FEDERAL COURT OF AUSTRALIA

Hill & Smith Holdings PLC v Safe Barriers Pty Ltd (No 2) [2020] FCA 8

ORDERS

THE COURT ORDERS THAT:

1.    Leave is granted to the applicants to amend their originating application and statement of claim in accordance with the reasons for judgment published today.

2.    Safe Barriers Pte Ltd and Russell William Hood be joined as parties to the proceeding, as the second respondent and the third respondent respectively.

3.    Leave is granted to the applicants to serve the second respondent and the third respondent in the Republic of Singapore, in accordance with the law of that country.

4.    Subject to order 5 below, each party pay its own costs of the applicants’ interlocutory application filed on 12 July 2019.

5.    The applicants pay the respondent’s costs, if any, thrown away by reason of the amendments.

6.    Within 14 days of the date of these orders, the respondent notify the applicants and Robertson J’s associate whether or not it opposes an order that it pay the applicants’ costs of the hearing on 29 May 2019. If the respondent does so oppose, the Court will make directions for short written submissions to be exchanged with a view to determining that issue on the papers.

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

REASONS FOR JUDGMENT

ROBERTSON J:

Introduction

1    Before the Court is the applicants’ interlocutory application filed on 12 July 2019 seeking leave to amend, to join three additional parties and to serve the three proposed parties, including two parties in the Republic of Singapore pursuant to r 10.43 of the Federal Court Rules 2011 (Cth).

2    I described the general nature of the proceeding in an earlier judgment: Hill & Smith Holdings PLC v Safe Barriers Pty Ltd [2018] FCA 1882. The first applicant is registered pursuant to the Patents Act 1990 (Cth) as the proprietor of Australian Standard Patent No. 2007323210 entitled “Crash Barrier Beam”. The impugned products of the respondent are a range of temporary road safety barrier products under the name “Defender”, including the Defender Barrier 70.

The evidence

3    The applicants relied on two affidavits by Mr John Collins, solicitor, sworn 11 July 2019 and 25 November 2019. The applicants also sought to rely on a letter dated 25 September 2017, handed up at the hearing of this interlocutory application, the tender of which, for the reasons I explain below, I reject. The present respondent relied on an affidavit sworn by Mr Malcolm Burrows, solicitor.

The submissions of the parties

4    The applicants submitted their application to amend should be allowed because the pleading as proposed to be amended was satisfactory, there was no disentitling delay or other discretionary factor, and it would meet the statutory requirements of determining all matters in controversy and avoiding multiplicity of proceedings, referring to s 22 of the Federal Court of Australia Act 1976 (Cth). The applicants submitted that if the amendments were allowed, the Court should grant leave to serve the second and third respondents in Singapore in accordance with r 10.43.

5    The parties agreed that the relevant principles for leave to amend were set out by Burley J in University of Sydney v ObjectiVision Pty Ltd [2016] FCA 1199, as follows:

62.    The onus is on the party seeking leave to amend to persuade the Court that such leave should be given: Dye v Commonwealth Securities Limited (No 2) [2010] FCAFC 118; (2010) 63 AILR 101 at [17].

63.    The principles articulated by the High Court in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 (Aon) apply to matters in this Court: Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261 (Cement Australia) at [43]. A Full Court of this Court in Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2; 332 ALR 199 at [125] (Tamaya) recently approved the following statement of the primary judge (Gleeson J at [127]) of relevant matters that the Court is to consider:

(1)    The nature and importance of the amendment to the party applying for it: Aon at [102];

(2)    The extent of the delay and the costs associated with the amendment: Aon at [102];

(3)    The prejudice that might be assumed to follow from the amendment, and that which is shown: Aon at [5], [100] and [102];

   (4)    The explanation for any delay in applying for that leave: Aon at [108];

(5)    The parties’ choices to date in the litigation and the consequences of those choices: Aon at [112] and Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 (Luck) at [44];

(6)    The detriment to other litigants in the Court: Aon at [93], [95] and [114] and Luck at [44]; and

(7)    Potential loss of public confidence in the legal system which can arise where a court is seen to accede to applications made without adequate explanation or justification: Aon at [5], [24] and [30].

64    The weight to be given to the considerations identified in Aon, individually and in combination, and the outcome of the balancing process, may vary depending on the facts in the individual case: Cement Australia at [51].

