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The City of Sydney v Streetscape Projects (Australia) Pty Limited & Anor [2011] NSWSC 831 (4 August 2011)

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The City of Sydney v Streetscape Projects (Australia) Pty Limited & Anor [2011] NSWSC 831 (4 August 2011)

Last Updated: 5 August 2011



Supreme Court

New South Wales

Case Title:
The City of Sydney v Streetscape Projects (Australia) Pty Limited & Anor


Medium Neutral Citation:


Hearing Date(s):
1/08/2011 - 4/08/2011


Decision Date:
04 August 2011


Jurisdiction:
Equity Division - Commercial List


Before:
Einstein J


Decision:
The order of the Court is to disallow the following paragraphs of the defendant's sixth further amended commercial list response:
(1)Paragraph 4(a) - particulars 2A, 2B and 4B
(2)Paragraph 15(h) (which is no longer pressed by the defendants)
(3)Paragraph 16(e)
(4)Paragraph 16(f)
(5)Paragraphs 17(e)(ix) to 17(e)(xiv)
(6)Paragraph 17(h)
(7)Paragraph 17(ta)
(8)Paragraph 17(tb)
(9)Paragraph 17AB(b)
(10)Paragraph 17AC
(11)Paragraph 23A of the further amended commercial list cross-claim summons and paragraphs 171A - 171C of second further amended commercial list cross claim statement.



Catchwords:
Leave to amend pleadings - Surprise - Appropriateness of new counsel being granted leave to amend - Case management


Legislation Cited:


Cases Cited:
Adamson v New South Wales Rugby League Limited [1991] FCA 9; (1991) 27 FCR 535
Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Ply Ltd [1973] HCA 40; (1973) 133 CLR 288
Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27
Barnes v Addy (1874) 43 LJ Ch 513
Grant v John Grant & Sons Pty Ltd [1954] HCA 23; (1954) 91 CLR 112
Haynes v Doman [1899] 2 Ch 13
Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Lid [1894] AC 535
Sali v SPC Limited (1991) 9 ACLC 1511


Texts Cited:


Category:
Procedural and other rulings


Parties:
The City of Sydney (Plaintiff)
Streetscape Projects (Australia) Pty Limited (First Defendant)
Moses Edward Obeid (Second Defendant)


Representation


- Counsel:
Counsel:
Mr T Jucovic SC, Mr S Climpson, Mr C Bova (Plaintiff)
Mr S Couper QC, Mr J Gooley, Mr R Higgins (Defendants)


- Solicitors:
Solicitors:
Holding Redlich (Plaintiff)
Colin Biggers & Paisley (Defendants)


File number(s):
2009/00298673 & 2010/0085353

Publication Restriction:

Judgment


Short overview


Procedural History


  1. The proceedings were commenced by the City in July 2009, over two years ago.
  2. The proceedings were first listed for hearing to commence on 31 May 2010.
  3. During the course of the proceedings, the defendants have been represented by at least six senior counsel. Mr P Durack SC, Mr D Yates SC, Mr D Studdy SC, Mr Garnsey QC, Ms J Baird SC and now Mr Couper QC. The defendants have been represented by the same junior counsel, Mr J Gooley, throughout, although other junior counsel have been retained from time to time including Mr M Sindone and Mr G Connolly.
  4. Due to substantive amendments to its claim (in particular the inclusion of paragraph 4 of the Commercial List Response which was approximately 15 pages in length) and late evidence served by the defendants, the proceedings were adjourned.
  5. The proceedings were next listed for hearing to commence on 11 April 2011. On 14 April 2011, the defendants brought an application to adjourn the hearing which was successful.
  6. The proceedings were listed for hearing for a third time to commence on 1 August 2011.

