FEDERAL COURT OF AUSTRALIA

Leica Geosystems Pty Ltd v Koudstaal (No 2) [2013] FCA 722

THE COURT ORDERS THAT:

1.    The applicants have leave to file a Third Further Amended Statement of Claim in the form marked as exhibit 5(A) in this proceeding, with tracked changes accepted.

2.    By 12 pm on 24 July 2013 the respondents file copies of their respective Defences, with tracked changes accepted.

3.    The respondents have leave to file amended Defences to the Third Further Amended Statement of Claim, with amendments limited to responding to paragraph 22 of the Third Further Amended Statement of Claim, by a date to be fixed.

4.    The applicants pay the costs of the respondents thrown away by the amendments to the Second Further Amended Statement of Claim.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    Yesterday was the first day of hearing in this proceeding. Mr Franklin SC for the applicants informed the Court that there were a number of “housekeeping” matters to be dealt with, including a prospective amendment to the Second Further Amended Statement of Claim (“2nd FASOC”). On that basis, the applicants orally applied in Court for an amendment to para 22 of the 2nd FASOC, in order to add the following words to that paragraph:

and on 27 January 2012 created a reproduction of the jmineops_acd.bak file.

2    On the basis that the proposed amendments was accepted, the proposal would result in para 22 of the 2nd FASOC reading as follows:

On or between 24 and 27 January 2012 the First Respondent accessed the copy of Leica’s material on his laptop computer, including accessing Leica’s material contained within the Virtual Machines (comprising part of the Taken Material) and on 27 January 2012 created a reproduction of the jmineops_acd.bak file.

3    The respondents opposed the amendment.

4    As became clear in light of extensive oral submissions made by Mr Franklin SC, this amendment was not a mere “housekeeping” matter. Rather, it posed an important issue for the conduct of this trial. In summary the amendment would:

    represent a further incident of copying of the jmineops_acd.bak file; and

    plead a further claim against both respondents.

5    After consideration I granted leave to the applicants to amend para 22 of the 2nd FASOC as sought. Accordingly, the applicants have leave to file a Third Further Amended Statement of Claim.

6    I now set out my reasons for this decision.

Background

7    The background to this proceeding is set out in some detail in Leica Geosystems Pty Ltd v Koudstaal [2012] FCA 1337. Materially, and in summary:

    The first, second and third applicants are related corporations. For the purposes of this interlocutory application, it is convenient to simply refer to them jointly as “the applicants” in view of their common interest in this matter.

    The applicants own or have an interest in certain source code and related software.

    The first respondent, Mr Koudstaal, was employed by the first applicant as a software engineer on or about 10 May 2010. His contract of employment included extensive confidentiality clauses.

    Mr Koudstaal resigned from the first applicant’s employment effective 3 November 2011, and commenced employment with the second respondent Automated Positioning Systems Pty Ltd (“APS”) on that date.

    The applicants allege, inter alia, that:

o    before ceasing employment with the first applicant, Mr Koudstaal downloaded and took with him a copy of the source code, which was then further reproduced on to an external hard drive and his laptop at various times;

o     one of the files downloaded was the jmineops_acd.bak file;

o     in the course of his employment with APS, Mr Koudstaal is using or has used that source code to work on software products for APS, and/or has provided a copy of the source code to APS.

    The applicants had alleged in the 2nd FASOC (inter alia) that Mr Koudstaal had accessed the copy of Leica’s material on or between 24 and 27 January 2012.

    The applicants seek extensive remedies including:

o     restraining orders against both Mr Koudstaal and APS in relation to reproducing, using, publishing, communicating or disclosing in any way the applicants’ material;

o     a declaration that the respondents have wrongfully used and disclosed confidential information of the applicants;

o     declaratory orders concerning breach of contract;

o     for breach of the Copyright Act 1968 (Cth);

o     alternative remedies including equitable compensation for breach of confidence, an account of profits, interest and costs.

8    A great deal of material has been filed in this proceeding, including within the last week. Further, it is apparent that there has been some narrowing of the issues which are the subject of the proceeding, as is apparent from recent – uncontested – amendments to the pleadings by both parties.

