Burden v ESR Group (NZ) Ltd
[2019] NZHC 1546
•3 July 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-002775 CIV-2014-404-002456
[2019] NZHC 1546
UNDER THE Copyright Act 1994 and Fair Trading Act 1986 IN THE MATTER OF
Infringement of copyright and breach of the Fair Trading Act 1986
BETWEEN
IAN JAMES BURDEN
First Plaintiff
PGT-RECLAIMED (INTERNATIONAL) LIMITED
Second Plaintiff
PLANTATION GROWN TIMBERS (VIETNAM) LIMITED
Third Plaintiff
AND
ESR GROUP (NZ) LIMITED
First Defendant
ELISA NORAH MCLENNAN
Second Defendant
Hearing: 14 June 2019 Appearances:
A Brown QC and J Oliver-Hood for Plaintiffs J Miles QC and A Pietras for Defendants
Judgment:
3 July 2019
JUDGMENT OF VENNING J
This judgment was delivered by me on 3 July 2019 at 2.15 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: James & Wells, Auckland
AJ Pietras & Co, Lower Hutt in 2456
Counsel: A Brown QC, Auckland
J Miles QC, Auckland in 2456
BURDEN & Ors v ESR GROUP (NZ) LIMITED & Ors [2019] NZHC 1546 [3 July 2019]
Introduction
[1] The plaintiffs in CIV-2014-404-2456 (the 2014 proceedings) seek leave to amend the third amended statement of claim in those proceedings.
[2] The defendants in CIV-2018-404-2775 (the 2018 proceedings) apply to strike out the plaintiffs’ claim against them.
[3]Both applications are opposed.
Parties
[4] Mr Burden is an Australian citizen and managing director of both Plantation Grown Timbers (International) Limited (Plantation International) and Plantation Grown Timbers (Vietnam) Limited (Plantation Vietnam), (together the Plantation interests). At material times the Plantation interests undertook the design and manufacture of furniture in Vietnam and produced and sold ranges of furniture, including the Irish Coast Collection.
[5] ESR Group (NZ) Limited, (ESR) is a New Zealand company which carries on the business of furniture importer and retailer. It imports and sells furniture under the style Roseberry and Westbury collections. Ms McLennan is the managing director of ESR. The remaining defendants in the 2014 proceedings are not relevant to the present applications.1
The High Court proceedings
[6] In the 2014 proceedings the Plantation interests sued ESR alleging breach of copyright. The copyright claim raised issues of authorship, ownership of the copyright works, copyright qualification, copying, secondary infringement, the effect of the importations and the notice issued by Customs. The Plantation interests also alleged ESR had breached the Fair Trading Act 1986.
1 There was an issue as to whether Mr Morrow and the Morrow interests had been properly served. The plaintiffs only went to trial against ESR. Customs was named as a defendant for the purposes of binding it to any particular orders the Court may make.
[7] Duffy J determined that Mr Burden owned the copyright in the relevant goods.2 In general terms she granted the following relief:3
(a)a declaration that ESR had infringed Mr Burden’s copyright by reproducing his copyright works;
(b)a declaration that ESR’s infringing products reproduced Mr Burden’s copyright works and therefore each was a pirated copy imported other than for private and domestic use;
(c)an injunction restraining ESR from further importing, selling, or dealing with its infringing products or otherwise infringing copyright; and
(d)an order for delivery up of goods and related documents and a direction for the filing of affidavit evidence as to the extent of the importation.
[8] The Judge reserved issues relating to damages or an account of profits.4 She dismissed the Plantation interests’ claim for breach of the Fair Trading Act.5
The appeal
[9] ESR appealed from the findings of breach of copyright. The Plantation interests cross-appealed against the Judge’s finding that neither Plantation International nor Plantation Vietnam were owners or co-owners of the copyright and technical drawings.
[10] The Court of Appeal allowed the cross-appeal.6 It concluded that Plantation International was the owner of the copyright and the technical drawings until 28 October 2003.7 From that date copyright vested in both it and Plantation Vietnam and both were entitled to sue in New Zealand for infringement of copyright.
2 Burden v ESR Group (NZ) Ltd [2016] NZHC 1542.
3 At [307].
4 At [309].
5 At [312].
6 ESR Group (NZ) Limited v Burden [2017] NZCA 217.
7 At [53].
[11] The Court of Appeal also allowed the appeal in part. The Court accepted that, while the High Court was correct to find that ESR was liable for secondary infringement, it was only liable in respect of the importations of goods into New Zealand on 28 August and 5 and 12 September 2014, but not in respect of an earlier importation on 30 July 2014.8
The proposed amended claim
[12] The Plantation interests now seek leave to amend their claim against ESR in the 2014 proceeding to allege, in addition to the claim for secondary infringement, a further and new cause of action alleging primary infringement in relation to the Roseberry and Westbury Collections sold or offered for sale by ESR from 15 May 2013. The Plantation interests seek a declaration of copyright infringement, and an account of profits.
[13] By way of brief explanation, Part 2 of the Copyright Act 1994 is headed “Infringement of copyright”. The two subheadings are “Primary infringement of copyright” and “Secondary infringement of copyright”. Primary and secondary infringement are different causes of action, with different requirements.
