Maggbury Pty Ltd & Anor v Hafele Australia Pty Ltd

[2001] HCATrans 211

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B36 of 2001

B e t w e e n -

MAGGBURY PTY LTD and GISMA PTY LTD

Appellants

and

HAFELE AUSTRALIA PTY LTD and HAFELE GMBH & CO

Respondents

GLEESON CJ
GUMMOW J
KIRBY J
HAYNE J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON MONDAY, 25 JUNE 2001, AT 10.20 AM

Copyright in the High Court of Australia

MR S.J. LEE:   If the Court pleases, I appear for the appellants.  (instructed by O’Shea Corser & Wadley)

MR J.S. DOUGLAS, QC:   May it please the Court, I appear for the respondents with MR G.C. McGOWAN.  (instructed by Logie‑Smith Lanyon)

GLEESON CJ:   Yes, Mr Lee.

MR LEE:   Your Honours, although I do not want to burden you with additional paperwork, there are a few additional matters I wanted to hand up which would be of assistance to the Court, I hope.

GLEESON CJ:   Thank you.

MR LEE:   If the Court pleases, I intend to address in the following three general areas:  firstly, to give a brief description of the invention; secondly, to discuss validity; and, thirdly, the question of injunctive relief.  The validity I would hope to break down into five categories so far as that is possible:  first, I will go to the relevant terms of the agreement; secondly, my submission that the promises do not, in fact, operate as a restraint on trade; thirdly, if contrary to that submission they do, then they are inherently reasonable; fourthly, some comments about freedom of contract; and, fifthly, the implied term alleged against us.

KIRBY J:   Now, does that cover all of the issues that the respondent puts in its written submissions?

MR LEE:   Yes, your Honour.

KIRBY J:   In a slightly different order.  I think they put the implied term up front because if you fall off that barrier then you do not get to all the other questions.

MR LEE:   Yes, your Honour.  They seem also to have it in a slightly different way.  They seem to say, as well, that there is some kind of public policy that you can never protect information which is not confidential.  So they have put it in a number of different ways. 

KIRBY J:   But, anyway, you will cover the same ground in the same issues?

MR LEE:   Yes, your Honour.  In that package handed up there are some pages from the evidence at trial and the numbers at the bottom of the page refer to the Court of Appeal appeal book.  The first two pages are the drawer‑mounted version that the respondents manufactured before they met the appellants.  I want to take you through these because they involve some of the prior art, so to speak.  Your Honours will notice that the drawer‑mounted version, whilst the board folds in half, it does not have a carousel and it comes out of a drawer as opposed to out of a wall.

KIRBY J:   Now, this is the respondents’ production, which varies – you say insignificantly, they say substantially – from your design?

MR LEE:   Yes.  This is the board they had before they met my clients.

KIRBY J:   This is their original board?

MR LEE:   Yes, and the trial judge’s findings were that there was no relevant copying in this respect.  The next at page 1229 is a board made by one of the respondents’ American subsidiaries.  Your Honours will see it comes out of a box and it is supported by a piece of wood or metal that goes down to the bottom of the wall or bottom of the box.  Again, the board does not fold and there is no carousel.  The next page is a patent published in 1984 referred to as the Wilson patent.  Your Honours will see there ‑ ‑ ‑

KIRBY J:   Will you explain what a carousel is?  As far as I am concerned, it is a musical, so you will have to explain what it does.

MR LEE:   Basically, your Honour, it is like – televisions sometimes have these facilities so that they can be turned around in any position and that is basically what this does.  This patent shows there is a carousel that enables the board to be swivelled around within 180 degrees.  Now, it also shows that there is a support going down to the bottom of the cupboard from the board and there the leaves apparently do not fold in half.

The next page shows the carousel and the support in some more detail.  Over the page again, page 554, is a product that was on the market in Australia, and still is, before Mr Allen’s designs and this one your Honours will see again, the board does not fold in half and it comes out of a cupboard, in this case between studs in the wall.  There is no carousel.

KIRBY J:   Where do we see the studs?

MR LEE:   If you go to the next page, your Honour, there is a diagram towards the bottom of the page in the middle.  It shows two ways the cupboard can be affixed, either between the timber studs when a house is being built for instance, or on top of the studs.

KIRBY J:   I am sorry, I am bit unversed in mechanics.  Where are the studs and what is their significance?

MR LEE:   About point 7 of the page, in the middle of the page, there are diagrams which refer to timber studs.

KIRBY J:   What is a stud?  It is simply an object that is impressed into something else.  Is that correct?

MR LEE:   My understanding, when a house is built these are simply the pieces of 4 x 2 that are vertically spaced at a certain distance in the construction of the wall and this particular design, it is a cupboard or a box arrangement that fits within that space or on top of it.  The significance of this will appear shortly.  Your Honours will see as well, at page 555, there is a support for the board that goes ‑ ‑ ‑

GUMMOW J:   What is all this going to, Mr Lee, what legal issues?

MR LEE:   I wanted to make the submission, your Honour, that what the trial judge found was novel about this design was the combination of features and the suggestion has been made that this design was really just gauges of steel and the like.  But I wanted to make the point so that your Honours understood it from a factual sense before I moved on to the legal submissions. 

GUMMOW J:   Where is the patent application?  That is the best starting point, is it not?  What is the date of the patent application?  It is not reproduced, I see.

MR LEE:   It was filed, the relevant international one, in 1996.

GUMMOW J:   No.

MR LEE:   Based on an Australian patent filed in 1995.

GUMMOW J:   Where is the 1995 application?

MR LEE:   That is in the appeal book.

CALLINAN J:   July 1995, was it not?

MR LEE:   That was around the time that Mr Allen started to look for venturers to exploit his ‑ ‑ ‑

GUMMOW J:   That is what I am asking you.  Now where is it?  It is an important part of the matrix to this agreement.  You have to construe the agreement.

MR LEE:   Yes, your Honour.  It appears at page 272 and following.  This is the patent that was referred to in the agreement itself, the patent application.

GUMMOW J:   Yes.

KIRBY J:   Is this the Australian patent?

MR LEE:   Yes, your Honour.

GUMMOW J:   It is the basis of the international application, is it not?

MR LEE:   Yes, that is correct, your Honour.  The international application appears at page 280 and following.  The design is the same.  The priority date for the international application is based on the Australian application.

GUMMOW J:   Now, where do we see that?

MR LEE:   At page 280.

GUMMOW J:   Yes.  Now, where do we see the acknowledgment of the Australian basis?  It is under priority date, is it?

MR LEE:   Yes, “PN 4147 14 July 1995”.  That is the date the Australian application was filed.  Having taken your Honours to that factual background, may I move to the submissions on validity?

GUMMOW J:   What do you mean by “validity”?  Validity of what?

MR LEE:   Validity of the promises contained in clause 5 restraining the use of the information.

GUMMOW J:   What happened to these applications, these patent applications eventually?  They were refused or withdrawn?

MR LEE:   The Convention application is still proceeding.  It has not been determined yet.

GUMMOW J:   Right.  So it may be that Mr Douglas’ clients – is Germany a relevant country for that?

MR LEE:   I do not know the answer to that.  Designated states are listed at page 280.

GUMMOW J:   Anyhow, it may well be that in one or other countries Mr Douglas’ clients end up infringing your patent.

MR LEE:   That is possible.  There was evidence about whether this particular patent covers what they have done and there was evidence about whether the patent could be amended to cover that but no conclusive finding was made on that point.

