Gnomon Technologies Pty Ltd v Element Engineering Pty Ltd

[2013] SASC 4

SUPREME COURT OF SOUTH AUSTRALIA

(Miscellaneous Appeal: Civil)

GNOMON TECHNOLOGIES PTY LTD & ANOR v ELEMENT ENGINEERING PTY LTD & ANOR

[2013] SASC 4

Judgment of The Honourable Justice White

25 January 2013

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS - GENERALLY

The parties are in dispute about the ownership of certain intellectual property - the plaintiffs applied for permission to amend their statement of claim - a Master refused to grant that permission and the plaintiffs appeal against that refusal.

Held (allowing the appeal):

(1) in a plea of the general nature of the first plaintiff's activities, it was not necessary for the plaintiffs to specify particular patents or patent numbers (at [27]);

(2) the phrase "at all material times" does not give rise to uncertainty given that the circumstances pertinent to the action occurred in a relatively confined period of time (at [33]);

(3) the addition of a minor detail to a shorthand description does not alter the substance of the existing plea, and the pleading does not, on its face,  give rise to uncertainty (at [38]-[39]);

(4) the Court should be slow to impose unrealistic requirements of particularisation of the contents of documents in dispute on persons who do not presently have access to those documents (at [52]);

(5) whilst some regard should be had to the interlocutory processes to follow when considering the sufficiency of the particularisation in a statement of claim, a pleading which is insufficiently precise to allow its terms to be replicated in an interlocutory order should not be disallowed on this basis (at [54], [56]).

Supreme Court Civil Rules 2006 (SA) r 98, r 99, r 136, referred to.
H Stanke & Sons v O'Meara (2007) 98 SASR 450; Pope v Harris Orchard [2010] SASC 354; Williams v Australian Telecommunications Commission (1988) 52 SASR 215, considered.

GNOMON TECHNOLOGIES PTY LTD & ANOR v ELEMENT ENGINEERING PTY LTD & ANOR
[2013] SASC 4

Appeal from a Master

1. WHITE J.             A Master refused to grant the plaintiffs permission to amend their statement of claim.  The plaintiffs appeal against that refusal.

   Background

2. The parties are in dispute about the ownership of certain intellectual property.  Some elements of the background to their dispute seem to be common ground, but the summary which follows is drawn very much from the pleas made by the plaintiffs in their proposed statement of claim (3S/C).

3. The second defendant is an engineer with expertise in design.  The first defendant (Element) is in a real sense his company as he is its sole director, its secretary and an employee.

4. As a result of discussions in May and July 2009, the second defendant reached an agreement with Messrs Tomblin, Shepherd, and Moss for the development of a thermal energy storage unit and a waste heat recovery unit and for the commercialisation of the technologies associated with those units.  The elements of the agreement are alleged to be these:

   1.   The four men would incorporate a company for the purposes of the development of the units and the commercialisation of the technology associated with them (3S/C [5.1]).  The first plaintiff, Gnomon, was incorporated on 11 August 2009 for this purpose (3S/C [6]).

   2.   In exchange for an agreed remuneration, Element would provide consulting and mechanical engineering services in connection with the development, design, promotion, commercialisation and manufacture of the two units (the Services Agreement) (3S/C [5.2]).  The services to be provided by Element were to commence before the incorporation of Gnomon but it was agreed that after its incorporation those services would be provided to, and paid for by, Gnomon (3S/C [5.3]).

   3.   The four men were to be the directors of Gnomon and they, or their nominees, would be its shareholders (3S/C [5.4.] and [5.5]).

5. Thereafter Gnomon was involved in the development, design and manufacture of renewable energy technologies and, in particular, the development of two units:  one known as a “Thermal Energy Storage System Unit” (“the TESS Unit”) (3S/C [1.2.1]); and the second being a “Waste Heat Recovery Unit” (“the WHR Unit”) (3S/C [1.2.2]).  Each unit is described more fully in proposed [1.2] of the 3S/C which is set out in full later in these reasons.

