FEDERAL COURT OF AUSTRALIA

Research in Motion Ltd v Samsung Electronics Australia Pty Limited [2009] FCA 320

PRACTICE AND PROCEDURE – application for leave to amend statement of claim and for further discovery – amendments sought to rely on doctrine of spoliation – whether proposition to be relied on at trial misconceived in law – whether proposed pleadings embarrassing and directed to matters of evidence – application refused  

Gray v Haig (1855) 20 Beav 219 referred to

The Ophelia [1916] 2 AC 206 referred to

Allen v Tobias (1958) 98 CLR 367 referred to

Dare v Pulham (1982) 148 CLR 658 cited

The Oxford English Dictionary

RESEARCH IN MOTION LTD and RESEARCH IN MOTION AUSTRALIA PTY LTD (ACN 101 291 425) v SAMSUNG ELECTRONICS AUSTRALIA PTY LIMITED (ACN 002 915 647)

VID 928 of 2007

KENNY J

6 APRIL 2009

MELBOURNE

THE COURT ORDERS THAT:

1.         The applicants have leave to amend their statement of claim to incorporate the proposed amendments to paragraph 21 thereof, as set out in Annexure A to the notice of motion dated 19 March 2009.

2.         The motion, notice of which is dated 19 March 2009, be otherwise dismissed.

3.         The applicants pay the respondent’s costs of the motion.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                          The applicants market and produce a device known as “BlackBerry”.  The respondent markets and produces a device known as “BlackJack”.  To date, the applicants plead against the respondent: (1) trademark infringement; (2) contraventions of ss 52 and 53 of the Trade Practices Act 1974 (Cth); and (3) passing off.  A trial of the proceeding is fixed to begin on 20 April 2009.

2                          The applicants apply, by a notice of motion dated 19 March 2009, for, amongst other things, leave to serve an Amended Statement of Claim and further discovery. 

3                          The proposed amendments fell into two categories.  The first was an amendment to [21(b)], which, at the hearing of the motion, the respondent did not oppose.  For reasons canvassed at that hearing, I would grant the leave sought to amend this paragraph in the manner sought.  The second more substantive amendments were proposed to be introduced as [28A] to [28K]. 

4                          The applicants invited the Court to consider the amendments in three groups.  First, the substance of [28C], [28D] and [28E] was that the respondent has been aware of the prospect of a dispute over the use of the name “BlackJack” for some time, including as far back as November 2006.  Amongst other things, the applicants rely on parts of an affidavit sworn on 16 January 2009 by Jenny Goodridge, who is an officer of the respondent.  

5                          Secondly, the substance of [28F], [28G], [28H] and [28I] was the allegation that certain documents have been destroyed in identified ways.  Thus, these proposed paragraphs read as follows:

28F      At all relevant times the Respondent has had document destruction policies           pursuant to which its documents are deliberately destroyed.

28G      Notwithstanding its knowledge and belief alleged in paragraphs 28C, 28D             and 28E above, from at least 23 January 2007 the Respondent has destroyed   “Channel Reports” and documents forming the basis of those reports …        which documents are likely to have been relevant to facts in issue in this   proceeding.

28H      The Respondent has destroyed documents on its back-up tapes of its “TL             drive”, which is a computer network drive accessible by members of the    Telecommunications Division of the Respondent.

28I       On or about 29 February 2008 the Respondent destroyed documents stored          on the computer of Ms Trudi Allen, a former Channel Representative           employed by the Respondent who was engaged in the marketing of the            BlackJack smartphone on behalf of the Respondent.

6                          The particulars for [28F] referred to [8] of the respondent’s List of Documents of 3 April 2008.  This List of Documents indicated that the respondent had practices, which it outlined, with regard to the deletion of emails sent or received using an in-house application known as “MySingle”.  The particulars for [28G] referred to nominated paragraphs of Ms Goodridge’s affidavit.  The “Channel Reports” the subject of [28G] were apparently in the nature of reports to management concerning sales activities, some of which accompanied the affidavit. The applicants stated that, at the trial, they proposed to allege that the Court should infer that there were other such reports, although they are not now in the respondent’s possession.  The particulars to [28H] referred to a letter from the respondent’s solicitors dated 5 September 2008 and a part of Ms Goodridge’s affidavit sworn on 11 July 2008, from which it appeared that the respondent had a practice of retaining backup TL drive files for a short period.  The particulars to [28I] referred to the same letter, in which it was also stated that data on a laptop belonging to a former employee (Trudi Allen) had been erased after she left the respondent’s employ.

