Polyaire Pty Ltd v K-Aire Pty Ltd - [2011] SASC 176

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
POLYAIRE PTY LTD v K-AIRE PTY LTD & ORS
[2011] SASC 176
Judgment of The Honourable Justice White
13 October 2011
PROCEDURE - CONTEMPT, ATTACHMENT AND SEQUESTRATION - CONTEMPT - WHAT CONSTITUTES - BREACH OF UNDERTAKING TO COURT
The plaintiff sought to use documents discovered, and affidavits filed, in a Supreme Court action in related Federal Court proceedings - the defendants contested this use, claiming that it would breach the implied undertaking which the plaintiff had given when receiving the documents, and that the use would be for an ulterior or collateral purpose.
Whether the plaintiff had breached the implied undertaking to date; whether special circumstances existed to justify a release from the implied undertaking.
Held: applications granted nunc pro tunc - special circumstances do exist which justify a release from the implied undertaking - that being the case, it is unnecessary for the Court to determine whether the plaintiff was in breach to date.
Corporations Act 2011 (Cth) s 471B, s 1321(1)(d), referred to.
Polyaire Pty Ltd v K-Aire Pty Ltd & Ors (2003) 226 LSJS 109; Polyaire Pty Ltd v K-Aire Pty Ltd & Ors (2003) 60 IPR 512; Polyaire Pty Ltd v K-Aire Pty Ltd & Ors (2005) 221 CLR 287; Polyaire Pty Ltd v K-Aire Pty Ltd (No 2) [2005] SASC 386; Hearne v Street (2008) 235 CLR 125; Crest Homes PLC v Marks [1987] AC 829; Eso Australia Resources Ltd v Plowman (1995) 193 CLR 10; Harman v Secretary of State for the Home Department [1983] 1 AC 280; Bell Group Ltd v Westpac Banking Corporation (1998) 86 FCR 215; Commissioner for Corporate Affairs v Harvey [1980] VR 669; Forty Two International Pty Ltd v Barnes [2010] FCA 397; Barnes v Forty Two International Pty Ltd [2010] FCAFC 87, considered.

POLYAIRE PTY LTD v K-AIRE PTY LTD & ORS
[2011] SASC 176
Civil

WHITE J. The plaintiff (Polyaire) seeks this Court’s permission to use two affidavits filed by a defendant in this action, as well as certain of the documents discovered by the defendants in this action, in proceedings which it has commenced in the Federal Court. It is concerned that it should not breach the implied undertaking to use those documents only for the purposes of this action and not for any ulterior or collateral purpose.
The affidavits in question are those of the third defendant (Mr Colebatch) sworn and filed in the Court on 10 February 2006 (FDN 255) and 26 June 2007 (FDN 287) respectively (the Colebatch affidavits). The discovered documents in question are certain of the documents discovered by some of the defendants in lists filed on 10 July 1998 (FDN 45), 21 February 2006 (FDN 257) and 6 July 2007 (FDN 290) (the Discovered documents).
Background Circumstances
The action in this Court has a long history, only some of which is pertinent for present purposes. The proceedings commenced in 1996 against nine defendants, all…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2011] SASC 176
Decision Date: 13 October 2011

CaseChat Overview and Summary

In Polyaire Pty Ltd v K-Aire Pty Ltd, the South Australian Supreme Court was tasked with determining whether Polyaire could use specific affidavits and documents discovered in earlier proceedings for purposes beyond those originally intended. Polyaire, having successfully established infringement of its registered design, sought to use the Colebatch affidavits and certain discovered documents in applications for an account of profits in the Federal Court. The defendants argued that Polyaire was in breach of an implied undertaking to the court regarding the limited use of these materials. The central legal issue was whether Polyaire could be released from the implied undertaking to use the documents solely for the purpose of making an election between damages and an account of profits.