[14] Primary infringement can arise in a number of ways. Of relevance to the plaintiff’s application to amend their third amended statement of claim is s 31 of the Copyright Act 1994, which provides:
31 Infringement by issue of copies to public
The issue of copies of a work to the public is a restricted act in relation to every description of copyright work.
The term “issue” is defined in s 9 of the Copyright Act 1994:
9 Meaning of issue to the public
(1)References in this Act to the issue of copies of a work to the public mean the act of putting into circulation copies not previously put into circulation; and do not include the acts of—
(a)subsequent distribution or sale of those copies; or
8 At [64].
(b)subject to subsections (2) and (3), subsequent hiring or loan of those copies; or
(c)subsequent importation of those copies into New Zealand; or
(d)distribution of imported copies that are not infringing copies within the meaning of section 12 subsequent to their importation into New Zealand.
[16] As regards a secondary infringement, the relevant provisions in this case are ss 35 and 36 of the Copyright Act 1994. Those sections relevantly provide:
35Infringement by importation
(1)A person infringes copyright in a work if—
(a)that person imports into New Zealand an object that is an infringing copy of the work and,—
(i)in the case of a work that is a sound recording, film, or computer program to which subsection (6) applies, that person knows or ought reasonably to know that the object is an infringing copy; or
(ii)in the case of other works, that person knows or has reason to believe that the object is an infringing copy; and
(b)the object was imported into New Zealand without a copyright licence; and
(c)the object was imported into New Zealand other than for that person’s private and domestic use.
36Possessing or dealing with infringing copy
Copyright in a work is infringed by a person who, in New Zealand, other than pursuant to a copyright licence,—
(a)possesses in the course of a business; or
(b)in the course of a business or otherwise, sells or lets for hire; or
(c)in the course of a business, offers or exposes for sale or hire; or
(d) in the course of a business, exhibits in public or distributes; or w(e) distributes otherwise than in the course of a business to such
an extent as to affect prejudicially the copyright owner—
an object that is, and that the person knows or has reason to believe is, an infringing copy of the work.
[17] The distinction between the two forms of copyright infringement turns on both the type of offending act, and for secondary infringement, the requirement that the defendant either knew or ought reasonably to have known that the object is an infringing copy. In an action for primary infringement there is no requirement on the plaintiff to show that the defendant had actual or constructive knowledge.
[18] As to the kind of offending act, in order for a defendant to commit a primary infringement, the act complained of must involve putting an object into circulation which has not previously been put into circulation. The High Court in Inverness Medical Innovations Inc v MDS Diagnostics Ltd considered that putting an object into circulation requires the release of a copy onto the market such that it may be passed on to other members of the public.9 In contrast, an action for secondary infringement does not require the plaintiff to show that the defendant was the first to release the copy onto the market.
[19] The application to amend is made under rule 7.7 of the High Court Rules 2016, which provides:
7.7 Steps after close of pleadings date restricted
(1)No statement of defence or amended pleading or affidavit may be filed, and no interlocutory application may be made or step taken, after the close of pleadings date without the leave of a Judge.
(2)Subclause (1) does not apply to—
(a)an application for leave under that subclause; or
(b)a pleading or an affidavit that merely brings up to date the information before the court; or
(c)an application for amendment of a defect or an error under rule 1.9.
[20] In most cases the application for leave to amend will be made prior to or during the first substantive hearing. It will only be in rare cases where an application is made following a substantive trial. In such a case parties are not able to amend their pleaded
9 Inverness Medical Innovations Inc v MDS Diagnostics Ltd (2010) 93 IPR 14 (HC) at [253]– [254].
case in light of what had happened at trial or to take any other step without first obtaining leave of the Court.10
[21] The overriding consideration on an application for leave to amend pleadings is whether it is in the interests of justice to grant the amendment.11
[22] As noted, the proposed amendment includes a fresh cause of action alleging primary infringement. Mr Brown QC accepted that the case pursued before Duffy J in the 2014 proceedings was limited to a claim for breach of secondary infringement. That is apparent from the wording of the pleading in the third amended statement of claim:
25.The First Defendant has infringed the Plaintiffs’ copyright in the Plaintiffs’ Copyright Works by:
25.1Importing into New Zealand an infringing copy of one or more of the Plaintiffs’ Copyright Works knowing or having reason to believe that the object was an infringing copy;
25.2Possessing or intending to possess an infringing copy of the Plaintiffs’ Copyright Works, knowing or having reason to believe that the object was an infringing copy;
25.3Issuing or intending to issue an object infringing the Plaintiffs’ Copyright Works to the public in New Zealand, knowing or having reason to believe that the object was an infringing copy.
[23] The pleaded wording closely follows the relevant wording of ss 35 (importation) and s 36(b) and (c) (dealing) of the Copyright Act 1994 and repeats the requirement for secondary infringement that ESR knew or had reason to believe the items were infringing copies.
