Admar Computers Pty Ltd v Ezy Systems Pty Ltd
[1997] FCA 885
•3 SEPTEMBER 1997
FEDERAL COURT OF AUSTRALIA
PRACTICE AND PROCEDURE - applicant seeking to adduce further evidence during hearing - objection by respondents - relevant considerations - history of proceedings - trial by affidavit under case management system - prejudice to applicant in proper presentation of case - prejudice to respondents - whether prejudice could be cured by granting of adjournment and appropriate order as to costs - effect of adjournment on viability of first respondent’s business.
Bomanite Pty Ltd v Slatex Corporation Australia Pty Ltd (1991) 32 FCR 379
State of Queensland v JL Holdings Pty Ltd (1997) 141 ALR 353
Ketteman v Hansel Properties Limited [1987] AC 189
Commissioner of Taxation v Brambles Holdings Ltd (1991) 28 FCR 451
GSA Industries Pty Ltd v NT Gas Ltd (1990) 24 NSWLR 710
Black v City of South Melbourne (1964) 38 ALJR 309
Howarth v Adey [1996] 2 VR 535
ADMAR COMPUTERS PTY LTD v EZY SYSTEMS PTY LTD & ORS
No VG 90 of 1995
GOLDBERG J
MELBOURNE
3 SEPTEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
No VG 90 of 1995
BETWEEN:
ADMAR COMPUTERS PTY LTD
(ACN 006 212 068)APPLICANT
AND:
EZY SYSTEMS PTY LTD
(ACN 060 028 284)FIRST RESPONDENT
EASYCOMP PTY LTD
(ACN 007 376 141)SECOND RESPONDENT
NICHOLAS THOMAS CUGURA
THIRD RESPONDENT
PETER ELLIS
FOURTH RESPONDENT
JUDGE:
GOLDBERG J
DATE:
3 SEPTEMBER 1997
PLACE:
MELBOURNE
RULING (No 2)
Introduction
On 27 August 1997 I ruled that the evidence of Professor Willis and Dr Yeh in relation to their pseudocode investigation and analysis was not relevant to or admissible in relation to the cause of action based on infringement of copyright but was relevant to and admissible in relation to the cause of action based on the issue of mis‑use of confidential information. I published my reasons for this ruling on 29 August 1997.
Professor Willis was then called as a witness, he was examined in‑chief and Mr Golvan, who appears for the respondents, commenced cross‑examination. In the course of the cross‑examination Professor Willis said that in preparing his reports he examined the source code of various Admar programs, which source code was made or dated 17 July 1995. Mr Golvan then interrupted the cross‑examination and, on the basis of what Professor Willis had said, submitted that the whole of the pseudocode evidence of Professor Willis and Dr Yeh was irrelevant as the basis of the experts’ reports and conclusions was a version of the source code which was shown only to exist as at 17 July 1995. Mr Golvan submitted that Professor Willis was not given what he should have been given, namely the February 1993 version of the Admar source code. It was not clear what ruling Mr Golvan was seeking and he put it on the basis that the whole of the evidence was based on a misconceived factual substratum. I pointed out to counsel that much depended upon whether there could be a connection between the source code which Professor Willis examined (the hard copy of which is dated 17 and 18 July 1995) and the February 1993 version in respect of which it is alleged that the applicant owns the copyright and in respect of which it is said it is confidential information.
In an affidavit sworn 14 February 1996 Mr Adrian Gilbert, a director of the applicant, said (in paragraph 115) that:
“The examination of the source of (sic) code of the Respondent’s software is examined in detail in the affidavit of Professor Robert Willis. In order to assist in this examination, I provided Professor Willis with a copy of the source code to the Applicant’s winery system, that copy being the version of the Applicant’s winery system as at February 1993.”
I raised with counsel the question whether it was open to me to infer from that evidence that there was a nexus between the 17 July 1995 version and the February 1993 version. Mr Golvan responded that there was no evidence which explained that the 17 July 1995 version examined by Professor Willis was the February 1993 version.
At that stage of the proceedings I refused to rule on the admissibility of Professor Willis’ evidence as a whole.
The next morning 28 August 1997, Mr Clarke, who appears for the applicant foreshadowed an application for leave to file further evidence and also to respond to a notice to produce which had been served on the applicant by the respondents which required production of:
Time sheets of the applicant in relation to all of its employees for the period on and from 1 February 1993 up to and including 31 July 1995; and
Disk copies of all of the applicant’s source code which was created or modified between 1 February 1993 and 31 July 1995.
Mr Clarke said he wished to seek to tender evidence which would meet Mr Golvan’s proposition and said:
“So it is not merely the case, your Honour, that the purpose of me seeking to put this further evidence that I foreshadowed before the Court is to cure a hole in the case. We do not for a moment concede there is a hole in the case, but my learned friend finds significance in this matter for the purpose of his cross‑examination, it does seem desirable to sort this matter out at this time.”
Introduction of further affidavits
On Friday 29 August 1997 the applicant filed and served further and better particulars of paragraph 6A of its amended statement of claim dated 26 May 1997 and sought leave to file and rely upon two affidavits sworn 29 August 1997 by Mr Gilbert and Dr Yeh. The affidavits contained material relating to what source code was the subject of the pseudocode analysis and what disks had been examined by the experts from both sides. In short, Mr Gilbert said that the source code provided to Professor Willis on or shortly after 17 July 1995 was the February 1993 version of the source code with the exception of 65 programs which were identified by Dr Yeh as having been the subject of amendment in 1994 and 1995. These amendments had been identified by Dr Yeh by what he called a string or text search. Mr Gilbert said that as at 17 July 1995 and as at 14 February 1996:
“there was no ‘snap-shot’ of the source code programs of the Admar winery system, as it was at February 1993 and which had not subsequently been amended.”
