C21 Pty Ltd (Trustee) v Hou (No 4)

[2023] FedCFamC2G 353

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

C21 Pty Ltd (Trustee) v Hou (No 4) [2023] FedCFamC2G 353

File number(s):	SYG 2055 of 2021
Judgment of:	JUDGE MANOUSARIDIS
Date of judgment:	8 May 2023
Catchwords:	INTELLECTUAL PROPERTY – Practice and procedure – applicant proposes to file expert evidence on account of profits one week before commencement of hearing – whether hearing should be vacated to give respondents an opportunity to respond to the account of profits evidence, or instead proceed with the hearing, and hear evidence in relation to account of profits at a later time – order made confirming hearing will proceed with evidence on account of profits to be received at a later time.
Division:	General
Number of paragraphs:	12
Date of hearing:	5 May 2023
Place:	Sydney
Counsel for the Applicant:	Mr C McMeniman, by telephone
Solicitor for the Applicant:	Gilbert + Tobin
Counsel for the Respondents:	Mr L Merrick, by telephone
Solicitor for the Respondents:	MGA Lawyers

ORDERS

SYG 2055 of 2021

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

BETWEEN:

C21 PTY LTD ATF THE RAMADAN FAMILY TRUST (ABN 65 592 475 152) 

Applicant

AND:

KATE HOU

First Respondent

HIBI DESIGN PTY LTD (ACN 654 588 717)

Second Respondent

order made by:	JUDGE MANOUSARIDIS
DATE OF ORDER:	8 may 2023

THE COURT ORDERS THAT:

1.The hearing that has been set down on 15-19 May 2023 will proceed.

Note: The form of the order is subject to the entry in the Court’s records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

REASONS FOR JUDGMENT

INTRODUCTION

1. At 9:30 am on 8 May 2023 I made an order confirming that the hearing of this matter that had been set down on 15-19 May 2023 will proceed, and that I would publish my reasons later. These are my reasons.

   HOW QUESTION AROSE

2. The applicant (C21) claims, among other things, that the first respondent, Ms Hou, a former employee of C21, has infringed, and continues to infringe, the copyright C21 owns in certain works, and has misused C21’s confidential information. C21 claims Ms Hou has been engaging in this unlawful conduct through the business of the second respondent of which Ms Hou is the controller. The works are said to consist of, and the confidential information is said to relate to, design templates for a number of different keycap profiles, design templates for a keyboard, and “bespoke three dimensional renders and production files for keycaps . . . for collaborations between [C21] and artists who create motifs to appear on the face of keycaps”. C21 claims a number of forms of relief, including an account of profits.

3. On 10 August 2022, before the parties had filed their evidence, I set the matter down for hearing for five days commencing on 15 May 2023. In the course of the second half of 2022 and early 2023, pursuant to orders I made by consent, the parties filed their lay and expert evidence. On 9 March 2023, after on 3 March 2023 I had determined a contested application for further discovery, I made orders by consent for the giving of further discovery, the filing of evidence in reply, and directions for the preparation of a court book, the filing of objections, and the filing of outline of opening submissions.

4. At 5:30 pm on 2 May 2023 C21, by its lawyers, sent an email to my Associate’s inbox requesting that the matter be relisted before me. The email stated as follows:

   1.On 17 August 2022, the Applicant reserved the right to prepare evidence regarding quantum after the provision of discovery by the Respondents. Whilst there was a delay by both parties in producing their discovery, the Respondents’ financial documents were not produced to the Applicant until 3 April 2023.

   2.Since receiving the Respondents’ discovery, the Applicant has prepared its lay and expert evidence in reply on liability, and has been considering its position regarding quantum. The Applicant has now briefed KordaMentha to prepare a report assessing the Respondents’ profits since September 2021.

   3.The Applicant has indicated its intention to the Respondents, but the Respondents’ solicitors have expressed concerns about the further evidence, including how it will affect the present timetable and the trial date.