GUMMOW J:   Yes.  Now, do you claim protection for confidential information so‑called that is not within any of the claims in these patent applications?

MR LEE:   I did not understand the question, sorry.

GUMMOW J:   Do you claim protection as confidential information for matter which is not claimed in this patent?

MR LEE:   There are some matters of design detail which are not in that patent which the appellants do say remains confidential but I concede that most of the information in this case is publicly available, either because of this patent or because of disclosures at the Sydney or Melbourne Trade Fairs or, indeed, the Cologne Trade Fair.

GUMMOW J:   Yes.  You refer in your written submissions to a case in the House of Lords called Mustad, do you not?

MR LEE:   Yes, your Honour.

GUMMOW J:   Why is this not a Mustad case, that is to say the contracting party, the licensor itself turns around and rather than rely on whatever contractual or confidential information provisions there are, it turns around and it seeks a patent grant from publishers for the patent grant?  That, the House of Lords said, destroyed the licence of its content.

MR LEE:   Firstly, there are some matters of design detail which were never displayed.

GUMMOW J:   But that is not what the case is really about. 

MR LEE:   There seems some ambiguity about it because the terms are never fully set out.  Lord Buckmaster’s speech was extempore but there seemed ‑ ‑ ‑

GUMMOW J:   Anyhow, I am taking you off your course but that is what is on my mind and I will be assisted at some stage if, when construing the agreement, you bear that in mind.

MR LEE:   Yes, and I will make the point quickly, your Honour, that in that case it seems the terms were limited to information which was confidential, which is not the case here.  Even apart from that, the injunctions sought were expressly framed to restrain use of confidential information.

GUMMOW J:   That is another question, you see.  Why would one ordinarily construe this agreement as including a perpetual restraint in relation to never confidential material?  It is the last way you would construe an agreement unless you had to because you would run into restraint of trade problems.

MR LEE:   With respect, the question should be:  why would you not construe it that way?

GUMMOW J:   Because you would run into restraint of trade problems.  You would have to justify it.

MR LEE:   I will endeavour to do that, your Honour.  The relevant terms start at page 312.  The recital at clause 2.1 and onwards really refers to a dual purpose of these agreements.  Clause 2.1 says:

The Inventor wishes to commercially exploit the product.

2.2  The Inventor and Hafele wish to hold discussions to consider mutually advantageous ways of commercially exploiting the Product –

That shows that particularly having regard to the obligations that follow that one of the purposes of this agreement was to lay the foundation for negotiations so that the inventor could feel relaxed about disclosing his product knowing that it would not be copied.  That is one of the purposes of this agreement.  Clause 2.5 really refers to another purpose.

GUMMOW J:   Could never be copied.

MR LEE:   Could never be copied.  Could never be used, I should say, and there is an important distinction in that which I will come to.

GLEESON CJ:   Now, this agreement was entered into 11 days after the application that we see on page 272.  Is that right?

MR LEE:   It is in that order, yes, your Honour.  Hafele Australia provided an introduction to Hafele Germany some time later and that agreement was signed November 1995 after there had been some initial discussions with Hafele Australia.  The question arose as to whether someone in Germany would need to manufacture this product.

GUMMOW J:   Now, the application the Chief Justice has just referred you to at 272, is that, going back to your agreement at 313, recital (e) “Product” – you see that definition there?

MR LEE:   Yes.

GUMMOW J:  

(2)  the product identified by patent application . . . lodged on or about 14 July –

That is page 272, is it?

MR LEE:   Yes, your Honour, and that is one of the reasons why I submit that this agreement makes it patently clear that it is to apply, even though a patent may well be published at some time in the future.

GUMMOW J:   And what are these past ‑ ‑ ‑

MR LEE:   They were earlier designs that were ultimately superseded by the Australian application and, as I say in my reply, some of those have been allowed to lapse because they have been superseded.

GUMMOW J:   Well, were they design grants or what?

MR LEE:   Design grants?

GUMMOW J:   Yes.  Were they granted under the Designs Act or were they patents?

MR LEE:   They were patent applications.

GUMMOW J:   Applications.

MR LEE:   Yes.

GUMMOW J:   And they never proceeded to grant?

MR LEE:   No.

GUMMOW J:   But they were current at the time of this agreement on 25 July?

MR LEE:   I would have to investigate that, your Honour.

GUMMOW J:   Well, that is an important part of the factual matrix, too.

MR LEE:   I would think so but I would have to investigate that.

GUMMOW J:   Well, it is a bit late for that, I guess.

MR LEE:   But the fact, your Honour, is that all of the relevant designs were included in the Australian application, which was, in fact, current.  Now, at clause 2.5 the recitals say:

Hafele has agreed to enter into this Deed to acknowledge the right title and interest of the Inventor in the Product and to scrupulously observe a strict code of confidentiality in relation to the Product.

This clause, as well as clause 9 which also acknowledges that Maggbury has, and at all times will have, the property in the information as defined, that is the words “at all times” are also significant in indicating that this contract is to apply perpetually.

GUMMOW J:   Now, what would be the priority date for the application?  That is important to know that as well, is it not?

MR LEE:   For the international application?

GUMMOW J:   For any of them, in particular for the Australian one, I guess.  That would base the foreign one.

MR LEE:   14 July 1995.

GUMMOW J:   That would be the relevant priority date?

MR LEE:   Yes.

GUMMOW J:   Is there any dispute about that?

MR LEE:   It is in the documents.  As far as I know, not.

GUMMOW J:   All right.  So any publication thereafter would not destroy any validity that this patent might have?

MR LEE:   This contract?

GUMMOW J:   No, I am talking about the patent at the moment, the patent application.

MR LEE:   I have not addressed that, your Honour.

GUMMOW J:   That is an important part of the factual matrix, too.

MR LEE:   Yes.  Can I give that some thought and respond to that later?  Clause 2.5 and clause 9 indicate that what these agreements do is to provide the terms upon which certain materials will be furnished to the respondents.  So, in effect, it is the terms of a bailment.  So, the contract does two things.  It not only lays the foundation of the terms of negotiations, but also it lays the terms of a bailment of materials and that is significant, I would ‑ ‑ ‑

GLEESON CJ:   Bailment of what?

MR LEE:   Of the materials that comprised the information.

GLEESON CJ:   Pieces of paper, you mean?

MR LEE:   Yes.  Crucially, your Honour the Chief Justice, clause 5 referred to “shall not use the Information”.  This is 5.1, 5.2, 5.3 and 5.6.

GLEESON CJ:   Now, just pausing at 5.1, a good deal of the information had been made public a few days before this.  Is that right?

MR LEE:   Not made public.  The application had been filed.  The international patent was published, the specification was published in February 1997 so the July 1995 date was only the date of the application for the patent.

GLEESON CJ:   What was the date in 1997?

MR LEE:   It was February 1997 – 6 February was the first such publication.

GLEESON CJ:   Thank you.

GUMMOW J:   But the importance of the earlier date is that any publication thereafter would not destroy the novelty of the grant.  Is that the idea?

MR LEE:   One would not think so.

GUMMOW J:   People will find out, in fact, at the later date because it has been published everywhere, but if Mr Douglas’ clients published this after 14 July, that fact would not have destroyed the novelty of the patent.

MR LEE:   No, your Honour.  The clauses that I referred to were relied on by the trial judge in granting the injunction, 5.1, 5.2, 5.3, 5.6, they restrain use of the information which is defined at page 312 of the appeal book.