6. It appears to be common ground that the actual work of developing, designing and manufacturing the TESS Unit and the WHR Unit was carried out substantially, if not wholly, by the defendants.  They were the ones with the relevant expertise.  This is reflected in [18] of the defendant’s summary of argument:

   The plaintiffs were effectively the financiers of research performed during a discrete time period.  The plaintiffs themselves have, and had, no expertise or knowledge [of] a Tess Unit or WHR Unit.  All the knowledge and expertise is that of the defendants and a party not being sued, Dr Patrick Glynn.

7. The plaintiffs plead both express and implied terms of the Services Agreement.  One of the express terms is that the defendants would obtain provisional patents in respect of the units and would assign those patents to Gnomon (3S/C [8]).  The plaintiffs plead that provisional patents of the two units were assigned to Gnomon and the defendants have acknowledged that that was so, at least in respect of the TESS Unit.

8. Two of the implied terms pleaded are that:

   10.1Gnomon would be the owner of, and entitled to possession of, all designs, drawings and documents produced by or on behalf of Element under the Services Agreement or otherwise coming into the possession of Element or [the second defendant] in connection with the Services Agreement (“the TESS and WHR Documents”); and

   10.2all TESS and WHR Documents would be delivered by Element to Gnomon on demand or otherwise upon the conclusion of the Services Agreement.

   …

   The underlining indicates the additions which the plaintiffs propose to the existing statement of claim (2S/C).  In effect, the plaintiffs plead that Gnomon is entitled to all the documents (given the shorthand label “the TESS and WHR Documents)  produced by, or coming into the possession of, Element under, or in connection with, the Services Agreement.

9. Further implied terms are pleaded in a new [10A].

   10AThe Services Agreement contained implied terms to the effect that Element (by itself and its officers, servants, employees and agents) (“the Implied Terms as to Confidentiality”):

   10A.1would, both during and after its engagement, keep confidential all information relating to the development, design or manufacture of the TESS Unit or the WHR Unit that came into its possession, or was developed by it, in connection with the Services Agreement;

   10A.2would not disclose to any third party, either during or after its engagement (other than in the proper course of its engagement), any information relating to the development, design or manufacture of the TESS Unit and/or the WHR Unit that came into its possession, or was developed by it, in connection with the Services Agreement, to the detriment of Gnomon; and

   10A.3would not exploit or cause or assist to be exploited, either during or after its engagement (other than in the proper course of its engagement), any information relating to the development, design or manufacture of the TESS Unit and/or the WHR Unit that came into its possession, or was developed by it, in connection with the Services Agreement.

   …

   As can be seen, proposed [10A] is a plea concerning the confidentiality of information.

10. Paragraph 15B pleads in its preamble:

    15BDocuments in relation to the development, design, promotion, commercialisation and manufacture of the TESS Unit and/or the WHR Unit and/or the Patents contain information of a commercially confidential nature, and belonging to Gnomon (“the Confidential Information”).

    It then goes on to particularise the “Confidential Information” and its creation.

11. The plaintiffs plead that the Services Agreement was terminated by Gnomon on 23 May 2011 or, alternatively, on 3 August 2011, when it accepted Element’s repudiation of it.  It seems to be common ground that the former is the actual date of termination.  The plaintiffs are concerned that since the termination, the defendants have retained and may make use of information of Gnomon said to be confidential. 

12. The plaintiffs seek relief in a variety of forms.  Those which are relevant presently are:

    1.   Element and [the second defendant] be restrained from disposing of or otherwise dealing with:

    1.1the TESS and WHR Documents;

    1.2the Confidential Information; and

    …

    2.   A declaration that all of the TESS and WHR Documents and the Confidential Information belong to Gnomon.

    3.   An order requiring Element and [the second defendant] to deliver to Gnomon, on oath or affirmation, all TESS and WHR Documents and Confidential Information in the possession, custody or control of Element or [the second defendant].

    …

    5.   A declaration that the TESS and WHR Documents and the Confidential Information are subject to the Implied Terms as to Confidentiality.

    6.   An order requiring Element and [the second defendant] to confirm on oath or affirmation that neither Element nor [the second defendant] (nor, to the best of their knowledge, any other person or entity) remain in possession, custody or control of any TESS and WHR Documents or Confidential Information.