The court found that the nature of the proceedings in the Federal Court warranted a departure from the strict interpretation of the implied undertaking. Polyaire's applications in the Federal Court, though procedurally separate, substantively pursued the same relief and profits as contemplated by the earlier orders. The court concluded that the use of the Colebatch affidavits and discovered documents for the same purpose in the Federal Court did not constitute a breach of the implied undertaking. Given the special circumstances and the nature of the relief sought, the court granted Polyaire a release from the implied undertaking, allowing the documents to be used in the Federal Court proceedings for the pursuit of an account of profits.

The court's decision was grounded in the principle that the scope of an implied undertaking should be interpreted in light of the practicalities and objectives of the proceedings. The release was granted with retrospective effect, enabling Polyaire to use the documents in its ongoing applications in the Federal Court. This ruling underscores the importance of flexibility in judicial undertakings to accommodate the evolving needs of litigation.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

The affidavits in question are those of the third defendant (Mr Colebatch) sworn and filed in the Court on 10 February 2006 (FDN 255) and 26 June 2007 (FDN 287) respectively (the Colebatch affidavits). The discovered documents in question are certain of the documents discovered by some of the defendants in lists filed on 10 July 1998 (FDN 45), 21 February 2006 (FDN 257) and 6 July 2007 (FDN 290) (the Discovered documents).Background Circumstances The action in this Court has a long history, only some of which is pertinent for present purposes. The proceedings commenced in 1996 against nine defendants, all but the third and fourth of whom (Mr Colebatch and Mr Benfield) were corporate defendants. Polyaire’s claim was that the defendants had infringed its registered design of certain air-conditioning components. On 19 May 1999, the Court ordered that the issues of liability should be determined separately from, and in advance of, the remaining issues. Polyaire succeeded in establishing the infringement of its design.[1] When entering judgment on 5 March 2003, the trial Judge (Besanko J) made a number of orders for the purpose of enabling Polyaire to make an election between its claim for damages and its claim for an account of profits. In particular, Besanko J ordered each defendant to file an affidavit providing information as to the profit which it or he had derived from the use of the infringing articles, as well as making discovery of relevant documents. It seems that these orders may not have been acted upon pending the resolution of appeals.[1] Polyaire Pty Ltd v K-Aire Pty Ltd [2003] SASC 41; (2003) 226 LSJS 109. The defendants appealed against the judgment of Besanko J to the Full Court of the Federal Court, where they were successful.[2] However, on further appeal to the High Court, the judgment of Besanko J was restored.[3][2] K-Aire Pty Ltd v Polyaire Pty Ltd [2003] FCAFC 310; (2003) 60 IPR 512.[3] Polyaire Pty Ltd v K-Aire Pty Ltd [2005] HCA 32; (2005) 221 CLR 287. The matter then returned to this Court for determination of the quantum aspects. On 25 August 2005 Besanko J, after revoking the orders which he had made on 5 March 2003 concerning disclosure, made orders (relevantly) as follows: …4.For the purpose of enabling the plaintiff to make an election between its claim for damages and its claim for an account of profits, and reserving liberty to the plaintiff to apply for further directions before making the election:4.1 Each of the first, second, fifth, sixth, seventh, eighth and ninth defendants, by its proper officer, make file and serve on or before 12 December 2005 an affidavit setting out in respect of all the infringing articles (being exhibits P3 and P4 in this action), the total number of such articles manufactured, sold and otherwise disposed of by it, the price at which each such article was sold or otherwise disposed of, the cost to the defendant of the manufacture, sale and disposal [of] such article, the approximate amount of profit it contends it made by the manufacture, sale or disposal of the said article, the method of allocating overheads, if any, which the defendant regards as reasonably acceptable, and the steps or reasoning by which the approximate amount has been calculated.4.2 The third defendant make, file and serve on or before 12 December 2005, an affidavit setting out in respect of all infringing articles manufactured, sold or otherwise disposed of by each of the first, second, fifth, sixth, and ninth defendants, the approximate amount of profit the third defendant contends he made from such activity by each of the said defendants, the amount of any further deduction to which he claims he is entitled in respect thereof, and the steps or reasoning by which the approximate amount has been calculated.4.3 the fourth defendant make, file and serve on or before 12 December 2005, an affidavit setting out in respect of all the infringing articles manufactures, sold or otherwise disposed of by each of the first, [fifth], sixth, seventh and eighth defendants, the approximate amount of profit the fourth defendant contends he made from such activity by each of the said defendants, the amount of any further deduction to which he claims he is entitled in respect thereof, and the steps or reasoning by which the approximate amount has been calculated.4.4 Each of the defendants on or before 12 December 2005 make discovery on oath of all documents relating to the manufacture, sale or other disposal of the infringing articles and of all documents relied upon by the defendant for the purpose of making his or its affidavit referred to in the preceding sub-paragraphs hereof, and permit the plaintiff to inspect such documents by arrangement between the parties.…6. The defendants file and serve on or before 22 September 2005 an affidavit deposing to the number of infringing articles sold, to whom such articles were sold and identifying the records kept in respect of such sales in the period from 1 October 2003 until 25 August 2005.…