The nature of the proceedings


  1. The proceedings principally concern the proper construction of a licence agreement alleged to have been entered into between the City of Sydney and Streetscape projects on or about 26 August 2002.
  2. In July 2009, the City commenced proceedings against Streetscape projects and Mr Moses Obeid in the Supreme Court to enforce contractual obligations it claimed had been breached during the course of the licence agreement.
  3. Additionally in October 2009, after the apparent expiration of the Licence Agreement, the City commenced proceedings against Streetscape projects and Australian Light Pty Ltd in the Federal Court to restrain what it argued was inappropriate post license agreement conduct in relation to, inter alia the continued use of the trademark.
  4. Over time there have been many amendments to the pleadings by both parties.
  5. The reasons which follow chronicle the extensive attempts by the defendant to refashion its case only days before the resumed hearing.
  6. The reasons point up the significance of the comments made in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 which sets the touchstone appropriate to the principled exercise of the discretion to allow new amendment to pleadings.
  7. Naturally every set of circumstances against which applications to replead are made need to be closely examined by the Court for the purpose of the principled approach to permitting late changes to pleadings.
  8. For much of the first three days following the re-commencement of the already stalled proceedings, the parties have been at issue as to whether or not the defendants' late application to vary its pleadings in sundry manner should be allowed or disallowed. Day after day the parties returned with further submissions, addressing the Court both orally and in writing.
  9. As well be apparent from the reasons the material discretion is to disallow the following paragraphs of the defendant's sixth further amended commercial list response:
  10. Likewise to disallow Paragraph 23A of the further amended commercial list cross claim summons and paragraphs 171A-171C of second further amended commercial list cross claim statement.

The state of these proceedings


  1. Following an extended hiatus, these proceedings recommenced on 1 August 2011. During the hiatus both parties sought to amend their pleadings. The plaintiff did so under the imprimatur of orders made by McDougall J on 5 July 2011.
  2. As a result of these amendments, relatively early in the day, leading counsel for the plaintiff took the Court through the major changes made pursuant to leave granted by McDougall J. The plaintiff's amendments, made by consent, added claims of breach of fiduciary duty against both Mr Obeid and his company and breach of confidence. These amendments were consented to, because they did not require the plaintiff to put on more evidence and hence there was minimal prejudice to the defendants.
  3. Order 5 of McDougall J reads "defendants to serve any further evidence relating to the amendments by 27 July 2011". Accordingly, on that date, the defendants served a number of further affidavits.
  4. At the same time, but separate to the previous amendments, the defendants sought to amend their defence and cross claim to include a number of new matters.
  5. Leading counsel for the defendants then opened their case. Following that opening, the plaintiff's counsel made clear that the City was taken by surprise in relation to aspects of the defendants' opening.
  6. The defendants accepted that they needed to identify the exact mechanics of the pleadings and were granted leave to put in a submission overnight in that regard.
  7. Adopting the form identified by plaintiff in its latest submissions, the plaintiff's objections can be summarised into six categories:

The principal contentions


  1. The matters separating the parties rest on two competing views of the purposes for which these amendments are sought.
  2. The defendants submitted that the amendments fall into two categories. The first being a bare response to the late amendment by the plaintiff to its commercial list statement and the second being amendments due to a fresh mind being applied to the case.
  3. The defendants contended that given the serious nature of the allegations now being made against Mr Obeid personally, as a matter of fairness, the Court should grant the defendants leave to amend in respect of the first category. In relation to the second category, the defendants submitted that although these amendments are new, they arise out of matters already pleaded, were made late out of necessity and not bad faith and do not cause significant prejudice to the plaintiff.
  4. The plaintiff wholly disputed this argument, submitting that in reality the defendants are attempting to run a completely different case to the one it began. The newly pleaded matters were open to the defendants at the start of the case but were not pursued. This late change has taken the plaintiff by surprise and if allowed would lead to insurmountable prejudice and would require the plaintiff to call more evidence.
  5. The defendants leading counsel [at transcript 55] was asked by the Court to explain precisely what the amendments to the pleadings in relation to Mr Obeid amounted to. The following dialogue then followed :

HIS HONOUR: And what do those amendments amount to? What genre? Can you tell me without having to go to them?


MR COUPER: Your Honour, those are the amendments, essentially in paragraph 4A, 2A and B, which deal with the question of the drawings which Streetscape obtained from KWA Design and the amendments in paragraph 17E 9 to 14, which plead matters going to the question of whether the information alleged by the city to be confidential is, in fact, confidential.


HIS HONOUR: This walks into the Goldspar and so forth.


MR COUPER: That latter set of amendments picks up the Goldspar documents issue.


HIS HONOUR: That would, inexorably, I imagine, if the Court permitted that inexorably, these proceedings could not continue until some further time this year or next year. Isn't that tolerably clear?


MR COUPER: Your Honour, we think we would have to accept that whilst we might debate with our learned friends how much more work the city might have to do, we would have to accept that they would have to do some more work.


HIS HONOUR: Yes.


MR COUPER: So the consequence is likely to be, we accept, that the trial dates would have to go off.