[24] The proposed amended claim also refers to further infringing items that were not expressly pleaded in the 2014 proceeding. The ESR interests accept that a number of the items in schedule 2 to the amended claim have shape similarity in material aspects to the Plantation interests’ copyright works. On that basis they could fall within the existing finding of secondary infringement and so be the subject of an
10 London v Smallbone [2018] NZCA 131 at [19].
11 See for example: Elders Pastoral v Marr (1987) 2 PRNZ 383 (CA) at 384 & 385.
amended claim for loss of profits. They do not, however, accept the Plantation interests can now amend their claim to pursue damages for primary infringement or for secondary infringement prior to the “reason to believe” date confirmed by the Court of Appeal of 28 August 2014.
[25] Mr Brown submitted that the Court should not take a restrictive approach to the amendment sought. He submitted that at the remedies phase of an intellectual property case the Court will often permit the plaintiff to extend the inquiry to related infringements which amount to new causes of action if it is fair and convenient to do so. He referred to Unilin Beheer BV v Berry Floor NV; AP Racing Ltd v Alcon Components Ltd; Nokia Corporation v Liu; and Fabio Perini SPA v LPC Group PLC,12 and extracts from leading intellectual property texts Copinger and Skone James on Copyright; Laddie, Prescott and Vitoria: The Modern Law of Copyright; Terrell on the Law of Patents; and The Modern Law of Patents to support that submission.13
[26] Mr Brown referred to the following observation by Jacob LJ in Unilin Beheer BV v Berry Floor NV:14
Now it is true that in an inquiry as to damages or account of profits the patentee is allowed to claim relief for types of alleged infringement not ruled on by the trial court. This saves the formal issuance of fresh proceedings in respect of these and is permitted as a matter of convenience, see General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd [1975] RPC 203 at 207. And of course if, in the inquiry or account, the patentee alleges a type of infringement not considered by the trial court, the court conducting the inquiry or account will have to rule on whether it falls within the scope of the patent.
[27] Mr Brown submitted that the policy basis was explained by Henry Carr J in AP Racing Ltd v Alcon Components Ltd as:15
I would add that it is in accordance with the modern approach to intellectual property cases in general that the rights-holder should not be required to
12 Unilin Beheer BV v Berry Floor NV [2007] EWCA Civ 364; AP Racing Ltd v Alcon Components Ltd [2016] EWHC 815 (Ch), [2016] FSR 28; Nokia Corporation v Liu [2009] FCAFC 138, (2009) 179 FCR 422; and Fabio Perini SPA v LPC Group PLC [2012] EWHC 911 (Ch).
13 Gillian Davies, Nicholas Caddick and Gwilym Harbottle Copinger and Skone James on Copyright (17th ed, Sweet & Maxwell, London, 2016) vol 1 at [21-280]; Speck and others Laddie, Prescott and Vitoria: The Modern Law of Copyright (5th ed, LexisNexis, 2018) vol 1 at [26.28]; Colin Birss and others Terrell on the Law of Patents (18th ed, Sweet & Maxwell, London, 2016) at [21- 84]; and Phillip Johnson, Ashley Roughton and Trevor Cook (eds)The Modern Law of Patents (3rd ed, LexisNexis, London, 2014) at [15.49].
14 Unilin Beheer BV v Berry Floor NV [2007] EWCA Civ 364 at [49].
15 AP Racing Ltd v Alcon Components Ltd [2016] EWHC 815 (Ch), [2016] FSR 28 at [24].
produce evidence of every possible infringement in the liability hearing but merely to bring forward sufficient examples so that the case of infringement can be dealt with in a cost-effective and expeditious way. To require the claimant to specify all infringements and to introduce them into the liability trial would be wasteful, time consuming and a recipe for delay.
[28] He also referred to the following passage in Copinger and Skone James on Copyright:16
The inquiry will extend to all infringements of the type proved at trial, and the court may permit it to extend to related infringements which amount to new causes of action if this is fair and convenient. The question of introducing new causes of action into the inquiry should be specifically raised and adjudicated upon by the court at the outset of the inquiry.
[29] In Nokia, on appeal from a single judge, the Federal Court of Australia confirmed the practice that an applicant in trademark infringement proceedings was not required to establish all instances of infringement at the liability stage.17
[30] While he had not found any New Zealand case law authority on the practice in New Zealand Mr Brown submitted it was nevertheless consistent with the overriding objective of the High Court Rules to secure the just, speedy, and inexpensive determination of the proceeding to permit the amendment at this stage.18
[31] In support of a broader approach, Mr Brown submitted it was fair and convenient to permit the amendment to the pleading and the interests of justice were met for the following reasons:
(a)the proposed new cause of action in this case (the primary breach) fell within the orders made by Duffy J;
(b)the degree of similarity between the new cause of action (and type of infringement) in the first pleading, including the parties, copyright works, infringing articles and infringing acts;
16 Gillian Davies, Nicholas Caddick and Gwilym Harbottle Copinger and Skone James on Copyright
(17th ed, Sweet & Maxwell, London, 2016) vol 1 at [21-280].