KIRBY J:   Now, if one construes clause 2.5 of the agreement on 312, that promise “to scrupulously observe a strict code of confidentiality”, how would one construe that?  Is that to be construed as to observe as between themselves or is it to be construed – and this is relevant to the implied term – as the strict code of confidentiality as against the world on an assumption that there is confidentiality as against the world?

MR LEE:   No, your Honour, and it really states a result that as between the parties they must deal with this information, or treat it, by not disclosing it to anyone else.  It really goes to a result rather than suggesting that the information must retain some confidential basis in order to be protected.

KIRBY J:   So, whatever happens to the information, as against the world and forever, there is to be confidentiality as between these parties?  It seems a very large promise.

MR LEE:   The confidentiality really summarises the obligations that appear in the agreement.  It is a shorthand.  It is a large promise but ‑ ‑ ‑

GUMMOW J:   What is the consideration for it?

MR LEE:   If it is not a deed – and that was never investigated – the consideration would be the furnishing of the materials.

KIRBY J:   Does it purport to be a deed?  It is called a deed.

MR LEE:   It is unclear whether it was signed, sealed and delivered as a deed.

KIRBY J:   That formula is not used.

MR LEE:   The Property Law Act in Queensland does have provisions that are somewhat unique, but it was given under the common seal of Maggbury.  At page 323 it says:

EXECUTED by the parties on the date set out ‑ ‑ ‑

KIRBY J:   What is the requirement of law in Queensland to make a document a deed?  Where do we find that?

MR LEE:   I would have to get that for you over lunch, your Honour, but it is in the Property Law Act.  One of the divisions concerns formalities for deeds – the 1974 Act.

KIRBY J:   But assume for the moment that it is not a deed and that you need consideration, what is the answer to Justice Gummow’s question?

MR LEE:   The furnishing of the materials constitute the consideration.  It would be, I suppose, a unilateral contract in that respect, an act for the promise by the respondents to observe these terms.

KIRBY J:   You give your information and designs and they give you this promise of confidentiality forever.

MR LEE:   Yes.

KIRBY J:   There seems to be a bit of a disjunction between the information and the designs and maps and charts and so on.  Now, can you promise confidentiality in respect of information disembodied from the designs?  Can you have bailment in respect of information?  You earlier said this is a bailment, but can you have a bailment in respect of information as distinct from the object in which the information is portrayed?

MR LEE:   I do not submit that information is property.  I submit that the record of information, such as the prototypes, the documents, the drawings and so forth, they are the subject of the bailment and since Prince Albert v Strange it has been recognised that one can breach an implied term not to use information embodied in materials and that is something that will sound in damages.  I rely on that principle to say that the materials are the subject of the bailment but you can breach an implied term by using the information embodied in that.  Here, at clause 3.1(a) “information” is defined as only meaning:

each and every record of information whatsoever disclosed, shown or provided to Hafele –

and it gives examples such as “prototypes”, “diagrams”, et cetera.

My submission will be that these agreements only restrain the use of the materials.  A point made by Justice Callinan during the special leave and also by your Honour is that promises such as these do not prevent a party from later using their recollection of what they may have seen in those materials, as long as the recollection has become part of their accumulated experience necessarily obtained because of the transaction on which they were involved.

It would be quite different if a party deliberately took a copy for some collateral purpose or they took a photograph or made deliberate prototypes based thereon as we say happened here, but these promises do not restrain trade because they do not restrain the use of subjective knowledge.  In your Honour Justice Gummow’s text, a copy of which has been handed up, that same point is made and has been made in numerous authorities.  That is all this agreement does.  It does not prevent use of subjective knowledge.

The other terms I wanted to refer your Honours to start at clause 5.1.  The Court of Appeal made this point, that the word “treat” seems to connote that the information is the subject of this protection even though it may not be private and confidential but it should be treated as such.  I have already referred your Honours to clause 9.1 which retains property rights “at all times” and clause 11.1 significantly says that:

Hafele will forever observe the obligations of confidence set out in this Agreement, unless released from such obligations in writing by the Inventor.

This is in an agreement which expressly refers to a patent application having been made.

GUMMOW J:   Sorry, which paragraph was that?

MR LEE:   Paragraph 11.1.

KIRBY J:   Where does it say “forever”?

MR LEE:   The second line of 11.1.

KIRBY J:   I see, yes.

MR LEE:   Clause 16.3 at page 318, that is the usual waiver clause.  Apart from drawing your attention to that, I will not stay on that, but clause 16.13 at page 320 – it appears as 6.13 but it should be 16.13 – that is a clause that is a “Whole Agreement” clause and it expressly says that there shall be no “implied” terms or “collateral” terms, no “representation” or “warranty” and in (c):

the existence of any implied or collateral or other agreement is expressly negatived.

Those clauses, I submit, are inconsistent with the implication that is sought to be drawn and, moreover, as I will submit later, an agreement can provide commercial protection for a party even if it protects information which is not confidential.  So, my submission is:  why would it be necessarily reasonable to imply the term that is suggested?  Why would that be something that Maggbury would have said, “Yes, of course”?

GLEESON CJ:   I may be taking you back to a point you made a moment ago, Mr Lee, but I am looking at the definition of “information” in 3.1(a).  Information is defined to mean “record of information” as distinct from the content of those records.

MR LEE:   Yes, but in accordance with Prince Albert v Strange you can breach an obligation not to use materials by using the information which is embodied in them, but my submission is that the obligation not to use these materials does not prevent the use of subjective knowledge.

GLEESON CJ:   I understand that, but is it the case that information, perhaps somewhat unusually, in this document means documents?

MR LEE:   Yes.

GUMMOW J:   Because later on it talks about returning the information, does it not, in 11?

MR LEE:   Yes, that is one of the terms that I rely on to say that this sets out the terms of a bailment, as it were, of materials.

GUMMOW J:   Clause 11.1(c):

after the Information is returned ‑ ‑ ‑

MR LEE:   Yes, and clause 7 requires the information to be kept safely and to be returned and 8 says that it must be returned as well.

HAYNE J:   Clause 10 is the principal provision about return, is it not?

MR LEE:   Yes, your Honour.  Whilst we are on the agreement, clause ‑ ‑ ‑

GUMMOW J:   Wait a minute.  You cannot just slide away from that.  Clause 10.1(b):

ceasing to use the Information for the Purpose –

and the purpose ‑ ‑ ‑

MR LEE:   Defined at clause 2.2.

GUMMOW J:   Yes, that is right.

MR LEE:   This is really like, I would submit, implied terms of good faith and fidelity where an employee takes away a copy of a list of agents or a list of customers.  It would have been quite legitimate for the employee to go away and if that person happened to remember that there was an agent in this place or that place they could then call up Telecom and find out that person’s number and then go and use them.

GUMMOW J:   But the postulate of all of this is that this information is of commercial utility because it is patentable so that Mr Douglas’ people will be able to, if they get a licence, exclude others and that is what they would be paying for.

MR LEE:   That is a postulate that does not appear in the document, your Honour.  The reason for entering into the negotiations is to determine whether the parties can reach some mutually beneficial arrangement.  Whether it is patented or not may have no bearing on that.

GUMMOW J:   But the die had been cast the week before.  It was going to be published.

MR LEE:   Quite.

GUMMOW J:   As the patent system rolled on.

MR LEE:   There is nothing in this agreement that says that it would not apply ‑ ‑ ‑

GUMMOW J:   And we know it was published in 1997.

MR LEE:   But there is nothing that says it would not apply if the patent was never granted.

GUMMOW J:   Then you would be paying for nothing.