The categories of dispute in more detail


  1. It is appropriate to address each category of objection separately.

The 1998 copyright pleading


  1. This amendment sought to plead that the design on which Streetscape's smartpoles are based was designed by KWA for Streetscape and therefore Streetscape owns the copyright in this design.
  2. The plaintiff submitted and I accept that that these amendments are not defensive but seek to plead a new matter, which wasn't previously sufficiently identified as an issue. This is because:
  3. In my view that leave should not be granted to include particulars 2A and 2B to paragraph 4(a) of the Commercial List Response because the City will suffer prejudice in that:
  4. In my view leave should not be granted because the relevance of the allegation that Streetscape Projects owned copyright in the drawings is not apparent on the face of the pleading or particulars; the effect of ownership is in some unknown way allegedly related to the fact that the defendants allege that "the City did not own or was not entitled to own or maintain the Intellectual Property... the subject of the Licence Agreement" (paragraph 4(a) of the Commercial List Response); the particulars do not, "invite [the Court] to find... that Streetscape cannot be stopped from using or producing poles derived from its own drawings" (as Senior Counsel for the defendant submitted the purpose of the proposed amendment would be) (transcript 01/08/11 T39 L47 - T40 L2).
  5. Further, I accept that the plaintiff is prejudiced, as it does not understand the case it is required to meet. The material facts necessary to establish ownership of copyright in the drawings have not been pleaded; these material facts include the basis upon which copyright is alleged to subsist in the drawings, including a plea that the drawings are original artistic works, as well as an identification of the author of the drawings.
  6. The defendants disputed that significant prejudice would arise from these amendments because the plaintiff's own witnesses had sworn evidence concerning the KWA designs and copyright prior to the licence agreements.
  7. There is an important distinction to be drawn between evidence and pleadings. Issues arise and are appropriately flagged on the face of the pleadings, not from the volumes of evidenced tendered in a case.. I do not accept Mr Couper's submission that no, or minimal, prejudice arises, where there is evidence pertaining to an issue but it is not addressed in the pleadings.

The restraint of trade pleading


  1. The defendant sought to amends its pleadings to argue that to the extent that cl 9 prevents Streetscape Projects from exploiting that confidential information, cl 9 operates as a restraint of trade and is invalid.
  2. The defendant's primary position was that this pleading is purely a consequence of cl 9 and gives rise to a legal argument and not a factual dispute.
  3. I accept the plaintiff's submission that this particular is also not responsive to the equitable duty paragraphs. It is entirely new and was not raised in opening. It was the result of further thought by Senior Counsel for the defendants' overnight and after the defendants had opened their case. It was "simply a case... that new minds have been brought to bear on the matter and it dawned on us".
  4. The suggestion by Senior Counsel for the defendants that there is no prejudice to the plaintiff and that the amendments do not "give rise to any new matters of evidence" is rejected. This is because if cl 9 of the Licence Agreement is a restraint, the clause is void unless the plaintiff is able to show that that the restraint is, in the circumstances of the particular case, reasonable: Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Lid [1894] 1 AC 535 at 565; Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Ply Ltd [1973] HCA 40; (1973) 133 CLR 288 at 315.
  5. That is, the onus of showing that the restraint goes no further than is reasonably necessary to protect the interests of the person in whose favour the restraint operates (i.e. the plaintiff), lies on the party seeking to support the restraint as reasonable (i.e. the plaintiff): Adamson v New South Wales Rugby League Limited [1991] FCA 9; (1991) 27 FCR 535 at 554 per Hill J.
  6. I accept that it is inappropriate for the defendants do be granted leave to rely on this particular because in order to deal with the restraint of trade pleading, the City would be entitled to call industry participants and expert evidence going to the question of reasonableness, which would necessitate the vacation of the hearing. Such evidence would inform the Court of the:

"[e]vidence from persons in the trade is admissible to inform the Court of its nature, and of what is customary in it, and anything requiring attention in the mode of conducting it, and of any particular dangers requiring precautions, and what precautions are required in order to protect a person carrying on a business from injury..."; and


(4) the ability to reverse engineer the Smartpoles and the extent to which the Confidential Information claimed remains protected despite the manufacture and sale of Smartpole poles.
  1. The City may also need to investigate calling detailed evidence of the steps it had taken to create the Smartpole and the costs involved in taking those steps, a matter clearly relevant to the reasonableness of the restraint.
  2. As a result the factual matters in issue would significantly expand. Further, leave should not be granted to rely on particular 4B because, as was submitted in the context of particulars 2A and 2B above, there is no relationship between the allegation of restraint of trade and paragraph 4(a) of the Commercial List Response - which pleads that "The City did not own or was not entitled to own or maintain the Intellectual Property... the subject of the Licence Agreement". Nor is particular 4B a response to paragraph 4 of the Commercial List Statement.

