Monier Roofing Ltd v Krieg, A.K

[1990] FCA 267

'.*,

'JUDGMENT No. &.l.:/ ...y &

IN THE FEDERAL COURT OF AUSTRALIA	)
1
NEW SOUTH WALES DISTRICT REGISTRY	) NO. NG 865 OF 1989
)
GENERAL DIVISION	1

BETWEEN:  MONIER ROOFING LIMITED
First Applicant
MONIER MANAGEMENT PTY LTD
Second Applicant

AND :  ANDREW KERRI KRIEG
First Respondent
ACACIA ROOFING TILES PTY LIMITED
Second Respondent

CORAM: HILL J PLACE: SYDNEY DATED: 20 APRIL 1990

EXTEMPORE REASONS

Before the Court are two notices of motion filed by the applicants, Monier Roofing Limited, Monier Management Pty Limited, and Redland Engineering Limited.

observation of the respondent's tile making process.

By the first, the applicant seeks to amend its application and consequentially its statement of claim. By the second, the applicants seek an order under Order 17 Rule l(a) of the Federal Court Rules for the inspection of certain machines and the

By their statement of claim, the applicants effectively made what for present purposes can be seen as two allegations. The first was an allegation of infringement by the respondents of the copyright in certain drawings, which are listed in Schedule A to the application. The second allegation was that information described in Schedule B to the application was confidential information which had been imparted to Mr Andrew Krieg, the first respondent, and to a Mr Mutton when they were employees of the applicants and associated companies. The respondents it is alleged used that information in breach of their obligation of confidence to the applicants.

The applicants sought inspection of the respondents' plant or alternatively certain listed items of the plant. The applicants and the second respondent are business competitors in the concrete tile making business.

Objection was taken to inspection of both the plant

generally (this was not then pressed) and certain of the items of plant, as being irrelevant to the proceedings. It was said

that the applicants1 case, as pleaded, raised no issue as to certain of the machines because they were neither the subject of particularised copyright drawings nor the subject of any of the material referred to in schedule B to the application.

The applicants relied in part upon a manual referred to in Schedule B to the Application, as providing the relevant nexus between the inspection of the items of plant and the applicants' case as pleaded, it being alleged that the manual had been disclosed to Mr Krieg.

Notwithstanding this reliance, the applicants sought to amend their pleadings to raise explicitly a case of breach of confidence in respect of certain drawings which it was alleged were the source of information used by the respondents to build and/or operate the following items of equipment: aggregate mixing unit and metering equipment; tile machine bed; guillotine assembly; and colour applicator and colour mixer.

It should be noted that an application to inspect an item of plant referred to as the "making head", the subject of the copyright claim, was not opposed.

The respondents opposed the amendment to the pleadings.
Evidence was adduced from Mr Krieg, who in accordance with the

usual practice on applications of this kind, was not the subject

of cross-examination. Mr Krieg deposed that he had been

employed by the applicants in Darwin between 1981 and 1983, where he had had access to a parts manual. He denied that this was the manual to which the applicants referred in Schedule B. Thereafter in his employment with the applicants he said he had not been furnished with manuals. He said he had taken no copies of the manual with him. He accepted however, that he may have seen certain drawings which appeared in the manual described in Schedule B.

Photographic evidence of the machines used by the applicants and the respondents were tendered before me. Mr Spurrier, an employee of the applicant, said in an affidavit which was read in the proceedings, which I accepted as a submission rather than as expert evidence, that there were "striking similarities" between the machines of the applicant and those used by the respondent. Mr Krieg, on the other hand, pointed in his affidavit to differences said to exist between the machines.

For the purposes of these proceedings, it is unnecessary to find whether the degree of similarity is substantial as the applicants contend or whether the similarities (which must inevitably appear as the machines carry out the same kind of operation) are outweighed by the differences pointed out by Mr Krieg .

W Krieg in his affidavit, deposed to the fact that one of

the companies in the Monier Group held a patent in relation to

the aggregate mixing unit which patent had lapsed and the	information in it was open to the public domain. The
respondents therefore challenged the confidential character of the information alleged to have been used by the applicants so far as it related to this aggregate mixing unit. It should however be mentioned that the information in the public domain did not include dimensions or tolerances which were alleged to have been disclosed in confidence by the disclosure of the drawings.
Krieg also deposed that the metering and mixing section for clay used by the respondents had been originally used at the Monier Ceramon Plant at Ottaway and sold to a third party and ultimately purchased by the second respondent. This second allegation first emerged in an affidavit received by the applicants' solicitors on Wednesday evening before the present Friday hearing and I was told from the bar table that the solicitors for the applicants had been unable to obtain instructions about it and, in particular, to adduce evidence, if such evidence were available, to rebut the allegation.
As counsel for the respondents properly conceded, amendments to the pleadings are normally freely granted. One aspect of the Court so doing is to ensure the proper disposal of all issues between the parties. Another aspect is that in the ordinary case, any real prejudice that will be suffered by the other party can be compensated for by an order for costs. These matters are reflected to some extent, at least, in Order
13 Rules 2(1) and 2(2) of this Court's Rules which provide as
follows :