MR LEE:   In Aronson v Quick Point ‑ ‑ ‑

GUMMOW J:   You would be paying for something that had been published which anybody could use – could find out about and use – and you would be the only person who had to pay for it merely because you are foolish enough to enter into an agreement to explore the matter at this earlier stage.

MR LEE:   If that is the correct characterisation, your Honour, then, with respect, the law of contract does not allow foolish people to escape from their bargains, but ‑ ‑ ‑

KIRBY J:   You say, as I understand it, this is what they agreed to and the practicality is it gave them the inside running when others may not have noticed the patent application or may not have been informed or concentrating on it or involved in it.  It gave them the inside running with this extremely valuable and useful new design, and that is your case?

MR LEE:   Yes, your Honour.

GUMMOW J:   It is yet to be demonstrated as extremely valuable and useful, is it not?

KIRBY J:   I think that is what you were doing at the beginning.

MR LEE:   Yes, your Honour ‑ ‑ ‑

GUMMOW J:   It is not extremely valuable and useful if it can be used by anybody without paying anything for it, and the inside running is of utility only to such time as the game is up.

MR LEE:   The courts are traditionally reluctant to enter into commercial decision‑making and this is, I would submit, an ideal example of that.  I was trying at the beginning to demonstrate how, whilst a lot of the individual features of this invention may have been common engineering techniques or seen in the art, they had never been seen before in this combination.  Like in Aronson v Quick Point Pencil which is a case exactly in point, that was an ingenious key holder which was subject to a patent application.  A manufacturer agreed for so long as it would manufacture that key holder it would pay a royalty.  The patent application did not succeed yet the US Supreme Court held that the manufacturer so long as it used that device had to pay the royalty, even though it was in the public domain through millions of sales.

It was an ingenious device in its combination, even though the individual components were not perhaps unique.  This is why this was unique:  it enabled the respondents to pre‑empt the market and that is what the US Supreme Court found determinative in that case as well.

GLEESON CJ:   Mr Lee, the concept of the information as being documents is emphasised by clause 7.1, I should have thought.

MR LEE:   It is, quite, your Honour.

CALLINAN J:   But yet, Mr Lee, interestingly, the product is defined to include in (e) on page 314 all technical information, which might in a sense be against you or it might assist you.

MR LEE:   I would say not.

CALLINAN J:   It is the only reference, I think, to information as opposed to documents which might contain information, is it not?

MR LEE:   Your Honour, the relevant definition of “information” says:

record of information . . . in relation to the Product –

All the definition of “product” does is to narrow the scope of what these documents relevantly are for the purpose of the promises.

CALLINAN J:   Getting back to that other point about what the purchaser acquired, I suppose the purchaser – there was evidence about the extent of the purchaser’s activities, was not there?  It is an international corporation, is that right?

MR LEE:   I do not understand the question.

CALLINAN J:   Was there evidence at the trial about the nature and extent of the respondents’ activities worldwide?

MR LEE:   In my reply I have dealt with that.

CALLINAN J:   But was there?  That is what I am asking you.

MR LEE:    There was.

CALLINAN J:   It was a major corporation.

MR LEE:   With subsidiaries worldwide.

CALLINAN J:   Which no doubt weighed up the value of entering into an agreement and the value, as it were, of the pre‑emption, is that right?

MR LEE:   No doubt, your Honour, yes.  They had made their own drawer‑mounted board.  They had engineers specifically ‑ ‑ ‑

CALLINAN J:   They must have thought that this had real potential to enter into an agreement of this kind.

MR LEE:   They had not seen it, of course, but my submission is, given their knowledge of the prior art, they – in fact, one of the American subsidiaries made a box wall‑mounted version which I showed your Honours earlier.  They must have appreciated the extent to which this device would or would not be fantastically novel.  They must have had some conception.  It is not really sufficient to say they signed the agreements blind.

CALLINAN J:   That is not really what I am asking you.  I am just asking you whether they were sufficiently informed in this area to make their own judgments about whether they should enter into an arrangement of this kind.

MR LEE:   The evidence, I would submit, is that they were.

CALLINAN J:   Yes.

GLEESON CJ:   Mr Lee, bearing in mind that the information is documents, may we take it that the primary or most important piece of information to which this agreement was directed was the document appearing at pages 272 and following?

MR LEE:   I would submit that that could be the subject of this agreement.  However, when one looks at the promises in question at clause 5, they only restrain use of the information and it does not restrain use of any information sourced elsewhere.

GLEESON CJ:   May I inquire do we know what were the documents, the use of which by Mr Douglas’ client founded the injunction that was granted at first instance?  Could it have been the document at pages 272 and following?

MR LEE:   No, because the injunction sets out what they are, but I did not finish my response.  The respondents knew otherwise than pursuant to this agreement that there was a patent.  For instance, the agreement itself refers to the fact that a patent was filed.

GUMMOW J:   A provisional application.  We do not have the full text of the provisional, by the way.  We are missing 13 pages of it, are we not?

MR LEE:   That is how it appeared in the original affidavit.  It is identical ‑ ‑ ‑

GUMMOW J:   Are you telling me that at the trial of this matter no one introduced the first 13 pages of the provisional specification of 14 July?

MR LEE:   Because they appear in the international specification in identical terms.

GUMMOW J:   I see.

GLEESON CJ:   Now, Mr Lee, was the document at 272 and following information within the meaning of the agreement?

MR LEE:   Yes, but that is not the whole answer.

GLEESON CJ:   I understand but I want to ask you a question about it if it is.  It was, was it?

MR LEE:   Yes.

GLEESON CJ:   All right.  Well, then, I want to test the meaning of the agreement by reference to that document.  What does it mean to promise without limit in point of time to treat that document as private and confidential?

MR LEE:   That would mean that that as a record of information could not be copied and reverse engineered, but that is not an obstacle, I would submit, in this case because the respondents knew for other reasons that this patent existed.  They could use that knowledge to go and get the patent and then copy it.

GUMMOW J:   No, they could not as at 1995 because it had not been published.

MR LEE:   But they knew that an application had been filed and when it came out they could have done searches and got it.

GUMMOW J:   That would be two years in the future.

MR LEE:   It might have been, but that is the agreement ‑ ‑ ‑

GUMMOW J:   It would not be immediate because that is not the way the patent system operates.

MR LEE:   That is the agreement they signed.

GUMMOW J:   They had an advantage in getting the text in advance, did they not, for the drawings.

MR LEE:   That is correct and, moreover, they also knew from oral discussions between the parties that an application had been filed, so this agreement does not cut into the area that your Honour the Chief Justice had asked about because their source of knowledge was other than pursuant to this agreement, pursuant to a patent provided.

GUMMOW J:   Well, why was it?

MR LEE:   I beg your pardon?

GUMMOW J:   Why do you answer the Chief Justice in that way?  You just agreed with me that it was not publicly available in 1995.

MR LEE:   Once it became available ‑ ‑ ‑

GUMMOW J:   In 1997.

MR LEE:   Yes.

GUMMOW J:   But we are construing an agreement in July 1995.

MR LEE:   Quite.  As at ‑ ‑ ‑

GUMMOW J:   We were construing the word “product” which actually refers to this application as having been lodged on 14 July.

MR LEE:   As at July 1995 the respondents knew through a variety of sources that an application was filed and they knew that they could go and get a copy of that without breaching this agreement.

GUMMOW J:   But what I am putting to you is that this word “product” has to be read as incorporating, if you like, this document at 272 and thereby giving further content to this expression “information”.

