Polyaire Pty Ltd v Lanthois
[2011] FCA 1486
•22 December 2011
FEDERAL COURT OF AUSTRALIA
Polyaire Pty Ltd v Lanthois [2011] FCA 1486
Citation: Polyaire Pty Ltd v Lanthois [2011] FCA 1486 Parties: POLYAIRE PTY LTD v PETER JAMES LANTHOIS and STEPHEN DUNCAN File numbers: SAD 183 of 2010
SAD 184 of 2010Judge: BESANKO J Date of judgment: 22 December 2011 Catchwords: PRACTICE AND PROCEDURE — Applications for particulars — where plaintiff company had brought successful action in the Supreme Court of South Australia against the companies of which the defendants were the liquidators for infringement of registered designs relating to an air-conditioning part — where plaintiff had obtained costs orders in its favour — where plaintiffs elected remedy of an account of profits — where plaintiff had lodged formal proofs of debt or claim with the defendants in relation to its claim for costs and an account of profits — where proofs of debt or claim substantially rejected — where plaintiff appealed the defendants’ decisions pursuant to s 1321(1)(d) of the Corporations Act 2001 (Cth) — where defendants sought particulars of claim — whether the Federal Court Rules 2011 applied to the applications, which were filed before those rules came into force but heard and determined afterwards — whether plaintiff had failed adequately to particularise the methodology it would ask Court to adopt in determining its claim for costs — whether particulars provided by plaintiff in relation to the account of profits claims were pleadings of evidence and not relevant matters of fact
Held: The applications for further particulars in relation to the costs claims were refused; certain particulars provided in relation to the account of profits claims were struck out.
Date of hearing: 27 October 2011 Place: Adelaide Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 31 Counsel for the Plaintiff: Mr B Jenner Solicitor for the Plaintiff: Lynch Meyer Counsel for the Defendants: Mr M Hoffman QC Solicitor for the Defendants: Kelly & Co Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 183 of 2010
BETWEEN: POLYAIRE PTY LTD
PlaintiffAND: PETER JAMES LANTHOIS
First DefendantSTEPHEN DUNCAN
Second Defendant
JUDGE:
BESANKO J
DATE OF ORDER:
22 DECEMBER 2011
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.The Federal Court Rules as in force immediately before 1 August 2011 apply to the hearing and determination of the defendants’ application for particulars.
2.The parties have leave to make submissions as to the appropriate orders in light of these reasons.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 184 of 2010
BETWEEN: POLYAIRE PTY LTD
PlaintiffAND: PETER JAMES LANTHOIS
First DefendantSTEPHEN DUNCAN
Second Defendant
JUDGE:
BESANKO J
DATE OF ORDER:
22 DECEMBER 2011
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.The Federal Court Rules as in force immediately before 1 August 2011 apply to the hearing and determination of the defendants’ application for particulars.
2.The parties have leave to make submissions as to the appropriate orders in light of these reasons.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
SAD 183 of 2010
SAD 184 of 2010
BETWEEN: POLYAIRE PTY LTD
PlaintiffAND: PETER JAMES LANTHOIS
First DefendantSTEPHEN DUNCAN
Second Defendant
JUDGE:
BESANKO J
DATE:
22 DECEMBER 2011
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
These applications are applications for particulars in two proceedings before the Court. The plaintiff in each proceeding is Polyaire Pty Ltd. The defendants in each proceeding are Mr Peter James Lanthois and Mr Stephen James Duncan. In SAD 183 of 2010 the defendants are sued in their capacity as liquidators of Kemalex Plastics Pty Ltd now ACN 078 898 281 Pty Ltd (‘Kemalex Plastics’) and in SAD 184 of 2010 the defendants are sued in their capacity as liquidators of Kemalex Pty Ltd (‘Kemalex’).
Kemalex Plastics and Kemalex were each placed into liquidation on 21 June 2006 upon a creditors’ voluntary winding up. Prior to that time both companies had been in administration under Part 5.3A of Chapter 5 of the Corporations Act 2001 (Cth) (‘Corporations Act’).
Kemalex Plastics and Kemalex were defendants in long-running litigation brought by the plaintiff in the Supreme Court of South Australia. Kemalex Plastics was the ninth defendant and Kemalex was the second defendant in the action in the Supreme Court. The plaintiff made various claims against the defendants including a claim that they had infringed registered designs it owned. The registered designs related to an article called an outlet director part which was part of an air-conditioning system.