The construction of Clause 15.5


  1. Thirdly, the defendants sought to amend their pleadings to insert a fresh claim that on a "true construction" of the Licence Agreement in relation to clause 15.5 or in the alternative, an "implied term", the City was only entitled to royalties if the City had intellectual property rights and in relation to territories outside of the licence agreement they had no such rights.
  2. Mr Couper submitted that this amendment is solely a matter of legal construction. His proposition was that there is no need for more evidence and as such there is no prejudice to the plaintiff.
  3. Mr Jucovic took a contrary approach, setting out in his written submissions why the Court should not grant leave to allow these amendments:

The loss of confidentiality and no confidentiality issue


  1. Under this category, the defendants sought to amend their pleadings to claim that the drawings and specifications in relation to "Smartpoles" were not confidential or alternatively, confidentiality in the designs was lost. Further, the defendants raised a new argument that the drawings were in all material respects the same as those available to Goldspar and on this basis the plaintiff's confidentiality argument failed.
  2. The defendants claimed that this pleading is defensive and arises out of serious claims of breach of confidence put against Mr Obeid in the plaintiff's latest amended list statement. Mr Couper submitted that because of the unconventional way in which these allegations are pleaded, it is necessary for the defendants to plead their argument this way.
  3. The plaintiff disputed this submission in their overnight written submissions claiming:
  4. In relation to the defendant's newest amendment, being the last part of 17(e)(xi) the plaintiff submitted:
  5. The proposed re-agitation of the Issue A Drawings would open up a new debate as to the ownership of copyright in those drawings; a debate which lasted four days before Gyles J. Given that the defendants place reliance on Goldspar being the owner of copyright in the Issue A Drawings, the plaintiff would be entitled to argue that KWA Design was the owner of copyright in the Issue A Drawings. This opens up a new and complex area of factual debate between the parties in which it will be necessary for the plaintiffs to investigate the relationship between Goldspar and KWA Design, including taking detailed instructions from at least Mr Matchett and Mr Newman in relation to the issue. It may also be necessary to confer with representatives of Goldspar and issue a subpoena for the production of documents.
  6. Contrary to the defendants' submission, this area of factual controversy was not live on the evidence of the parties. There was no pleaded issue in this regard. To the contrary, the detailed chronology in paragraph 4 of the Commercial List Response - upon which the case has been conducted for the past 12 months - commenced with the 6400 Issue A Drawings which were created for the purposes of the 9912 Tender (in around May 1999).
  7. I accept if these amendments are allowed, there will also be a debate as the similarities between the Issue A Drawings and the 4930 Issue C Drawings. In order to prepare for such a debate it will be necessary for the plaintiff to confer at least with Mr Newman, Mr Matchett and Dr Green.
  8. Finally, senior counsel for the defendants submitted that any criticism that these additional paragraphs ought be "somewhere else" in the pleading was a "matter of form" and that the only question is whether the paragraphs "respond to the new case against us". I reject that submission because the submissions are seeking to raise new defences in relation to pre-existing claims which are not the breach of equitable duty claims.

Clause 2.3 Compromise


  1. The defendants conceded 15(h) was no longer appropriate in light of the plaintiff's argument, but pressed 17AC. The essence of this amendment was to plead that at the time of entering into the first deed of variation, the parties had in contemplation royalties in other territories and the deed intended to compromise the City's royalties.
  2. The defendants asserted that leave should be granted to make this amendment, as it is a matter of construction of the deed only.
  3. I accept the plaintiff's submission that the claim was not the subject of either of the defendants written opening outlines in response and on the cross Claim dated 5 and 11 April 2011 which were required to be filed and is entirely new.
  4. There is also no suggestion in any of the evidence that the sale of poles in Singapore or the UAE were in the contemplation of parties at the time of the execution of the Deed. Further, there is no suggestion in any of the evidence that Singapore or UAE poles were raised in discussions before the First Deed of Variation or that such sales were in the contemplation of the parties at the time the Deed was executed. On the principles enunciated in Grant v John Grant [1954] HCA 23; (1954) 91 CLR 112, these proposed paragraphs would disclose no reasonable defence would have a tendency to cause prejudice, embarrassment and delay (within Rule 14.28).
  5. During oral submissions on 1 August 2011, senior counsel for the defendants advised the Court that further particulars would be given as to the basis on which it is contended that sales in Singapore and UAE were in the contemplation of the parties in 2 weeks time. However, I accept that the plaintiff needs to know what those particulars are before it calls the witnesses who were involved in those negotiations (Robyn Hobbs, Gary Harding, Kylie McRae and Lynn Nicholson). In that regard, the particulars may open up a new area of factual inquiry which would need to be responded to by the witnesses who were involved in the negotiations leading up to the First Deed of Variation and may raise a need to consider pleading further estoppels and/or claims under the TPA