Mr Gilbert said that the applicant made no claim against the respondent in respect of the 65 programs identified by Dr Yeh and said that the Admar programs produced on or about 17 July 1995 represented the Admar winery system as at February 1993 notwithstanding the subsequent amendments referred to which, in his view, were minor and of little consequence for the overall operation of the Admar winery system. Mr Gilbert, in effect, identified what he called the “standard” version of the complete Admar winery system which as at 17 July 1995 was found in the applicant’s computer in the “Villa” directory. He said that the programs on the disks given to Dr Yeh on or about 17 and 18 July 1995 were not written or created on those days but were copied on those days onto the disks given to Dr Yeh from the “Villa” directory on the applicant’s computer.
Mr Golvan initially challenged the reception of this evidence on the basis that it did not close the gap in the evidence as it assumed that every change in the source code had a date reference, that this was incorrect and that the premise ought not to be accepted that there were amendments post February 1993 which only affected 65 programs. Mr Golvan foreshadowed a submission not to admit the evidence on the grounds that it would be unjust to do so having regard to the current financial situation of the respondents and on the ground that there had been substantial non-compliance by the applicant in respect of earlier directions. He submitted that it was unfair for the respondents to be asked to accept that there had only been 65 changes to the source code since February 1993.
At that stage of the proceeding the five computer disks identified by Dr Yeh as the source code given to him on or about 17 July 1995 were made available to the respondents for examination by Dr Bellair, the expert retained by the respondents, over the weekend of 30/31 August 1997. Mr Golvan also challenged the further particulars which had been supplied on the basis that there was no evidence to support them.
On Friday 29 August 1997 Mr Clarke, on behalf of the applicant, responded to the notice to produce by producing a number of time-sheets of the applicant and five floppy disks in relation to the call for production of disk copies of all of the applicant’s source code which was created or modified between 1 February 1993 and 31 July 1995.
The respondents crystallised their submissions in relation to the applicant’s application for leave to reply upon the further affidavits of Mr Gilbert and Dr Yeh sworn on 29 August 1997 (“the further affidavits”) and in relation to the filing of the further particulars under paragraph 6A of the amended statement of claim by applications in the form of a notice of motion in which they sought orders that leave not be given to the applicant to file or adduce the evidence in the further affidavits, that paragraphs 1 and/or 2 of the further and better particulars of paragraph 6A dated 29 August 1997 be struck out and that there be orders for costs. The applicants relied upon affidavits of their solicitor Zaid Mohseni sworn 29 August 1997, the third respondent Nicholas Cugura sworn 29 August 1997, their solicitor Mr Nankervis sworn 31 August 1997, Mr Huw Jones and the fourth respondent, Mr Peter Ellis, both sworn 1 September 1997, the earlier affidavits of Mr Mohseni sworn 16 May 1997 and 23 June 1997 and Mr Ellis sworn 20 November 1996.
It is fair to say that the evidence which the applicant now seeks to adduce is critical to the proof of its case on mis‑use of confidential information. It is also critical to the applicant’s case on infringement of copyright but the effect of my ruling on the pseudocode evidence in relation to the infringement of copyright cause of action leaves little left to argue in relation to infringement of copyright other than in relation to the screen report viewer program. The case on mis‑use of confidential information, however, is still very much at large. Mr Clarke submitted, in substance, that the consequence of the applicant being shut out from leading the evidence was to move into the area under consideration in Bomanite Pty Ltd v Slatex Corporation Australia Pty Ltd (1991) 32 FCR 379 where the effect of the trial judge declining to allow the applicant to rely upon further evidence resulted in the conclusion that the applicant would almost certainly fail at trial.
Mr Golvan put his submissions essentially on four bases:
(a)there was a history in the interlocutory stages of the proceedings of the applicant failing to comply with various interlocutory directions as to the filing of affidavits and other documents;
(b)the new evidence would open up a new area of factual investigation which would require a reconsideration of the evidence and further substantial work by the respondents’ expert;
(c)if the hearing of the trial was adjourned as a result of the further evidence being submitted substantial prejudice would be caused to the respondents having regard to confidential financial evidence which prejudice could not be cured by an award of costs;
(d)if the new evidence was admitted and there was no adjournment (he being instructed by the respondents not to ask for an adjournment because of the consequences it would have for them personally and on the first respondent’s business) the respondents would not be able to run their case and their cross‑examination adequately because they would not have time to carry out the relevant investigative and analytical activities and seek the expert advice necessitated by the evidence in the further affidavits.
The interlocutory steps in the proceeding were undertaken by reference to case management principles and there had been numerous directions hearings between the date of filing of the initiating application on 6 February 1995 and the commencement of the trial. In particular directions had been given on 27 October 1995 for the filing and service of affidavits. There is a comprehensive recitation and analysis of the various directions hearings, orders made and directions given and the complaints made by the respondents about the applicant’s pleadings, particulars and failures to comply with orders and directions in Mr Mohseni’s affidavit of 29 August 1997. It is not necessary to set out all those matters in detail other than to observe that I have taken into account all those matters in making this ruling. On 27 October 1995 orders were made by consent that subject to any order of the trial judge evidence be given by affidavit and that the applicant’s affidavits be filed and served by 15 December 1995. This order was not complied with and the affidavits were served substantially out of time on 14 February 1996. The respondents filed and served their affidavit evidence during August 1996 and an order was made on 6 September 1996 for the filing of the applicant’s affidavits in reply by 8 November 1996 but again this order was not complied with. On 21 November 1996 a further order was made for the filing of the applicant’s affidavits in reply by 13 December 1996 and again this order was not complied with the affidavits in reply being filed and served within the following three days. On 21 February 1997 the parties attended a call‑over and told Merkel J that the parties were ready to proceed to trial and there were no further outstanding matters at hand. The hearing was later fixed for 26 May 1997. On 8 May 1997 the applicant’s solicitors foreshadowed the filing and service of further affidavits and further affidavits of Professor Willis and Dr Yeh were served on 19 May 1997. On 21 May 1997 Merkel J vacated the hearing date and gave directions for the filing and service of an amended statement of claim and affidavits of Mr Tseng and Mr Gilbert by 13 June 1997. An affidavit was filed by Mr Gilbert but no affidavit was filed by Mr Tseng.
