Bottrill Research Pty Ltd v Dover Fisheries Pty Ltd

[1995] HCATrans 65

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A3 of 1995

B e t w e e n -

BOTTRILL RESEARCH PTY LTD

Applicant

and

DOVER FISHERIES PTY LTD

Respondent

Application for special leave to appeal

BRENNAN J
DEANE J
DAWSON J

TRANSCRIPT OF PROCEEDINGS

FROM ADELAIDE BY VIDEO LINK TO CANBERRA

ON THURSDAY, 30 MARCH 1995, AT 10.28 AM

Copyright in the High Court of Australia

MR B.R.M HAYES, QC:   I appear with MR S.H. MILAZZO for the applicant.  (instructed by Low & Partners)

MR N.W. MORCOMBE, QC:   If the Court pleases, I appear with MR G.L. MUECKE for the respondent.  (instructed by Piper Alderman)

MR HAYES:   If the Court pleases, there are two issues which we say justifies this Court examining this case.  The first is in relation to the disclosure of confidential information in commercial agreements.  The reason we say that that is an important issue for the Court to examine is because in the continually developing area of scientific ideas and discoveries and their application to commercial agreements and products the finding in this case by the Full Court that the idea to use air agitation in the cooling process, which was put forward by the respondent in the belief that it would lead to improved recoveries, was enough to be the subject of confidentiality has some major ramifications in the scientific and legal community.

Your Honours will see from the summary of argument that we have shown why we say the court was wrong in identifying it merely an idea, which was untested at that stage as being the subject of confidentiality.  I do not want to go through the whole of the argument which is set out in the written summary, but I would like to take the Court just to a couple of passages on page 4 where we have set out extracts from the case of Secton and on page 5 in O’Brien v Komesaroff.  Firstly at page 4, that case sets out a test which is a convenient test to relate the facts as they appeared in this case.  Very quickly the extract refers to two arguments put in Secton’s Case by Mr Goldberg and his Honour Justice King said:

the concepts concerned, on being expressed, were recognisable as not only new and original but also as potentially valuable.  They were suggestions the merit of which announced itself on their expression; they were not speculative, requiring investigation to ascertain whether they had merit.

And he goes on to say later in that judgment:

Whatever value or potential value it has will still have to be established by testing.  Until that happens the concept is speculative and cannot be a trade secret.

Just applying those observations to the facts here, the use of air agitation in the cooling of cooked fish per se was not novel, as your Honours will see from the bottom of page 4 of the argument.  It was not novel in the cooling of cooked fish.  It was in the public domain and the available literature contains a number of references to it.

BRENNAN J:   Is that material to the construction of the terms of the contract?

MR HAYES:   It is because part of the terms of the contract, which is in paragraph 5(a) of the contract which appears at page 45 of the application book:

All intellectual property such as patentable inventions, non-patentable processes or know how designs copyright and the like created by the Consultant in carrying out work in pursuance of the retainer shall be put at the disposal of the Owner but all such intellectual property shall remain the property of the Consultant -

Now, that is important in the factual context here where the court found that Dover Industries came up with this idea of air agitation but required the applicant to conduct the tests to see whether or not it was feasible, and it is precisely that that is that kind of context that is referred to in the Komesaroff Case, the extract which appears on page 5 of the summary.

BRENNAN J:   But clause 5(a) has nothing to do with it, has it?  Is it not clause 8(a) that is relevant?

MR HAYES:   Clause 5(a) is relevant in the context of the know how which the consultant retained.  Clause 8(a) is in relation to the disclosure of confidential information.  But the point that we make is that at the stage at which the idea was presented to Bottrill to carry out the testing, that is a mere idea at that stage.  As he developed a process, he would acquire the know how which was involved in developing that process pursuant to clause 5(a).  What we say here is that the Full Court failed to distinguish between the respondent’s idea on the one hand, which it accepted emanated from the respondent, and the cooking process which utilised the form of air agitation which was developed by the applicant.

BRENNAN J:   Why does the idea not fall within the meaning of the words in clause 8(a) “all information and other material supplied”?

MR HAYES:   We say it does not because clause 8(a) must be looked at - and it was accepted, as I understand it by the parties, that the confidential information referred to in the agreement was comparable to the general law governing confidentiality.  We then go back to the principles set out in Secton - that is why I referred your Honours to ‑ ‑ ‑

BRENNAN J:   To mean that there was a conventional basis of conducting the litigation that the meaning of the words “all information and other materials supplied” was to be restricted so as not to encompass anything other than that which constituted intellectual property?