65    Parties must have a sufficient opportunity to identify the issues they seek to agitate: Aon at [94], [98] and [112]. …

…

67    Significantly, the Court will consider whether the proposed amendments disclose a reasonable cause of action, or whether they have a tendency to cause prejudice, embarrassment or delay in the proceeding: Research in Motion Ltd v Samsung Electronics Australia Pty Limited (2009) 176 FCR 66 at [21] to [22]; Wotton at [59].

6    The applicants submitted that the proposed amendments were significant to the applicants’ case, and would significantly add to the relief available to the applicants in vindication of their rights if successful at trial. In essence, the applicants submitted, the amendments added claims of misuse of confidential information to the patent infringement claims; and asserted those claims against the present respondent and:

(a)    Safe Barriers Pte Ltd (Singapore company), the company responsible for the design and development of the Defender Barrier 70 product range imported and sold by the present respondent, alleged by the applicants to infringe the patent in suit, and to have been designed with the benefit of the applicants’ confidential information;

(b)    Mr Russell Hood, a director of the present respondent, a former director of the Singapore company and a former employee of the second applicant; alleged by the applicants to have breached his employment contract, an equitable duty of confidence, s 182 of the Corporations Act 2001 (Cth), authorised the infringement of the patent in suit and to have been a joint tortfeasor in that infringement;

(c)    Mr David Moule, a director and the company secretary of the present respondent, a former employee of the second applicant, alleged by the applicants to have committed the same wrongs as Mr Hood.

7    The applicants submitted there was no disentitling delay. The relevant period was from the start of the proceedings until May 2019 when the proposed amendments were foreshadowed and a timetable ordered for the application to amend the pleadings. The applicants submitted that the time between the making of a mediation order and the mediation itself (about three months) should not be held against them. They submitted that the evidence showed that they thought they did not have enough information to bring the proposed additional claims at the commencement of the proceedings. As the present application demonstrated, the applicants submitted, they now considered that they did have enough information, including because of documents produced on discovery that the applicants maintained were not publicly available. That was the explanation for the timing of the application and in those circumstances, the applicants submitted, the passage of time was not undue. No evidence had been filed in the proceeding. No hearing date for the trial had been set. There was no prejudice to the present respondent arising from the timing of the application. The mere fact of delay was not a reason to refuse leave to amend, the applicants submitted.

8    The applicants submitted there was no other unfair prejudice to the respondent. The present respondent identified what it regarded as deficiencies in the proposed amended pleading but, the applicants submitted, none of these should cause the application to be refused. The applicants summarised those issues, and their answers, as follows:

(a)    The identity of clients and suppliers ([34], [36], [59]). As to suppliers, the applicants submitted they included at least Holmes Solutions Limited Partnership and Dynamic Traffic Systems (HK) Ltd. As to clients, they included at least Fulton Hogan Ltd. The applicants stated that they did not wish to name further clients in a publicly-accessible pleading or submission due to commercial sensitivities.

(b)    Alleged lack of clarity as to how pleaded conduct involves a breach of particular contractual terms or a duty of confidence ([35], [37], [41], [60], [72]). The applicants submitted this complaint was misconceived. The conduct had been pleaded. The contractual terms had been pleaded. The applicants submitted that it was wholly conventional to plead in a conclusory way that the conduct involved a breach. If the present respondent (or additional respondents) disagreed, they would deny the allegation.

(c)    Identification of confidential information ([38], [56]). The applicants submitted that the paragraphs adequately pleaded the information they alleged to be confidential. The complaint about the particularised documents, which the applicants submitted had now been produced to the respondent, was without merit.

(d)    Allegedly conclusory and unparticularised allegations ([40], [59]). The allegations in these paragraphs were clear, the applicants submitted. The respondent’s complaints about these paragraphs related to matters of detail which, if the allegations were true, would be within the respondent’s (or additional respondents’) knowledge. If the respondent(s) disputed the allegations, they would be denied. The applicants also referred to their response to the complaint concerning identification of clients.

9    As to joinder and service out, the applicants submitted that the proposed additional respondents were necessary parties to ensure that each issue in dispute in the proceeding was able to be heard and finally determined.

10    As to service out, the relevant rule provides:

10.43     Application for leave to serve originating application outside Australia

(1)    Service of an originating application on a person in a foreign country is effective for the purpose of a proceeding only if:

(a)    the Court has given leave under subrule (2) before the application is served; or

   (b)    the Court confirms the service under subrule (6); or

(c)    the person served waives any objection to the service by filing a notice of address for service without also making an application under rule 13.01.

Note:    A respondent may apply to set aside an originating application or service of that application—see rule 13.01.