Submissions of the applicants

9    In relation to the proposed amendment to the 2nd FASOC, the applicants submit (in summary) as follows:

    The amendment relates to a further incident of copying of the jmineops_acd.bak file on to Mr Koudstaal’s laptop and, to that extent, is an important aspect of the applicants’ case.

    Evidence that Mr Koudstaal copied the jmineops_acd.bak file on to his laptop on 27 January 2012 (as distinct from merely accessing Leica’s material on the laptop) is already before the Court. In particular:

o     Mr Frederik Potgieter in his affidavit affirmed 28 February 2012 annexes (as Annexure FJJP-2) an analysis by Mr Daniel Swart of data on Mr Koudstaal’s laptop as at 28 February 2012. Included in files on the laptop was the jmineops_acd.bak file;

o     in his affidavit affirmed 15 March 2012 Mr Stephen Roberts, the Chief Executive Officer of Leica Geosystems Mining, deposed that he had seen the jmineops_acd.bak file listed as appearing in the hard drive of Mr Koudstaal’s laptop;

o     in his report annexed to his affidavit sworn 9 August 2012, forensic computer expert Mr Ajoy Ghosh at [41-47] referred to the jmineops_acd.bak file being copied on to the laptop and to Virtual Machine software being used to download material on 27 January 2012;

o     in his report annexed to his affidavit sworn 5 July 2013 forensic computer expert Mr Mark Garnett identified that on 27 January 2012 the Virtual Machine software was used to download material on to Mr Koudstaal’s laptop;

o     Mr Koudstaal in his affidavit sworn 5 July 2013 – which was filed by the second respondent – gave evidence that on 24 January 2012 he copied the material from an external hard drive on to his laptop because he was endeavouring to attempt a “bug fix” in relation to software, and needed to operate Virtual Machine software in order to do so. He further deposed that, because he was unable to open the Virtual Machine software on the external hard drive, he needed to copy the applicants’ source code directly on to his laptop. On 27 January 2012 he decided to look at the database again;

o     in his third report annexed to his affidavit sworn 17 July 2013 software engineer Mr Nicholas Inglis opined, in summary, that the version of events deposed to by Mr Koudstaal in his affidavit sworn 5 July 2013 in relation to the jmineops_acd.bak file cannot be correct, because the data on the jmineops_acd.bak file was too old to contain the “bug fix” Mr Koudstaal deposed he was endeavouring to address. It follows that Mr Koudstaal’s motive in accessing the jmineops_acd.bak file on 27 January 2013 must have been for a reason other than the “bug fix” alleged.

    The respondents would suffer no prejudice in respect of this amendment to the 2nd FASOC. They would be able to easily answer the amendment because they were already aware of the relevant evidence.

    That Mr Koudstaal appeared to have copied the jmineops_acd.bak file again on 27 January 2012 only came to the applicants’ attention after Mr Koudstaal had filed his affidavit sworn 5 July 2013 and Mr Inglis had sworn an affidavit in reply on 17 July 2013. It followed that the applicants had not delayed in seeking an amendment to the 2nd FASOC.

10    The respondents submit, in summary, that:

    Assuming that the issue of Mr Koudstaal copying the jmineops_acd.bak file on 27 January 2012 has been before the Court since at least the affirmation of Mr Potgieter’s affidavit on 28 February 2012, there is no real explanation as to why the applicants have waited until the commencement of the trial before seeking this amendment to their 2nd FASOC. This is particularly so in light of the fact that earlier this year APS sought particulars from the applicants in relation to para 23 of the 2nd FASOC.

    No real evidence is pleaded that the jmineops_acd.bak file was copied on 27 January 2012.

    The applicants are now claiming a separate act of alleged infringement by reproduction, which affects both respondents. This new claim requires careful consideration by expert witnesses of the respondents and cannot be properly addressed by the respondents or their witnesses by the end of this week.

Consideration

11    It is unfortunate that a further amendment should be proposed at the commencement of a four day trial, where the trial already involves detailed and complex issues and where a great deal of material has already been filed. This amendment is not trifling – all parties acknowledge that the proposed amendment alleges a separate and distinct issue to those issues already pleaded in the 2nd FASOC. I accept the submission of Mr Barlow SC for APS that APS and its witnesses (including expert witnesses) will need to consider this new claim. Delay in the progress of the trial is inevitable.

