Polyaire Pty Ltd v K-Aire Pty Ltd - [2003] SASC 41

POLYAIRE PTY LTD v K-AIRE PTY LTD & ORS
[2003] SASC 41
Civil

BESANKO J This is an action by Polyaire Pty Limited (“Polyaire”) against K-Aire Pty Limited (“K-Aire”) and eight other parties claiming an injunction, damages or, at the option of the plaintiff, an account of profits, and other forms of relief.
Before I outline the nature of the plaintiff’s claim, it is convenient to describe each of the parties to the action.
Parties
Polyaire is a company which carries on business as a manufacturer and seller of airconditioning components from premises at 11 Kenworth Road, Gepps Cross in the State of South Australia. Polyaire was formerly known as A.C. Components Pty Limited. The name of the plaintiff was changed on 7 February 1995.
One of the components manufactured and sold by Polyaire was an airconditioning air outlet director or grille. In these reasons I will use the words “outlet director” and “grille” interchangably.
The plaintiff was the owner of a registered design under the Designs Act1906 (Cth) with respect to an outlet director. The number of the registered design was 84267. The plaintiff manufactured and sold an outlet director which was designed in accordance with this registered design. I will refer to Registered Design Number 84267 as “RD1”. The representations attached to the Certificate of Registration for RD1 are attached to these reasons and marked Appendix A. They show the outer frame, the neck section and the cruciform or cross-section. They show the four blade packs which were also referred to in the evidence as cores or “biscuits”. In these reasons I will refer to these items as “blade packs” or “cores”. The blade packs rest on the cruciform section and may be rotated in four different directions. The outlet director as assembled is inserted in the ceiling of domestic, commercial or industrial premises, and it regulates and controls the direction of the air pumped into the room by the airconditioning system.
The plaintiff is also the owner of a second registered design with respect to an outlet director part. The number of this registered design is 110628. The plaintiff manufactured and sold an outlet director part that was designed in accordance with this registered design. I will refer to Registered Design Number 110628 as “RD2”. The representations attached to the Certificate of Registration for RD2 are attached to these reasons and marked Appendix B. It will be apparent that RD2 relates only to a blade pack.
The first defendant, K-Aire, is a company incorporated in South Australia on 12 July 1996. K-Aire was formerly known as Air Direct Products Pty Ltd. The name of the first defendant was changed on 25 October 1996. The registered office of K-Aire is care of accountants, Harris and Orchard, at 172 Fullarton Road, Dulwich. The principal business that K-Aire was incorporated to carry on was the manufacture and sale of airconditioning ducts. Since the incorporation of K‑Aire, the sole director of the company has been Mr Richard Colebatch who is…

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: [2003] SASC 41
Decision Date: 20 February 2003

CaseChat Overview and Summary

Polyaire Pty Ltd v K-Aire Pty Ltd & Ors is a case that involves a dispute between two companies, Polyaire Pty Ltd and K-Aire Pty Ltd, over the infringement of patents and other intellectual property rights. The case was heard in the Supreme Court of South Australia. The primary issue in the case was whether Mr. Benfield, a former employee of Polyaire Pty Ltd, had breached his contractual obligations with the company and whether K-Aire Pty Ltd had infringed on Polyaire Pty Ltd's patents. The court was also required to decide whether certain documents and statements were admissible as evidence in the case.

In its decision, the court found that Mr. Benfield had not breached his contractual obligations with Polyaire Pty Ltd, and that the patents in question were valid. However, the court found that K-Aire Pty Ltd had infringed on Polyaire Pty Ltd's patents and that certain statements and documents were inadmissible as evidence due to legal professional privilege. The court also found that Polyaire Pty Ltd was entitled to damages for the infringement of its patents.

In summary, the court found in favour of Polyaire Pty Ltd on the issue of patent infringement but not on the issue of contractual obligations. The court also ruled that certain evidence was inadmissible due to legal professional privilege. The case serves as an important reminder of the importance of protecting intellectual property rights and the need for companies to ensure that their employees do not breach their contractual obligations.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