The fact that there has been a history of failure to comply with orders and directions under a case management procedure or protocol does not of itself disentitle the applicant from seeking to file further material out of time to make good deficiencies in its evidence; any such application must be considered on its merits albeit in the context of such earlier orders as may have been made and having regard to the consequences of the admission or rejection of the evidence on the respective parties. The touchstone for the determination of the applications before me is the attainment of justice. As the majority of the High Court said in State of Queensland v JL Holdings Pty Ltd (1997) 141 ALR 353 at 357:
“But it ought always to be borne in mind, even in changing times, that the ultimate aim of a court is the attainment of justice and no principle of case management can be allowed to supplant that aim.”
In that case the court was concerned with the trial judge’s refusal to grant leave to amend a defence some six months before the commencement of the trial. At 357 the majority of the court said:
“Justice is the paramount consideration in determining an application such as the one in question. Save in so far as costs may be awarded against the party seeking the amendment, such an application is not the occasion for the punishment of a party for its mistake or for its delay in making the application. Case management, involving as it does the efficiency of the procedures of the court, was in this case a relevant consideration. But it should not have been allowed to prevail over the injustice of shutting the applicants out from raising an arguable defence, thus precluding the determination of an issue between the parties.”
However, it must be remembered that justice must be considered not only so far as it concerns the applicant but also so far as it concerns the respondents. In Ketteman v Hansel Properties Limited [1987] AC 189 Lord Griffiths said at 220:
“Justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxieties occasioned by facing the issues, the raising of false hopes ...”
I should also have regard to that line of authority which establishes that there is a public interest in ensuring that parties comply with directions given and orders made in relation to the preparation for trial of a proceeding as any disruption to the trial process can have an adverse impact on the ability of courts to deal with cases efficiently: Ketteman v Hansel Properties Limited (supra, 220); Commissioner of Taxation v Brambles Holdings Ltd (1991) 28 FCR 451, 455-6; GSA Industries Pty Ltd v NT Gas Ltd (1990) 24 NSWLR 710, 715‑716; Bomanite Pty Ltd v Slatex Corporation Australia Pty Ltd (supra, 379, 387, 392).
The respondents relied upon Bomanite Pty Ltd v Slatex Corporation Australia Ltd (supra) where the Full Court of the Federal Court upheld the decision by Lockhart J refusing the applicant leave to adduce further affidavit evidence for a trial to commence 24 days later even though the effect of his ruling had the result of making it very difficult for the applicant to prove its case. However, each case must be determined by reference to its own particular facts and although there are some similarities between the circumstances facing Lockhart J in Bomanite and the circumstances facing me I do not consider that that decision necessarily requires me to reach the same conclusion as Lockhart J. French J and Gummow J, who comprised the majority, each took the view that Lockhart J’s discretion had not miscarried. It was apparent in that case that the allowance of the further affidavit evidence would have resulted in an adjournment of the trial and this was after a directions hearing some three months earlier when Wilcox J specifically drew the applicant’s counsel’s attention to a problem with the affidavits and after further consideration the applicant’s counsel said that the evidence for the applicant was complete. Lockhart J had particular regard to eight considerations some of which apply in the present proceedings, namely the lengthy history of the interlocutory steps, the number of direction hearings held and that the relevant evidence could have been led earlier. It seems to me that one of the most significant matters considered by Lockhart J and the majority of the Full Court was the fact that counsel for the applicant had considered whether or not he wished to call further evidence and made a deliberate decision not to do so. That is not the situation in this proceeding and I rely on Bomanite for the statements of general principle in it rather than for the purpose of seeking to match up the facts in that case with the facts before me. However Bomanite must be read and understood in the light of the reasoning and principles in State of Queensland v JL Holdings Pty Ltd (supra).
On the present state of the evidence the applicant is at risk that it has not proved by admissible evidence the identification of the software and the source code which it claims is the repository of the copyright and the confidential information which it seeks to protect. As Mr Golvan correctly points out, having regard to his cross‑examination of Professor Willis, there is no particular February 1993 version of the Admar software and source code which is specifically referred to in the evidence. When one matches Mr Gilbert’s earlier evidence with the documents and disks exhibited earlier by Dr Yeh one sees that what Mr Gilbert says were the disks given to Professor Willis and Dr Yeh bear dates in July 1995. The identification of that software as being the February 1993 version therefore has to be determined by inference. Mr Golvan submits that the further evidence which seeks to identify the February 1993 software and source code by reference to the software given to Professor Willis and Dr Yeh on or about 17 July 1995 raises a substantial further issue as it is predicated upon the proposition that the software and source code given to Professor Willis and Dr Yeh has come about as a result of a number of amendments subsequent to February 1993. The applicant seeks to overcome this problem by identifying through Dr Yeh amendments to 65 programs in the source code and abandoning any reliance on those 65 programs as being the repository of the claimed copyright and confidential information. Dr Bellair in his affidavit sworn 31 August 1997 has identified numerous further differences in the source codes in the disks produced pursuant to the notice to produce which relate to 12 winery customers of the applicant. Further, Mr Nankervis, the solicitor for the respondent has identified in the time-sheets produced by the applicant pursuant to the notice to produce numerous entries which suggest that there has been work carried out and amendments made to the software and source code between February 1993 and July 1995.
The applicant seeks to rely upon Mr Gilbert’s further affidavit to show that what Mr Gilbert identifies as the “Demonstration Version” of the system which became the standard version and which was generated by the computer in July 1995 can be analysed as if it is the February 1993 version by eliminating the amendments to which Dr Yeh has referred. The respondents contest this proposition and say it cannot be accepted without further analysis. Dr Bellair has identified substantial differences between the source codes in the 12 winery programs produced pursuant to the notice to produce and the source code in the programs produced by Dr Yeh. Dr Bellair challenges Dr Yeh’s method of determining the number of amendments to the source code on the basis that programmers may not have made comment references in the source code which could provide a date for amendments when making amendments to the source code. The respondents rely on the affidavits of Mr Jones and Mr Ellis to show that it was not the practice of all the applicant’s programmers to insert comments in the source code when amending or altering it so as to identify a date for any such amendment or alteration. However Mr Ellis cannot give any evidence in this respect in relation to the relevant period after February 1993.