17 Nokia Corporation v Liu [2009] FCAFC 138, (2009) 179 FCR 422 at [34].
18 High Court Rules 2016, r 1.2.
(c)the circumstances in which the plaintiffs came to learn about the new infringing copies and causes of action;
(d)whether the plaintiffs would be unfairly prejudiced as to costs and delay by having to prove the new cause of action at a second trial;
(e)whether the defendants would be unfairly prejudiced by the introduction of a new cause of action at the remedies phase, rather than the liability phase;
(f)the limited extent of the evidence required to prove the new cause of action; and
(g)it would be an efficient use of judicial resources.
Do the amendments fall within the orders made by Duffy J?
[32] An important consideration is whether the amendment (and in this case) the new cause of action for primary infringement falls within the scope of the orders made by the Judge following the liability trial.
[33]In her judgment Duffy J made the following orders:19
(c)an injunction to restrain ESR, its servants, officers, marketers, distributors or agents, from reproducing, importing, distributing, advertising, offering for sale, selling or otherwise dealing with the infringing Roseberry products or otherwise infringing the plaintiffs’ copyright or converting the same for its own use;
(d)an order for delivery up of all goods and any related documents in the possession, custody, power or control of ESR, the sale, supply or use of which by ESR or its servants or its agents would be an infringement of the abovementioned injunction;
(e)an order that ESR makes and serves upon Mr Burden’s solicitor an affidavit:
(i)detailing quantities of the infringing Roseberry products that have been imported into New Zealand by itself or in concert with any other party, including but not limited to the second and third defendants; and
19 Burden v ESR Group (NZ) Ltd [2016] NZHC 1542 at [307].
(ii)detailing the name, address and contact details of each person, firm or company to whom ESR has supplied or offered to supply the infringing Roseberry products; and listing and exhibiting copies of all documents relating to each such importation, supply or offer to supply;
(f)an order that ESR make and serve on Mr Burden’s solicitors an affidavit:
(i)detailing quantities of the infringing Roseberry products that have been exported to New Zealand whether by itself or in concert with any other party;
(ii)detailing the name, address and contact details of each person, firm or company to whom the second and/or third defendant has supplied or offered to supply the infringing Roseberry products; and listing and exhibiting copies of all documents relating to each such importation, supply or offer to supply;
…
[34] Mr Brown argued that the additional infringements and the claim for primary infringement fell squarely within the Judge’s orders. But the orders made by the Judge for injunctive and other relief must be considered in the context of and be informed by the scope of the proceeding before the Court. What was before the Court was a claim for secondary infringement.20 There was no claim for primary infringement.
[35] The reference in the injunction to restraining ESR from selling or otherwise dealing with the infringing Roseberry products or otherwise infringing the plaintiffs’ copyright is consistent with the pleading of secondary infringement, referring as it does to the importation and issuing the infringing copies to the public with the necessary knowledge. I do not accept Mr Brown’s submission that the order encompasses issuing copies to the public as defined by s 31 of the Copyright Act. Section 31 provides for primary infringement which Mr Brown accepts was not pleaded. When the orders are considered in context they are entirely consistent with the pleading which refers to issuing copies to the public with the knowledge requirement stipulated under s 36(b) and (c) of the Act. The declarations are also consistent with that interpretation.
20 Burden v ESR Group (NZ) Ltd [2016] NZHC 1542 at [242].
The similarity between the existing and proposed causes of action
[36] In my judgment there is good reason to distinguish between permitting an amendment to enable all possible infringements that may follow from the initial liability phase, and amendments which seek to plead and raise a different and separate basis for liability. The first should be permitted (and indeed as much is acknowledged by ESR in this case), the second should not. The Court has resolved the issue of the Plantation interests’ ownership of the copyright and found ESR has been liable for secondary infringement from 28 August 2014, but, as yet, there has been no finding that ESR has committed primary infringement.
[37] While it is open and consistent with the rules to allow an amendment to identify new infringing items consistent with the infringement found following a liability trial, it is quite a different issue to suggest that a fresh cause of action requiring the proof of different elements should be permitted. For example, there may be an argument that the items it is said ESR issued had previously been put into circulation, and thus it was not the first entity to do so.
[38] The Fabio Perini case relied on by Mr Brown provides an example of the application of the principles.21 The judgment was on the scope of the inquiry into damages and the principles upon which the assessment was to be undertaken. Fabio Perini alleged breach of the patent against both the Paper Converting Machine Company Italia (PCMC) and the Paper Converting Machine Company Limited (PCMC (UK)) as makers and sellers of an infringing rotoseal machine. Fabio Perini also sued two manufacturers and suppliers of paper products who used the machine, LPC Group Plc (LPC Group) and LPC (UK) Ltd (LPC). Fabio Perini’s case was that the two original offending rotoseal machines had been made at PCMC’s factory in Italy, shipped to the UK and installed and commissioned by engineers of PCMC and/or engineers of PCMC (UK) Ltd in the premises of and used as part of the manufacturing capability of LPC Group and/or LPC. In the substantive proceeding Floyd J found the machines were purchased from PCMC in Italy. LPC had imported the machines and operated them, infringing the patent. But the Judge held the evidence inadequate to establish an offer for sale or supply by PCMC (UK). PCMC were jointly liable with
21 Fabio Perini SPA v LPC Group PLC [2012] EWHC 911 (Ch).
LPC for infringing the patent. It was a common design. LPC Group was not liable. The Judge then directed an inquiry into damages.