2(1)	The Court may, at any stage of any proceeding, on application by any party or of its own motion, order that any document in the proceeding be amended, or that any party have leave to amend any document in the proceeding, in either case in such manner as the Court thinks fit.
2(2)	All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding, or of correcting any defect or error in any proceeding, or of avoiding multiplicity of proceedings.

In rare cases, amendments of a pleading may not be allowed because to do so would be obviously futile. However, it must be stressed that such cases will be rare. For example, in Zoneff v. Elcom Credit Union Limited (unreported) 9 February 1990, I refused to permit the applicant to amend his pleadings because the claim pleaded was statute barred and to allow the amendment would, in such a case, be improper and unjust the rule in Welden

v. (1887) 19 QBD 394, not having been abrogated by the provisions of the Rules of this Court: see Part 20 Rule 4 of the Su~reme Court Rules of New South Wales which deal specifically with such an amendment.

In National Mutual Holdinas v. The Sentrv Cor~oration

(unreported) 27 September 1989, Northrop J considered an application to amend a defence, a process to which the same principles generally apply. In the course of that judgment his Honour said at p.3:

"Normally in motions of this kind, it is not

the motion is based. For the purpose of considering	necessary to establish by affidavit facts upon which
leave, the allegations of fact contained in the proposed defence are assumed to be established and the motion is to be determined accordingly."

In the case before his Honour, documents had in fact been put before the Court which supported the facts upon which the proposed defences were based. However, his Honour made the following comment pertinent to the present case:

"The Court should not be enticed into conducting a mini trial on separate issues under the guise of a hearing and determining a motion for leave to amend a

defence. "

The same comment can be made concerning a motion for leave to amend a statement of claim. In an earlier judgment delivered on 30 March 1989 in the same proceedings, also unreported, his Honour had considered an application for leave to amend the statement of claim. In that judgment his Honour had expressed the view that it was undesirable in interlocutory proceedings to determine finally questions of whether a pleading was so untenable that leave to amend should not be granted to so plead because the amendment disclosed no reasonable cause of action. His Honour recognised, as do I, that by analogy with a strike out application and in accordance with what was said by Barwick CJ in General Steel Industries Inc v. The Commissioner for Railwavs New South Wales (1964) 112 CLR 125, cases may arise where it is necessary to consider the matter in detail.

Particularly, this will be so where the facts are not in dispute and the motion disposes of the whole of the action.	Neither of these circumstances existed in the case before
Northrop J nor do they exist here. Although the applicant filed no affidavits in reply (time alone would have prevented this) and did not cross-examine Mr Krieg, I do not understand the applicants to concede at this stage of the proceedings the truth of what M r Krieg said. No inference should be drawn from the failure of the applicants to seek leave to cross-examine Mr Krieg. The proper time for the facts to be agitated is at the time of the trial, not on an interlocutory application to amend a statement of claim.
Counsel for the respondents accepted that it was for him to show that the applicants' case was untenable. He relied upon
MrKrieg's evidence in support of a submission that I should in
effect infer that the application to amend was in reality a fishing expedition in support of the application to inspect the plant in order to "dredge up", as it was put, a case. He submitted that the pleadings of the applicants were no more than mere allegations of breaches of confidential information unsupported by any evidence and denied on oath by Mr Krieg. It was submitted that the application was to be seen therefore as vexatious.
Behind this submission lies, in my opinion, a fundamental problem. It assumes that in an application to amend a statement of claim there is some obligation upon the applicants to make out what was referred to as a tenable case or alternatively, if
motion, to accept the challenge of that evidence as an evidence be adduced by the respondents in opposition to the
inducement to prepare for and cause the Court to embark upon a mini trial of the allegations to determine whether a tenable case exists.
Like Northrop J, I do not regard this as an appropriate procedure, particularly on the facts of the present case. Where issues of fact are likely to be involved and where as here matters of credit will presumably be at issue in the trial, the proper course is to allow the pleadings to be amended so as to ensure that all of the issues between the parties are litigated and determined at the proper time, that being the time of the trial and not on an earlier interlocutory application.
Ultimately, in my view, that course will dispose of the case more efficiently and more promptly than to refuse to allow, at this stage, an amendment of the pleadings thereby causing the applicants to commence fresh proceedings relating to the matters the subject of the proposed amendment and then considering at a later time on a further application a strike out application where again a mini trial of the issues will be inappropriate.
I should say in answer to the two particular matters raised by counsel for the respondents - the existence of an expired patent and the purchase of the machine that came indirectly from the applicants, that the first of the two matters is not necessarily conclusive of the case brought by the
applicants. It is the particular dimensions and measurements
and tolerances shown in the drawings said to be confidential and said to have been imparted to the respondent, Mr Krieg, that are relied upon by the applicants, not the material that is in the public domain. As to the metering and mixing machine, I would not refuse the applicants leave to amend their statement of claim where there had been no time to obtain instructions upon the correctness of the allegation.
If it turns out that the allegation contained in Mr Krieg's affidavit be correct then I would expect that the applicants would properly and promptly notify the respondents that they no longer rely upon the claim that information in the form of drawings relating to that machine is confidential. It follows that I would allow the applicants to amend their application with the consequential effect that has of amendment to the statement of claim.
Counsel for the respondents agreed that once the amendment to the statement of claim was allowed it was appropriate, subject to a question of confidentiality, to permit inspection both by the legal advisers of the applicants and Mr Spurrier. Subject therefore to Mr Spurrier giving the appropriate undertaking as to confidentiality in the same form as other similar undertakings already given, I would order that inspection be given.