In my opinion, a business takes on the relevant character only when it sells, offers for sale or manufactures a prohibited outlet director.The Evidence and Findings of Fact I turn now to consider the evidence of Mr Benfield’s conduct between 8 September 1992 and 8 September 1996. As I have said, Mr Benfield did not give evidence. The plaintiff called a number of witnesses who gave evidence about Mr Benfield’s activities during this period. It also tendered a number of documents which throw light on that subject. The Colebatch defendants called Mr Andrew Rogers who is an industrial designer who trades under the business name, “Andrew Rogers Industrial Design” (“ARID”). It was Mr Rogers, of all the witnesses called, who was able to give the most complete picture of Mr Benfield’s activities during the relevant period. Although I do not accept all of the evidence he gave, he assumes a prominent role in the statement of facts which follows, although at times I will need to refer to the details of the evidence given by other witnesses. Except where I indicate otherwise, I make findings of fact in accordance with the statement set out below. As it happens, I think only a handful of the facts set out below are of crucial significance. Nevertheless, it is important that I make all relevant findings of fact.1. The China Outlet and the Heatshield Patent Mr Rogers first met Mr Benfield in the late 1980s. He was engaged by Mr Benfield and Mr Weatherell, the general manager of Silentaire Products (ie., Jadon Investments) to do some design work in relation to airconditioning clips and other accessories. Some time in late 1991 or early 1992 and during the course of carrying out design work for Silentaire Products, Mr Rogers came up with the idea of developing an airconditioning outlet which combined the register and the grille as a single unit. In 1992, Mr Benfield instructed Mr Rogers to further develop the idea of an airconditioning outlet incorporating a one-piece register. It is unclear whether Mr Benfield was giving the instructions on behalf of Heatshield or on his own behalf. Mr Rogers believed that he was receiving instructions from Heatshield. Mr Rogers referred to the idea of a one-piece register as the “China outlet”. For convenience only, I will use that description. Mr Benfield thought an aspect of the China outlet might be capable of being the subject of a patent and he instructed Mr Rogers to prepare the necessary drawings. Mr Rogers prepared those drawings in July 1992 and a patent specific illustration was provided to R K Maddern and Co (Patent and Trademark Attorneys) on 17 August 1992. In September 1992, Mr Rogers signed an Application for the Registration of a Patent entitled “Improvements in and relating to Air Diffusers”. Mr Rogers was listed as the inventor of what he calls “The Heatshield Patent”. In his evidence, Mr Rogers described the Heatshield Patent in the following terms:“The Heatshield Patent relates to that aspect of the China Outlet which comprised a system of interlocking blade assemblies that could be connected on the ground to form a single unit and inserted into the register from below the ceiling.In previous designs, in which four separate blade packs were housed in a multi-directional airconditioning ceiling outlet, the blade packs were supported by a cross piece in the face of the outlet.”

Decision

Reasons for decision

BESANKO J

It will be necessary to determine the extent of each company’s liability at the next stage of the hearing.Conclusions I find that Mr Benfield did not act in breach of clause 9 of the Deed. The plaintiff is not entitled to relief in relation to the alleged breach of clause 9 including the alleged infringement of RD1. I find that RD2 is valid and the defendants are not entitled to relief in relation to the allegation that RD2 is not valid. I find that a fraudulent imitation of RD2 has been applied to KA1 and KA2 and that each of the defendants is liable for the infringement of the plaintiff’s monopoly in RD2. I will hear from the parties as to what orders are appropriate in light of these conclusions.(APPENDICES “A”, “B”, “C” AND “D” SHALL REMAIN ON THE COURT’S FILE.)APPENDIX EPOLYAIRE PTY LTD v K-AIRE PTY LTD & ORSReasons for RulingRULING NO 1: MR BENFIELD’S STATEMENT AND AFFIDAVIT1During the course of the plaintiff’s case, counsel for the plaintiff applied to tender certain paragraphs in a witness statement of Mr Benfield, and certain paragraphs in an affidavit sworn by Mr Benfield on 11 September 1989.2The witness statement of Mr Benfield consists of 129 paragraphs and it addresses each of the issues in the action. It was prepared by the solicitors for the Colebatch defendants and filed in Court on 5 December 2001. The statement was filed and served pursuant to an order made by a Judge of this Court. The order relevantly provides:3.That by the close of business on 28 September 2001 the defendants file and serve:3.1 a list of the witnesses which the defendants intend to call at trial;3.2 a signed statement in the form of a proof of evidence to be given as evidence-in-chief by each witness (“witness statement”) and which identifies the documents to which the witness proposes to refer; and3.3 in the case of a witness not willing to provide a proof of evidence, a statement of the substance of the evidence that the party calling the witness expects the witness to give in relation to each issue.3The time limit referred to in the order was extended. Similar orders were made in relation to witness statements to be filed and served by the plaintiff. In addition, orders were made to the effect that every witness statement was to stand as the evidence-in-chief of the witness concerned and the parties were not entitled, without leave of the Court, to lead evidence from that witness which was not contained in that person’s statement. The parties were not entitled to lead evidence from any person unless a witness statement had been filed and served, or a statement of the substance of the evidence had been filed and served.4I assume that the order was made pursuant to the power of the Court to make pre-trial orders for the just, efficient, fair and expeditious trial of an action. This Court does not have a specific rule of court or practice direction dealing with the exchange of witness statements.5Mr Benfield did not oppose the making of the order for the exchange of witness statements.6The affidavit of Mr Benfield was used on an interlocutory application in Action 1810 of 1989. There is no issue of legal professional privilege in relation to the affidavit. The only issue in relation to the affidavit is whether the plaintiff should be required to tender additional paragraphs to those it sought to tender in order to avoid the paragraphs it sought to tender creating a misleading impression or being taken out of context.7I ruled that the plaintiff could not tender any part of Mr Benfield’s witness statement. I ruled that the plaintiff could tender Mr Benfield’s affidavit but only if it tendered certain additional paragraphs, namely, paragraphs 4 (second para), 5(b) and (c), 6, 11, 12, 13 (second para). The plaintiff tendered those paragraphs in Mr Benfield’s affidavit it had identified and the additional paragraphs referred to in my ruling.8My reasons for those rulings follow.Mr Benfield’s Statement9 Counsel for Mr Benfield opposed the tender of the statement on a number of grounds.10First, he submitted that the statement was protected by legal professional privilege, and that there had been no waiver of privilege. For reasons I will give, I accept that submission. It follows that it is not strictly necessary for me to consider the other arguments which were advanced. However, in recognition of the detailed submissions of counsel, I will deal with them briefly.11Secondly, counsel for Mr Benfield submitted that insofar as the plaintiff relied on s 45B of the Evidence Act 1929 (SA), and assuming the statement was not protected by legal professional privilege, the plaintiff was required to tender the whole statement. He argued that what was admissible under s 45B was a document which meant the whole document.

