CATCHWORDS
REMEDIES - election between damages and account of profits - whether applicant can be put to election before question of liability is determined, or before evidence has been closed.
Trade Practices Act 1974: s 82
Copyright Act 1968: s 115(4), s 116
20th Century Fox Film Corporation v SA Brewing Co
(1996) AIPC ¶91‑258
Minnesota Mining & Manufacturing Co v C Jeffries Pty Limited
(1992) 37 FCR 294
Caterpillar Inc v Sun Forward Pty Ltd (1996) 37 IPR 41
LED Builders Pty Limited v Eagle Homes Pty Limited
(1996) 36 IPR 293
Neilson v Betts (1871) LR 5 HL 122
De Vitre v Betts (1873) LR 6 HL 319
United Australia Ltd v Barclays Bank Ltd [1941] AC 1
Thornton Hall Manufacturing Ltd v Shanton Apparel Ltd
(1989) 3 NZLR 304
Colbeam Palmer Ltd v Stock Affiliates Pty Limited
(1968) 122 CLR 25
Island Records Ltd v Tring International plc
(1996) 1 WLR 1256
Tang Man Sit v Capacious Investments Ltd [1996] 1 AC 514
Gentry Homes Pty Limited v Diamond Homes Pty Limited
(1993) AIPC ¶91-008
Brugger v Medicaid (1996) FSR 362
DR MARTENS AUSTRALIA PTY LTD & ORS v BATA SHOE COMPANY OF AUSTRALIA PTY LTD & ORS
No VG 959 of 1995
GOLDBERG J
MELBOURNE
29 MAY 1997
FEDERAL COURT OF AUSTRALIA )
VICTORIA DISTRICT REGISTRY )
GENERAL DIVISION ) No VG 959 of 1995
B E T W E E N:
DR MARTENS AUSTRALIA PTY LTD
R GRIGGS & Co LTD
DR ING HERBERT FUNCK
ELISABETH MAERTENS
WOLLASTON VULCANISING COMPANY LTD
and
DR MARTENS INTERNATIONAL TRADING GMBH
Applicants
and
BATA SHOE COMPANY OF AUSTRALIA PTY LTD
JOHN RICHARD BECKWITH
GORDON HERBERT THRING
MALCOLM WILLIAM GRANT
and
ALAN KELLY
Respondents
CORAM: GOLDBERG J
PLACE: MELBOURNE
DATE: 29 MAY 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
1. The application by the respondents that on or before 17 June 1997 the applicants notify the respondents of their election between an account of profits and damages be dismissed.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court rules
FEDERAL COURT OF AUSTRALIA )
VICTORIA DISTRICT REGISTRY )
GENERAL DIVISION ) No VG 959 of 1995
B E T W E E N:
DR MARTENS AUSTRALIA PTY LTD
R GRIGGS & Co LTD
DR ING HERBERT FUNCK
ELISABETH MAERTENS
WOLLASTON VULCANISING COMPANY LTD
and
DR MARTENS INTERNATIONAL TRADING GMBH
Applicants
and
BATA SHOE COMPANY OF AUSTRALIA PTY LTD
JOHN RICHARD BECKWITH
GORDON HERBERT THRING
MALCOLM WILLIAM GRANT
and
ALAN KELLY
Respondents
CORAM: GOLDBERG J
PLACE: MELBOURNE
DATE: 29 MAY 1997
REASONS FOR JUDGMENT
HIS HONOUR:
This proceeding is brought by the applicants against
the respondents in relation to conduct and activities which have arisen in
relation to the manufacture and sale of certain footwear. There are a number of applicants with
different interests, but for the purposes of these reasons, I do not need to
distinguish between them. Looked at
compendiously, they claim intellectual property rights, including trademark
protection, in relation to footwear described colloquially as Doc Martens
shoes. It is alleged that the footwear
has a
number of distinctive features and characteristics, which are spelt out in
detail in the second amended statement of claim filed on 14 June 1996.