(2)    A party may apply to the Court for leave to serve an originating application on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country.

  (3)    The application under subrule (2) must be accompanied by an affidavit stating:

(a)    the name of the foreign country where the person to be served is or is likely to be; and

   (b)    the proposed method of service; and

   (c)    that the proposed method of service is permitted by:

(i)    if a convention applies—the convention; or

(ii)    if the Hague Convention applies—the Hague Convention; or

(iii)    in any other case—the law of the foreign country.

(4)    For subrule (2), the party must satisfy the Court that:

   (a)    the Court has jurisdiction in the proceeding; and

   (b)    the proceeding is of a kind mentioned in rule 10.42; and

(c)    the party has a prima facie case for all or any of the relief claimed in the proceeding.

Note 1:    The law of a foreign country may permit service through the diplomatic channel or service by a private agent—see Division 10.5.

Note 2:    Rules 10.63 to 10.68 deal with service of local judicial documents in a country, other than Australia, that is a party to the Hague Convention.

Note 3:    The Court may give permission under subrule (4) on conditions—see rule 1.33.

(5)    …

11    The applicants submitted that the affidavit required by r 10.43(3) was provided in the two Collins affidavits. The applicants submitted that the Court had jurisdiction in the proceeding, that the proceeding was of a kind mentioned in r 10.42, and that the applicants had a prima facie case for relief in the proceeding, each criterion being apparent from the face of the proposed amended pleading.

12    The respondent submitted that these proceedings were commenced in July 2018 and pleadings closed two months later. The only issue, presently, was patent infringement. After an interlocutory dispute, both parties gave discovery. After an unsuccessful mediation on 12 March 2019, the deadline for the applicants’ evidence in chief on its patent infringement claim was 3 May 2019. On 2 May 2019, the applicants told the respondent that they were “taking instructions in relation to possible amendments to the pleadings” and sought deferral of the timetable for its patent infringement evidence. One and half years into the proceedings, the applicants had not put on any evidence in support of that case, the respondent submitted.

13    The respondent submitted that the proposed claim against it suffered from at least two vices.

14    First, contrary to the basal requirement that the alleged confidential information be identified with precision (citing O’Brien v Komesaroff (1982) 150 CLR 310 at 326-8), the applicants had pleaded 13 very broad categories of information, referring to [38] and [56] of the proposed amended pleading. An allegation that a former employee has stolen confidential information is of the “utmost seriousness” – as a matter of fairness, the identification of the alleged confidential information “must be in more than general terms”, the respondent submitted, referring to Liberty Financial Pty Ltd v Scott (No 2) [2005] VSC 26; 11 VR 629 at [13].

15    Some of those categories concerned supplier, customer and potential clients’ names and information, none of which were particularised, the respondent submitted, referring to [38](e)-(f) and [56](f)-(g). It was not apparent from the proposed amended pleading why that information was confidential, the respondent submitted, and the law did not presume that to be so, referring by way of example to Weldon & Co Services Pty Ltd v Harbinson [2000] NSWSC 272 at [11], [70], [71]. A pleader must identify what it is about the information which attracts the notion of being confidential, the respondent submitted, referring to Lynx Engineering Consultants Pty Ltd v ANI Corp Ltd (No 2) [2009] FCA 363 at [58], and also at [48]-[51]. The applicants had particularised 17 categories of material, some containing multiple documents, without identifying what information within it was the confidential information. Reliance on the whole of documents said to constitute confidential information did not suffice as a matter of pleading, the respondent submitted, referring for comparison to Lynx at [54], [68]. The respondent submitted that the proposed amended pleading suffered from the problem identified in Ocular Sciences Ltd v Aspect Vision Care Ltd [1997] RPC 289 at 360 (approved in GlaxoSmithKline Australia Pty Ltd v Ritchie [2008] VSC 164; 77 IPR 306 at [38]).

16    Secondly, the respondent submitted, the breach of confidential information allegation was entirely speculative. A confidential information case ought not to go forward on that basis, it submitted, referring to ACM Services Pty Ltd v Linmac Cranes Australasia Pty Ltd [2008] FCA 76 at [29].

17    Although it was unclear from the particulars to the proposed amended pleading at [72], the respondent submitted that [69] and [72] (read with [40], [45], [59], [64] and [71]) appeared to be to the effect that: (1) the directors stopped working for the applicants (it was pleaded at [21] and [53] that the directors were employed by the second applicant) and then worked for the respondent; (2) the respondent released its own product; and (3) the respondent approached unidentified clients of the applicants (the nature of the approaches not being properly particularised). Without more, the respondent submitted, “the mere fact that the defendants called on some people who were customers of the plaintiff would not of itself be sufficient to constitute a breach of confidential information”, referring to Forkserve Pty Ltd v Pacchiarotta [2000] NSWSC 979; 50 IPR 74 at [23]. The applicants had filed no evidence on the interlocutory application concerning (3), the respondent submitted.