[39]In its amended claim Fabio Perini sought to reopen its claim in two ways:
(a)first in relation to the rotoseal supplied to LPC. It alleged PCMC infringed the patent by supplying and/or offering to supply LPC in the UK; and
(b)while the case for infringement advanced at trial had been based upon the supply of infringing machines by PCMC (UK) (which was rejected) and the use by LPC of the patented process (for which PCMC was liable as joint tortfeasor) the damages case was now advanced on the basis PCMC had conducted itself in the same way in relation to the supply of rotoseals to a third party, Georgia-Pacific.
[40] The Judge concluded that Fabio Perini could not run a supply case against PCMC in respect of the LPC contracts. Floyd J had expressly rejected the supply case insofar as it related to PCMC (UK) and, while not expressly rejecting the supply case against PCMC, given the issues raised on the pleadings for relief claimed and the order made it was clear that the Judge must have rejected the supply case. Res judicata applied.22 Alternatively, it would be an abuse of process for Fabio Perini to pursue that amended claim.23
[41] The Judge then considered whether the amendment seeking to claim in respect of the supply to a third party, Georgia-Pacific should be permitted. He said that the question before him was whether the plaintiff was entitled to claim relief for a type of infringement, on which he failed at trial in respect of the defendants therein named, but now seeks to assert against a third party.24 In the course of his decision he noted:25
In their strictest and most literal sense these declarations related only to infringements arising from the two Original Rotoseals sold to LPC. But PCMC was right to concede that upon its proper interpretation the Order
22 At [25].
23 At [34].
24 Fabio Perini SPA v LPC Group PLC [2012] EWHC 911 (Ch) at [47].
25 Fabio Perini SPA v LPC Group PLC [2012] EWHC 911 (Ch) at [45]–[46].
would permit the inquiry to cover infringement by use (and joint and several liability for infringement by use) arising from the sale of Original Rotoseals to any other purchaser on terms which included a provision by PCMC of installation and commissioning services of the type provided to LPC.
But before me it has been argued that it is permissible to take a much broader view and to extend the inquiry to infringements other than infringements by use.
The Judge then referred to the General Tire26 case noting that, in that case, the question was addressed as to whether a number of other compounds and other tyres also infringed the patent, before concluding:27
This was an exceptional case and the reason why this course was taken does not appear from the report (though there is a reference to the directions given and an observation on the convenience of the course adopted at [1975] RPC 203, 207).
[42] The Judge also considered the case of Building Product Design Ltd v Sandtoft Roof Tiles Ltd.28 In that case the claimant successfully established infringement of its patent by the defendant who made “clay half-round ridge vent roof tiles”. An inquiry as to damages was pursued. In it the claimant sought to include claims involving: (a) concrete half-round ridge vent roof tiles; (b) clay “hog’s back” ridge tiles; and clay “wing angle” ridge tiles. Neither of those categories had been included in the particulars of infringement. The Judge refused to permit the claim to be amended to pursue those claims and later refused a second action to be brought in relation to the “hog’s back” ventilators on the ground that it ought to have been alleged in the first proceeding.
[43] Having referred to that case the Judge ultimately ruled the inquiry was to be limited to the liability of LPC for its infringement by use for which damages PCMC was also liable as a joint tortfeasor.29 The plaintiff was not entitled to add a new cause of action, against a third party, similar in terms to a cause of action on which it failed at trial.
26 Fabio Perini SPA v LPC Group PLC [2012] EWHC 911 (Ch), citing General Tire [1971] RPC 173.
27 Fabio Perini SPA v LPC Group PLC [2012] EWHC 911 (Ch) at [46].
28 Fabio Perini SPA v LPC Group PLC [2012] EWHC 911 (Ch), citing Building Product Design Ltd v Sandtoft Roof Tiles Ltd [2004] FSR 823.
29 Fabio Perini SPA v LPC Group PLC [2012] EWHC 911 (Ch) at [51].
[44] In the present case the liability established is secondary infringement, the secondary infringement being by way of importation and selling with the requisite knowledge as from 28 August 2014. While it is open to amend the pleading at the inquiry stage to encompass the additional items of furniture as particulars it is not open to plead and establish a separate and distinct cause of action for primary infringement given the issues that such a cause of action can give rise to.
[45] Mr Brown also relied on the Court of Appeal decision in Jeans West Corporation (NZ) Ltd v G-Star Raw CV to support his argument there was little difference between the two causes of action.30 In that case the Judge had held the plaintiff had proved secondary infringement but did not make a finding of primary infringement. Despite that, on appeal the Court made a finding of primary infringement as well. The Court accepted that, although the pleading was perhaps ambiguous, primary infringement was raised before the Court.31 It was confirmed in the prayer for relief. The Court considered the Judge was wrong not to have addressed the issue of primary infringement. It ruled on it. The Jeans West case is quite different and able to be distinguished. The pleading in the present case is entirely consistent with secondary infringement. Primary infringement was not part of the plaintiff’s case.