It is alleged that the first respondent has infringed the applicants' intellectual property rights in the footwear and has advertised, manufactured, promoted, marketed for sale and sold footwear having the distinctive features and get up identified in the second amended statement of claim. The causes of action raised against the first respondent, in general terms, are misleading and deceptive conduct under the Trade Practices Act 1974 ("the Act"), passing off and infringement of trade mark. It is said that the other respondents have been directly or indirectly knowingly concerned in the alleged contraventions. It is also alleged that the first respondent has made a profit by the alleged wrongful acts and that the applicants have suffered loss and damage.
The respondents have filed a defence in which they deny all allegations of contraventions and breach and put the applicants to proof on all issues.
In the amended application filed on 14 June 1996, declaratory relief is sought in relation to the contraventions relied upon and injunctive relief is sought in relation to the various causes of action. The amended application also seeks:
...
7. an inquiry as to damages or, at the applicants' option, an account of profits and payment of all sums which are found to be due upon such inquiry or taking of accounts.
8. Damages pursuant to s 82 of the Act.
9. Damages or, at the applicants' option, an account of profits for passing off.
10. Damages or, at the applicants' option, an account of profits for infringement of Australian trade mark number 641055 (25).
The present application by the respondents arises on a general directions hearing and two orders are sought. First, that on or before 10 June 1997 the first respondent file and serve an affidavit made by one of its directors which:
(a) states the number of pairs of the footwear referred to in the particulars to paragraph 21 sold by the first respondent;
(b) states the gross sales of the first respondent of the footwear;
(c) states the gross profit of the first respondent derived from sales of the footwear;
(d) annexes or exhibits copies of business records of the first respondent which record the calculation of the said gross profit;
(e) states the net profit of the first respondent from the said sales;
(f) annexes or exhibits copies of business records of the first respondent which record the calculation of the said net profit.
The second order which is sought is that on or before 17 June 1997 the applicants notify the respondents of their election between an account of profits and damages. Mr Roberts, who appears for the respondents, informed me during argument that the application - that the applicant make the election as between damages and account of profits - is sought in respect of the trademark and passing off causes of action. In the proceedings, orders for general discovery have been made, including orders for supplementary discovery against the respondents. At this stage no order has been made that there be a split trial, that is, a trial where the issue of liability is determined before any issues as to assessment of damages or the relief which should follow from any contraventions established are considered.
The respondents submit that, on the basis of them
supplying information by affidavit which informs the applicant by relevant
information as to whether or not they profited, and to what extent, from making
the alleged infringing footwear, the applicants should elect before the trial
commences between damages and an account of profits in respect of the trademark
and passing off causes of action. The
respondents say that recent authority supports their application and they rely
on 20th Century Fox Film Corporation v SA
Brewing Co (1996) AIPC ¶91‑258; Minnesota
Mining & Manufacturing Co v C Jeffries Pty
Limited (1992) 37 FCR 294; Caterpillar
Inc v Sun Forward Pty Ltd (1996) 37 IPR 41 and LED Builders Pty Limited v Eagle Homes Pty Limited (1996) 36 IPR
293.
In my view none of these cases support the proposition that the applicants should be required to elect between an account of profits and damages at this early stage, not only before the commencement of the trial where liability is one of the issues, but also before any evidence has been filed. Directions have been given for the filing of evidence by affidavit and the primary evidence upon which the applicants seek to rely is yet to be filed as is any the respondents' evidence.
The authorities make it clear that damages and an account of profits are inconsistent remedies and that prior to final judgment, a plaintiff must make an election as to which remedy to pursue. A plaintiff or an applicant cannot obtain judgment for both: Neilson v Betts (1871) LR 5 HL 122; De Vitre v Betts (1873) LR 6 HL 319, 321; United Australia Ltd v Barclays Bank Ltd [1941] AC 1; Thornton Hall Manufacturing Ltd v Shanton Apparel Ltd (1989) 3 NZLR 304; Colbeam Palmer Ltd v Stock Affiliates Pty Limited (1968) 122 CLR 25, 32; Island Records Ltd v Tring International plc (1996) 1 WLR 1256, 1258, Tang Man Sit v Capacious Investments Ltd [1996] 1 AC 514.
I turn to the cases upon which the respondents
rely. In 20th Century Fox Film Corporation v South Australian Brewing Co
Limited (supra), the proceedings involved causes of action of passing off
and contravention of s 52 of the Act.