Ratio Decidendi

Legal Principle Established

Established by: BESANKO J

It is difficult to make a finding about the precise date of the conversation. It could have been in either July, or August or September 1996. Even taking into account Mr Benfield’s absence from the witness box, I do not think the evidence is sufficiently precise to enable me to make a finding on the balance of probabilities that the conversation took place before 8 September 1996.6. The Incorporation of K-Aire and Events Thereafter K-Aire was incorporated in the State of South Australia on 12 July 1996. It was incorporated under the name of Air Direct Products Pty Ltd, and on 25 October 1996 it changed its name to K-Aire Pty Ltd. Mr Colebatch was the subscriber to the Memorandum of Association, and, on incorporation, four one dollar shares were allotted to him. On 12 July 1996, Benfield Investments Pty Limited (as trustee of the Marlene Benfield Family Trust), MDM Investments Pty Ltd (as trustee of the Luciana Benfield Family Trust), Ino Duct Pty Ltd (as trustee of the Reich Family Trust) and Redgum Pty Ltd (as trustee of the Direct Air Discretionary Trust) entered into a partnership to conduct a business of manufacturing certain airconditioning vents for sale. Recital A of the partnership agreement states:“A The parties (Partners) conduct a business of manufacturing certain airconditioning vents for sale.” Clause 2 of the agreement provides that the partnership will commence on 12 July 1996. Clause 4 provides that each of the partners will contribute and own a twenty-five per cent interest in the capital of the partnership. The banker of the partnership is to be Bank SA. Clause 13 contains obligations on the partners to diligently devote themselves to the partnership business. Benfield Investments Pty Ltd is a company owned and controlled by Mr Benfield or members of his family, and Mr Benfield’s brother, Mr Peter Benfield. MDM Investments Pty Ltd is a company controlled by Mr Benfield and Mr Peter Benfield and owned by Mr Peter Benfield or interests associated with him. Ino Duct Pty Ltd is a company owned and controlled by Mr Heinrich Reich or interests associated with him. Redgum Pty Ltd is a company owned and controlled by Mr Colebatch or interests associated with him. On 12 July 1996 Mr Colebatch executed a Declaration of Trust to the effect that he held one of the shares in K-Aire on trust for Mr Peter Benfield. On 12 July 1996 the partners and K-Aire executed an agreement whereby the partners appointed K-Aire to manage the partnership business. Mr Colebatch sought finance from Bank SA to purchase various dies and equipment used in the manufacture of plastic airconditioning components. An offer of finance was made by the Bank on 15 May 1996. It is addressed to the directors of Kemalex. The Bank said it required various forms of security including a mortgage from an interested third party and a guarantee and indemnity from Mr Colebatch and the interested third party. A replacement offer was made by the Bank by letter dated 12 July 1996 addressed to “Messrs R Colebatch, H Reich, B Benfield and P J Benfield”. The purpose of the facility was stated by the Bank to be:“To purchase various dies and equipment used in the manufacture of plastic air-conditioning components via a LIE [Lease in Escrow Agreement] and subsequently converted to a CHP [Commercial Hire Purchase Agreement].”