Do the further affidavits introduce a new issue into the proceeding?
In my opinion the admission of the two affidavits into evidence would open up a new area of factual analysis not presently before the Court. Professor Willis and Dr Yeh have based their investigation, analysis and conclusions, as has Dr Bellair, on the copy of the source code which was provided to them by the applicant on or about 17/18 July 1995. The disks they were given were, according to Mr Gilbert, “the version of the applicant’s winery system as at February 1993”. It appears that another copy of the same source code on another set of disks was given to the respondents to enable Dr Bellair to undertake his investigation and analysis and prepare his affidavit. Thus, both Professor Willis/Dr Yeh and Dr Bellair proceeded on the basis that the software in respect of which they were giving their evidence was the version of the source code as at February 1993. At the time they carried out their investigations and prepared their reports and evidence there was no issue as to whether the source code they were examining had been amended, altered or changed subsequent to February 1993.
The substance of Mr Gilbert’s affidavit sworn 29 August 1997 is that as at 17 July 1995 there was in existence a version of the source code of the Admar system stored in the “Villa” directory on the computer hard disk maintained by the applicant and that it was that source code which was copied on to floppy disks from the Villa directory on 17/18 July 1995. Mr Gilbert calls this version of the source code the “Demonstration Version”. He says that this version was in existence as at February 1993, it was not specific to any particular customer and that it contained certain amendments which had been made subsequent to February 1993. Dr Yeh in his affidavit sworn 29 August 1997 says that on 27 or 28 August 1997 he performed “a string or text search” of the Admar source code that he had been given (which Mr Gilbert identifies as the “Demonstration Version”) and he discovered that there were 35 programs which were identified as being the subject of amendment in 1994, 30 programs which were identified as being the subject of amendment in 1993 and that there were no amendments in 1995 or thereafter. Mr Gilbert then says that the applicant makes no claim against the respondents in respect of these 65 programs and says that the balance of the 956 programs were in existence as at February 1993 in the form given to Dr Yeh and presumably Dr Bellair. If this evidence is admitted there is then, in my opinion, not only a new area of factual analysis opened up but there is also an issue created as to whether Professor Willis/Dr Yeh and Dr Bellair based their investigations, analyses and conclusions in any way on, or in relation to, any amendments or alterations to the source code as it existed as at February 1993 which amendments or alterations were made after February 1993. The issue then becomes to what extent, and in what respects, has there been a change or changes since February 1993 in what is said to be the repository of the copyright and the confidential information. Putting the matter another way, there will now be an issue as to the precise identification of what is said to be the repository of the copyright and the confidential information.
Mr Golvan submitted, in my view correctly, that the fact that there have been some changes between February 1993 and July 1995 opens up the need for a different form of analysis of the applicant’s source code said to be the repository of the applicant’s copyright and confidential information. In support of his submissions Mr Golvan relied upon Dr Bellair’s affidavit of 31 August 1997 in which he identified substantial differences between the source codes of programs supplied by the applicant to 12 winery customers and said that it would take him a considerable period of time to undertake a full comparison of the many hundreds of different programs the subject of the copyright and confidential information claimed and the changes made with the programs supplied to the winery customers. Mr Clarke submitted that Dr Bellair’s evidence and the respondents’ reliance upon it was misconceived on the basis that I would have to assume that every change identified by Dr Bellair in the source codes for the 12 winery customers found its way into the “Demonstration Version”. Accordingly, said Mr Clarke, that evidence does not open a whole new field of enquiry because the field of enquiry referred to by Dr Bellair relates to the customised disks for the 12 winery customers and not to the Demonstration Version upon which the applicant relies.
There is no doubt that Dr Bellair’s evidence refers to the subject matter of the disks supplied to the 12 winery customers but I do not regard the comparison which he seeks to make with the 12 customised programs as being the critical issue raised by the application by the applicant to rely on the further affidavits. Rather, the critical issue is that the integrity of what the applicant says is the 1993 source code and which forms the basis of investigation, analysis and report by the experts on both sides is now to be called into question. This is due to the acknowledgment by the applicant that the version of the source code which forms the basis of the experts’ reports is not the February 1993 source code as such (or as it is put, is not a “snap‑shot” of it) but rather is a version of the February 1993 source code which has been amended and altered in respect of a number of programs. The applicant claims that the number of programs altered is 65; the respondents challenge the method by which the applicant arrives at that number, and say that they wish to investigate whether the number and extent of such alterations may be larger.
Mr Clarke submitted that the fresh evidence was clarification of the evidence already before the Court and that Mr Golvan’s submissions went rather to the weight of the evidence. I do not think this is correct, nor does it follow that by rejecting the evidence I am forming a view that I do not accept the evidence of Mr Gilbert and Dr Yeh as deposed to. Indeed Mr Clarke submitted that if I receive Mr Gilbert and Dr Yeh’s evidence it provides “a complete answer” to the respondents’ submissions that there is not before the Court an identified version of the February 1993 source code. However, the respondents wish to challenge the evidence proposed that there were only 65 amendments to the February 1993 source code. It is that factual analysis which has been opened up by the evidence and I am not required to form a view whether Mr Gilbert and Dr Yeh are right or wrong or whether Dr Bellair is right or wrong in relation to the extent of the amendments made. Dr Bellair says that Dr Yeh’s string or text search is an imprecise way of analysing program changes. He may be right, he may be wrong but the issue which now arises is that if the further affidavits are accepted there will need to be an enquiry undertaken which will engage the respondents which was not hitherto an issue before the Court. This enquiry is necessitated independently of any consideration of the customised programs for the 12 winery customers of the applicant produced pursuant to the notice to produce in respect of which Dr Bellair has made his preliminary analysis. It arises because of the fact of the post‑February 1993 amendments to 65 programs in the source code said to be the version of the source code as at February 1993.