Liability was established and damages and an account of profits were
sought. Judgment was given on the issue
of liability only, injunctions were granted, and orders for discovery and
disclosure of information made were in similar form to those propounded by the
respondents in this case. However, those
orders were only made after the issue of liability had been established and
permanent injunctions granted.
In Minnesota Mining & Manufacturing Co v C Jeffries Pty Limited (supra), liability had been determined and an injunction granted. The trial had been split between the issues of liability and quantum and no election was required prior to the determination of liability. The applicant was prepared to make an election once the applicant had access to the respondents' documents, and Sheppard J did not have to consider whether the applicant could wait until the commencement of trial on assessment of damages or during the hearing before making an election.
In Caterpillar Inc v Sun Forward Pty Ltd (supra) Merkel J did not consider the issue as to when an election had to be made. As in the other cases to which I have referred a final order on liability had been made and Drummond J had given an interlocutory judgment for damages including additional damages pursuant to s 115(4) of the Copyright Act 1968, and damages for conversion pursuant to s 116 of the Copyright Act 1968 to be assessed or, at the first applicant's option, for an account by the respondent of the profits made by it by infringing the first applicant's copyright. That was quite a different situation from the present situation. The passage relied upon by Mr Roberts at 45, referring to Minnesota Mining & Manufacturing Co (supra) and supporting the order for discovery to enable the applicant to be in an informed position, was made after the first stage of the split trial had been concluded and liability had been determined. There is nothing in that case which assists the respondents in their submissions that, at this early stage before trial on liability has commenced, I should put the applicants to their election as between damages and account of profits.
In Gentry Homes Pty Limited v Diamond Homes Pty Limited (1993) AIPC ¶91‑008, Beazley J required the applicant to make an election at the commencement of the hearing. Liability was, in effect, conceded and the issue which arose was whether the applicant should proceed on the basis of an account of profits or whether an application to amend should be allowed to claim damages. Beazley J held, in my respectful opinion correctly, that in that case s 115 of the Copyright Act 1968 required the applicant to make an election and she directed that that election be made prior to the hearing. Again that was a hearing at which the issue of liability was not in issue.
Before turning to LED Builders Pty Limited v Eagle Homes Pty Limited (supra) I should refer to Island Records Ltd v Tring International plc (supra) where the issue of election arose at the stage of a motion for summary judgment. It was common ground that the plaintiff was entitled to judgment for breach of copyright. Lightman J held that the plaintiff was only obliged to make an election between its claim for damages and an account of profits when it could make an informed choice and by informed choice, I mean a choice based on information supplied by the defendant as to its use of the infringing products and as to what profits, if any, had been made. A declaration was made that the plaintiff was entitled at its election to an assessment of damages or an account of profits and directions were given as to the provision by the defendants of information and as to the time, after the plaintiff had the opportunity to consider that information, within which the plaintiff was to elect between damages or an account of profits.
It is important to note that liability was admitted before the election had to be made. Lightman J accepted that where no split trial had occurred, an election between damages and an account of profits did not have to be made until at least during or at the end of the evidence. His Honour said (1258):
In proceedings in which the plaintiff claims in the alternative,
damages or an account of profits, the plaintiff may seek and obtain a trial at
which will be determined all issues of liability, of the assessment of damages
and of calculation of profits. In such a
case full discovery will include all documents relevant to assessment and
calculation and the plaintiff can make
an informed election between damages and profits in the course of the trial in
the light of the information revealed on discovery and in the evidence at the
trial. With a view to the saving of
costs, the practice has developed, in
particular in intellectual property cases, when this is practicable, to have a
split trial. (emphasis added)
Lightman J then elaborated on that situation. It seems to me that the reasoning of Lightman J is consistent with the view that a plaintiff or applicant is not required to make an election as between damages and an account of profits at least until the close of evidence, and possibly until final submissions. This passage to which I have referred was cited by Lindgren J in LED Builders Pty Limited v Eagle Homes Pty Limited (supra) to which I will refer.
It is clear, in my view, that the decision in Island Records Ltd v Tring International plc (supra) was only concerned with the issue of election after liability was established. Lightman J identified four principles in relation to the availability of damages and an account of profits as remedies. He said at 1258:
"First, whilst a plaintiff can apply in proceedings in the alternative for damages and an account of profits, he cannot obtain judgment for both; he can only obtain judgment for one or the other ...