18    Further, the absence of any explanation for the delay both told against granting leave to amend and suggested that the applicants could not offer any explanation favourable to it on the interlocutory application, the respondent submitted, referring to Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; 239 CLR 175 at [108]. They submitted that this also provided further context by which to assess the deficiencies in the proposed amended pleading.

19    The applicants wrote to the respondent in March 2018 seeking preliminary discovery in respect of the confidential information allegation they now sought leave to add, but chose not to pursue preliminary discovery. This was relevant for three reasons, the respondent submitted. First, as the applicants accepted, they considered at the time that they did not have a sufficient basis to allege misuse of confidential information. Secondly, the applicants made a “deliberate strategic choice” not to pursue preliminary discovery in respect of that claim and, instead, to commence proceedings for patent infringement only, the respondent submitted, comparing Fewin Pty Ltd v Burke [2016] FCA 503 at [63]. Thirdly, the applicants would inevitably seek wide-ranging discovery in support of their confidential information claim if amendment were allowed.

20    As to the applicants’ submission that they now had a sufficient basis to allege misuse of confidential information against the respondent because of documents obtained in discovery in the present proceedings, this should be rejected, the respondent submitted. There was no basis for the Court to find that the applicants’ position was materially different from that in March 2018. No representative of the applicants had gone on affidavit to provide a proper evidentiary basis for the applicants’ assertion. Nor was it apparent that the proposed amended pleading pleaded any documents obtained from discovery. The applicants had not explained why they did not seek preliminary discovery, the respondent submitted, comparing Repacholi Aviation Pty Ltd v Civil Aviation Safety Authority [2011] FCAFC 122 at [10]-[11].

21    In any event, even if the applicants’ assertions were accepted, they had not explained why they waited until the day before the evidence deadline to raise the issue of amendment, the respondent submitted. Discovery was provided on 7 December 2018. The High Court had made clear that courts will not “indulge parties who engage in tactical manoeuvring that impedes the ‘just, quick and efficient’ resolution of litigation”, the respondent submitted, referring to UBS AG v Tyne [2018] HCA 45; 360 ALR 184 at [45]. The chronology, and the absence of any explanation for the delay from December 2018, suggested that this was precisely what the applicants had done, the respondent submitted.

22    As to joinder/service out, the respondent submitted that joinder required an “affirmative case” (referring by way of example to Brisbane Slipways Operations Pty Ltd v Pantaloni [2010] FCA 654; 270 ALR 13 at [151]-[154]), while service out required a prima facie case per r 10.43(4)(c) of the Federal Court Rules.

23    The respondent submitted that the applicants’ approach, that the asserted prima facie case against each proposed respondent was “apparent from the face” of the pleading, was not the correct approach. On service out, the question was whether the evidence before the Court supported the facts for which the party seeking the Court’s leave contended, the respondent submitted, referring to Vringo Infrastructure Inc v ZTE (Australia) Pty Ltd (No 4) [2015] FCA 177; 323 ALR 138 at [38]-[41]. The respondent submitted that the requirement for evidence may also apply in the joinder context.

24    As to the Singapore company, the applicants sought to allege patent infringement but had not adduced any evidence establishing a prima facie case, the respondent submitted. A prima facie case for patent infringement needed to be made out by evidence, the respondent submitted, comparing, for example, Vringo at [163]. The mere fact that there was an existing patent infringement allegation against the respondent did not suffice. Further, there was no evidence on the interlocutory application concerning a breach of confidential information by the proposed second respondent, which was also deficiently pleaded, the respondent submitted.

25    As to the directors, the respondent submitted, each of the claims sought to be added – patent infringement by authorisation or joint tortfeasance, misuse of confidential information, breach of contract and breach of the Corporations Act – must also fail because there was insufficient evidence to support a prima facie (or arguable/affirmative) case.

26    Further and in any event, the respondent submitted, the allegations had not been properly pleaded and the nature of the case the applicants sought to bring was opaque. Despite having had nearly 5 months to do so, the applicants had not addressed the detailed list of pleading deficiencies provided by the respondent at the applicants’ request on 15 July 2019 (referring to Mr Burrows’ affidavit at [23](b) and to the document there annexed), each of which the respondent maintained in resisting the interlocutory application.