Mr Golvan says that the respondents do not accept that only 65 programs have been altered and, in my opinion, he is entitled to take that approach if the further affidavits are admitted; that is to say he is entitled to challenge, investigate and test that evidence. He has produced evidence from Mr Jones a former programmer employee of the applicant who says that whenever he made modifications to the source code of the applicant’s software as a result of modifications requested by the client he did not generally include comments in the source code to explain the nature of change, the date of the change or other details concerning the change. This evidence supports the respondents’ position that they do not accept that there were only 65 amendments to the February 1993 source code produced from the computer in July 1995. However, even without Mr Jones’ evidence, the issue is raised by the proposed further evidence as to the nature and extent of the amendments and alterations made to the source code since February 1993.
Mr Golvan says that if the evidence is admitted the respondents will want to investigate the changes and also put to the witnesses that the alterations to the customised source codes for the 12 winery customers was part of an integrated activity which, as I understand the submission, included alterations to the Demonstration Version in the Villa directory of the computer said to be the February 1993 source code. In my opinion, the introduction of the further affidavits bears upon this further factual analysis.
In his pseudocode investigation and analysis (which I have described in my earlier ruling on 27 August 1997) Professor Willis and Dr Yeh examined a step by step comparison of the logic flow of the applicant’s source code and the first respondent’s source code. However not all the programs in the two source codes were compared. The investigation and analysis was conducted by the investigators first identifying four program types which are used by all or most system modules in both source codes. For a specific program type, a representative source program in both systems was then selected and the two sets of selected programs were compared in pairs in terms of program logic. Accordingly the investigation and analysis was limited to the program logic comparison of four program types that it was said are most widely used by both systems. One of the four program types examined was “Transaction Update” and the representative programs examined were the “accounts payable invoice/adjustment (creditor transaction) update” program and the “General Ledger Interface Update” program. That latter program had the designation or program code “gli00.prg”. In exhibit “CHY‑5” to Dr Yeh’s affidavit of 29 August 1997 in which he listed and recorded the programs in the “Demonstration Version” of the applicant’s source code which had been the subject of an amendment in 1994 he included program “GLI00.PRG”. It therefore appears that one of the programs upon which the pseudocode investigation and analysis is based, and from which Professor Willis and Dr Yeh derive their conclusions, was an amended version of the program as it existed in February 1993. This is particularly relevant for the respondents, if for no other reason than that Dr Bellair in carrying out his investigation and analysis and preparing his affidavit evidence assumed that what he had been given was representative of the whole of the two systems and source codes. He was entitled, at that time, to make that assumption having regard to what had been said and propounded by the applicant in relation to what it said was the February 1993 source code. Mr Golvan submitted that if the further affidavits are admitted not only will he need to obtain instructions and seek advice in relation to the cross‑examination of the applicant’s witnesses, but he will also need to review Dr Bellair’s affidavit in the light of the further affidavits in particular because of a number of concessions about similarities and differences between the two source codes which may become irrelevant because of amendments to the February 1993 version of the applicant’s source code. These matters demonstrate why it is important for the respondents to have the opportunity to investigate, analyse and seek expert advice on the amendment issue before the case proceeds any further.
Would the admission of the further affidavits result in prejudice to the respondents?
There is thus a conflict created for the respondents. They submit that, if the further affidavits are admitted they would need, and in my view they would be entitled, to investigate the issue of amendments of the February 1993 source code relied upon by the applicant. It is apparent from the nature of the subject matter, that is to say the source code and the over 900 programs in it, and from investigations and reports by the experts already in evidence that this would take some time. Indeed, Dr Bellair says that it would take him many weeks of full‑time work to undertake a full comparison of the programs forming part of the February 1993 source code relied upon by the applicant and the customised programs for the 12 winery customers of the applicant. On one view the extent of the work referred to by Dr Bellair is not strictly brought about by the proposed further evidence but rather by an examination of the disks produced pursuant to the notice to produce. However, it is apparent from the nature of the subject‑matter of the further affidavits and Dr Bellair’s evidence that in any event an investigation, analysis and conclusion of the issue of the nature and extent of amendments to the February 1993 source code will take some time and if that investigation, analysis and consideration is to be made it will require an adjournment of the hearing of the proceedings. Because of a commitment full‑time on developing computer software for Nissan Australia Dr Bellair says that he is not able to take off any further substantial time “to carry out further time‑consuming analysis of the applicant’s material until at least the beginning of October 1997”.
The nature of the proceeding, the significance of the further evidence and the extent of the area of further analysis opened up is such that, in my view, the respondents should not be compelled to have this work carried out “on the run” whilst the proceeding is continuing and cross‑examination of the applicant’s witnesses, particularly the expert witnesses, is being conducted by counsel for the respondents. Putting the matter bluntly, if this work is to be carried out properly and adequately there will have to be an adjournment. In particular the respondents should not be compelled to cross‑examine the applicant’s witnesses particularly the experts and Mr Gilbert until they have completed their investigation, analysis and consideration of the issue of the nature and extent of the post‑February 1993 amendments to the Demonstration Version of the source code produced from the Villa directory in the applicant’s computer
However, Mr Golvan informed me that whatever the result of my ruling the respondents would not be seeking an adjournment because of the prejudice which would be caused to the respondents by a further adjournment of the proceedings. If there was to be an adjournment it would be an adjournment which would probably mean that the proceeding could not be re‑listed and continued until early 1998. For almost the whole of the remainder of 1997 I have a full docket of Court commitments and having regard to the anticipated duration of the case I would not have any blocks of time available to enable the case to be completed unless there was a settlement of a substantial case in my docket.
The respondents say that any further adjournment of the proceeding will cause them substantial prejudice on both a personal and commercial level. The trial was originally fixed for hearing before Merkel J on 26 May 1997 but some few days before that hearing on 21 May 1997 the applicant sought leave to file further evidence and sought an adjournment of the commencement of the trial on 26 May 1997 to enable a Mr Tseng to attend Australia and give evidence which resulted in the trial date being postponed. In the events which occurred that further evidence was not filed. At that time Mr Golvan for the respondents had instructions to endeavour to preserve the trial date and he submitted to Merkel J that the commercial viability of his clients was very much at issue. The evidence placed before me is to a similar effect. It is significant and relevant that the software in issue is but one of a number of software products sold by the applicant whereas the first respondent is basically a one product company - it only sells the software in issue in this proceeding. Confidential evidence placed before Merkel J (which is again relied upon before me) showed that the respondents and in particular the first respondent have not been in a strong financial position. That evidence was updated before me as at 28 August 1997. Further, Mr Cugura in an affidavit sworn 1 September 1997 set out the current commercial and financial situation of the first respondent.