    ...

    11. Damages to be assessed.

13. In substance, the relief which the plaintiffs seek is the delivery up of documents to which they assert an entitlement under the Services Agreement, declarations as to the confidentiality of certain information, and protection of that confidential information.

14. On 16 March 2012 a Judge of this Court issued a search order against the defendants and another entity Silcom Pty Ltd.  That order was executed against Silcom on 22 March 2012 but not against the defendants.  Instead, in compliance with a mandatory injunction, the defendants delivered various materials to Mr Clarke, the independent lawyer appointed under the search order to supervise its execution.  Mr Clarke holds those materials and the documents seized from Silcom, pending further order from this Court.

15. The plaintiffs have proposed a regime of orders which would permit a Mr du Plessis (who has expertise in information technology and who was named in the search order) to have access to the seized electronic material and which would permit them to have access to the seized material in hard copy form.

16. The defendants contend that the terms of the search order were unduly wide and thereby allowed the seizure of documents and information going beyond the legitimate interests of the plaintiffs.  They are concerned that the plaintiffs should not be granted access to all the seized documents, because they include documents and information which are confidential to them.  For this reason they seek to have the plaintiffs plead their case with some particularity so as, amongst other things, to provide a ready means by which their entitlement to access to, and production of, documents may be determined.

17. The Master has deferred consideration of the plaintiffs’ proposed regime for access to the seized documents until the pleading amendment application has been finalised.

    General Principles

18. The purposes of pleadings are well known.  They provide a structure or framework for the litigation designed to promote a just outcome.  They define the issues between the parties thereby providing the basis for the determination of questions as to discovery before trial and admissibility of evidence at trial and of questions as to what the litigation has decided for the purposes of the Rules as to res judicata and issue estoppel.  They also give the parties fair notice of the case to be made against them at trial, thereby minimising the risk of injustice resulting from surprise.[1] 

    [1]    Williams v Australian Telecommunications Commission (1988) 52 SASR 215 at 216; H Stanke & Sons v O’Meara [2007] SASC 246 at [75]; (2007) 98 SASR 450 at 465.

19. The defendants are correct in principle, therefore, in their contention that regard is to be had to the disclosure issues, when an assessment of the sufficiency of the plaintiffs’ proposed 3S/C is made.  That does not mean, however, that the pleading must be such as to permit the entitlement to access every document in question, as distinct from each category of document, to be determined.  That is especially so in a case like the present in which the plaintiffs’ entitlement to documents is part of the very subject matter of the litigation and not something arising adjectively, as is the case with disclosure of documents under r 136 of the Supreme Court Civil Rules 2006 (SA).

20. The purpose of pleadings is also informed by r 98 of the Supreme Court Civil Rules 2006.  Rule 98(2) requires a pleading to be as brief as the nature of the case allows, to state only the material facts relied upon and to plead such facts as give fair notice of the party’s case at trial. 

    Proposed Paragraph 1

21. The plaintiffs wish to amend [1] of the statement of claim as follows:

    The First Plaintiff, Gnomon Technologies Pty Ltd (Gnomon):

    1.1is and was at all material times a company duly incorporated pursuant to the Corporations Act 2001 (Cth) and is able to sue in and by its corporate name and style; and

    1.2is and was at all material times involved in the development, design and manufacture of renewable energy technologies, in particular;

    1.2.1 the development of a unit known as a Thermal Energy Storage System unit (“the TESS Unit”), being a thermal energy storage apparatus that, through the use of silicon metalloid material, provides a means for the absorption and storage of thermal energy (to provide a means by which a consistent supply of thermal energy can be given to converters of such thermal energy, to produce electrical and/or mechanical energy); and

    1.2.2 the development of a Waste Heat Recovery unit (“the WHR Unit”), being an arrangement for converting heat from high temperature industrial emissions to mechanical and/or electrical energy, including a heat sink to which high temperature industrial emissions are directed from their source in the industrial process, supported and in thermal communication with a thermal energy absorbing medium configured to direct absorbed heat from the heat sink to a focal point, such that when the high temperature industrial emissions make contact with the heat sink, heat is distributed out through the supporting thermal energy absorption medium to the focal point.