27    In addition, the deficiencies included a failure to indicate what conduct by the directors was relied on to make out the causes of action. Although there “must at least be precision in identification of what it is that constitutes the breach”, the respondent submitted, referring to Lynx at [49], the allegations as to the impugned conduct were conclusory and not, or improperly, particularised.

28    The respondent’s submissions concerning delay were said to apply mutatis mutandis in the joinder and service out contexts.

29    Irrespective of the outcome of the interlocutory application, and consistent with authority that it was usual for the parties seeking an indulgence to pay costs, the respondent submitted that the applicants should pay its costs of the interlocutory application.

Consideration

30    The respondent made no separate objection to the proposed amended originating application and it therefore stands or falls with the amendments proposed to the statement of claim.

31    It is necessary to consider the proposed pleading in respect of the present respondent and, separately but relatedly, in relation to each of the three proposed respondents.

32    As to service on the proposed respondents in the Republic of Singapore, r 10.43(4)(c) requires the applicants to satisfy the Court that they have a prima facie case for relief, that is, that on the material before the Court, inferences are open which, if translated into findings of fact, would support the relief claimed. A prima facie case exists, provided there is such evidence, even on a hearsay basis, as to sufficient elements of the proceeding leading to any (and not necessarily all) of the relief sought. It is not the task of the Court to reach a definitive conclusion as to the accuracy of the facts advanced or to express any preference for competing accounts. The question is whether the evidence supports the facts for which the party seeking leave contends: Vringo at [38]-[41].

33    I turn first to consider the proposed amendments extending the patent claim, including the issue of any delay.

34    The applicants sought to rely on a letter dated 25 September 2017 (MFI-1) from the United States Department of Transportation to Mr Hood, the proposed third respondent, for the proposed second respondent, the Singapore company. The subject matter was the Singapore company’s request for the Federal Highway Administration to review a roadside safety device, hardware, or system for eligibility for reimbursement under the Federal-aid Highway program. The decision of the Federal Highway Administration was that the Defender Barrier 70 was “eligible within the length-of-need, with details provided in the form which is attached as an integral part of this letter…”. Senior counsel for the applicant sought to rely on a statement in the annexure to the letter, being a document from Mr Hood for the Singapore company to the Federal Highway Administration, stating that “[t]he Defender Barrier™ 70 successfully contained and redirected the 1100c vehicle impacting the test article at 24.7 degrees and a velocity of 69.4km/h (43.1mph)”, and other similar statements and illustrations. The proposition was that on the face of the respondent’s product there were deflections in the profile of the barrier and at heights which at least arguably reflected the places where aspects of claim 1 of the patent required them to be. A related proposition was that the respondent’s product met another aspect of claim 1 in the applicants’ patent which provided that “in the event of a vehicle impact, the gradient of the impact wall and the inwardly and outwardly stepped deflections assist in redirecting an impacting vehicle wheel back towards the road away from the barrier”. It was submitted that it was arguable those aspects of claim 1 were reflected in the Defender Barrier 70 product.

35    The tender of MFI-1 was opposed by senior counsel for the present respondent on the basis that the proposed use of the document was notified to the present respondent at 9 PM on the day before the hearing of the interlocutory application on 17 December 2019; that the timetable for evidence had been set, with the applicants to file their evidence in support by 12 July 2019; and that the present respondent would want the opportunity to respond and would have addressed the issue in a way very differently from the way it had approached the application. In my opinion, the reasons advanced by senior counsel for the present respondent are valid and I reject the tender of MFI-1.

36    As to the substance of the proposed extended patent claim in relation to joinder, I accept the submission on behalf of the present respondent that it is not sufficient for an applicant seeking joinder simply to demonstrate satisfaction of the kind of tests discussed in General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 as those tests are no substitute for the language of the rule: see Brisbane Slipways Operations Pty Ltd v Pantaloni [2010] FCA 654; 270 ALR 13 at [151]-[153]. That rule is now r 9.05.

