Dart Industries Inc v The Decor Corporation Pty Ltd

The applicant, Dart Industries Inc, sought special leave to appeal to the High Court of Australia from a decision of the Full Court. The dispute concerned the appropriate method for calculating an account of profits in a case where the respondent, The Decor Corporation Pty Ltd, had been found liable for infringement. The core of the disagreement lay in the distinction between the "incremental or differential method" and the "average or absorption cost accounting" method for attributing overheads.

The legal issue before the High Court was which accounting method correctly determined the profits for which the infringer was liable to account. Specifically, the court had to decide whether only those overheads directly increased by the infringing activity should be deductible, or if all overheads that contributed to obtaining the profit, regardless of whether they would have been incurred in any event, were permissible deductions.

The applicant argued that the correct approach was the incremental method, which involves deducting direct costs and only those overheads that were increased by the infringing manufacture. This method, they contended, ensures the infringer accounts for all "ill-gotten gains" without allowing deductions for expenditures that would have been incurred regardless of the infringement. The applicant submitted that the primary judge had correctly applied this method, but the Full Court erred by substituting the absorption cost method, which they argued was wrong in principle and inconsistent with Australian law's focus on disgorging profits derived from infringing activities. The applicant also raised concerns about the Full Court's reliance on US case law, suggesting it was based on a different legal foundation.