What is significant is the fact that the existence of the proceedings is causing the first respondent significant commercial disadvantage. Since the commencement of the proceedings the applicant has informed the wine industry of the existence of the proceedings on a number of occasions. In particular two newsletters dated 8 May 1995 and 31 July 1995 have been circulated by the applicant to a number of wineries throughout Australia and New Zealand. Those newsletters set out in very general terms the applicant’s allegations that the Ezy winery management system software (the first respondent’s only product) is an infringement of the copyright in the applicant’s software and was obtained, or based on information obtained, from the applicant in breach of obligations of confidence. The newsletters also state:
“Admar claims therefore, that any express or implied representations by Ezy Systems that it is the owner or author of the Ezy Systems’ software are false and misleading.
Admar is currently investigating whether other software Ezy Systems distributes or intends to distribute also infringes Admar’s rights.
All the allegations are denied by the defendants.As the matter is before the Court, we are unable to comment further until the Court delivers its judgement (sic).
Of course, with all the software supplied by us, users are provided with a warranty that our software does not infringe the copyright of any other person.”
The fourth respondent says that since commencement of the proceedings and the distribution of the newsletters to wineries throughout Australia the first respondent’s sales of its software to the wine industry have slowed dramatically. This was said by Mr Ellis in his affidavit sworn 20 November 1996 in which he expressed a belief that:
“The continuation of these proceedings and any delay in the hearing and the determination of the proceedings will cause further financial harm to the First Respondent but will not adversely affect the applicant.”
This theme was continued by Mr Cugura, the third respondent, in his affidavit sworn 1 September 1997 in which he said:
“The last 12 to 24 months for the business of the first respondent have been very poor in financial terms. I am in charge of sales and marketing for our winery system, the only computer program which we sell. We have hardly made any sales of the winery system since the commencement of this proceeding. As a result of the litigation, I have stopped since about May 1995 even attempting to promote the product because any attempt by me to do so has been met by responses from customers concerning the litigation. Customers have shown me the document which is exhibited to the affidavit of Mr. Ellis dated 20 March 1996, and marked “PWE‑1”, and have told me that they do not want to get into any controversy over the software which we would supply. The sales we have made are isolated and have arisen generally from approaches to us. In almost every case, the sales in question have been conditional on the withholding of monies by the customers due pending the outcome of this proceeding. In two instances, I have only been able to secure a commitment to a sale by offering to give personal financial guarantees from myself and Mr. Ellis to secure the companies in question in the event that they suffer any loss following the outcome of the proceeding.
The proceeding has been devastating for my company and for both Mr. Ellis and myself personally. We have both been placed under enormous levels of personal stress. In my case, I have suffered very serious personal consequences which I attribute to the enormous financial pressure caused by the litigation on members of my family.
A further delay in the resolution of the Applicant’s claim would, from my point of view and that of Mr. Ellis and my company, be intolerable. As it was, the delay in the conduct of the hearing of the matter from May until August (which the Respondents strongly opposed) caused great harm to us personally as well as to the company. I was very aggrieved by this delay but understood that it was beyond my control. I had been endeavouring to reassure clients that the case would be resolved following a hearing in May. The fact that it remains unresolved now, and may be further adjourned due to no fault of the Respondents, is a matter of serious concern as regards relations between myself and clients. I believe that the delays in themselves impact seriously on my credibility with clients.
There are five members on staff at the first respondent, including myself and Mr. Ellis. We cannot commit to the continued employment of the full time staff for more than a further two or three months without a significant alteration in our sales position, which I think can only occur through a resolution of the Applicant’s claim. The further conduct of our business is at a crisis point, and I am fearful that any delay in the further resolution of the proceeding of the nature of many months and possibly more, would be catastrophic financially from a personal position, as well as from the perspective of my company. Our business and personal financial position has been seriously harmed by the effect of the litigation. We ask the Court to have regard to have regard to the serious concerns of the Respondents in refusing the application for leave to adduce further evidence, which I believe will inevitably prolong the determination of the Applicant’s claim for a considerable time, a fact in itself which I believe is very likely to destroy our business.”
(I take the reference to the document marked “PWE‑1” exhibited to the affidavit of Mr Ellis dated 20 March 1996 to be a reference to the copies of the newsletters dated 8 May 1995 and 31 July 1995 which are exhibit “PWE1” to the affidavit of Mr Ellis dated 20 November 1996).
Mr Cugura’s evidence was not challenged and Mr Clarke did not seek to cross‑examine Mr Cugura. His submission was that the prejudice to the respondents which was deposed to particularly in Mr Cugura’s affidavit did not “take the case out of the ordinary for cases of this class”. I do not agree with this submission. The matters deposed to by Mr Cugura are not, in my opinion, ordinary for the present proceeding. The first respondent markets only one product, its Ezy Wine Management System software. Its potential market has been expressly alerted to the court proceedings by the applicant in the newsletters (and I express no view on this issue other than to note that it has occurred) and this has had a deleterious effect on the first respondent’s business. Potential customers do not want to get into a controversy over any software they would acquire from the first respondent. Such sales as have occurred are isolated and the customers involved have withheld payment for the software until the outcome of the court proceedings. Thus any further delay in the proceedings would exacerbate the situation in which the respondents find themselves while the court proceeding is current. There is also the continuing stress suffered by the personal respondents further exacerbated by the fact that the trial has already been postponed once in May 1997. In my opinion for all these reasons the prejudice which will be suffered by the respondents if the hearing is adjourned will be out of the ordinary for a case such as this case.