37    Nevertheless, I accept that there is a prima facie inferential basis for the claim that the Singapore company is a supplier involved in the promotion and exploitation of the product claimed to infringe, and also that the applicants seek to place in dispute the factual questions which support that claim such that the Singapore company should be called to account in the proceeding in respect of those questions. The present respondent has indicated in a letter dated 11 April 2018 that it is the Singapore company that owns the rights associated with the Defender Barrier 70. Although the letter describes the present respondent as “the proponent of the Defender Barrier 70 in Australia”, that party has not discovered any documents relating to an alleged supply to Kennards. I find there is an available inference that the Singapore company made a supply to Kennards, as the applicants plead. I do not accept the submission on behalf of the respondent that there is no evidence of exploitation in this jurisdiction, if by that it was meant that there is no basis at this interlocutory stage for the inference I have said is available. It is not my present task finally to resolve that factual issue.

38    In this respect I do not consider that there has been disqualifying delay on the part of the applicants. I do not accept the submission on behalf of the respondent that there is no basis for the Court to find that the applicants’ position is materially different from that in March 2018, being the month of the applicants’ letters before action.

39    As to the position of the two individuals, the proposed third respondent (Mr Hood) and the proposed fourth respondent (Mr Moule), I distinguish between the position of Mr Hood and Mr Moule so far as concerns the proposed claims of indirect patent infringement. In my opinion there is a distinction between the inferences available having regard on the one hand to the position of Mr Hood, being in effective control of the conduct and business of the present respondent and of the Singapore company, and the position of Mr Moule on the other. In my opinion, Mr Moule’s position as a director and company secretary of the present respondent does not provide a sufficient basis for the inference the applicant seeks to persuade the Court to draw and I do not find anything in the letter dated 11 April 2018 from Mr Moule’s solicitors which adds substance to that claimed sufficient basis.

40    To be clear, I consider there is a proper basis for joinder of the proposed second respondent, the Singapore company, and of the proposed third respondent, Mr Hood, and I also find that there is a prima facie case within the meaning of r 10.43(4)(c) of the Federal Court Rules so far as concerns those proposed respondents.

41    The applicants also seek to bring a case against Mr Hood, the proposed third respondent, for breach of contract, not dependent on confidential information. The essence of the pleading is that in breach of what is referred to as the “Hood Service Agreement” dated 30 April 2015, bearing in mind that his employment with the second applicant is claimed to have ceased on 10 November 2016, no later than 17 November 2015 Mr Hood took steps to set up and operate companies in direct competition with the applicants. As particularised at [31] of the proposed pleading, the applicants allege that Mr Hood no later than 17 November 2015 set up and operated the present respondent, which offered the Defender Barrier products in direct competition with products sold by the applicants. It is also claimed that Mr Hood set up and operated the proposed second respondent, the Singapore company, which offered the Defender Barrier products in direct competition with products sold by the applicants. It is claimed that Mr Hood became a director of the present respondent on 17 November 2015 and a director of the Singapore company on 6 March 2017, continuing until 1 June 2018. The Singapore company was incorporated on 6 March 2017, within the 12 month period stipulated in the Hood Service Agreement from the end of Mr Hood’s employment with the second applicant, the applicants allege.

42    At [34] and following of the proposed pleading, it is alleged that by no later than 17 November 2015, Mr Hood, through Mr Moule and through the present respondent, endeavoured to entice away from the applicants the business of, or dealt with, people who, during the year before the end of his employment with the second applicant, were, to his knowledge, clients of the applicants and had dealt with the third respondent in the normal course of Mr Hood’s employment with the second applicant. It is claimed that Mr Moule approached clients of the second applicant on behalf of the present respondent and Mr Hood, offering products in direct competition with those of the applicants.

43    The proposed pleading alleges, at [36], that within a year after the end of his employment with the second applicant, the proposed third respondent (Mr Hood) solicited or endeavoured to entice away from the applicants the business of the applicants’ clients. It is also claimed that he employed or engaged, or arranged to employ or engage, the proposed fourth respondent (Mr Moule), who was a senior employee or consultant of the applicants, and attempted to solicit, or arrange the solicitation of, Mr Moule, with whom Mr Hood had personal dealings in the normal course of his employment with the second applicant within the year before the end of his employment with the second applicant. It is claimed that around October 2017, Mr Moule approached clients of the second applicant on behalf of the present respondent and on behalf of Mr Hood, offering products in direct competition with those of the applicants. It is also claimed that Mr Hood, through the present respondent, engaged suppliers of the applicants who dealt with the proposed third respondent in the normal course of his employment during the year before the end of his employment with the second applicant.