Second, once judgment has been entered either for damages or for an account of profits, any right of election is lost ...
Third, a party should in general not be required to elect or be found to have elected between remedies unless and until he is able to make an informed choice ...
Fourth, the exercise of the right of election should not be unreasonably delayed to the prejudice of the defendant."
At 1259 Lightman J said:
"The question raised is whether the Court can adopt a procedure which reconciles the four principles and enables the plaintiff who has established the liability of the defendant and his right to elect between remedies to secure the wherewithal to make an informed election before thereafter with reasonable promptitude committing himself to either remedy. The need for such procedure is made the more acute by the desirability of supporting the practice of limited discovery in case of split trials and of encouraging the plaintiff who is so entitled to enter judgment at an early stage in the proceedings (thereby saving Court time and costs). Whilst it is true that there is no English authority where such a procedure has been adopted or even hinted at I think that it is open to the Court to develop such a procedure and that it is just and convenient that it should do so".
Lightman J found support for his view in Minnesota Mining & Manufacturing Co v C Jeffries Pty Limited (supra) and went on to say at 1259:
"In my view, the Court can at the split trial or on any other application for judgment be invited to defer entry of judgment for damages or profits. At this stage the Court may either make no order as to the remedy for infringement (as in the Minnesota case) or (as I would prefer) may grant a declaration that the plaintiff is entitled at his election to judgment for either. The Court may at the same time or thereafter give directions which secure that such information as is available and is reasonably required to enable the plaintiff to make an informed election (and accordingly is necessary for fairly disposing of the cause or matter ...)"
Lightman J then referred to the relevant orders which are made to ensure that the election is made within a reasonable time thereafter.
In a subsequent case, Tan Man Sit v Capacious Investments Limited (supra), the Privy Council had to consider the issue of election not in the context of an intellectual property case but in the context of an action where breach of trust had been established in relation to the use or ownership of a number of houses.
At 521 Lord Nicholls, delivering the judgment of the Privy Council, accepted, in my view, that the plaintiff was not obliged to elect as between damages and account of profits for the breach of trust until either liability was determined or evidence had been called and submissions made. His Lordship said (521):
"Faced with alternative and inconsistent remedies a plaintiff must choose or elect between them. He cannot have both. The basic principle governing when a plaintiff must make his choice is simple and clear. He is required to choose when but not before judgment is given in his favour and the judge is asked to make orders against the defendant. A plaintiff is not required to make his choice when he launches his proceedings. He may claim one remedy initially, and then by amendment of his writ and his pleadings abandon that claim in favour of the other. He may claim both remedies, as alternatives. But he must make up his mind when judgment is being entered against the defendant. Court orders are intended to be obeyed. In the nature of things, therefore, the Court should not make orders which would afford a plaintiff both of two alternative remedies.
In the ordinary course, by the time a trial is concluded a
plaintiff will know which remedy is more advantageous to him. By then, if not before, he will know enough
of the facts to assess where his best interests lie. There will be nothing unfair in requiring him
to elect at that stage. Occasionally
this may not be so. This is more likely
to happen when the judgment is a default judgment or a summary judgment and at
the conclusion of a trial. A plaintiff
may not know how much money the defendant has made from the wrongful use of his
property. It may be unreasonable to
require the plaintiff to make his choice without further information. To meet the difficulty, the Court may make
discovery and other orders designed to give the plaintiff the
information he needs, and which in fairness he ought, to have before deciding
upon his remedy."
Although this judgment was given in the context of a claim for equitable relief for breach of trust where the alternative remedies were equitable compensation (rather than damages strictly so called) or an account of profits, I consider that the reasoning is equally applicable to the causes of action presently under consideration.
A recent example of where plaintiffs were put in a position to enable them to make an election is Brugger v Medicaid (1996) FSR 362, where an order was made for the defendant to supply an affidavit setting out information relevant to determining whether or not the plaintiff should consider seeking an account of profits consistently with the procedure in Island Records Ltd v Tring International plc (supra). In that case the defendant had admitted breach of copyright and had submitted to judgment. No order was made as to when the plaintiffs had to make their election between damages and an account of profits.
