whether the accounts identified in paragraph (a) constitute sales revenue, rental revenue, royalty revenue or some other kind of revenue; and (c) the proportions of the amounts recorded in the accounts in paragraph (a) which constitute revenue from the supply of tools in Australia and not in Australia. REASONS FOR JUDGMENT BESANKO J: 1 In the course of a case management hearing in a proceeding in the Court, the parties have proposed different orders relevant to the applicants' election whether to pursue damages or an account of profits. The proceeding involves a claim for patent infringement which has been determined in favour of the applicants and, relevantly, the relief by way of damages or an account of profits remains outstanding. The applicants have not yet made an election between damages and an account of profits. 2 The parties have agreed that an order that the respondents provide written answers to interrogatories relevant to the applicants' election should be made and that an order for costs in relation to an application brought by the applicants should be made. The orders which are in dispute relate to the issue of when the applicants will be required to make their election between damages and an account of profits. The orders which are sought by the applicants are as follows: 2. On or before 4pm AEDT on 10 March 2021, the Applicants file and serve any affidavits, including any expert evidence, on which they intend to rely on in support of a claim for damages, and expressly subject to their election to do so. 3. On or before 4pm AEDT on 10 March 2021, the Respondents file and serve their affidavits, including any expert evidence, accounting for their profits from the sale, hire or disposal of the Orifinder Tools. 3 The orders sought by the respondents are as follows: 2. By 16 December 2020, the Applicant notify the Respondents of any further interrogatories or categories of discovery that it requires for the purpose of making its election as to damages or an account of profits. 3. By 21 December 2020, the Respondents advise the Applicant of their position in relation to any request made pursuant to order 4, and if the Respondents agree to any or all of the request made they are to provide answers to written interrogatories and discovery by 25 January 2021. 4 As I understand it, the applicants oppose the respondents' proposed orders on the ground that, expressly or impliedly, they restrict the applicants in terms of the further steps which may be taken before they are required to elect between damages and an account of profits. In other words, the applicants contend that the respondents' proposed order 2 has the effect, or is intended to have the effect, of embodying their last opportunity to obtain information from the respondents before they are required to elect. They do not wish to be in this position. It was not put by the respondents that that was not the effect, or intended effect, of their orders. In the circumstances, the applicants seek orders that they file their evidence, including expert evidence in relation to their claim for damages and the respondents file their evidence, including expert evidence with respect to an account for the profits of the sale, hire or disposing of Orifinder Tools. 5 The applicants referred me to the well-known authority of LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 3) (1996) 70 FCR 436 at 450 to the effect that an applicant is entitled to be fully informed before being required to elect between damages and an account of profits (see also Dr Martens Australia Pty Ltd v Bata Shoe Company of Australia Pty Ltd [1997] FCA 505; (1997) 75 FCR 230). 6 I was also referred to Norm Engineering v Digga Australia (No 3) [2007] FCA 953; (2007) 73 IPR 77 (Norm Engineering) and, in particular, the following observations of Greenwood J (at [30]): Plainly enough, there is no obligation on a party to exercise a remedial election until the applicant is in a position to make an informed and meaningful choice between the two alternative remedies. The election ought not to be unreasonably postponed. However, considerations that condition whether a party has acted reasonably in all the circumstances may vary widely: LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 3) (1996) 70 FCR 436; 36 IPR 293 per Lindgren J; Dr Martens Australia Pty Ltd v Bata Shoe Company of Australia Pty Ltd (1997) 75 FCR 230; 145 ALR 233; 38 IPR 163 per Goldberg J. In this case, the applicant made an election on 16 June 2006 against the background of the expert reports. The conduct of the trial proceeded on the footing that cross-examination of experts and other witnesses (in relation to this aspect of the case) was directed to the applicant's claim for damages where the issues of liability and damages were dealt with in one hearing. There may be cases where interlocutory processes of the court reveal all there is to know to enable an applicant to reasonably reach a meaningful and informed election. Such a point is unlikely to be reached in the absence of the filing and serving of relevant statements and experts' reports. In other cases, it may be that an election cannot properly be made until an applicant has had the benefit of cross examining experts to determine the final state of the evidence on all aspects of the controversy including differences in an approach to the calculation of damages or the basis upon which an account of profits might be struck. Although a remedial election ought not to be postponed unreasonably or deferred in a way prejudicial to the respondent, the court ought not to adopt an approach to the exercise of the election which is unnecessarily prescriptive. 7 The respondents submitted that they have been asked for information by the applicants and they have provided it. They have agreed to provide answers to interrogatories. The point has now been reached (so the submission goes) where the applicants have not identified any further information which they need, and in the circumstances and subject to allowing the applicants one further opportunity to request further interrogatories or categories of discovery, it would be unreasonable for the applicants to postpone their election any longer. That is, as the respondents' counsel put it, at the crux and the heart of the issue between the parties. 8 I have read and taken into account Mr Williams' affidavit sworn on 26 November 2020 in support of the Interlocutory application seeking an order that interrogatories be answered. 9 The question is whether I can be satisfied at this stage that the opportunity afforded by the respondents' proposed order 2 will put the applicants in a position in which they are fully informed such that they should be required to elect between damages and an account of profits. It seems to me that I should be at least fairly certain that that was the case and I am not on the material and submissions put to me. The alternative is the applicants' proposed orders which are consistent with Greenwood J's observation in Norm Engineering that the point where the applicants are able to make a meaningful and informed election is unlikely to be reached in the absence of the filing and serving of relevant statements and experts' reports. In all the circumstances, the applicants' proposed orders are appropriate and I will make them. I would add that I am not making any decision now as to the position once those orders are complied with. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Besanko. Associate: Dated: 16 December 2020