MR LEE:   Yes.  It certainly is within information but the question, I would submit, that should be asked is whether it is within the meaning of the words “use the information”.  I would submit it would not here because the respondents would be using things other than the information.  They would be using their knowledge gained orally from Mr Allen or from the clause that your Honour Justice Gummow just referred to in the agreement.

Your Honours, that is the crucial point here:  at what time is validity to be assessed.  The respondents’ argument is that you look at everything that has happened now and because they find themselves in a very difficult position, they say therefore the contract must be unreasonable and therefore the injunction should not go but, if one asks the question as at July 1995 or as at November 1995, the respondents did not at that time have to make their own prototypes of the agreement which they did without Mr Allen’s prior knowledge, they did not have to display their own prototype at a trade fair.

All they had to do was assess whether these drawings, these prototypes, were such that they could exploit it for their benefit and now that they have done that and now that they have breached the agreement by putting on to the market a facsimile, of course it will be difficult for them to use the same engineers to design another model because those engineers would probably necessarily be using information that was copied from Maggbury’s materials.  But, if they used a new design team, even if those persons had seen the Maggbury materials or seen the Hafele version, those persons could use such of that as they happened to remember in designing a new Hafele version.

KIRBY J:   Now, there was some evidence that they were advised in Germany by their patent attorneys that if they did a certain variation that they would not be in breach of their confidentiality agreement or of copying the appellants’ design.

MR LEE:   Yes.

KIRBY J:   Now, that rather suggests that they were acting in a way which, putting it very generally, was improper and in breach of certainly the spirit of their agreement with your client.  What was that evidence and where do we find it?

MR LEE:   At page 404.

KIRBY J:   You present yourself as a small Australian designer and company which had a bright idea and designed a very useful product of international value, made your application, entered into these dealings with the respondents, that they went along with it, they are well advised, they are a big corporation, they are global, they signed the agreement and then when they got your information they breached the agreement and went ahead and produced their own product with minor variations which they were advised in Germany that if they did they would not be in breach of their obligations.  That is how you present your case, is that right?

MR LEE:   Yes.  They confronted, it seems, the very question whether what they were doing would breach these agreements.  That appears at page 406 in a handwritten note which is translated at page 407 where it says, referring to this patent advice, that what they have now done would circumvent the patent:

Then we would not need a license from Maggbury.  However, the question arises whether he should be given something for providing the idea.

If your Honours turn to page 404, this is the change that they made after the Cologne Trade Fair but before they put their version on to the market some three months later.  You will see in this drawing there is a pivot and lug mechanism.  The pivot points are the things that have a cross through them.  The lug appears on the wall part of the bracket.

KIRBY J:   Now, you know what a lug is but I do not.

MR LEE:   I do not know that I can explain it terribly well but you have a pivot point and a beam and a lug is a piece of metal that protrudes so the beam cannot go any higher.  This enables the design to be supported from a wall only without any of the other beams that I referred your Honours to earlier in the prior art.

KIRBY J:   But does it have the swivel and the carousel concept?

MR LEE:   Yes.

GUMMOW J:   Now, would it infringe or not infringe any claim in the application?

MR LEE:   The evidence was unclear about that at the trial but the ‑ ‑ ‑

GUMMOW J:   So there is a debate about it?

MR LEE:   The respondents took the view that it would not and we led evidence, which was objected to, that the application could be amended to cover what they have done.

GUMMOW J:   Right.  Now, I see in Mr Douglas’ submissions that he says the Convention application has been lapsed, is that right?

MR LEE:   As I say in my reply, that is incorrect.  That is only the anterior applications which have been superseded.  The Australian application and the international application have not lapsed.

GUMMOW J:   I am not sure I understand what that means.

MR LEE:   The designs arose over a period of time since the mid to late 1980s.  A number of applications, including, I think, a petty patent application, were made.  As the designs improved they finally got to a point in July 1995 where they were encompassed in this Australian application.

GUMMOW J:   I understand that.  Now, what I want to know is what happened to the Australian provisional application?

MR LEE:   That is still not determined.

GUMMOW J:   It has not lapsed?

MR LEE:   No.

GUMMOW J:   I see.  When the agreement refers in that recital on page 313 - there are four items referred to there.  Have they lapsed?  Is that what is being talked about?

MR LEE:   Yes, I think that is so, your Honour.

GUMMOW J:   Can I be sure.  I cannot write a judgment saying, “Oh, counsel were not sure but it may be”.  I cannot determine people’s rights on that basis.  Anyhow, let me know later, otherwise I cannot make sense of what is going on and I have to make sense of what is going on.

MR LEE:   It is simply an erroneous assertion.  All that your Honour needs to make sense of, I would submit, is ‑ ‑ ‑

GUMMOW J:   That is for me to decide.

MR LEE:   Yes, it is, but the evidence was that the Australian application has superseded these earlier designs.

GUMMOW J:   The word “supersession” means nothing to me in terms of patent law - nothing.

MR LEE:   This agreement at page 313 ‑ ‑ ‑

GUMMOW J:   All I want to know is whether the Australian provisional application, which is set out and which is the basis of the international application, is still pending?

MR LEE:   It is.

GUMMOW J:   So, it may be that Mr Douglas’ client could put on an opposition at some stage, could it not, and assert, as its experts were telling us, that there is nothing in this invention?

MR LEE:   Yes, and that might provide a defence to the patent claim but not a defence to this action for breach of contract.

GUMMOW J:   That is an interesting aspect of the case we are dealing with.

MR LEE:   Yes.

GUMMOW J:   What will be the public interest in that, having that result?

MR LEE:   As Aronson v Quick Point Pencil points out, there are a number of public interests, including encouraging inventors to divulge information.

GUMMOW J:   But by definition we have said the opposition to the patent grant succeeds, so there is no invention and no public interest in protecting any invention because there is not one on this hypothesis.  Now, what then is the public interest in giving this particular monopoly vis-à-vis one party forever.  Forever.  Not just for the term of patent either.  Forever.

MR LEE:   The law does not say that patents are the only things that may be protected in one way or the other.  Indeed, Justice Williams in ‑ ‑ ‑

GUMMOW J:   But the patent system is a restraint of trade surely?  That is what the statute on monopolies was all about; it struck down monopolies but said you can have these ones, so it locks into the doctrine of restraint of trade.

MR LEE:   I cannot deny that but it is also a principle that ‑ ‑ ‑

GUMMOW J:   Which doctrine of restraint of trade strikes into contract law.  Would you agree with that?

MR LEE:   As far as it goes it does.  But that is the very question, does this restraint ‑ ‑ ‑

GUMMOW J:   Unless we have all that picture in our minds, it seems to me, we just get lost in a lot of minutiae.

MR LEE:   If I do not us the phrase “invention”, information can be commercially valuable, even though it is not patentable.  That is the point I was making from Aronson.

GUMMOW J:   Provided it is secret.

MR LEE:   Not at all.  In many of the cases I have cited there can be commercial value in protecting information which is not secret because a party in its own commercial judgment decides that it can exploit an invention.

GUMMOW J:   You are using the word “invention” again, you see.

HAYNE J:   Can I see if the construction of the agreement for which you contend amounts at its root to this?  Maggbury’s say, “I will give you some documents on terms that (a) you keep them safe and secret, (b) you return them when I ask, and (c) you may never use what they record, whether that is patentable or not, except when I agree”.  Is that the nub of your ‑ ‑ ‑

MR LEE:   Yes.