    1.3refers to and repeats the matters pleaded in paragraphs 13 – 15 below and says that it is the holder of the right, title and interest in and to the inventions and intellectual property the subject of (collectively “the Patents”):

    1.3.1 International Patent Registration Certificate for Patent No PCT/AU2010/001035 (being Australian Provisional Patent Applications No 2010282232, being in respect of the TESS Unit);

    1.3.2 Australian Provisional Patent Application No 2009903820, being in respect of the WHR Unit; and

    1.3.3 International Patent Registration Certificate for Patent No PCT/AU2011/001039 (being Australian Provisional Patent Application No 2010903658, being in respect of the WHR Unit.

    As can be seen, [1.2.1] refers to “the TESS Unit” and [1.2.2] to the WHR Unit.

22. Sub-paragraph 1.3 incorporates by cross‑reference [13]-[15].  Those paragraphs plead the assignment to Gnomon of two patents:  one “in relation to” the TESS Unit (No 3818); and one “in relation to” the WHR Unit (No 3820) (using in each case only the last four digits of the provisional patent application number).

23. The defined expressions “the TESS Unit” and “the WHR Unit” are used elsewhere in the proposed statement of claim.  All the references to “the WHR Unit” in the 3S/C are new.  The expression “the TESS Unit” was used in the 2S/C and so not all references to it in the 3S/C are new.

24. The Master disallowed each of the proposed amendments to [1] although his reasons indicate that it was only proposed [1.2.1] and [1.2.2] which he regarded as unsatisfactory.  He gave the following reasons:

    [5]The definitions in 1.2.1 and 1.2.2 of the “TESS Unit” and the “WHR Unit” are unsatisfactory.  The prefix “the” in the name given to each unit implies that it is a particular discreet entity.  That is consistent with these units being the subjects of the pleaded patents which require the precise definition of what it would be possible to construct using the specifications of the patents.  Such objects constructed in accordance with the patents would be the TESS Unit and the WHR Unit and they would be separate and distinct from any other similar unit.

    [6]From the balance of 1.2.1 and 1.2.2, and the other material on the file about TESS Unit, it appears that the plaintiffs, at least in part, are referring to concepts of TESS Units and WHR Units which are evolving and not static.  Insofar as 1.2.1 and 1.2.2 are meant to encompass units which are not the subject of the pleaded patents, there needs to be some better definition of what exactly is being referred to and whether it is a discrete object or a concept.

25. In my respectful opinion, the Master has taken an unduly stringent view of the proposed amendments to [1.2] in the 3S/C.  Proposed [1.2] has the character of an introductory paragraph describing the activities of Gnomon.  In substance, it asserts little more than that at material times Gnomon has been involved in the development of particular technologies, one being the development of a Tess Unit and the other the development of a WHR Unit.  It gives some description of each of those units by reference to their purpose and function.

26. For the purpose of this statement of Gnomon’s activities, it was not necessary for the plaintiffs to go further and identify the particular units by reference to patents or patent numbers.

27. In any event, there does not seem any reason to suppose that the whole of the development of the respective technologies to the date of termination of the Services Agreement (on 23 May 2011) had been made the subject of patents.  There had been provisional patents issued on 14 August 2009, but it seems to be common ground that the development of the technologies had continued thereafter.  There is nothing to indicate that the further development which had occurred had been reflected in the issue of new patents.  By itself this makes the Master’s reasons for disallowing the amendment inappropriate.

28. If the descriptions of the TESS Unit and the WHR Unit in the 3S/C [1.2] are not sufficiently precise when those expressions are used elsewhere in the statement of claim, then that is a matter which should be addressed in the context of those other paragraphs.  It is not a reason by itself for disallowing an introductory and generalised plea concerning the nature of Gnomon’s activities.