12    I note the principles explained by the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, in particular that:

    An award of costs to compensate the other party for the inconvenience of the trial dates being vacated as a consequence of the amendment to the pleadings is not a panacea.

    The Court should recognise any ill-effects of resultant delay upon the parties to the proceedings and the effects on other litigants who are also seeking a resolution to their proceedings.

    The nature and importance of the amendment to the party applying for the amendment cannot be overlooked.

    The exercise of the discretion requires an explanation to be given where there is delay in applying for amendment.

    There may be cases where it may properly be concluded that a party has had sufficient opportunity to plead their case and that it is too late for a further amendment, having regard to the other party and other litigants awaiting trial dates.

    The timing of the application for amendment is a salient issue.

    An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement.

13    However, as the Full Court of the Federal Court observed in Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261 at [51]:

Aon Risk is not a one size fits all case. Whilst various factors are identified in the judgment as relevant to the exercise of discretion, the weight to be given to these factors, individually and in combination, and the outcome of that balancing process, may vary depending on the facts in the individual case. As the plurality in Aon Risk observed at [75], statements made in cases concerning amendment of pleadings are best understood by reference to the circumstances of those cases, even if they are stated in terms of general application.

(cf Dye v Commonwealth Securities Ltd (No 2) [2010] FCAFC 118).

14    In this case, while some disruption to the progress of the trial would result from allowing the applicants to amend the 2nd FASOC, I am satisfied that leave should be granted. I so find for the following reasons.

15    First, it does not appear to be in dispute that the additional claim sought to be pleaded by the applicants raises serious and important issues in relation to their case. The evidence to which Mr Franklin SC referred in his submissions appears relevant to a claim that a separate act of reproduction of the jmineops_acd.bak file took place on 27 January 2012, and to this extent explains the proposed amendment to para 22 of the 2nd FASOC.

16    Second, notwithstanding that evidence appears to have subsisted for some time supporting the claim now formulated by the applicants in relation to Mr Koudstaal having separately copied the jmineops_acd.bak file on 27 January 2012, I am satisfied that the applicants only became aware that this was a potential issue following the filing of the affidavits of Mr Koudstaal and Mr Inglis within the last three weeks (and where Mr Inglis’ evidence only became available last Wednesday). To that extent it is clear that there has been no improper delay by the applicants in seeking to amend the 2nd FASOC.

17    Third, while I accept that the respondents require time to respond to this new aspect of the applicants’ case, including the possibility of adducing further evidence, the issue of timing can properly and realistically be addressed by the trial in this case being adjourned after the applicants both open their case this week and call witnesses whose evidence is not relevant to the amendment to para 22 of the 2nd FASOC. It is now clear that, in light of the volume of material before the Court and the potential complexity of issues to be addressed, four days is insufficient for the hearing of this proceeding. To that extent, and in any event, the resultant splitting of this trial appears inevitable. Any matters relevant to the amended case of the applicants can properly, and efficiently, be addressed by the respondents once the trial resumes at a future date. Accordingly, I am not satisfied that the respondents are to any significant degree prejudiced by the amendment to the 2nd FASOC sought by the applicants. I am also satisfied that this approach satisfies the spirit of s 37M of the Federal Court of Australia Act 1976 (Cth).

18    Fourth, this case is not comparable with, for example, the adjournment of a four week trial which was sought in Aon Risk Services. Case management issues relevant to the conduct of Court business are unlikely to be significantly affected by the resumption of a hearing over several days at a future date.

19    Fifth, in this case I consider that costs are adequate compensation to the respondents for any ill-effects they may experience as a result of the amendment to the 2nd FASOC, including any need to recall expert witnesses at a future date or a truncation of listed hearing dates this week.

20    Finally, it appears that the applicants placed the respondents on notice on 19 July 2013 that they intended to seek leave to amend the 2nd FASOC in the terms the subject of today’s submissions. While not conclusive, in my view the fact that the interlocutory application to amend the 2nd FASOC was not a surprise to the respondents yesterday is relevant to the exercise of the Court’s discretion to grant leave.

21    It follows that the applicants should have leave to amend the 2nd FASOC in the terms produced to the Court.

Associate:

Dated:    24 July 2013