It follows that I would make the following orders:

1.     In respect of the application by the applicants to amend their application I would order that the applicants have leave to file a further amended application in the form annexed to the notice of motion and marked A.

2(a). In respect of the application made pursuant to Order 17 Rule l(a) and Order 17 Rule (e) of the Court's Rules, I would order that, subject to both Mr Spurrier and Mr Swinfield signing undertakings as to confidentiality in the form previously agreed between the parties, that they and an employee or partner of the applicants' solicitors be given leave to enter the land at 3 Palina Court, Smithfield Plains, South Australia and to inspect and observe such part of the process of manufacture by the second respondent of its Acacia roofing tile as relates to or involves the use of the following equipment -

(A) the aggregate mixing unit and metering equipment being the equipment referred to in Part 3 of Amended Schedule "B" to the further amended application and in the following sections of the Operating and Maintenance	Manual referred to in Part 1 of Amended
Schedule "B" to the further amended application: Volume 1 sections 4 and 5; Volume 2 sections 2 and 3; Volume 3 sections 1-3;

(B) the tile machine bed being the equipment referred to in Part 3 of Amended Schedule "B" to the further amended application and in sections 1-5 of Volume 3 of the Operating and Maintenance Manual referred to in Part 1 of Amended Schedule "Bu to the further amended application;

(C) the making head being the equipment referred to in Parts 2 and 3 of Amended Schedule "B" to the further amended application and in sections 1-5 of Volume 3 of the Operating and Maintenance Manual referred to in Part 1 of Amended Schedule "B" to the further amended application;

(D) the guillotine assembly (including knife cylinders and equipment) being the equipment referred to in Part 3 of Amended Schedule "B" to the further amended application and in sections 1-6 of Volume 3 of the Operating and

Maintenance Manual referred to in Part 1 of

Amended Schedule "B" to the further amended
application; and

(E) the colour applicator and colour mixer being the equipment referred to in Part 3 of Amended Schedule "B" to the further amended application and in sections 1-7 of Volume 3 of the Operating and Maintenance Manual referred to in Part 1 of Amended Schedule "B" to the further amended application; and

2(b)	to inspect and observe the following equipment used in the process of manufacture by the second respondent of its Acacia roofing tiles:
(A) the aggregate mixing unit and metering

equipment;

(B) the tile machine bed;
(C) the making head;

(D) the guillotine assembly (including knife cylinders and equipment); and

(E) the colour applicator and colour mixer.

The parties are agreed that in the event that I were to find in favour of the applicants on the notice of motion that the proper order as to costs would be that the costs be costs of the proceedings and I so order.

I certify that this and the

preceding twelve (12) pages
are a true copy of the Extempore
Reasons for Judgment of the

Honourable M r Justice Hill.

Associate:	K&,
Dated: 20 April 1990
Counsel and Solicitors	Mr D Catterns instructed by
for Applicants	Messrs Freehill Hollingdale
& Page
Counsel and Solicitors	Mr J Ireland instructed by
for Respondents	Messrs Henry Davis York
Date of hearing:	20 April 1990
Date Judgment Delivered:	20 April 1990