29. I note that the defendants appear, in any event, to know what is meant by the expression “the TESS Unit” in [1.2].  In their defence filed on 26 October 2011 to the original statement of claim, they admitted the existing plea concerning the TESS Unit.  That suggests that the defendants regarded [1.2] in the original statement of claim as giving adequate notice of the allegation concerning the TESS Unit.  Counsel for the defendants acknowledged that that was so but drew attention to the fact that the original statement of claim did not make the claim for the confidentiality of information contained in documents relating to the development of the Tess Unit which is made in proposed [15B].  This was, in effect, a submission that the expression “the Tess Unit” and “the WHR Unit” had to be defined more precisely in relation to the claim of “Confidential Information” made in [15B] of the 3S/C.  It is convenient to address that submission in that part of these reasons which concerns the proposed [15B].

1. It is also to be expected that the defendants would well know the activities of Gnomon.  The second defendant was, during the currency of the Services Agreement, one of its directors and would thereby have acquired knowledge of its activities.

2. The Master gave an independent reason for disallowing the proposed amendments to [1.2].  This was the use of the expression “at all material times” in the clause that Gnomon “is and was at all material times” involved in the development, etc, of renewable energy technologies.  He considered that this expression gave rise to uncertainty and that the plaintiffs should be required to state a timeframe within which the TESS and WHR concepts were developed.

3. With respect, I consider that this is a mistaken view of the pleading.  Gnomon’s involvement is for a relatively confined period, bearing in mind the plea that it was incorporated on 11 August 2009 (3S/C [6]) and that the Services Agreement was terminated on 23 May 2011.  There is no suggestion of some material change in circumstances in that relatively confined period which gives rise to uncertainty.

4. There are circumstances in which use of the expression “at all material times” in a pleading can give rise to uncertainty.  The statement of claim considered in Pope v Harris Orchard[2] provides an example.  However, that cannot be said in respect of the relatively narrow timeframe encompassed by the expression “at all material times” used in the 3S/C [1.2].  Counsel for the defendants did not point to any uncertainty to which the use of the expression gave rise.  I also note that the expression “at all material times” was used in the original statement of claim (in [2], [3] and [4]) without it being suggested that it gave rise to difficulties.

   [2] [2010] SASC 354 at [26]-[38].

5. I conclude that the Master erred in disallowing the amendments proposed in the 3S/C [1]. Given this finding, it is unnecessary to address the plaintiffs’ submission regarding the Master’s use of “other material” on the Court file.

   Proposed Paragraph 10.1

6. The Master regarded the plaintiffs’ proposed amendment in the 3S/C [10.1] (set out earlier in these reasons) as unsatisfactory.

7. In relation to this proposed amendment the Master said:

   [7]The definition in 10.1 of “the TESS and WHR Documents” is also unsatisfactory.  The definition does not refer to either the TESS Unit or the WHR Unit as previously defined.  It is ambiguous whether cognitive elements of the previous definitions of the TESS Unit and the WHR Unit are impliedly incorporated into the definition of the TESS and WHR Documents by the inclusion of these terms in the names.  It is also unsatisfactory that 10.1 is the pleading of the terms of a contract.  It is not clear whether the definition merely refers to what is the term of the contract or whether it refers to actual, physical documents or possibly both.

8. With respect, I do not share the Master’s concerns.  The proposed amendment is to add only two words to a shorthand label in the pleading of an implied contractual term relating to the ownership of certain designs and documents.  When [10.1] is read in conjunction with [1.2] and [5], it is reasonably clear that the TESS and WHR Documents described in [10.1] are “all designs, drawings, and documents produced by or on behalf of Element … or otherwise coming into [its] possession” in the carrying out of the consulting and mechanical engineering services which it was to provide in connection with “the development, design, promotion, commercialisation and manufacture” of the TESS Unit and the WHR Unit which were the subject of the Services Agreement.  Contrary to the Master’s concern, the descriptions of the TESS Unit and the WHR Unit are incorporated into [10.1] by cross‑reference.  The pleading does not seem, on its face, to give rise to uncertainty.  There is no suggestion, for example, that the defendants were engaged at different times in the development of more than one TESS Unit or more than one WHR Unit which may give rise to some confusion. 

9. With respect, the position would be no different if the 3S/C had alleged an express agreement that the parties had agreed that Gnomon would be the owner of, and entitled to possession of, the documents described in [10.1].  It is not easy to see how else the plaintiffs could plead the implied term which they assert.  The addition of a minor detail to the shorthand description of the documents does not alter the substance of the plea.