The action in the Supreme Court proceeded to trial on liability only. The plaintiff was substantially, although not wholly, successful. It succeeded on its claim that the defendants had breached one of its registered designs. The plaintiff obtained an order for costs in its favour, although only in relation to particular issues in the action. A taxation of costs would have required an apportionment of costs as between particular issues.
There were then various appeals first to the Full Court of this Court and then to the High Court. In the result the judgment in favour of the plaintiff at first instance was upheld. A number of costs orders were made in the plaintiff’s favour during the course of the appeal process.
The plaintiff has not taxed any of its costs and no certificates of costs have been issued in its favour.
After the appeal processes had been exhausted, the plaintiff made an election for the remedy of an account of profits. Various disclosure orders in relation to the plaintiff’s claim for an account of profits were made against the defendants in the action in the Supreme Court. In compliance with those orders a Mr Richard Kempley Colebatch swore two affidavits, one on 10 February 2006 and the other on 26 June 2007. Mr Colebatch was a director of a number of the defendant companies including Kemalex Plastics and Kemalex. He swore his first affidavit on behalf of, inter alia, Kemalex Plastics and Kemalex, but his second affidavit was not sworn on behalf of those companies. It may be inferred that that was because each of the companies had gone into liquidation before the second affidavit was sworn.
Mr Colebatch’s affidavits contain detailed information about material costs, direct labour rates, direct labour costs, manufacturing overhead costs, construction costs, component costs, packaging costs and profit in relation to the infringing article and the packages or kits which included the infringing article.
The plaintiff lodged formal proofs of debt or claim in the liquidations of Kemalex Plastics and Kemalex respectively in relation to its claim for costs and for an account of profits by letter dated 17 August 2009. Those proofs of debt or claim were allowed in part by the liquidators of the two companies. However, it is fair to say that the bulk of the plaintiff’s claims (in terms of amount) were rejected. In the liquidation of Kemalex Plastics, the plaintiff’s claim for profit of $1,615,363.00 was allowed to the extent of $592,309 and its claim for costs of $897,280.98 was allowed to the extent of $317,687.23. In the liquidation of Kemalex, the plaintiff’s claim for profit of $450,983.00 was wholly rejected and its claim for costs of $897,280.98 was allowed, as with the plaintiff’s claim in the liquidation of Kemalex Plastics, to the extent of $317,687.23.
The plaintiff has appealed to this Court pursuant to s 1321(1)(d) of the Corporations Act against the liquidators’ decisions, and proceeding SAD 183 of 2010 relates to the claims in the liquidation of Kemalex Plastics and proceeding SAD 184 of 2010 relates to the claims in the liquidation of Kemalex.
In each proceeding I made an order that the plaintiff file and serve a Statement of Claim and that was duly done. The defendants then sought particulars in each proceeding by letter dated 1 June 2011. In response, the plaintiff filed and served a document in each proceeding entitled Particulars of Statement of Claim (‘Particulars of Claim’) dated 7 June 2011.
Each proceeding came before me on 10 June 2011 and the defendants made an oral application that the plaintiff provide the particulars identified in their letter dated 1 June 2011. They claimed that the Particulars of Claim did not answer their request.
The defendants’ oral applications were made before the Federal Court Rules 2011 (‘the 2011 Rules’) came into force. However, they did not come on for argument until well after the 2011 Rules had come into force. That was because the plaintiffs made an application in the Supreme Court action to be released from their implied undertaking not to use Mr Colebatch’s affidavits in this proceeding (Polyaire Pty Ltd v K-Aire Pty Ltd and Ors [2011] SASC 176). Nevertheless, the parties had prepared their submissions by reference to the Rules in force before the 2011 Rules and they argued the applications by reference to those Rules. I think that the principles by which these applications are to be determined are the same whether the Rules in force immediately before the 2011 Rules or the 2011 Rules apply. In the circumstances I think it is appropriate to make an order that these applications be determined by reference to the Rules in force immediately before the 2011 Rules.
The Proofs of Debt or Claim in so far as they relate to the Plaintiff’s claims for costs
The paragraphs in the Statement of Claim in SAD 183 of 2010 which are in issue are paragraphs 14 (Supreme Court costs orders), 20 (first Federal Court costs order), 26 (High Court special leave costs order) and 31 (High Court appeal costs order). The issues raised by the defendants’ application are common to each paragraph and my decision in relation to paragraph 14 will apply to the other paragraphs. In those circumstances I will address only paragraph 14. The same issues arise in relation to the same paragraphs in the Statement of Claim in SAD 184 of 2010 and it is not necessary for me to address that proceeding separately.