HAYNE J:   That last term seems a very large term.  It seems to engage directly restraint of trade in a way that presents rather large hurdles for you, does it not?

MR LEE:   It does allow some scope for the clause to have more limited effect.

KIRBY J:   Was it argued that it was within the contemplation of the parties that when subsequently a grant of the patent was made Maggbury would then be licensed and that therefore, though it says “forever” that it was not contemplating in fact forever?  Is that an argument that is available to you or not?  Forever is a bit of a problem, it seems to me because it is a very long time.

MR LEE:   I suppose, your Honour, that once a licence agreement was entered into, that would discharge this agreement.  There would be new obligations put in place that might be inconsistent with this agreement.

KIRBY J:   That is what I would have inferred was the practicality, that this was in a sense a holding pattern.  You were going to go ahead with your Australian and international application.  If you got your patent, you were then licensed, but meantime, not to hold things up, you gave this inside running to the respondents.

MR LEE:   Yes.

KIRBY J:   And they agreed, for their part, in very large terms, but that was in a milieu, which was known to both parties, of the patent application.  Now, is that something that was considered by the primary judge or not, because the word “forever” does seem to create a problem for you.  A patent does not give it forever.  Forever is, on the face of things, a serious infringement of parties’ rights to trade, but is it to be read in the context of these dealings between the parties of which both of them knew and which you were proceeding to exercise for your part, rather languidly as has turned out in view of developments.

MR LEE:   I do not know that his Honour addressed that particular issue, but my clients could have kept their materials in a cupboard and shown no one.  If they showed anyone they were entitled, I would submit, to do so on the basis that those persons only use it for a limited purpose.

GUMMOW J:   They could not have kept it in the cupboard after 1997 once this application was published, could they?

MR LEE:   But the application did not publish these materials; it published information.  Maggbury had property in these materials.  It is like the law of conversion.  That does not restrain trade.  This is a very point at which this case differs from ‑ ‑ ‑

GUMMOW J:   They had property in some pieces of paper on which where were drawings.

MR LEE:   Yes.

GUMMOW J:   They may have had copyright in them too but, nevertheless, once the publication took place, which was the route your client chose to go - your client chose to go into the patent stream and, inevitably, there would be publication.  Now, true enough, the German people got something of a springboard because they got the information before the general public would and they could tool up and work out whether it would be worthwhile getting a licence and start thinking about their plans and so on and so forth well in advance – two years, as it turns out.  But is not that the area of consideration that we are talking about?

MR LEE:   It would not any the less be conversion if this patent were published, and conversion may give a lesser measure of damages, but why cannot you get a greater measure of damages by contract as Prince Albert v Strange says you can?

GUMMOW J:   Because there is not an uninhibited freedom of contract, given the restraint of trade doctrine.

MR LEE:   This does not restrain trade.  The reasonableness of the contract is therefore irrelevant, I would submit.

GUMMOW J:   Was your position that the restraint of trade doctrine had no application at all to this agreement?

MR LEE:   Just as it has no application in cases of breach of implied terms of good faith.  It simply does not apply.  If an employee takes that list of agents and goes and uses it, the courts will enjoin perpetually the use of that list and may even, say, destroy it, but that does not mean the restraint of trade applies.

GUMMOW J:   Yes, I am just asking you.  That was your submission, was it, no application?

MR LEE:   Yes.

GUMMOW J:   So, you did not have to justify it as reasonable in the interests of the parties and the public?

MR LEE:   That is right.

GUMMOW J:   I see.  You were relying on Lord Pearce in Esso, were you?

MR LEE:   This does not even get to that territory because this is a case where the terms, on their face, do not restrain trade.  The respondents can go out an make this very product if we assess it at the date of the agreements.  They could even have used the same design engineers who looked at these materials.  If they happened to remember certain things about them they could go and make the very same product.  It is no answer to say that because they have copied it they cannot use the same design engineers.  That is a result of their breach.

KIRBY J:   Mr Lee, you have been answering questions from the Court but at some stage it would help me if you can get your case back to the structure that you announced at the beginning, because otherwise I am likely to lose my way in all of these points.  There are a number of points in this appeal and, unless you keep to your structure, or some structure, it is going to be a little bit confusing.

MR LEE:   Thank you, your Honour.  The submission about these promises not restraining trade I have largely articulated but I would like to take your Honours to Ormonoid Roofing and Asphalts v Bitumenoids Limited.

KIRBY J:   But what is the proposition?  I mean, first of all, Justice Gummow took you to the historical background and covered a few centuries in a couple of words, but what is the proposition that you are advancing?

MR LEE:   A party can divulge objective materials to another on terms that those materials not be used for any purpose other than a limited purpose.  If on the proper construction of that agreement it applies even though the information may be publicly available, then the courts will enforce that promise.

KIRBY J:   Now, that, as it were, is posited on the right of parties to agree between them as to what they will do but my understanding of the doctrine which limits restraint of trade is that it is something above the parties; it is something that the law lays down for the public interest.  If that is so, why should parties be able as between themselves to exempt the policy of the law which is for the protection of the entire public?

MR LEE:   The policy that the doctrine of restraint of trade protects is that a man or woman shall not be ‑ ‑ ‑

GUMMOW J:   Or corporation, more likely.

MR LEE:   Or corporation – shall not be denied the capacity to work and to provide the community with the benefit of that work.  These promises do not do that because the respondents can still use their own accumulated experience, even that gained from looking at these materials.  They can still make them even with these promises.

HAYNE J:   I do not understand what you are then saying.  Are you saying that what is recorded in the pieces of paper that were handed over could be used by the respondents?

MR LEE:   I am saying that their recollection that they take away in their head of what might be in these documents they can use because they are using their experience, they are not using the documents.  What they cannot do is for some collateral purpose take a photograph, make a prototype which in fact copies what is in these things because ‑ ‑ ‑

KIRBY J:   That seems a strange theory.  There are some people I know - Justice McHugh is one of them – who have photographic memories and that would mean that if you just happened to have a photographic memory you can just look at it, memorise it completely and then walk away and use it, whereas if you take a physical photograph you cannot.  It does not seem a very rational distinction.

MR LEE:   The distinction between night and day is sometimes not easy to gather either but, as Justice Gummow says in his textbook, a deliberate memorisation would infringe the promise as well.

GUMMOW J:   Now, you wanted to take us to Ormonoid for that proposition, do you not?

MR LEE:   That proposition that I have been articulating, yes.

GUMMOW J:   Yes.

MR LEE:   It is at tab 8.

GUMMOW J:   It is a slippery idea though.

MR LEE:   That is what the law provides.  It is a difficult distinction to identify at the very margins but the distinction is there.  At page 354, point 2, starting from “The case of Herbert Morris Ltd v Saxelby” over to 356, point 1 – given the length of it I think I will not try to read it out.

KIRBY J:   Where is the essence of it?

MR LEE:   At the second half of 355, point 6, his Lordship said:

“If he can carry the materials away in his head no one can prevent his doing that and making use of it.”  A similar distinction was drawn in the case of Louis v Smellie (73 LT 226). In the court below Mr Justice Keckwich said that the statement of the law in Lamb v Evans ([1893] 1 Ch 219) avoided any distinction between the use by copying or the like or by an effort of memory.

That is the point about deliberate memorisation.

The Court of Appeal –

in Louis v Smellie –

however held that the plaintiff was entitled to an injunction to restrain the defendant from making use of any copies or extracts from the plaintiff’s register which had been obtained by the defendant while in the plaintiff’s employ and added:  “That I think is as far as we can go.  If the defendant happens to remember that there is an agent whose address he can find out from the ordinary directories he is at liberty to do it.”