10. Again, with respect to the Master, I consider it reasonably plain that [10.1] is referring to the designs, drawings and documents produced by, or on behalf of, Element under the Services Agreement or otherwise coming into the possession of Element or the second defendant in connection with the Services Agreement.

11. I note again that the greater part of [10.1] appears in the existing statement of claim to which the defendants have already pleaded.

12. In my respectful opinion, the Master erred in disallowing the amendment to [10.1].

    Proposed Paragraph 15B

13. Proposed [15B] in the 3S/C is entirely new.  I set out its substantive assertion, namely the claim that the documents in relation to the development, etc, of the TESS Unit and the WHR Unit contain Confidential Information, earlier in these reasons.

14. The remainder of [15B] contains particulars of that allegation.  In proposed [15B.1], the plaintiffs allege that the confidential information contained in the documents relating to the development, etc, of the TESS Unit and the WHR Unit was created by or came into the possession of Element pursuant to, or in connection with, the performance of the Services Agreement:  proposed [15B.2] identifies seven different subjects comprising the confidential information; proposed [15B.3] pleads that Gnomon was developing the TESS Unit and the WHR Unit with a view to commercialising intellectual property the subject of the patents; and proposed [15B.4] claims that the TESS and WHR documents contain information which was not in the public domain and which was of commercial value to Gnomon and its competitors.

15. The particulars conclude with a plea that “further particulars of the confidential information may be provided after disclosure and inspection have been completed” ([15B.6]).

16. In relation to proposed [15B] the Master said first:

    [8]The definition of “Confidential Information” in 15B is also unsatisfactory.  Information is primarily abstract knowledge and not documents.  Documents may contain, or evidence, information, but information as such exists independently of any such documents.  It is unclear whether 15B is the commercially Confidential Information at large or whether it is confined to documents.  It is also unclear whether it is limited to documents which by their creation give rise to the Confidential Information or whether it can extend to documents which are merely secondary evidence of the plaintiffs’ Confidential Information.

    [9]A further defect in 15B is that it gives no meaningful criteria for ascertaining what information of the plaintiffs is commercially confidential.  Presumably some of the documents would contain information which was in the public domain, and thus would not qualify as commercially confidential.

    [10]If paragraph 2 of the Minutes for the inspection order are to incorporate the definitions of the TESS and WHR Documents and of Confidential Information, they need to have a sufficient degree of precision so that the documents which the plaintiffs are entitled to inspect can be properly identified.  This applies both at the stage of paragraph 2 of the Minutes, and in any subsequent stage where the defendants are given an opportunity to object to a provisional list prepared by Mr du Plessis.  It seems clear that more documents have been seized than the plaintiffs will be entitled to inspect.  The difficulty will be to ensure that the plaintiffs are able to inspect the relevant documents, but the defendants’ confidentiality in the remaining documents is not negated.

    Finally, the Master was critical of the pleading in proposed [15B.6] in which the plaintiffs have said that they may provide further particulars following disclosure and inspection.  He said:

    [11]… It is not consistent with justice that the plaintiffs should be permitted to see the defendants’ documents containing commercially confidential information of the defendants for the purpose of the plaintiffs then deciding from the contents of those documents whether they are documents which are relevant to the action.

17. In my respectful opinion, the Master’s first criticism of proposed [15B] overlooks the content of the first four lines of the paragraph.  That is a plea that confidential information belonging to Gnomon is contained in documents in relation to the development, design, promotion, commercialisation and manufacture of the TESS Unit, the WHR Unit and the patents.  It may well be the case that Gnomon has confidential information extending beyond that contained in the documents, but that does not alter the fact that the subject matter of proposed [15B] is confidential information contained in documents. 

18. I also consider, with respect, that the distinction which the Master drew between documents which, when initially created, contained confidential matter, on the one hand, and documents which are “merely secondary evidence” of that confidential matter, on the other, is unnecessary.  There is no reason to suppose that the plaintiffs’ concern (and their pleading) does not extend to both.  On the contrary, the plaintiffs wish to assert and protect the matters which are confidential to them, whether that is contained in documents of a “primary” or “secondary” kind.