7                          [28J] made be put to one side for the moment.  The legal consequence of the proposed pleading was alleged in [28K] as follows:

In the premises, by reason of the matters alleged in paragraphs 28A to 28J, the Court should draw all adverse inferences from the destruction of the said documents which are consistent with the matters alleged in paragraphs 22 and 23 and further, or in the alternative, 24 to 28 above.

PARTIES’ SUBMISSIONS

8                          Counsel for the applicants stated that the applicants proposed to invite the Court to draw an inference or inferences against the respondent from various facts including that: (1) emails were deleted; (2) the contents of a laptop computer used by Ms Allen were erased; (3) not all Channel Reports have been made available; and (4) the backup TL drive files were not retained.  In support of this submission, the applicants referred to the following three authorities: Gray v Haig (1855) 20 Beav 219; The Ophelia [1916] 2 AC 206; and Allen v Tobias (1958) 98 CLR 367.  The material fact was, so the applicants said, the destruction of documents.  If they were to plead the inferences to be drawn from this destruction, then, so they said, they would be pleading impermissibly matters of evidence.  The applicants’ case was that it was the fact of destruction by the respondent that was sufficient and necessary for their pleading.

9                          The applicants relied on Dare v Pulham (1982) 148 CLR 658 to support their contention that, given the function of pleadings, the Court should grant leave to amend.  In a well-known passage (at 664), the High Court said in that case that:

Pleadings and particulars have a number of functions: they furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it …; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial ...; and they give a defendant an understanding of a plaintiff’s claim in aid of the defendant’s right to make a payment into court.

10                        Counsel for the applicants argued that the applicants would be at risk of the respondent claiming at trial that it was taken by surprise if they had not sought to amend their pleadings.  Further, counsel stated that the applicants wanted to adduce evidence at trial concerning the fact of destruction of documents; and the admissibility of such evidence would not be apparent without the amendment.  Further, counsel for the applicants said the amendment enabled the respondent to understand how the applicants put the case against it.

11                        In addition, as indicated above, the applicants sought discovery of two categories of documents:

(a)        the Respondent’s policies or practices with respect to the retention and/or destruction of documents (including, but not limited to, email and MySingle correspondence); and

(b)        any variations or exceptions to those policies or practices implemented since November 2006.

12                        The applicants also submitted that the costs of the application should be reserved.

13                        Counsel for the respondent opposed the application for leave to amend on three bases.  These bases were: (1) the proposed amendments would contravene O 11 r 2, in that they sought to plead evidence not material facts; (2) the pleading would be liable to be struck out as tending to cause prejudice, embarrassment and delay contrary to O 11 r 16; and (3) the case the amendments sought to make was so weak as to warrant refusal of leave as a matter of discretion. 

14                        The respondent noted (and it may be accepted for present purposes) that [28F] was not concerned with all emails but with a specific category of in-house emails, which was in the nature of an in-house instant messaging program and subject to the respondent’s email management policies.  The respondent noted (and it may be accepted) that the applicants did not allege that there was any reprehensible aspect to these policies or that any deleted emails were likely to have included emails relevant to an issue in the proceeding.   The respondent made analogous submissions about the loss of the documents on Ms Allen’s laptop, as alleged in [28I].

15                        As the respondent noted, [28G] contained an allegation that the respondent had destroyed documents “likely to have been relevant to facts in issue”. The respondent noted, however, that the particulars showed that the basis for the assertion that the respondent had destroyed what were said to be fortnightly Channel Reports was that those that had been produced on discovery were “sporadic” without setting out the basis upon which the applicants made this latter claim.  Hence, according to the respondent, the pleading was embarrassing.  I accept this submission, although this is a defect the applicants could plainly cure.