Any further delay in the proceedings will continue to have a deleterious effect on the first respondent’s business. In my view this is self evident from Mr Cugura’s evidence. In Black v City of South Melbourne (1964) 38 ALJR 309 Barwick CJ said at 310:
“Questions of surprise and disadvantage because of a change of course in proof can almost always be met by adjournment and appropriate orders as to costs”.
In my opinion that observation is not apposite to the circumstances of this case for the reasons to which I have referred. Further, I am reminded by Lord Griffiths in Ketteman v Hansel Properties Limited (supra, 220):
“Justice cannot always be measured in terms of money and in my view a judge is entitled to weigh in the balance the strain of litigation imposes on litigants, particularly if they are personal litigants rather than business corporations, the anxieties occasioned by facing new issues, the raising of false hopes ...”
In State of Queensland v JL Holdings Pty Ltd (supra, 357) the majority of the Court said:
“In this case, which is of a commercial nature, the litigants are on the one side a developer and on the other side government and there is nothing which would indicate any personal strain which would justify the conclusion that costs are not an adequate remedy for prejudice caused by the amendment sought to the pleadings.”
The strain the litigation has imposed upon the respondents is deposed to by Mr Cugura in his affidavit and by Mr Ellis sworn on 20 November 1996 and that evidence by those deponents establishes, in my opinion, that costs are not an adequate remedy for the prejudice caused to the respondents by the admission into evidence of the further affidavits. (See also Commissioner of Taxation v Brambles Holdings Ltd (supra, 456)).
In my view there is a further particular prejudice faced by the respondents if I were to admit the further evidence of Mr Gilbert and Dr Yeh. The result of the admission of that evidence is that either there should be an adjournment of the proceeding or that the proceeding must proceed on the basis that the respondents do not have sufficient, or almost any, time in which to investigate, analyse and consider the new area of factual analysis to which I have already referred. In either event the respondents will suffer prejudice. In my view the prejudice in each of those events cannot be cured by an award of costs. If the matter proceeds without any adjournment there will be a different prejudice suffered by the respondents. They will have to continue with the cross‑examination of the respondents’ witnesses without having the opportunity to investigate, analyse or consider the issue of amendments to the source code upon which the applicant relies or to seek detailed advice from Dr Bellair on the issue of the amendments to what is said to be the February 1993 source code and to evaluate the consequences of that issue and such advice as may be received from Dr Bellair in relation to the evidence of Professor Willis and Dr Yeh and the substance of their reports. They will also have to evaluate and re‑consider Dr Bellair’s evidence in the light of the amendments to the source code issue. As I have noted earlier it is also significant that one of the programs said to have been amended and proposed to be abandoned by the applicant is one of the programs the subject of the pseudocode analysis. In my view this is a significant prejudice which would give rise to injustice to the respondents if it was allowed to occur. It can only be overcome by an adjournment but for the reasons already analysed an adjournment would also cause significant prejudice to the respondents and would also result in injustice to the respondents. The respondents should not be forced, in order to avoid the prejudice that would be caused by an adjournment of the proceeding, to subject themselves to this different kind of significant prejudice for which an award of costs is obviously not an adequate remedy. They should not be compelled to sail between Scylla and Charybdis.
Prejudice to the applicant if the further affidavits are not admitted
However, prejudice, justice and injustice must be considered in relation to all parties to litigation and I am bound to consider whether any prejudice and injustice will be caused to the applicant by refusing to grant leave to rely upon the two further affidavits. Further, I should consider not only the nature of such injustice but the extent of it. In this context Mr Clarke referred me to the decision of the Victorian Court of Appeal in Howarth v Adey [1996] 2 VR 535 where an appeal was allowed against the refusal of the trial judge to allow an amendment to the plaintiff’s statement of claim which would have enlarged the plaintiff’s case in negligence. The President of the Court of Appeal observed at 541:
“Very little emphasis, if any, was given to the prejudice which would be suffered by the plaintiff in the event of him losing his right to have his alternative claim determined on its merits.”
I am very conscious of the prejudice that will be suffered by the applicant if leave is not granted to rely on the further affidavits and the injustice that is said to result and I take it into account. The consequence is similar, but not the same as, that faced by the applicant in Bomanite Pty Ltd v Slatex Corporation Australia Pty Ltd (supra) as a result of Lockhart J refusing leave to adduce further evidence but as I noted earlier, I rely on that case for statements of principle rather than an application of its fact situation to the circumstances before me. In any event, as I have already observed, that decision must now be read and understood in the light of the reasoning and principles in State of Queensland v JL Holdings Pty Ltd (supra).
Mr Clarke ultimately submitted that the evidence was propounded to fill “a gap that ought not to have been there”. He submitted that a ruling against the admission of the further affidavits would be “devastating” and would have “very important consequences for this case”. Put shortly Mr Clarke said that the applicant needs the evidence:
“... by way of elaboration and clarification of what is in [the] disks that the parties had been working on as a matter of common ground since 1995”.
I accept that the consequence of my ruling against the admission of the further affidavits would be that the applicant will be substantially at risk that it is not able to identify and prove the source code and the nature and extent of it, in respect of which copyright is said to reside and which is said to be repository of the confidential information. In such circumstances the applicant may well not be able to establish any of the causes of action upon which it relies.
Of course, at this early stage of the proceedings I express no view on whether, in the absence of this further evidence, the applicant is able to fill the gap to which Mr Clarke referred and prove the existence, nature and extent of the relevant February 1993 source code upon which the applicant relies. There is further evidence to be considered in this context and cross‑examination and re‑examination of all deponents is yet to occur. Nevertheless, for the purpose of this ruling, I proceed on the basis that the exclusion of the further affidavits will have a very severe effect on the ability of the applicant to establish all the causes of action upon which it relies. This case is different from Bomanite (supra) in the sense that the applicant was not “warned” about the need or possibility for the further evidence to be adduced prior to the commencement of the trial. Nevertheless, that is only one factor to be taken into account. Mr Clarke frankly acknowledges that the matter should have been addressed earlier and submits that the prejudice which will result from the applicant not being allowed to adduce the evidence in the further affidavits should result in my exercising my discretion to allow it to be adduced, notwithstanding the fact that, in effect, it arises as a result of the applicant not preparing its case properly.