In its Statement of Claim the plaintiff frames its claim in paragraph 14 by first identifying its actual costs including disbursements. It then alleges that with respect to the issues upon which it succeeded and which were the subject of the costs orders in its favour the appropriate apportionment of the time at trial is approximately 80 per cent and of the number of exhibits tendered at trial approximately 70 per cent. By this means it reaches a figure of not less than 74 per cent for its actual solicitors’ costs. It then reduces the resulting figure by one-third to reflect (so it contends) the difference between actual costs and party/party costs. It also reduces its actual disbursements by one-third to reflect its alleged entitlement to disbursements.
In its formal Proof of Debt or Claim dated 17 August 2009 the plaintiff set out a table which identified each hearing day and the stated number of transcript pages for that day. There was then an apportionment of the number of pages which were relevant to the issues upon which the plaintiff was successful and which were the subject of the costs orders in its favour. The plaintiff also identified the total number of exhibits and the total page numbers of the exhibits. The plaintiff then set out its apportionment in relation to those exhibits. The plaintiff alleged that the ‘widely accepted’ ‘broad brush approach’ was to calculate party/party costs at two-thirds of actual costs incurred.
In their Notice of Rejection of Formal Proof of Debt or Claim dated 28 October 2010 the liquidators rejected an amount of $253,920.13 of the plaintiff’s claim of $428,363.83 stating:
You have made an arbitrary assessment/apportionment of these costs without having them taxed/adjudicated. I consider that assessment to be excessive.
In their request for particulars by letter dated 1 June 2011 the defendants sought the following particulars of the plaintiff’s claim for costs in relation to the Supreme Court action:
1.As to paragraph 14.2 please provide particulars of the basis on which it is alleged that approximately 80% of the hearing time at the trial of the Supreme Court action was spent on issues in respect to which the plaintiff’s [sic] succeeded identifying each of the issues and the time spent.
2.As to paragraph 14.3 please provide particulars of the basis of the allegation that 70% of the exhibits tendered at the trial in the Supreme Court action were relevant to issues in respect to which the plaintiff’s [sic] succeeded identifying the exhibits tendered and those said to be relevant to the issues in respect to which the plaintiff succeeded.
3.As to paragraph 14.4 please provide particulars of the basis on which it is alleged the plaintiff would be entitled to not less than 74% of its actual solicitor’s costs. Please also provide particulars as to the basis on which it is alleged the plaintiff’s actual costs ought be discounted by one third.
4.As to paragraph 14.5 please provide particulars of the basis on which it is alleged that the plaintiff would be entitled to not less than two thirds of its actual disbursements identifying each of the disbursements and the basis on which the plaintiff alleges an entitlement to the same.
In its Particulars of Claim the plaintiff responded to the defendants’ request as follows:
3.As to the request in respect of paragraph 14.2, the percentage assessment was one made by the Plaintiff’s solicitor Mr Hutton and that assessment is explained in detail in the letters dated 17 August 2009 and 12 November 2009 (together hereafter referred to as ‘proof of debt letters’) to the Defendants’ solicitors. The approach taken by Mr Hutton is the approach which it is reasonable in the circumstances to expect the Court would take upon taxation of the Plaintiff’s entitlement to costs having regard to the issues on which the Plaintiff succeeded at trial and those that it did not succeed on and the amount of hearing time devoted to each.
4.As to the request in respect of paragraph 14.3, the percentage assessment was one made by the Plaintiff’s solicitor Mr Hutton and that assessment is explained in detail in the proof of debt letters. The approach taken by Mr Hutton is the approach which it is reasonable in the circumstances to expect the Court would take upon taxation of the Plaintiff’s entitlement to costs.
5. As to the request in respect of paragraph 14.4:-
5.1the percentage assessment was one made by the Plaintiff’s solicitor Mr Hutton and that assessment is explained in detail in the proof of debt letters. The approach taken by Mr Hutton is the approach which it is reasonable in the circumstances to expect the Court would take upon taxation of the Plaintiff’s entitlement to costs; and
5.2the discount of 1/3rd is the amount which common experience shows is the likely discount to a Plaintiff’s actual costs on taxation having regard to the nature and length of the proceedings.