MR HAYES:   No, I could not say that it is restricted in that way, but what we say is that the clause 8(a) must be construed as the general law has construed confidential information and an idea as such is simply not capable of forming the basis of a confidential information as that term is used in 8(a) because it is designed, in other words, to protect trade secrets.

DEANE J:   So is what you say this, that if the idea of the use of the air agitation in the steam retorting of canned abalone was an absolutely revolutionary idea that had never been thought of by anyone anywhere before, the fact that it was an idea would mean that it could not be confidential in terms of a confidentiality agreement between a consultant and his client?

MR HAYES:   It would depend on the facts, but on that fact scenario that your Honour has put to me it would at that stage still be an unproven or untested idea, yes.

DEANE J:   In other words, as long as it is an idea the consultant is free to disclose it to competitors and everybody else, notwithstanding a confidentiality agreement.

MR HAYES:   It is not capable at that stage of ‑ ‑ ‑

DEANE J:   That is your argument?

MR HAYES:   Yes.  Your Honours, the Full Court, in our submission, erred in its approach to this aspect of the case.  If, however, it was right, the second point that we raise in relation to the special leave application is in relation to the respondent’s ability to terminate the agreement as it did, having regard to the terms of the agreement.

Your Honours will see from the summary of argument that we have put in that it deals with the agreement in a certain way, but what was overlooked by the Full Court was the argument that - the Hong Kong Fir Case is referred to on page 7 of the summary of argument which contemplated terms other than essential or fundamental terms, but terms which were characterised as intermediate or nominate, the consequences of which were to be construed depending upon the gravity of their breach.

Now, whilst Justice Prior alluded to the argument put in this regard, he dismissed it.  The other two judges, Justices Bollen and Duggan, simply did not address the issue at all.  They all addressed the issue from the point of view of whether or not it was a breach of an essential term of the contract and that made them approach the question from the wrong direction, in our submission, because the terms in 8(a), which your Honour has referred to ‑ ‑ ‑

DAWSON J:   But the claim was a claim for damages, was it not?

MR HAYES:   It was.  The terms in the contract relate to a number of different way in which confidentiality might be breached.  It might be breached in serious way or in not so serious ways.  But Justice Prior, for example, held that any breach of the terms would give rise to a termination.

DAWSON J:   But why are we talking about termination when the claim is for damages?

MR HAYES:   Your Honour says the claim was for damages, but the claim by the respondents included rescission of the contract.

DAWSON J:   But the only relief which was granted by the Full Court was damages, is that not so?

MR HAYES:   No, your Honour.  If your Honours turn to page 72 of the application book where Justice Bollen states his findings, in paragraph 6 he finds that:

The respondent is not entitled to royalties after the time of dismissal.  In the light of the terms of the dismissal that time may be taken as one month from the 23rd December 1992.

Now, he talks in terms of dismissal there, but the respondent there is in fact a consultant, not an employee of the company.

Your Honour, in relation to the question of termination, the Full Court unanimously held that the provisions relating to confidentiality amounted to essential conditions, any breach of which - sorry, Justice Prior held that any breach of which would give rise to rescission or repudiation, termination of the agreement.  That enabled Dover to terminate the agreement and thereby deprive the applicant from royalties which he had set up and was entitled to be paid pursuant to the terms of the agreement.  We say if the conditions set out in the Hong Kong Fir Case

were applied, which appear to have been adopted by this Court in Ankar v National Westminster Finance (Australia) Ltd subsequently, if they had approached it from that point of view they would have looked to see the extent of the gravity of the breach, which the trial judge found was not a serious breach in the circumstances.

Your Honours, for those reasons and the reasons which we set out on page 9 of the summary of argument, we say that the correctness of the Full Court’s decision in this case is questionable and the issues of principle justify this Court in examining that decision in the circumstances because the issues of principle are not peculiar to the facts of the case but they do apply across the whole area of the law of contract.  If the Court pleases.

BRENNAN J:   Thank you, Mr Hayes,  We need not trouble you, Mr Morcombe.

The case turns essentially on its own facts and particularly on the construction of the particular contract between the parties.  It does not involve any question of general principle.  For that reason special leave is refused.

MR MORCOMBE:  If it please, I seek an order for costs.

BRENNAN J:   You have nothing to say about that, Mr Hayes?

MR HAYES:   No, your Honour.

BRENNAN J:   Special leave is refused with costs.

AT 10.43 AM THE MATTER WAS CONCLUDED