   4.The parties consider further hearing days may be necessary, given the extent of the lay evidence from both parties (of which the parties were not aware on 3 December 2021 when the estimate of 5 days was given). The likelihood of additional evidence regarding quantum is also relevant to the hearing timetable.

5. The matter was relisted before me at 11:30 am on 5 May 2023 at which time I heard submissions from counsel for the parties. Before the hearing C21 filed an affidavit made by Ms Dunn, the lawyer for C21, to which she exhibited, among other things, a letter of instruction dated 26 April 2023 to Ms Davitt of KordaMentha, requesting that Ms Davitt prepare “a short form expert report calculating the Respondents’ account of profits generated since they commenced operating the business” (account of profits evidence).

6. At the hearing on 5 May 2023 counsel for C21 explained the circumstances that gave rise to C21 deciding, so near to the hearing, that C21 needed to file the account of profits evidence, these being the circumstances stated in the email C21’s lawyers sent to my Associate’s inbox on 2 May 2023. Counsel submitted that the hearing of 15-19 May 2023 could still proceed because it is doubtful that the hearing, on the current evidence, would be completed in the five days set down for the hearing; and that the account of profits evidence related to discrete issues that could be heard separately after the hearing, and after the respondents would have an opportunity to consider the account of profits evidence and adduce further evidence, if so advised.

7. Counsel for the respondents, on the other hand, submitted it would be unfair for the hearing to proceed without the respondents first being given an opportunity to consider the account of profits evidence and determine whether they should put on evidence. Counsel submitted it was likely that Ms Hou would give lay evidence about the costs of the business, and in particular, about which of those costs should be allocated to revenue. Counsel submitted that if the hearing proceeded, Ms Hou would be liable to be cross-examined on matters she is likely to give in relation to costs before Ms Hou will have had an opportunity to consider what evidence she would need to put on; and this will be unfair to Ms Hou. In those circumstances, counsel for the respondents submitted that the hearing could not be split in the manner suggested by counsel for C21 and, for that reason, the hearing of 15-19 May 2023 should be vacated.

   DETERMINATION

8. It is necessary to note at the outset two things. First, the respondents do not submit C21 is at fault for having determined so near to the hearing date that it needs to file the account of profits evidence. Second, counsel for C21 does not contend that the questions of liability and remedy be separately determined; counsel for C21 goes no further than submitting that C21’s decision for filing at this late stage the account of profits evidence can be accommodated while maintaining the current hearing dates without any loss of efficiency and without any unfairness to the respondents. In these circumstances, the first and, if answered in the affirmative, the only question is whether this submission is correct. In my opinion it is correct.

9. First, the issues that will be raised by the account of profits evidence are discrete. I accept there is a potential for unfairness if, before Ms Hou has had an opportunity to consider whether she should give evidence in response to the account of profits evidence, Ms Hou were cross-examined on matters relating to any subject about which it is reasonable to suppose Ms Hou might give evidence in response to the account of profits evidence. This potential unfairness, however, can be avoided by making a direction at the hearing of 15-19 May 2023 that Ms Hou not be cross-examined on matters that exclusively relate to any subject about which it is reasonable to suppose Ms Hou might give evidence in response to the account of profits evidence.

10. Second, even without the account of profits evidence, there is a substantial possibility that the five days that have been allocated to the hearing of the matter are not sufficient. It is therefore likely that additional days will need to be allocated for the hearing of the matter. This will not have been caused by C21’s decision to file the account of profits evidence.

11. Third, there will be prejudice to both parties if the hearing is vacated. The parties have manifested an admirable diligence in preparing for the hearing on 15-19 May 2023. If the hearing is vacated, a not insubstantial amount of costs will be thrown away because it is inevitable that, for the purposes of the future hearing, the parties will need to reacquaint themselves with the work they have already performed in preparation of the hearing on 15-19 May 2023.

    CONCLUSION

12. It is for these reasons that at 9:30 am on 8 May 2023 I made an order confirming that the hearing that had been set down on 15-19 May 2023 will proceed.

I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis.

Associate:

Dated:       8 May 2023