6. As to the request in respect of paragraph 14.5:-
6.1the discount of 1/3rd is the amount which common experience shows is the likely maximum discount to the Plaintiff’s actual disbursements on taxation having regard to the nature and length of the proceedings and the issues on which the Plaintiff succeeded at trial and those that it did not succeed on and the amount of hearing time devoted to each;
The disbursements claimed (before any discount) are:-
6.2Court Fees of $7,112.90
6.3Transcript fees of $12,830.00
6.4Photocopying of $30,032.76
6.5Experts’ fees of $6,383.00
6.6Witness fees of $1,810.00
6.7Counsel fees of $336,355.30
The defendants contend that the ‘particulars’ provided by the plaintiff are not proper particulars. They make a number of points. First, they contend that a number of the particulars are in the nature of an argumentative submission rather than particulars. Some of the assertions do appear to be in the nature of submissions and I refer in particular to paragraph three (second sentence), paragraph four (second sentence) and paragraph 5.1 (second sentence). Secondly, the defendants contend that the assertion that Mr Hutton’s approach is one ‘which it is reasonable in the circumstances to expect the Court would take upon taxation’ is so vague as to be embarrassing. Thirdly, the defendants contend that the provision of particulars by cross-reference to the Proof of Debt or Claim is improper. The defendants contend that in any event the Proof of Debt or Claim is premised on an assertion that the approach is ‘broad brush’ and cannot be called in aid of the discharge by the plaintiff of its obligation to provide proper particulars. Finally, the defendants contend that the plea of common experience as to the likely discount is deficient because it does not identify ‘whose common experience, in which court and whether (if there be any common experience) it is in any way referrable to the plaintiff’s assertion as to claims for costs which are not pleaded to be founded in taxable form but rather apparently on actual costs incurred on a time costed basis’.
The function of particulars is well-established. Particulars are designed to give the other party fair notice before trial of the case it will have to meet. This function serves a number of purposes. It avoids surprise and enables the opponent to properly assess the case including the merits of the case and to determine the evidence to be gathered for trial. It enables the Court to rule on the evidence which may be called at trial and the arguments and submissions which may be put.
Although some of the defendants’ criticisms of the particulars have force I have reached the conclusion that the particulars are adequate. The plaintiff has identified in paragraph 14 of its Statement of Claim the methodology it will ask the Court to adopt in determining its claim for costs. The prospects of the Court doing so are not relevant to an application for particulars. The basis of the apportionments alleged by the plaintiff are set out in the Proof of Debt or Claim. Again it is to be noted that the merits of those apportionments are not relevant on an application for particulars. It is true that generally speaking particulars should be provided in one document rather than by seeking to incorporate other documents. That is so for a number of reasons which I do not need to pause to identify. However, the Proof of Debt or Claim clearly sets out the basis of the apportionment and there is a discretion to refuse to order particulars if, as here, to do so would serve no real purpose and simply add to the cost of the proceeding. The plaintiff contends that it is entitled to two-thirds of its actual costs by way of party/party costs. It does so by reference to what it describes as common experience. However, I think the better description is probably by reference to common practice. I do not think it is too strained an interpretation of the particulars to read them in that way. Whatever the merits of the plaintiff’s approach to the quantification of its claim for costs, I think it has sufficiently identified the case it will advance.
In both proceedings I reject the defendants’ application for particulars of the plaintiff’s claims for costs.
The Proofs of Debt or Claim in so far as they relate to the Plaintiff’s claim for an account of profits
Again, I can address the defendants’ complaints by addressing only a small number of the paragraphs in the plaintiff’s Statement of Claim in SAD 183 of 2003.
The plaintiff pleads in paragraphs 41, 50 and 51 of its Statement of Claim the following:
41.At all material times the cost per kilogram of plastic used in the manufacture of the 300S Ultra Vent Kit (‘300S’) was $1.72 per kilogram.
Particulars
41.1The cost is the cost asserted by Mr Colebatch in the first Colebatch affidavit at [66.4] and in the second Colebatch affidavit at [122].
41.2The Plaintiff is not able to give any further particularity of the calculation and relies upon the sworn statements of Mr Colebatch.
50. At all material times the cost for metal clips was $0.1635 per kit.
Particulars
50.1The cost is the cost asserted by Mr Colebatch in the first Colebatch affidavit at [26.33] and in the second Colebatch affidavit at [112].