In LED Buildings Pty Limited v Eagle Homes Pty Limited (supra) Lindgren J was faced with an application for discovery by the applicant in relation to issues arising in relation to relief sought for breach of copyright. A split trial had in fact occurred and Davies J had found infringement established: see [1996] 36 IPR 1. Davies J had given declaratory and injunctive relief and had made an order for delivery up of infringing items and had left for further determination claims for damages and/or an account of profits. His Honour had also ordered that the respondent file an affidavit setting out details of houses built by reference to infringing plans and that the applicant specify by letter the documents in respect of which it sought discovery. The affidavit was filed and the letter was sent. The respondent's solicitors replied to the letter saying that the applicant was bound to elect whether it wished to seek damages or an account of profits. The applicant's solicitor said that the applicant was not obliged to make an election until the evidence established the facts upon which an election could be fairly made. The applicant sought discovery of the documents set out in its solicitor's letter. Lindgren J was faced with an exercise of discretion under Or 15 r 5 of the Federal Court Rules whether or not to order the discovery sought and this raised the issue whether the discovery was necessary. That issue in turn, raised for consideration the point of time at which the applicant was obliged to make its election between damages and an account of profits. The applicant's primary submission was that it was not obliged to make its election until after the further hearing was concluded and reasons for judgment had been delivered. The applicant's alternative submission was that it was entitled to defer its election until after discovery and inspection of the documents referred to in its solicitor's letter.
Lindgren J reviewed the cases to which I have referred. He rejected the submission that the applicant was only obliged to elect once the court had delivered judgment, and indicated what might be awarded for damages or profits. I respectfully agree with his Honour that the court is not required to give an advisory opinion. However, I am compelled to differ from his Honour's reasoning by which he rejected the submission that an election need only be made after hearing but before delivery of reasons for judgment. His Honour said (at 307):
"In the ordinary case, the owner of copyright or other intellectual property will be able to be adequately informed prior to the hearing, for the purpose of making its election, by the interlocutory procedures of discovery and, if appropriate, the administration of interrogatories, or by other means referred to in the cases discussed earlier. It is not to the point that in cases in the past a defendant may in fact have allowed a hearing, particularly one on all issues, to proceed to conclusion without having insisted that an election be made at any earlier stage. If a defendant takes the point, prima facie it should not be required to meet alternative claims for damages and an account of profits, whether as part of a single 'all issues' hearing or in the second stage of a 'split' hearing".
None of the cases referred to by His Honour in my respectful opinion support the proposition that the election cannot be made either at the conclusion of the evidence in an "all issues" hearing or in the second stage of a "split" hearing. Indeed, Island Records Ltd v Tring International plc (supra) and Tang Man Sit v Capacious Investments Ltd (supra) support and approve the proposition that the election not be made at least before the conclusion of the hearing of evidence on liability and quantum. Lindgren J said in LED Builders (supra) that the applicant can be informed earlier, that is, earlier than the commencement of the trial and close of the case and final submissions, by interlocutory procedures such as are proposed by the respondents in this case which would enable an election to be made on an informed basis.
That may be true, but in my view an applicant cannot be compelled to do so. In my view, an applicant cannot be compelled to insist upon an election being made before the commencement of trial and, consistently with the cases to which I have referred, in my opinion the applicant is entitled to delay making an election at least until all the evidence is in. If the trial is not split, this means that an applicant will have to call evidence to deal with both damages and an account of profits, as will the respondents. If the trial is split then the issue will not arise until after the determination of liability, as is exemplified in a number of the cases to which I have already referred.
For these reasons I dismiss the application by the respondents that on or before 17 June 1997 the applicants notify the respondents of their election between an account of profits and damages. The authorities do not support the submission that such an order should be made at this point of time, even if the relevant material which the first respondent is prepared to file is in fact filed.
Counsel for the applicant: Mr B J Hess
Solicitors for the applicant: Coltmans Price Brent
Counsel for the respondent: Mr M G Roberts
Solicitors for the respondent: Septimus Jones & Lee
Date of Hearing: 29 May 1997
Date of Judgment: 29 May 1997
I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment of the Honourable Justice Goldberg
Associate:
Date: 6 June 1997