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

WHITE J

It was common ground that this Court may give an order releasing a party from the implied undertaking retrospective effect. I am satisfied that that is so.[17][17] Forty Two International Pty Ltd v Barnes [2010] FCA 397 at [94]; Barnes v Forty Two International Pty Ltd [2010] FCAFC 87 at [11]-[12].Conclusion For the reasons given above, I am satisfied that Polyaire has established special circumstances justifying a release from the implied undertaking in relation to the Colebatch affidavits and the Discovered documents. I grant such release but only for purposes related to the pursuit of Polyaire’s s 1321(1)(d) applications in the Federal Court. I direct that the release operate retrospectively with effect from 17 August 2009.

Ratio Decidendi

Legal Principle Established

Established by: WHITE J

As an overarching submission, counsel submitted that Polyaire proposes using the Colebatch affidavits and the Discovered documents for a purpose which goes well beyond the purpose originally intended by Besanko J’s orders which, it was submitted, had required the Discovery to be made and the affidavits filed only for the limited purpose of facilitating Polyaire’s election between a remedy by way of account of profits, on the one hand, and damages, on the other.Consideration I remain of the view that it is unnecessary for this Court to decide whether or not there has been a breach of the implied undertaking to date. The making of such a determination is not a necessary pre-requisite to the grant of a release. The Court should not, of course, decide hypothetical issues. However, for the reasons given earlier I am satisfied that there is a real issue between the parties as to whether there has been such a breach, and that Polyaire is not raising a matter which is hypothetical only. The proceedings in the Federal Court are separate and distinct from those in this Court but they do have particular features which are important for present purposes. I refer first to the character of the proceedings in the Federal Court. As already noted, Polyaire’s applications in that Court involve (relevantly) a claim for an account of profits made by each of the second and ninth defendants from the use of its registered design. The forensic means by which Polyaire seeks the account of profits is different but, in substance, Polyaire is pursuing claims for the same relief and in respect of the same profits as was contemplated by the orders of Besanko J in this Court. As noted earlier, counsel for the defendants emphasised the purpose for which Besanko J had ordered the affidavits and Discovery, namely, to assist Polyaire in making an election. Counsel submitted that that purpose had concluded when Polyaire made its election on 19 October 2007. In considering this submission, it is instructive to consider the probable course of events if Polyaire had continued to pursue its claims against the second and ninth defendants in this Court. Once Polyaire made its election for an account of profits, the carrying out of the account would have occurred in the present proceedings. Counsel for the defendants acknowledged that use by Polyaire of the Colebatch affidavits and the Discovered documents in these proceedings in the course of such an account would not have involved any breach of the implied undertaking. Implicit in this concession was an acknowledgement that the purposes for which Besanko J ordered the filing of the affidavits and the discovery of documents included providing assistance to Polyaire not only in the making of its election, but also in its pursuit of the remedy for which it did elect (in particular an account of profits). If the Colebatch affidavits and the Discovered documents could be used in the account of profits in these proceedings in this Court, then it is but a short step to conclude that the documents should be able to be used for the same purpose for (relevantly) the same account in the Federal Court proceedings.