[46] Further, in the Jeans West case counsel for the plaintiff had opened on both primary and secondary infringement without objection by counsel for the defendant. Counsel for the defendant had only suggested that the pleadings did not allege primary infringement when he opened the defendants’ case. The issue of primary infringement was before the Court in the Jeans West case. By contrast, in the present case the issue of primary infringement was not before the Court on the pleadings before it. That is the reason the amendment now sought is required.
Circumstances in which plaintiffs came to learn of new cause of action
[47] Mr Miles QC submitted that if the Plantation interests had wished to pursue primary infringement of copyright they should have done so before Duffy J. He noted
30 Jeans West Corporation (NZ) Ltd v G-Star Raw CV [2015] NZCA 14.
31 At [84].
that the Plantation interests would or should have been aware that ESR had sold the items in issue. In its amended statement of defence ESR expressly admitted:
(a)importing into New Zealand;
(b)keeping for sale in New Zealand;
(c)offering for sale in New Zealand; and
(d)selling in New Zealand
the items identified in the schedule to the Plantation interests’ amended statement of claim but put in issue ownership of the copyright and whether they infringed.
[48] Further, ESR counterclaimed in relation to the importations held by Customs. In support of its counterclaim ESR provided discovery which disclosed sales. While the documents were only provided on 27 August 2015, I am unable to accept Mr Hazel’s explanation for not appreciating the documents confirmed sales by ESR as a reasonable one in all the circumstances. While I accept the Plantation interests’ (and their advisers’) focus would have been on preparation of their claim in relation to secondary infringement, they should have been on notice that ESR had made sales of the items.
[49] It follows I do not accept the submission that the Plantation interests were not aware ESR had made actual sales of the infringing items.
Prejudice to the parties
[50] I consider Mr Brown’s submission that, if the Court was to take the view the allegations of primary copyright infringement were not permitted as an amendment it would lead to significant further work and waste of resources in these types of cases to be overstated. The focus in the hearing before Duffy J was on the importations. A party in the position of the plaintiff alleging copyright infringement will usually be able to point to specific items of sale as well as importations, and if an item has been
sold or is offered for sale in breach of s 31 it will be a relatively simple matter to plead primary as well as the secondary infringement. The plaintiff did not do so in the present case.
[51] In my judgment ESR would be unfairly prejudiced at this stage of these proceedings by having to face a new cause of action at the inquiry into damages phase of the 2014 proceedings. They are entitled to have the 2014 proceedings finalised on the basis they faced at the liability trial and as confirmed by the Court of Appeal judgment.
The extent of the evidence required
[52] The evidence may be limited to prove primary infringement, but it cannot be said to be in the region of the one hour, or half a day as suggested in a number of the authorities referred to by Mr Brown. Issues may arise on the subject of “issue to the public” under s 9 of the Act.32
Efficient use of judicial resources
[53] The consideration of the efficient use of judicial resources is, at most, neutral. If the plaintiffs succeed in opposing the application to strike out the fresh proceedings, then the same sort of resource will be required although there would be two separate hearings. But the focus of the first hearing on the damages in relation to damages arising from the 2014 proceeding should be relatively straightforward.
Result – application to amend
[54] For those reasons I do not consider it to be in the interests of justice to permit the amendments sought to plead primary infringement and secondary infringement prior to 28 August 2014. The application to amend the pleadings to cover those aspects is declined. Leave is, however, granted to amend the pleadings to represent the Court of Appeal’s findings as to ownership of copyright and to include the inquiry for damages for secondary infringement in relation to the additional items of furniture
32 See for example: Ian Finch (ed) James & Wells: Intellectual Property Law in New Zealand (3rd ed, Thomson Reuters, Wellington, 2017) at 410.
identified in the schedules to the proposed amended claim (except for the sleigh bed as its copyright was not established at the first hearing) but limited to infringement after 28 August 2014.
The 2018 proceedings
[55] In the 2018 proceedings the Plantation interests sue ESR and Ms McLennan alleging both primary and secondary infringement of copyright by ESR and by Ms McLennan. The claim against Ms McLennan is on the basis that at all relevant times she has been a director of ESR. They also plead a second cause of action against ESR for breach of the Fair Trading Act.
[56]The application to strike out is advanced on the basis of:
(a)res judicata;
(b)abuse of process;
(c)insufficient particulars to establish a cause of action.
[57] During submissions Mr Brown advised the Court that the Plantation interests no longer pursued the Fair Trading Act cause of action. That was a proper concession. Such a claim is a clear abuse of process, that issue having been determined against the Plantation interests in the 2014 proceeding.33 For the same reason it would be an abuse of process to pursue a further claim for secondary infringement predating the relevant date which the Court of Appeal found ESR had knowledge from. That issue has been finally determined against the plaintiffs.34 Further, I accept the submissions for the ESR applicants that the only apparent reason to now seek to pursue Ms McLennan is an attempt to place pressure on ESR. The pleading against her is general and adds nothing to the claim against ESR. There is no new evidence to support a claim against her. The claim against Ms McLennan is also an abuse of process.