16                        According to the respondent, [28H] conflated different types of documents. That is, the documents to which Ms Goodridge referred in [6] of her affidavit of 11 July 2008 were discovered.  The documents to which reference was made in the respondent’s solicitor’s letter of 5 September 2008 were incidental documents, which are not said to be relevant to the proceeding.

17                        The respondent alleged that [28K] was embarrassing because it did not state any particular inference that the applicants wished the Court to draw. 

18                        The respondent further submitted that the applicants might have sought to amend their pleading at any time after 5 September 2008, but had not chosen to do so until much later.  It was to be borne in mind that the trial had been fixed for a date later this month.  Further, the last occasion to seek discovery was September 2008.

19                        The applicants replied to the claim of delay, by noting that they relied on Ms Goodridge’s affidavit of 11 July 2008; and further that the respondent alleged no prejudice.

CONSIDERATION

20                        Order 11 rule 2 provides that a pleading shall contain “and contain only” a statement in a summary form of the material facts on which the party relies, but “not the evidence by which those facts are to be proved”.  Material facts are not limited to the cause of action but extend to the relief being sought and generally so that there is no chance of surprise.  The evidence upon which facts are to be established is not to be pleaded.  It is not always easy to distinguish between facts to be pleaded and evidence that should not. 

21                        Order 11 rule 16 provides that, where a pleading has a tendency to cause prejudice, embarrassment or delay in the proceeding, the Court may order that it be struck out.  Naturally, the Court would not give leave to amend in respect of a pleading that was liable to be struck out.

22                        Order 13 rule 2 confers on the Court a wide discretion to allow amendment of a pleading in an appropriate case.  If the matter that the amendment would raise is unlikely to succeed, then leave will generally not be given.

23                        For the reasons to be stated, I would not grant such leave in this case because: (1) the propositions that the applicants seek to advance in support of their case are misconceived in point of law; (2) the proposed pleading would be embarrassing within the meaning of O 11 r 16; and (3) the proposed pleading is in the main directed to matters of evidence.

24                        In order to explain why I have reached this conclusion, it is necessary to examine the three cases relied on by the applicants to support their pleading.

25                        Gray v Haig (1855) 20 Beav 219 concerned one Mr Gray, who was the agent for Haig & Son, selling whisky on commission.  When his agency ended, a dispute arose as to the amount of the commission due and an account was ordered.  However, after the dispute arose, Gray destroyed the books, on which the taking of the account depended.  The Master of the Rolls held, at 226, that:

In a case before me this year, one partner, several years before the institution of the suit, and upwards of twenty years after the closing of the partnership business, and when the accounts had been settled between him and his partners by arbitration, and never afterwards opened or disputed, had destroyed the books which contained the accounts of that partnership, I treated lightly the circumstance of that destruction, and did not suffer it to prejudice his case.  But the case is very different when the transactions to which they relate are recent, where the accounts arising from them have not been finally adjusted, or the balance ascertained or paid, and still more when that destruction takes place by the person who has actually filed a bill to have the accounts taken of those very transactions to which these books relate.  In such a case some very cogent reason must be given to satisfy the Court that the destruction was proper or justifiable, and, in the absence of any such satisfactory reason, which is the fact here, I am compelled to act on the principle laid down in the well-known case of Armory v Delamirie (1 Strange, 505), and presume, as against the person who destroyed the evidence, everything most unfavourable to him, which is consistent with the rest of the facts, which are either admitted or proved.

Counsel for the applicants stated that this was the applicants’ “inspiration for [their] plea”.  The passage makes it clear, however, that the principle that was under discussion was essentially an evidentiary principle, the application of which depended on the particular circumstances of the case.  These circumstances included that the documents in question were essential to the taking of the account and destroyed by the very person who sought the relief at a time when the account was yet to be taken.  The destruction of the documents in this circumstance was reprehensible and not merely mistaken.

26                        The Ophelia [1916] 2 AC 206 concerned a German steamship, which was seized by the British ship, HMS “Meteor”, in October 1914 and taken as a prize.  The German Government claimed her release upon the ground that she had been operating as an auxiliary military hospital ship.  The British Crown contended that she had been operating as a signalling ship for military purposes. The case was first heard in the Prize Court, which condemned the “Ophelia” as lawful prize. An appeal was taken directly to the Privy Council, where their Lordships’ advice was delivered by Sir Arthur Channell.  