Conclusion
I have found this a very difficult ruling to make because of the consequences of the ruling which ever way it were to go on the party not succeeding in its submission. As is apparent from these reasons there are a number of factors which I have taken into account in reaching my conclusion and, without again elaborating them exhaustively, these are:
(a)an order was made for trial by affidavit and there were numerous orders made for the filing of affidavits both in chief and in reply;
(b)the trial fixed for 26 May 1997 was adjourned on 21 May 1997 on the application of the applicant on the grounds that it wished to file further evidence;
(c)the new evidence will open up a new area of factual enquiry;
(d)the respondents should have the opportunity to investigate, evaluate, consider and take expert advice in respect of that new area of factual enquiry before continuing with the case and in particular before continuing with the cross‑examination of the applicant’s witnesses;
(e)the fact that the evidence is sought to be adduced to fill a gap in the applicant’s proof of one of the basic or core issues in the proceeding, namely the identification of that source code said to be the repository of the copyright and confidential information;
(f)the deleterious effect which the existence of the proceedings is having on the commercial activities of the first respondent and the prolongation of that effect as a result of any further adjournment;
(g)the level of personal stress under which Mr Cugura and Mr Ellis have laboured which would be prolonged as a result of any further adjournment;
(h)the consequence of a further delay in the proceedings and the extent of that delay on the respondents;
the experts on both sides have prepared reports, analyses and affidavits based on the fact that the source code produced by the computer from the Villa directory on or about 17/18 July 1995 was in fact the source code as it in fact existed as at February 1993;
(j)the very serious consequences for the applicant as a result of my ruling against the admission of the further affidavits.
I am also conscious of the fact that the proceeding has been operating under case management principles but, with respect, I adopt and apply the observations of the majority in State of Queensland v JL Holdings Pty Ltd (supra, 357):
“Case management is not an end in itself. It is an important and useful aid for ensuring the prompt and efficient proposal of litigation. But it is always to be borne in mind, even in changing times, that the ultimate aim of the Court is the attainment of justice and no principle of case management can be allowed to supplant that aim.”
The majority then went on shortly after, to observe in relation to the amendment which the applicants had sought:
“If it is arguable, the applicants should be permitted to argue it, provided that any prejudice to JLH might be compensated by costs.”
The observations apply, in my view, equally to a situation where a party is seeking to adduce further evidence in the manner and in the context presently before me.
In my opinion, as I have observed earlier, the prejudice which I have identified in relation to the respondents if the further affidavits are admitted cannot, in my view, be compensated by costs. Further, I am conscious and apply the observations of the majority in JL Holdings Pty Ltd (supra, 357) that an application such as is made by the applicant should not be the occasion for punishing the applicant for its mistake or delay in making the application. Although case management and the desirability to comply with directions of the court to the filing of affidavits is a relevant consideration I have been guided in reaching my conclusion by reference to the attainment of justice and the necessary weighing and evaluation of any prejudice and resultant injustice which will be caused to the respondents if I allow the application for the admission of the further affidavits and the prejudice and resultant injustice which will result to the applicant if I disallow that application. It is fair to say that which ever way the ruling goes there will be a perception of injustice as a result of the prejudice suffered by the party against whom the ruling is made. Accordingly, I am bound to evaluate and weigh the respective prejudices which will be suffered by both parties and then determine where the ultimate justice lies.
In my opinion the application for the admission of the further affidavits into evidence should be refused having regard to all the matters to which I have referred but in particular having regard to the fact that I have weighed the prejudice which will be suffered by the applicant with the prejudice which will be suffered by the respondents if the further affidavits are admitted into evidence. In my opinion the prejudice which will be suffered by the respondents outweighs the prejudice which will be suffered by the applicant having regard to the background and context against which, and within which, the respective prejudices arise. In my opinion the prejudice which would be occasioned to the respondents should be accorded more weight in all the circumstances than the prejudice which will be occasioned to the applicant.
The further particulars
I do not consider that the further particulars of paragraph 6A of the amended statement of claim should be struck out. The applicant puts its case very broadly as to the repository of the confidential information; it relies upon the whole of the source code. To that extent I consider the further particulars to be appropriate. There may be consequences in relation to these particulars as a result of this ruling refusing leave to rely on the further affidavits but I am not prepared at this early stage of the proceeding to rule on the particulars by reference to the evidence which is said to support them. Mr Golvan also submits that the reference to the knowledge of the respondents in paragraph 1(c) of the further particulars is contrary to a proper basis for claiming breach of confidence and he relies on Faccenda Chicken Ltd v Fowler (1985) 6 IPR 155 at 165. However the determination of that question involves a detailed factual analysis of the nature of the relevant information and the nature of the employment which it is not appropriate to undertake at this time.
Accordingly I refuse the applicant’s application for leave to rely on the affidavits of Chung‑Hsing Yeh and Adrian Brandon Gilbert both sworn 29 August 1997. On the respondents’ motion I order that leave not be given to the applicant to file or adduce the evidence of Dr Chung‑Hsing Yeh in his affidavit sworn 29 August 1997 and Adrian Brandon Gilbert in his affidavit sworn 29 August 1997 and I dismiss the application that paragraphs 1 and/or 2 of the applicant’s further and better particulars of paragraph 6A of the amended statement of claim dated 26 May 1997, such particulars being dated 29 August 1997 be struck out.
I will hear the parties on the question of what order I should make as to costs from and including Thursday 28 August 1997 to the publication of these reasons.
I certify that this and the preceding thirty (30) pages are a true copy of the Ruling herein of the Honourable Justice Goldberg
Associate:
Dated: 3 September 1997
Counsel for the Applicant: Mr G S Clarke Solicitor for the Applicant: Phillips Fox Counsel for the Respondents: Mr C D Golvan Solicitor for the Respondents: Wilmoth Field & Warne Date of Hearing: 28 August 1997 Date of Ruling: 3 September 1997
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