44    In my opinion, there is a proper basis to bring forward these claims against the proposed third respondent, Mr Hood, and there are no disqualifying features. I do not regard any delay in doing so as disentitling, in circumstances where the parties have not put on their evidence, there is not yet a timetable to take the matter to trial, and no limitation period is or could be relied on. It is not the point that the applicants were considering bringing a claim against the proposed third respondent as early as March 2018. Neither is it to the point, in my opinion, that the applicants could have, but did not, apply for preliminary discovery against the proposed third respondent under r 7.23 of the Federal Court Rules. If an applicant considers that it has sufficient information to enable the decision whether to start a proceeding in the Court to be made, then the possibility of an application for preliminary discovery is not relevant.

45    Similarly, in my opinion, as a matter of inference I consider there is a prima facie case within the meaning of r 10.43(4)(c) so far as concerns the proposed third respondent, Mr Hood. I have taken into account the terms of the letter dated 11 April 2018 written by the solicitors for Mr Hood (who are also the solicitors for the present respondent). By that letter the solicitors, while stating that their client denied all allegations made against him, set out the following chronology to provide context:

(a)    on 29 April 2011, our Client commenced employment with Hill & Smith pursuant to a contract for services;

(b)    on 1 February 2012, our Client entered into a contract of service with Hill & Smith UK;

(c)    on 30 April 2015, our Client entered into a services agreement with Hill & Smith AU, making our Client the General Manager of Hill & Smith AU;

(d)    in or around September of 2015, Mark Tonks (Tonks) informed our Client that Hill & Smith UK had decided to exit the Australian market due to ongoing losses and poor sales;

(e)    in or around October of 2015, our Client approached Tonks and offered to purchase Hill & Smith AU;

(f)    on 17 November 2015, Safe Barriers Pty Ltd ACN 609 345 931 (Safe Barriers) was incorporated for the purposes of purchasing/taking over the business of Hill & Smith AU;

(g)    between October 2015 and January 2016, our Client held conversations with executives from Hill & Smith (Derek Muir – CEO, Mark Pegler – CFO, Joel Whitehouse – Corporate Development Officer, Tonks – Managing Director, Peter Wilkinson – Asset International VRS Managing Director) to discuss the offers made by our Client to purchase Hill & Smith AU, utilising Safe Barriers as the purchasing vehicle; and

(h)     in or around February 2016, Hill & Smith formally rejected our Client's offer to purchase Hill & Smith AU.

46    Later in that letter, the solicitors stated as follows:

(vi)    We are instructed that Safe Barriers Pte Ltd was incorporated in Singapore on 7 March 2017 by our Client’s wife, with our Client as Director. Safe Barriers Pte Ltd was involved in the design and development of the Defender Barrier 70 and owns all rights associated with it; Safe Barriers was not involved in the design or development of the Defender Barrier 70, it is merely the proponent of the Defender Barrier 70 in Australia.

(vii)    As our Client has over twenty (20) years experience in the temporary road safety barrier industry, he has acquired a vast knowledge and understanding of designing, testing, manufacturing and marketing temporary safety barriers – his know-how. As Safe Barriers Pte Ltd is a small business, the time taken to make decisions is far less. Primary reasons for this (compared to a large company such as Hill & Smith) include:

(A)    the small number of people required to work on a project at a small company versus a large number in different divisions, locations and with different goals at a large company;

(B)    the singular focus on one (1) barrier at a small company versus the multiple barriers in development at a large company; and

(C)    no need to approve capital expenditure or work to a budget cycle at a small company versus the requirement to stay within the predetermined capital and budget requirements at a large company.

(Emphasis in original.)

47    This is not the occasion to consider the merits on either side. As I have said, it suffices that there is a proper basis for the contractual claim against the proposed third respondent, Mr Hood, and a prima facie case for the purposes of r 10.43(4)(c).

48    As to the claim against the proposed fourth respondent, Mr Moule, as explained by senior counsel for the applicants, the case against him is more confined and apart from the patent infringement issues, focused on confidential information.

49    I come therefore to the proposed confidential information case. At the heart of this case are the allegations, as against the proposed third respondent (Mr Hood), at [38] of the proposed pleading and, as against the proposed fourth respondent (Mr Moule), at [56] of the proposed pleading. I set out the former as a sufficient example:

38.    As part of his employment the Third Respondent had access to and possession of the following information:

(a)    crash test reports and technical information in relation to the testing of the Applicants’ “Zoneguard” temporary steel road safety barrier products (Zoneguard Barrier Products) for road safety approval in Australia and New Zealand;

  (b)    design specifications of the Applicants’ Zoneguard Barrier Products;

(c)    video and photos concerning the Applicants’ Zoneguard Barrier Products in relation to testing for the NSW Road Traffic Authority;

(d)    technical data regarding the Applicants’ products, including submission data on the Second Applicant’s shared Dropbox folder;

(e)    names of and contact information for the Applicants’ agents, suppliers, customers and distributors of the Applicants’ safety barrier products; and

(f)     terms of business pricing and fee arrangements between the Applicants and their actual or potential clients and suppliers for safety barrier products.