That is the nub of that passage.

GUMMOW J:   But that is really talking about the relationship over a period of time and experience coming out of a whole pattern of conduct.

MR LEE:   But this is clearer because it has been articulated by the parties expressly in a contract, so one does not need to infer from a pattern of conduct.

GUMMOW J:   No, but the idea of experience is something that is derived over time of the whole pattern of dealing.  You learn to become a better tradesman of a particular type and so on and so forth.  That is one side of the distinction and the other is particular items of information.  In this case you only have the first, not the second.  This was not a case of a longstanding commercial relationship between the licensor and the licensee where design, drawings and suggestions had been passing backwards and forwards over a period of years, which does happen in some cases, and the licence is then terminated and the question is, what could the licensee do by making use of its general accretion to its skill as distinct from using a particular drawing, or in Ormonoid a master and servant case.

MR LEE:   It may be difficult to draw the line as between what you can and cannot do, but the courts have said that what you cannot do is to deliberately copy those materials, and that is what has happened here.  The courts have never said that that doctrine is subject to a restraint of trade.  In fact, some of the cases cited by your Honour in the text, a copy of which I have handed up, make that point that restraint of trade only begins where the implied term of “good faith and fidelity” ends and where the doctrine of breach of confidence in equity ends.  The restraint of trade doctrine only cuts in there.  That is because it is a promise that relates to dealing with a person’s property.  To apply the restraint of trade to that would be to set aside the law of conversion.

CALLINAN J:   Mr Lee, do you accept that if the restraint of trade doctrine does apply to this agreement, if it does, that you cannot get any assistance out of 6.10 on page 319?  I think it is really 16.10.  Perhaps you might in New South Wales.

MR LEE:   It is not possible to read down the word use the information.

CALLINAN J:   There is no severance of any of the relevant clauses that would enable this to be given any effect, is that right?

MR LEE:   It is not possible to sever that within a clause, no.

GUMMOW J:   It does not explain what the parties mean by “severance” of course.  They talk about the blue pencil rule and nothing more.

MR LEE:   There are a number of clauses in the agreement.  If any one of them separately is held to be invalid ‑ ‑ ‑

GUMMOW J:   I know, but my first question is:  are they just talking about the blue pencil rule?  Is that all they mean by “severance”?  I doubt it, but you may be right.  In other words, are they saying you have to be able to strike out words and make sense of what is left in order for this clause to work and it has no operation outside that sort of activity in striking out the actual words.  You cannot give a distributive meaning to an expression.  Is that what they are talking about?  The first question is to construe the severance clause itself.  Do you see what I mean?

MR LEE:   Yes.

GUMMOW J:   “Severance” itself is not a word with only one idea in it in the law.

MR LEE:   It is a fairly large clause.  It may well have broader connotations of the kind that your Honour referred to.

CALLINAN J:   At any rate, you do not submit that the Court could substitute for “an indefinite period”, for which the agreement makes provision, some shorter period as a result of that clause?

MR LEE:   No.  Your Honours, Wright v Gasweld is relied upon by my learned friends.  I would like to take your Honours to that to show how that case is different.

KIRBY J:   Is that in the compilation?

MR LEE:   It is 33 in my learned friend’s bundle.  I take your Honours to the Court of Appeal decision.

KIRBY J:   On what proposition is this being cited?

MR LEE:   My proposition is that in this case the clause is “restrain the use of subjective knowledge” and therefore it was quite understandable that the court might have taken the view that these clauses operated in restraint of trade.  It was common ground in the action anyway that they were in restraint of trade, no doubt partly influenced by the fact that there is legislation in New South Wales enabling clauses to be read down.

GUMMOW J:   Is it true to say that the majority in Wright v Gasweld did not follow Faccenda Chicken?  Is the headnote right?

MR LEE:   I think that is right.  They disagreed with comments of the Court of Appeal in Faccenda.  As to those remarks, I would submit that they are all comments made in the context of an assumption that the restraint of trade doctrine applies to a particular promise.  If it does not apply, confidentiality does not enter into the equation unless it does on construction grounds.  If I could take your Honours to page 322, the first clause appears in 6(a):

The employee shall not during the continuance of this agreement or after its determination (however caused) disclose, use or attempt to disclose or use in any manner any information obtained during the course of employment as to the identities and whereabouts of any supplier utilised by the company . . . or as to the identities of any customer of the firm.

That is the first clause that was in issue.  The second clause in 6(b):

The employee shall not . . . after its determination (however caused) disclose, use or attempt to disclose or use in any manner, except as far as is necessary or proper in the ordinary course of this employment with the company any information including confidential, secret or technical information know-how or trade secrets of or relating to the firm.

Then there is an exclusion allowing the employee to exercise his skill.

If I could address 6(a) first, in that case the very employment in question involved importing goods from Taiwan.  There were some 3,000 Taiwan suppliers, some reputable and some not.  It took considerable trial and error involving at least substantial risks of loss to acquire information as to which of those suppliers was reliable.  It took several expensive trips that the defendant went on to ascertain that information.  In those circumstances a covenant which prevents the employee from using any information relating to that is a covenant that prevents that employee using information about what he or she saw, heard, read and the mental processes that went through that person’s mind in relation to that topic.  It is a topic that is of vital importance in carrying on a business because you could fail if you import goods from a supplier who does not come up with the goods, so to speak.

KIRBY J:   I know it is not determinative, but what we were told was the evidence of the German personnel, to the effect that they did not conceive of the possibility that the agreement would bind once it gets into the public domain. 

MR LEE:   That is very interesting, because that was the very German fellow who proffered the agreement which was rejected. 

GUMMOW J:   “Witness”, you mean. 

MR LEE:   Witness.  He is the very man and his name appears on page 330 of the appeal book.  Also, he is the very witness who also said that Hafele did not use any of Maggbury’s materials, yet the trial judge found that that did happen.  To my learned friends, I am referring to his evidence in an affidavit, but the extent to which that was accepted may well be another thing.  It is very easy for someone to say having a finding of fact made against you – let me rephrase that.  After regretting entering into a contract, it is very easy to say that you did not think it would apply to this or that situation. 

GUMMOW J:   Was he cross-examined on this?  Was there any cross‑examination on what appears at line 50 of page 306 of the Court of Appeal appeal book, on this page that has been handed up?

MR LEE:   I cannot distinctly remember.  I cannot say that there was. 

GUMMOW J:   At least, if it is unearthed, perhaps we should be supplied with it, so we have a less incomplete record. 

MR LEE:   But that of itself is not determinative, I would submit, respectfully, because ‑ ‑ ‑

GUMMOW J:   That is right. 

MR LEE:   ‑ ‑ ‑ a trial judge, when he hears a statement, can make a ruling often in non-verbal ways, such as the raising of the eyebrows.

GUMMOW J:   We are not going to get into the SID factor at 4 o’clock. 

KIRBY J:   We are glad to hear that. 

MR LEE:   My learned friend refers to a public policy, yet it cannot be all that strong a policy if there is an exception to it in the case of hard consideration, whatever that means.  It cannot be all that strong a public policy if there is a springboard exception.  It cannot be all that strong a public policy if there is a fiduciary relationship exception.  In fact, Cranleigh v Bryant itself comes very close to showing why there is no such public policy.  There, it was a Phipps v Boardman‑style case where the employee knew that there was a patent somewhere else out there in the ether.  That was held, I suppose, confidential, because there was more to the information other than the fact that there was a patent, but it was very nearly information which was totally devoid of confidentiality. 

