Federal Court of Australia

Australian Mud Company Pty Ltd v Globaltech Corporation Pty Ltd (No 3) [2022] FCA 596

ORDERS

THE COURT ORDERS THAT:

1.    The respondents’ oral application for an order that on or before 27 May 2022, the applicants make and notify the respondents and the Court of their election between damages or an account of profits, be refused.

2.    The respondents pay the applicants’ costs of and incidental to the respondents’ oral application, to be taxed in default of agreement.

3.    On or before 4:00pm on 13 July 2022, the parties file and serve any evidence (including any expert evidence) in answer to the evidence filed on 23 April 2021.

4.    The applicants make their election between damages or an account of profits within 14 days of receipt of the evidence served pursuant to paragraph 3 of these orders.

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

REASONS FOR JUDGMENT

BESANKO J:

Introduction

1    On 29 April 2022, I made an order that the Interlocutory application issued by the respondents in which they sought a stay of further steps in this proceeding be refused (Australian Mud Company Pty Ltd v Globaltech Corporation Pty Ltd [2022] FCA 445).

2    Following that decision, the respondents made an application for the following order:

On or before 27 May 2022, the Applicants make and notify the Respondents and the Associate to Besanko J of their election as between damages or an account of profits.

3    The respondents’ application was supported by an affidavit of their solicitor, Ms Leanne Michelle Oitmaa, sworn on 10 May 2022 and an Outline of Submissions dated 10 May 2022.

4    The applicants opposed the making of such an order and they relied on an affidavit of their solicitor, Mr Christopher Edmund Duvall Williams, sworn on 13 May 2022 and an Outline of Submissions dated 13 May 2022.

5    On 17 May 2022, I heard the application. At the conclusion of short oral submissions, I made an order that the application be dismissed. I made the following additional orders:

5.    The respondents pay the applicants’ costs of and incidental to the respondents’ oral application, to be taxed in default of agreement.

6.    On or before 4:00pm on 13 July 2022, the parties file and serve any evidence (including any expert evidence) in answer to the evidence filed on 23 April 2021.

7.    The applicants make their election between damages or an account of profits within 14 days of receipt of the evidence served pursuant to paragraph 6 of these orders.

6    These are my reasons for refusing the application.

7    The right of a plaintiff who has established an infringement of his or her patent is to claim either damages or an account of profits and the plaintiff has the option of one or the other (s 122 of the Patents Act 1990 (Cth)). The section contains no indication of the time by which the election must be made.

8    In this case, the applicants have filed their evidence with respect to damages and the respondents have filed their evidence with respect to an account of profits. In terms of evidence, and assuming this application fails, the remaining steps will be for the applicants to file their evidence with respect to an account of profits and the respondents to file their evidence with respect to damages.

9    The respondents submitted that the applicants should make their election between the two remedies at this point. In support of that submission, they relied on the following three matters: (1) current case management principles applied by the Court; (2) applicable legal principles; and (3) previous statements of the applicants about the information they need before they would be in a position to make their election.

10    Following the provision of both expert and lay evidence, the applicants’ case for damages is for the sum of $21.5 million including interest and the respondents’ case with respect to an account of profits is that the proper quantum of such a claim is $3.3 million.

11    In LED Builders Pty Ltd v Eagle Homes Pty Ltd (No 3) [1996] FCA 972; (1996) 70 FCR 436 (LED Builders) (at 442–449), Lindgren J in a case involving a breach of copyright carried out a historical review of the cases — a number of which were patent cases — concerning the timing of an election and its effect. His Honour considered that Lightman J had stated correctly the relevant principles in Island Records Ltd v Tring International Plc [1996] 1 WLR 1256; [1995] 3 All ER 444. Those principles were set out by Lindgren J in LED Builders as follows (at 447):

1.    While a plaintiff can apply for damages and an account of profits in the alternative, he can obtain judgment only for one or the other (his Lordship cited Neilson v Betts and De Vitre v Betts).

2.    Once judgment has been entered for damages or for an account of profits, any right to elect for the other remedy is forever lost (his Lordship referred to United Australia Ltd v Barclays Bank Ltd at 30).

3.    “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. A right of election, if it is to be meaningful and not a mere gamble, must embrace the right to readily available information as to his likely entitlement in case of both the two alternative remedies. It is quite unreasonable to require the plaintiff to speculate totally in the dark as to whether or not the sum recoverable by way of damages will exceed that recoverable under an account of profits” (at 1258H–1259A; 447). (His Lordship referred to Mate v Samuel Stephen Ltd (1930) MacG Cop Cas (1931) 257 at 261.)

4.    The exercise of the right of election must not be unreasonably delayed to the prejudice of the defendant.

12    In my respectful opinion, they are suitable working principles. Furthermore, as I understood the respective submissions of the parties in this case, they both accepted that the relevant principle was that the exercise of the right of an election must not be unreasonably delayed to the prejudice of the defendant or respondent.

13    As to when a party has readily available information as to its entitlement, the respondents placed emphasis on particular observations of Lindgren J later in his reasons as follows (at 450):

… 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.

14    The respondents asked the Court to note that there are no outstanding interlocutory procedures in this proceeding.

15    Both parties referred to the decision of Greenwood J in Norm Engineering v Digga Australia (No 3) [2007] FCA 953; (2007) 73 IPR 77. I have considered what his Honour said at [30]–[32]. His Honour did not depart from the proposition that a “remedial” election ought not to be postponed unreasonably or deferred in a way prejudicial to the respondent. It is a matter of considering when the plaintiff or applicant has been put in the position to make to an informed decision. His Honour said the following (at [30]):

… In this case, the applicant made an election on 16 June 2006 against the background of the expert reports. … There may be cases where interlocutory processes of the Court reveal all there is to know to enable an applicant to reasonably reach a meaningful and informed election. Such a point is unlikely to be reached in the absence of the filing and serving of relevant statements and experts’ reports. …

16    The respondents also point to the statutory and other obligations on parties and their legal advisers in the conduct of civil litigation to act in a way that avoids unnecessary costs and delay (see ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) and AON Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at [23]–[24] per French CJ). In this respect, the respondents contend that the prejudice to them is in the costs and wasted time and resources in preparing their damages evidence. If the applicants ultimately elect to seek an account of profits, then the respondents’ efforts and costs in respect of the preparation of their response on damages will be thrown away.

17    The respondents also contend that the applicants have previously said that they will be in a position to make an election upon receipt of information about the respondents’ revenue and deductions. I do not see this point as one of any particular significance. The issue is one to be determined objectively.

18    The applicants submit that they are entitled to take a cautious approach and they wish to be able to assess the respondents’ evidence in answer on damages prior to making their election. In their Outline of Submissions, the applicants said the following:

AMC wants to be able to analyse the evidence of the foreshadowed 3 to 6 lay witnesses and accounting expert report on damages to be filed by Globaltech: see Oitmaa at [21], Williams at [10]. Globaltech’s evidence in answer will enable AMC to test and assess the merits of its own expert’s approach to the calculation of damages and the factual assumptions underlying that report: Williams at [11].

19    In my opinion, the applicants are entitled to take this approach before making their election. I would also note that it is not without significance that if the applicants, in fact, take the course which the respondents contend is obvious, that is to say, elect to claim damages, then there will be no “waste” of costs or additional delay.

20    It was for these reasons that I made the orders I did on 17 May 2022.

Associate:    

Dated:    20 May 2022