27                        At the time of the seizure, various documents, including signals log, were thrown overboard.   One of the issues in the case concerned the principles of evidence relating to the “spoliation of documents”.  The signals log was in the circumstances of the case a most important document.  In respect of this document, Sir Arthur Channell said (at [1916] 2 AC at 228-229):

There seems, taking the evidence as a whole, the greatest uncertainty as to what books recording signals were really kept; but the one thing which is certain is that any which were kept, except the news log, were thrown overboard when it was seen that the vessel was about to be searched.  If nothing but innocent signals had been sent, the signal log was the very book of all others which should have been preserved.  The result, therefore, is that the appellant has nothing to show to vouch his story that all signals sent … were of an innocent character.  Further, the absence of such evidence, if any ever existed, is caused by his own act.

This leads to the subject of what is technically called spoliation of documents, on which the President, rightly, as their Lordships think, laid much stress …

Sir Arthur Channell subsequently described the doctrine relating to spoliation of documents in the following passage (at [1916] 2 AC at 229-230):

[I]t may be that in some respects the old doctrine was rather technical. The substance of it, however, remains and is as forcible now as ever, and it is applicable not merely in prize cases, but to almost all kinds of disputes. If any one by a deliberate act destroys a document which, according to what its contents may have been, would have told strongly either for him or against him, the strongest possible presumption arises that if it had been produced it would have told against him; and even if the document is destroyed by his own act, but under circumstances in which the intention to destroy evidence may fairly be considered rebutted, still he has to suffer. He is in the position that he is without the corroboration which might have been expected in his case.

…

28                        In stating their Lordships’ opinion, Sir Arthur Channell concluded (at [1916] 2 AC at 230-231):

Their Lordships are of opinion that Captain Pfeiffer [the “Ophelia's” commander] and the other witnesses have by their acts put themselves in such a position that their evidence cannot be relied on; that the evidence discloses facts of which no satisfactory explanations are or can be given; and that although on the Crown affidavit evidence some ambiguities have been pointed out which have not been cleared up by cross-examination or re-examination, yet there are incriminatory matters in those affidavits to which no answer has been given.  They are of opinion that the President was fully justified in finding that the Ophelia was not constructed or adapted or used for the special and sole purpose of affording aid and relief to the wounded, sick, and shipwrecked, and that she was adapted and used as a signalling ship for military purposes.

29                        Notwithstanding Sir Arthur Channell’s comment that the doctrine of spoliation is applicable “to almost all kinds of disputes”, The Ophelia [1916] 2 AC 206 is essentially a case on the law of prize.  In any event, the case makes plain that the doctrine of spoliation is an evidentiary one.  The case illustrates an approach to evidence, especially in a prize context. 

30                        Further, it is clear from the report of the case that what was in issue was a very clear and deliberate act of spoliation – the deliberate destruction of evidence.  The case is not authority for the broad principle that the applicants espouse – that every destruction of documents attracts an adverse inference.  That is, I doubt that Sir Arthur Channell intended to say that, in any litigation, where it can be shown that one party destroyed a document, then it must be presumed that that document supported the opposing party.  Such a proposition would be unreasonable. 

31                        The significance of The Ophelia [1916] 2 AC 206 depends, so it seems to me, on what is intended by the word “spoliation”: see The Oxford English Dictionary, which includes that “spoliation” means “[t]he action of spoliating, despoiling, pillaging, or plundering; seizure of goods or property by violent means; depredation, robbery. Also, the condition of being despoiled or pillaged”.  The doctrine of spoliation is sometimes expressed as “omnia praesumuntur contra spoliatorem”.  For the purposes of the doctrine of spoliation, there is a distinction between: (1) the deliberate destruction of documents with the intention of destroying evidence; and (2) the deliberate destruction of documents where there is no such intention.   That is, there must be something reprehensible about the destroying party’s conduct for the doctrine of spoliation to apply. It seems to me that such a distinction is inherent in the passage set out at [27] above.  It is only in the first situation that there may arise a presumption adverse to the destroying party.  In the second situation, the destroying party suffers a detriment, but only in the sense that he has thereby lost corroboration. 