19. The Master’s reference to the concept of relevance in [11] of his reasons appears to indicate an understanding on his part that the plaintiffs were wishing to assert a position with respect to disclosure of documents.  That is not so.  The gravamen of [15B] is the assertion that the documents which Gnomon asserts belong to it contain confidential information which it wishes to protect.  If the documents do belong to it, it will be entitled to protect that confidentiality to the extent that it exists.

20. I agree, with respect, with the defendants and the Master that proposed [15B] does not contain “meaningful criteria” by which one can distinguish the confidential information in the documents from that which is available in the public domain.  However, this criticism of the defendants did not warrant the Master disallowing [15B].

21. In fact, there is a certain Catch-22 quality to this submission of the defendants.  The plaintiffs assert an arrangement with the defendants which, of its very nature, is likely to have given rise to confidential information contained in documents.  The defendants were to do the work giving rise to that confidential information and, putting to one side the seizure of documents under the search order, apparently have possession of it.  The plaintiffs plead that they have paid just under $200,000 to Element for its work.  The effect of the plaintiffs’ plea, as I understand it, is that they do not have access to the documents.  The defendants acknowledge this, submitting that:

    [T]he knowledge was entirely that of the defendants, not the plaintiffs.  It is not a case where the plaintiffs have imparted any knowledge, knowhow or confidential information to the defendants, but rather it is the other way around. 

22. Despite that circumstance, the defendants contend that the plaintiffs should, without knowledge of the documents or their content or access to them, specify in some meaningful way the criteria for distinguishing that which is in the public domain from that which is not, and that which is confidential to them from that which is not.  It is not easy to see how the plaintiffs could ever, whether by themselves or through some expert retained at arms length, perform that task.  The Court should be slow to impose such an unrealistic requirement on persons who allege an agreement with another pursuant to which that other person is to bring information of a confidential kind into existence.

23. In my opinion, the manner of description of the TESS Unit and the WHR Unit is not likely to cause difficulties in the context of proposed [15B].  It is sufficiently clear that the plaintiffs are claiming that the documents relating to the development, etc, of the two units, which are the subject of the Services Agreement, contain confidential information.

    General

24. I repeat my agreement with the Master that it is appropriate, when considering the sufficiency of the particularisation in the statement of claim, to have some regard to the interlocutory processes which will follow.  However, that cannot be a controlling matter.  Even if the statement of claim is, at this stage, insufficiently precise to allow the terms used in it to be replicated in an interlocutory order, that does not mean that the pleadings should not be allowed.  It may simply mean that close attention to the terms of any interlocutory order for disclosure or inspection may be necessary in due course.

25. Further, and in any event, it is appropriate to keep in mind that the very subject matter of the plaintiffs’ claim is the entitlement to the claimed documents.  This is not a case in which the emphasis is on proper pleading in order to facilitate the disclosure process.

26. I agree that the Court will require greater specificity in the description of the “TESS and WHR Documents”, and of the “Confidential Information” if it is to make orders of the kind which the plaintiffs claim in Part 2 of the 3S/C, but that is not a reason for refusing the plaintiffs permission to amend at this stage. 

27. Further, I do not agree that it is inappropriate for the plaintiffs to assert that they may provide further and better particulars once they can inspect the documents to which they do not presently have access.  It is possible that the plaintiffs’ very entitlement to the documents may have to be determined first but it is quite understandable that they cannot particularise further the claim for confidentiality until they see the documents which they claim are Gnomon’s property.

28. Finally, I consider that some of the defendants’ submissions do not accurately reflect the 3S/C.  Contrary to [12] and [19.3] of the defendants’ summary of argument, the plaintiffs are not making a claim of infringement of their patent or of misuse of their confidential documents.

    Conclusion

29. For the reasons given above, I allow the appeal.  I set aside the orders made by the Master on 28 September 2012 in relation to the plaintiffs’ application to file a third statement of claim and will hear from the parties as to the orders which are to be made in their place.