50.2The Plaintiff is not able to give any further particularity of the calculation and relies upon the sworn statements of Mr Colebatch.
51.At all material times the packaging cost was $0.5793 per kit.
Particulars
51.1The cost is the cost asserted by Mr Colebatch in the first Colebatch affidavit at [26.36] and the second Colebatch affidavit at [112].
51.2The Plaintiff is not able to give any further particularity of the calculation and relies upon the sworn statements of Mr Colebatch.
The defendants sought the following particulars of these allegations:
13. As to paragraph 41 please provide particulars of:
13.1 the material times referred to,
13.2the actual cost, what the cost per kilogram is alleged to have been ‘the costs per kilogram of plastic used in the manufacture of the 300S ultra vent kit’. The particulars provided are no more than a reference to evidence in the form of an affidavit of Mr Colebatch. The affidavit of Colebatch does not depose to the actual cost per kilogram of plastic used ‘at all material times whatever they may be.
21. As to paragraph 50 please:
21.1 identify the material times referred to;
21.2provide particulars of the cost of metal clips per kit pleaded. The particulars provided by reference to Mr Colebatch’s affidavit refers to a sample of invoices that are not clearly identified on the basis of which he has performed a calculation.
22. As to paragraph 51 please:
22.1 identify the material times referred to;
22.2provide particulars of the packaging cost per kit pleaded. The particulars provide in Mr Colebatch’s affidavit refers to his estimates founded on a review of an unidentified sample of invoices on the basis of which he has performed a calculation.
In response to that request the plaintiff said in its Particulars of Claim:
15. As to the request in respect of paragraph 41:-
15.1the material times are the times are [sic] September 1996 to June 1998,
15.2no further particulars of the allegation are necessary as the particulars given identify the manner in which the allegation will be proven.
23. As to the request in respect of paragraph 50:-
23.1the material times are the times which specified in paragraphs 36 to 74 of the Claim namely July 1998 to August 2005,
23.2no further particulars of the allegation are necessary as the particulars given identify the manner in which the allegation will be proven.
24. As to the request in respect of paragraph 51:-
24.1the material times are the times which specified in paragraphs 36 to 74 of the Claim namely July 1998 to August 2005,
24.2no further particulars of the allegation are necessary as the particulars given identify the manner in which the allegation will be proven.
It is apparent from these and similar pleas that the plaintiff will seek to prove many of the allegations forming the basis of its claim for an account of profits by relying on Mr Colebatch’s affidavits.
The problem with the approach adopted by the plaintiff is that its ‘Particulars’ are evidence not statements of fact. That is not permissible (O 11 r 2). There are a number of difficulties with the pleading. First, the pleading involves a reference to another document. Secondly, the particulars detract from the principal allegation. Take paragraph 41 as an example. The principal allegation is of the cost of plastic whereas the particular is of the cost of plastic asserted by Mr Colebatch. Thirdly, the particulars direct attention to Mr Colebatch’s affidavits and what he might be saying in those affidavits. That may be relevant at trial, but it is not relevant at this stage. Whether or not the plaintiff can rely on Mr Colebatch’s affidavits at trial is not presently the issue. The point is that particulars must be particulars of relevant matters of fact. The particulars provided by the plaintiff do not meet this description and should be struck out.
The parties did not take me through the defendants’ request for particulars in relation to each of paragraphs 41, 42, 43, 44, 45, 46, 48, 49, 50 and 51 and make submissions as to the particulars which should be provided assuming the existing particulars are struck out. In another case I would have thought it fairly arguable that no further particulars would be required of at least some of the allegations. For example, the cost of the plastic per kilogram would not seem on the face of it to require further particularisation. However, in this case the plaintiff has indicated quite clearly (by reference to evidence) how it proposes to put its case and that may mean that it would wish to give further particulars or recognises an obligation to do so. In the circumstances I will give the plaintiff the opportunity to provide further particulars if it considers it appropriate and I will give the defendants the opportunity to press their application with respect to particular paragraphs.
CONCLUSIONS
In relation to the plaintiff’s claim for costs in each proceeding, the defendants’ application for particulars is refused. In relation to the plaintiff’s claim for an account of profits in each proceeding, the particulars referring to Mr Colebatch’s affidavits will be struck out and the parties will have leave to make submissions as to any further orders.
I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. Associate:
Dated: 22 December 2011
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