32                        Allen v Tobias (1958) 98 CLR 367 largely confirms this view of The Ophelia [1916] 2 AC 206.   Allen v Tobias commenced as an action for penalties against one Leslie William Allen on the ground that he had acted as a shire councillor, while being disqualified from so acting since he was concerned in a contract with the municipality concerning the municipal rubbish tip.  There was a question as to whether the documents in which the agreement was made were executed by him. The trial judge said that there was a suspicion that the documents were destroyed by the defendant “lest the fact of execution … might prove difficult for the defendant in anticipated litigation”: 98 CLR at 371. In the High Court, this observation led Dixon CJ, McTiernan and Williams JJ to say (98 CLR at 375):

It is perhaps desirable to refer again to one question of fact which Sholl J [the trial judge] left unsettled.  Did the defendant and his brothers execute the agreement with the council drawn up in April 1953, the three copies of which were destroyed by the defendant?  Notwithstanding the difficulty which his Honour felt in arriving at a conclusion, there are two grounds why the Court should proceed upon the assumption that the document was so executed.  In the first place to presume the fact against the defendant seems but a proper application to the circumstances of the principle omnia praesumuntur contra spoliatorem.  It is a far cry from the municipal warfare of the present case to a case in Prize but no statement of the principle could be more apposite than that of Sir Arthur Channell delivering the opinion of the Privy Council in The Ophelia.  …

At this point, their Honours set out the passage at [27] above. 

33                        The report of Allen v Tobias demonstrated that what was at issue was the deliberate destruction of documents with the intention of destroying evidence in anticipated litigation.  As in The Ophelia, this was a proper occasion in which to apply the doctrine of spoliation as an evidentiary presumption.  Further, in the High Court, their Honours did not rely on this doctrine alone, but also on the further reason that the statute cast the burden of proof on the defendant to disprove the disqualifying facts.

34                        These authorities lead to the conclusion that the applicants have misconceived the doctrine of spoliation, on which in effect they wish to rely.   For the purposes of this doctrine, it is not enough to show that the respondent destroyed documents deliberately.  Rather, the applicants must show that the respondent deliberately destroyed documents with the intention of destroying evidence.  

35                        It follows from the fact that the applicants have misconceived the doctrine that they have a fundamentally defective proposed amendment. It is not sufficient to allege that the respondent has destroyed documents without also alleging in what respect or respects they would have been evidence in the action and that the respondent destroyed them with the intention of destroying this evidence.  [28F], [28H] and [28I] are deficient in these respects.  Further, I doubt whether the pleading in [28G] is sufficient to identify in what respect the documents in question would have been evidence in the action, but, even if it is sufficient in this respect, the applicants do not claim that the respondent has destroyed any documents with the intention of destroying evidence.  It is not suggested that the applicants have any basis for such a pleading. [28K] rests upon the previous proposed pleading and does not seek to remedy any of these deficiencies.  As I have said, [28K], which expresses a conclusion, depends on a view of the law that is mistaken.  If it mattered, I would regard the reference to “adverse inferences” without more in [28K] as embarrassing, for the reasons outlined by the respondent.

36                        Furthermore, although it is not strictly necessary to decide the point, I am inclined to the view that, since the doctrine of spoliation is a doctrine concerning an evidentiary presumption, a party need not plead it in order to rely on the doctrine at trial.  This is not to say that a party intending to rely on the doctrine need not give notice to the other party of this intention.  Rather, this means that a party wishing to rely on the doctrine may properly give notice of this intention (if notice is called for) in some other way, such as by letter to the opposing party’s solicitors.  

37                        For these reasons, save as to [21], I would not grant leave to amend the statement of claim in the manner sought by the applicants.  Since the application for further discovery was dependent on the grant of leave to amend, it too must fail.

38                        Accordingly, I would grant leave to amend [21] of the statement of claim but otherwise order that the motion, notice of which is dated 19 March 2009, be dismissed with costs.

Associate:

Dated:         6 April 2009