If you can have a fiduciary relationship not to be disloyal pertaining to information which is not confidential, why cannot you have a contract?  There is analytically no difference between a fiduciary duty and the implied term of good faith.  In terms of the argument about a stay, I would simply refer to the decision of – I think it is called the American Dairy Queen Case.  I do not have it with me, but your Honour Justice Callinan appeared in that, leading Mr Keane.  That was a case in the 1980s where the trial judge had granted an injunction and it was set aside on appeal and the High Court restored it.  The question for this Court ‑ ‑ ‑

KIRBY J:   What was that little Queensland vignette in aid of? 

MR LEE:   Yes.  The question for this Court based on Dignan’s Case is simply whether the Court of Appeal was right at the time it made its decision.  I have already made submissions about Deta Nominees.  What my friend says differs, but your Honours can make up your own mind.  The promises appear at page 179 of that report.  In terms of the comments made about the injunction, my learned friend asserts that you need to show damage or substantial damage in order to get an injunction.  I have dealt with that in my outline. 

The question about utility is not so much utility from the respondent’s point of view, but whether an injunction is useful to the promisee.  Here, I have already tried to outline why that is so.  The mere fact that information is in the public domain does not mean that it is not commercially valuable and cannot be the subject of a commercial benefit in its exploitation.  One only has to look at cases such as Lamb v Evans to see why that is so and also cases like Louis v Smellie where the same information can be got elsewhere quite easily and legitimately by the defendants, yet the injunction went.

KIRBY J:   If one has a choice here, if the law is, in the end of analysis, ambiguous, given the phenomena of technology nowadays – that is to say, the Internet, the photocopying, the capacity to replicate and reproduce information – would one not uphold the principle of Lord Buckmaster, which we are told Lord Goff also embraced, and say once it gets out there in the public domain, it is futile for courts to try to stop it, because it is on the Internet and it is going all around the world and people know about it and courts do not like to look stupid?

MR LEE:   As in Exchange Telegraph v Central News, it may well be out there ‑ ‑ ‑

KIRBY J:   A lot of these cases all happened in earlier times before photocopies.  Photocopiers and the Internet contributed – and telecommunications, generally – to the fall of the Soviet Union.  Things have changed. 

MR LEE:   It is a matter of degree, but the same point applies, that it might be out there and known to a number of people in the trade, but how many people know how to go and do a patent search?  Indeed, it may well cost a fair amount of money but ‑ ‑ ‑

KIRBY J:   Yes, but those who matter know.

MR LEE:   Those in the trade know, but a lot of people do not know, and those are the lot of people who are willing to spend money to buy the finished product. 

KIRBY J:   Yes, but you want to win this case, but this Court has to look at the issue as a matter of principle. 

MR LEE:   I am just referring to a statement referred to in my outline from Exchange Telegraph v Central News, that ‑ ‑ ‑

CALLINAN J:   You say because piracy might be easier is not any reason to encourage it? 

MR LEE:   True. 

KIRBY J:   But injunctions are very serious orders and once you grant them you have to have a good reason and they often end up with people in gaol.  So you have to be careful before you do it and you do not want to do it if you are going to look stupid doing it.  It is just going to be futile. 

MR LEE:   No.  The respondents expressly promised not to do something and they agreed an injunction would be appropriate if there were a breach.  But also, the cases I have referred to, such as Lamb v Evans, give a good example that injunctions are useful.  In that case, it concerned printing blocks which the owner of this business was provided by third party traders who wanted to put advertisements in the plaintiff’s directory.  The court held that the employee had gone off and used these blocks illegitimately for a rival publication and granted a perpetual injunction, even though they said that these ex‑employees could quite legitimately, once the plaintiff’s journal was published, take that journal along to the traders and say, “Here is what you have done in the past.  I want to do exactly the same for the rival publication”, and the traders could give the same printing blocks to these people quite legitimately.  So my point is that it would be quite easy in that case for the defendants to go and get the information elsewhere but ‑ ‑ ‑

KIRBY J:   Yes, that is your point.  My point is we do not have printing blocks now.  We have electronic messages which are circling the world.  One has to be just a bit careful in this area of picking up old cases. 

MR LEE:   The same principle was applied in a newspaper situation in Exchange Telegraph v Central News.  But cases where a party has expressly agreed not to do something can add, or should add, a further element to the exercise of the discretion.  It is not just a breach of confidence case in equity where these considerations have played more weight.

There is even a case in the outline, Pollard v Photographic Company, page 18, note 118.  A photographer was restrained by perpetual injunction from using negatives of a photo shoot of the plaintiff to display in his window to attract other clients.  That was in breach of an implied term only to use the negatives for the purpose of supplying prints to the plaintiff.  That photographer could easily have gone around and taken shots of this person out on the street and displayed those, but it is really a question of what is the damage, what is the detriment which the promisee apprehends, which it wants to restrain?

The Court of Appeal identified that here as being something that the plaintiff was entitled to be protected against, and here, these acts are going to be repeated time and time again.  Damages are extremely difficult to assess.  The whole purpose of taking an express covenant is to relieve a promisee of having to show any particular damage. 

The passage in Toulson and Phipps only makes the point that what my learned friend says about Mustad is taking it too far.  That passage in Toulson and Phipps makes it quite clear that Mustad was only dealing with, as far as the authors were concerned, confidential information in equity.  I know there was an express covenant, but it more or less comes down to the same thing if the covenant is limited to confidential information.  In fact, Toulson and Phipps quote a United Kingdom Law Commission report which, in fact, makes the point for which the appellants contend, that an express covenant can protect publicly available information.  That is paragraph 4.05, I think. 

KIRBY J:   Do we have that in our compilation? 

MR LEE:   I think my learned friends have it on their list. 

KIRBY J:   Paragraph?

MR LEE:   4.05.  Finally, just to refer to a couple of matters I omitted to mention in my address.  On the question of restraints unlimited as to time, I referred to the proprietary nature of the materials.  I would like briefly to

refer to two short passages concerning the inapplicability of the restraint of trade doctrine when it comes to protecting chattels.  Justice Higgins in Bacchus Marsh (1919) dissenting in that case, gave an example.

GUMMOW J:   Any discussion of this in Justice Heydon’s book? 

MR LEE:   This is an example, I think, that comes up from time to time.  I do not know ‑ ‑ ‑

GUMMOW J:   I know.  Is there any discussion of the point you are trying to make in Justice Heydon’s book on restraint of trade doctrine, of which there is a recent edition, which is the leading text everywhere on the point?

MR LEE:   Yes, I have not looked at the most recent edition.  I have looked at the older editions.  But I think this point was made in argument in Petersville as well, your Honour, that at page 449 Justice Higgins said: 

If A sells a horse to B, there would be no unreasonable restraint of trade in a covenant by A not to use the horse.  Such an obligation is, indeed, implied in the sale. 

And in Triplex Safety Glass v Scorah, which is on the list at No 18, at page 27 at lines 24 to 28: 

Whether bound by express contract or not, no employee is entitled to filch his employer’s property, in whatever form that property may be, whether it is in the form of a secret process of goodwill or in some other form.  Whatever is the property of the employer must not be wrongfully used by the employee in any way, but remains the property of the employer. 

Unless there is anything further, they are my submissions. 

GLEESON CJ:   Thank you, Mr Lee.  We will reserve our decision and we will adjourn. 

AT 4.14 PM THE MATTER WAS ADJOURNED