(Hood Information)

Particulars

(i)    Report entitled “Component Testing for Hill & Smith Highway Products Zoneguard” submitted by XD Engineering PLC.

(ii)    Report entitled “Safety Barrier Product Information: Zoneguard Steel Temporary Barrier” dated 26 May 201 o.

(iii)    Document entitled “ZONEGUARD Steel Safety Barrier - Temporary (Sequence 8)” dated 24 May 2013.

(iv)    Document entitled “Anti Gawk Screen Support Details - Concept” dated 20 June 2013.

(v)    Document entitled “Anti-Gawk Screen for Zoneguard Barrier Post and Brackets Sheer 2” dated 10 July 2013 and marked as “Preliminary Issue”.

(vi)    “Zone Guard Original Submission” pack containing acceptance letters, covering letters, materials and specifications drawings’, product information and test results dated between 30 August 2013 and 19 February 2014.

(vii)    Report entitled “Report 112358.00: TL4 Compliance testing of Zoneguard steel temporary barrier system with anti-gawk screens” prepared by Holmes Solutions dated December 2014.

   (viii)    Further particulars may be provided following discovery.

50    In my opinion, the proposed confidential information claim does not identify the particular contents of the documents asserted to constitute information the confidentiality of which the applicants are entitled to protect. The proposed pleading does not comply with the precept that the applicant must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question: see Corrs Pavey Whiting & Byrne v Collector of Customs (Vic) (1987) 14 FCR 434 at 443 per Gummow J citing, amongst other authorities, O’Brien v Komesaroff (1982) 150 CLR 310 at 326-328 per Mason J. Although Gummow J’s observations were expressly confined to a case of confidence protected in equity, and were not in terms directed to a case of confidence protected by contract, of which the present is in part an example, the authorities requires a similar degree of specificity, not least to reflect the seriousness of an allegation of the present sort having regard to the principles in Briginshaw v Briginshaw (1938) 60 CLR 336: see, eg, Liberty Financial at [12]-[13]. In my opinion the proposed pleading does not exhibit sufficient specificity, as considered in Liberty Financial at [13]; Lynx at [56]; and (in circumstances where the applicants intend to seek an order in the terms of [10] of the proposed amended originating application) GlaxoSmithKline Australia Pty Ltd v Ritchie [2008] VSC 164; 77 IPR 306 at [38].

51    It follows that I also find there is an insufficient basis for the claim of breach of confidence by the present respondent and by the proposed second respondent, the Singapore company, on the pleaded allegations that: they received confidential information from either the proposed third respondent, Mr Hood, or the proposed fourth respondent, Mr Moule; in the circumstances they knew or should have known that the information was confidential; they thereby came under a duty of confidence; and they breached that duty by use of the information.

52    In light of that conclusion it is not necessary to address the issue of any delay in respect of the claims based on confidential information so far as concerns the present respondent. I do however take into account that a further round of discovery by the present respondent would be likely to be necessary if this amendment were allowed, and a costs order would not meet the time and expense involved in that exercise: see Aon at [101]. I should also add that I see no basis for the respondent’s submission that the applicants have engaged in tactical manoeuvring that impeded the just, quick and efficient resolution of litigation. I think it more likely, as put by senior counsel for the applicants, that minds have changed over the course of the litigation.

53    I refuse leave to the applicants to amend to add the claims based on confidential information.

Conclusion and orders

54    The applicants are to pay the costs, if any, thrown away by reason of the amendments I have allowed. Subject to that matter, in relation to the costs of the interlocutory application the parties have had mixed success, such that there should be no order as to costs.

55    I note that the applicants in their interlocutory application claimed an order that the present respondent should pay the applicants’ costs of the hearing on 29 May 2019, those costs having been reserved until the date then contemplated for the hearing of any interlocutory application to amend and to serve outside Australia. This matter was not addressed at the hearing and therefore the respondent should indicate to the applicants and to my associate, within 14 days of the date of these orders, whether or not it opposes that costs order. If it does so oppose, I will make directions for short written submissions to be exchanged with a view to determining that issue on the papers.

Associate:

Dated:    8 January 2020

SCHEDULE OF PARTIES