33 Henderson v Henderson [1843-60] All ER Rep 378.
34 Shiels v Blakely [1986] 2 NZLR 262, 266.
[58] That leaves the claim for primary infringement against ESR. It has been raised for the first time and was not dealt with by the Court in the 2014 proceedings.
[59] Mr Miles submitted that the ESR application to strike out the second proceeding was based on Henderson v Henderson principles.35 He made several points in support. He submitted the plaintiffs could and should have pursued the claim for primary infringement in the 2014 proceedings and to seek to do so now was an abuse. He submitted the plaintiffs were aware in the 2014 proceedings that the defendants had imported infringing copies of the plaintiffs’ furniture and had issued them for sale. He made the point that the defendants had formally pleaded that the first defendant ESR had imported, offered for sale and sold the furniture in New Zealand.
[60] Mr Miles also emphasised that the documents discovered on 27 August 2015 in advance of the trial on 7 September confirmed ESR had made sales of Roseberry furniture from April 2013. He submitted that despite that, the plaintiffs chose to rely on s 35 and to go to trial on secondary infringement rather than primary infringement. It was an abuse of process to now seek to raise a claim for primary infringement of copyright.
[61] Next, Mr Miles pointed to the delay between the outcome of the appeal and the issue of the 2018 proceedings. He submitted it was only after the plaintiffs became aware of the minimal number of imports post 28 August and the limited damages (which the defendants had agreed to pay) arising from the secondary infringement that the plaintiffs decided to issue the second proceeding in 2018.
[62] Mr Miles submitted it was an abuse of process for the plaintiffs to now pursue a fresh cause of action. ESR would be seriously prejudiced by having to defend a new cause of action based on essentially the same facts litigated earlier. It had a legitimate expectation the plaintiffs had run their best arguments at trial. ESR had been put to considerable cost and inconvenience to continue opposing these claims. Mr Miles
35 Henderson v Henderson [1843-60] All ER Rep 378.
submitted ESR’s case was supported by the discussion of the principles in: Johnson v Gore Wood & Co; Aldi Stores Ltd v WSP Group Plc; and Stuart v Goldberg Linde.36
[63] Mr Brown submitted that it could not be an abuse of process to pursue a claim which had not been raised before. He relied on the case of AP Racing Ltd v Alcon Components Ltd.37
[64] In that case AP Racing had successfully pursued proceedings for patent infringement of certain disc brake calipers against Alcon. It had thereafter embarked on an inquiry as to damages. AP Racing had intended to include claims in relation to a further ten brake calipers at the damages stage of the inquiry but abandoned that proposal and issued a fresh claim in relation to the calipers. Alcon argued that seven of the ten were publicly available at the time of the first action and that the second proceedings were an abuse of process. Henry Carr J held that AP Racing was under no general duty to exercise reasonable diligence to ascertain whether it had a potential further cause of action against Alcon. This was not a case of a party having actual knowledge of the facts keeping them secret for use on another day, as in Aldi and Stuart.
[65] Mr Miles submitted the AP Racing case was distinguishable on its facts. He argued it was crucial in that case the plaintiffs had advised the defendants at the outset they believed there were other infringing products in the market and had sought details from the defendants. The defendants had declined to give the details and had later declined the option of having the further goods included in their inquiry. In that case it was not surprising the issue of the later proceedings was ruled not to be an abuse of process.
[66] The most helpful explanation of the Henderson v Henderson principle for present purposes is to be found in the decision of Lord Bingham in Johnson v Gore
36 Johnson v Gore Wood & Co [2000] UKHL 65; [2001] 1 All ER 481; Aldi Stores Ltd v WSP Group Plc [2007] EWCA Civ 1260, [2008] 1 WLR 748; and Stuart v Goldberg Linde [2008] EWCA Civ 2, [2008] 1 WLR 823.
37 AP Racing Ltd v Alcon Components Ltd [2016] EWHC 815 (Ch), [2016] FSR 28.
Wood & Co where, after discussing the development of the law after Henderson v Henderson Lord Bingham summarised the position as follows:38
It may very well be, as has been convincingly argued (Watt 'The Danger and Deceit of the Rule in Henderson v. Henderson: A new approach to successive civil actions arising from the same factual matter' (2000) 19 CJQ 287), that what is now taken to be the rule in Henderson v Henderson has diverged from the ruling which Wigram V C made, which was addressed to res judicata. But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in early proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.
[67] A relevant observation for present purposes is that it is wrong to hold that, because a matter could have been raised in earlier proceedings, to raise it in later proceedings is necessarily abusive. That is too dogmatic an approach. What is
38 Johnson v Gore Wood & Co [2000] UKHL 65, [2001] 1 All ER 481, at 498-499.
required is a broad, merits-based judgment. The issue is whether in all the circumstances the plaintiffs’ claim is an abuse.
[68] In the present case, taking a strict view, or in the words of Lord Bingham a dogmatic approach, the Plantation interests could have raised a cause of action for primary infringement in the 2014 proceedings. It would have required an application for leave but it is likely such application would have been granted. That however does not address the crucial issue on this point which is whether in now seeking to pursue a cause of action based on primary infringement the Plantation interests are misusing or abusing the process of the Court.
[69] There is another relevant factor. In Johnson v Gore Wood Lord Millett emphasised the important right of a citizen’s right to access to the Court:39
It is one thing to refuse to allow a party to relitigate a question which has already been decided; it is quite another to deny him the opportunity of litigating for the first time a question which has not previously been adjudicated upon. This latter (though not the former) is prima facie a denial of the citizen's right of access to the court conferred by the common law and guaranteed by art 6 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (Rome, 4 November 1950; TS 71 (1953); Cmd 8969). While, therefore, the doctrine of res judicata in all its branches may properly be regarded as a rule of substantive law, applicable in all save exceptional circumstances, the doctrine now under consideration can be no more than a procedural rule based on the need to protect the process of the court from abuse and the defendant from oppression. In Brisbane City Council v A G for Queensland [1978] 3 All ER 30 at 36 , [1979] AC 411 at 425 Lord Wilberforce, giving the advice of the Judicial Committee of the Privy Council, explained that the true basis of the rule in Henderson v Henderson is abuse of process and observed that it—
'ought only to be applied when the facts are such as to amount to an abuse, otherwise there is a danger of a party being shut out from bringing forward a genuine subject of litigation.'
There is, therefore, only one question to be considered in the present case: whether it was oppressive or otherwise an abuse of the process of the court for Mr Johnson to bring his own proceedings against the firm when he could have brought them as part of or at the same time as the company's action. This question must be determined as at the time when Mr Johnson brought the present proceedings and in the light of everything that had then happened. There is, of course, no doubt that Mr Johnson could have brought his action as part of or at the same time as the company's action. But it does not at all follow that he should have done so or that his failure to do so renders the present action oppressive to the firm or an abuse of the process of the court.
39 Johnson v Gore Wood & Co [2000] UKHL 65; [2001] 1 All ER 481, at 525-526.
[70] While there is force in Mr Miles’ submission that the AP Racing case was perhaps an easy case for the Court to find the second proceedings were not an abuse given the circumstances of that case, in my judgment it would not be an abuse of process to permit the Plantation interests to pursue ESR with a claim for primary infringement.
[71] The issue of primary infringement was not before this Court or the Court of Appeal in the 2014 proceedings. While there may have been information available to the Plantation interests and their advisers which should have put them on notice that such a claim might be available, the focus of the pleading in those 2014 proceedings was on the ownership of the copyright and then on the importation and secondary infringement. In Stuart v Goldberg Linde it was a relevant consideration that not all the evidence was before the Court.40 In that case the information which provided the basis for the new claim also came from the defendant himself, at a late stage in the proceedings. It would be draconian to prevent the Plantation interests from pursuing a claim for primary infringement merely on the basis that they failed to seek leave to amend their pleadings in the 2014 proceedings to add a claim of primary infringement.
[72] To deny the Plantation interests the right to pursue a claim for primary infringement in the circumstances of this case would be to deny them their right under s 27 New Zealand Bill of Rights Act 1990 to access the Court to have that claim heard.
[73] On a strike out application such as this, ESR is not at this stage able to satisfy the Court that the proposed claim for primary infringement is clearly legally untenable. The test for strike out is different to the test on the application for leave to amend pleadings.
[74] There will be further costs to ESR in defending the proceeding. That is not determinative either. In the AP Racing case in answer to the argument that the defendants would incur further costs and inconvenience facing the second proceedings, Henry Carr J noted that all actions involve cost and inconvenience to a defendant, the question however is whether the second action is oppressive.41 The
40 Stuart v Goldberg Linde [2008] EWCA Civ 2, [2008] 1 WLR 823.
41 AP Racing Ltd v Alcon Components Ltd [2016] EWHC 815 (Ch), [2016] FSR 28 at [45].
present proposed claim for primary infringement should not be an unduly complicated proceeding. The issues of ownership of copyright have been resolved and are res judicata. The only issues in the second proceeding will be whether there has been primary infringement by the defendants and if so the damages that follow.
Result
[75] For those reasons the application to strike out the plaintiffs’ entire claim in the 2018 proceedings is dismissed. The application is however successful to the extent that the causes of action alleging breach of the Fair Trading Act and secondary infringement are struck out as an abuse of process, as is the cause of action against the second defendant.
Costs
[76] The ESR interests have successfully opposed the application to amend in the 2014 proceedings. They have partially succeeded in the strike out on the 2018 proceedings. The Plantation interests have succeeded in maintaining their claim for primary infringement in the 2018 proceedings.
[77] The issue addressed by these applications has been created by the failure of the plaintiffs to seek leave to amend the 2014 proceedings to pursue the claim for primary infringement. In the circumstances a fair result is for the ESR interests to have costs on one application and the hearing on a 2B basis, together with disbursements as fixed by the Registrar. I certify for second counsel for the hearing.
Venning J
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