Cross claim amendment


  1. Finally, the defendants sought leave to amend their cross claim statement to allege that by reason of a "total failure of consideration", the basis for payment of royalties and licence fees to the City pursuant to the Licence Agreement failed and, in those premises, the City has been "unjustly enriched" by receipt of those payments and is obliged to make restitution to Streetscape Projects.
  2. The plaintiff did not consent to this amendment, submitting:
  3. The defendants conceded that the plaintiff may need to call more evidence in response to the change of position defence. On this basis, the amendments are disallowed.

Quick just and cheap


  1. The recent decision of the High Court of Australia in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175; [2009] HCA 27 sets the touchstone appropriate to the principled exercise of the discretion to allow an amendment to pleadings.
  2. The overriding purpose of s56 of the Civil Procedure Act 2005 (NSW) is to facilitate the just resolution of the real issues in civil proceedings with minimum delay and expense.
  3. The purposes stated in r 21 reflects the principles of case management by the Courts. Such management is now an accepted aspect of the system of civil justice administered by Courts in Australia. It was recognised some time ago, by Courts here and elsewhere in the common law world, that a different approach was required to tackle the problems of delay and cost in the litigation process. In its report in 2000, Managing Justice: A review of the federal civil justice system, the Australian Law Reform Commission noted that: "Over the last ten years Australian Courts have become more active in monitoring and managing the conduct and progress of cases before them, from the time a matter is lodged to finalisation".
  4. The majority judgment [Gummow, Hayne, Crennan, Kiefel and Bell JJ]:

The majority in Aon further observed that Gleeson CJ, Gaudron and Hayne JJ in Coal and Allied Operations went on to point out that the latitude as to choice may be considerable or it may be narrow.


(2) At 92, the majority observed that case management by the Courts is now an accepted aspect of the system of civil justice administered by the Courts in Australia, adding:

It was recognised some time ago, by Courts here and elsewhere in the common law world, that a different approach was required to tackle the problems of delay and cost in the litigation process. In its report in 2000, Managing Justice: A review of the federal civil justice system, the Australian Law Reform Commission noted that:


"Over the last ten years Australian Courts have become more active in monitoring and managing the conduct and progress of cases before them, from the time a matter is lodged to finalisation".


(3) At 93 the majority pointed out that "the achievement of a just but timely and cost-effective resolution of a dispute has an effect upon the Court and upon other litigants. In Sali v SPC Ltd Toohey and Gaudron JJ explained that case management reflected:

"[t]he view that the conduct of litigation is not merely a matter for the parties but is also one for the Court and the need to avoid disruptions in the Court's lists with consequent inconvenience to the Court and prejudice to the interests of other litigants waiting to be heard ...".


"'Discretion' is a notion that 'signifies a number of different legal concepts'. In general terms, it refers to a decision-making process in which 'no one [consideration] and no combination of [considerations] is necessarily determinative of the result'. Rather, the decision-maker is allowed some latitude as to the choice of the decision to be made."


The circumstances where briefs change hands


  1. Up until three days before the hearing was to recommence, the plaintiff had not been informed that the defendants' previous leading silk had been replaced by Mr Couper of Queen's Counsel.
  2. Mr Couper readily accepted that a very significant number of changes to the pleadings were purely and simply the product of his own diligence in studying the pleadings and determining that they could be bettered.
  3. The days when litigation could permit a party to blithely at the last moment seek to alter its pleadings without a very special reason being given have long gone. To the contrary, the Court takes into account the importance of the litigation proceeding in the fashion in which each party intended. Ambush is no longer tolerated.
  4. Whilst the Court entirely accepts that Mr Couper with his new careful study of the manner in which the case has been prepared had every right to do his best to better his clients case, the important dictates of the Court in ensuring that the litigation will progress to its logical conclusion clearly represents the position as it obtains in the year 2011.
  5. In truth these proceedings are actually now in their ninth day and a considerable period has been set aside for the continuance of the proceedings. There are other litigants awaiting the Courts time. The simple fact of life is that the many changes to the state of the pleadings which would in exorbitantly result if the defendants' alterations to the pleadings were permitted could not be case managed without a further adjournment of the matter probably for a significant period of time. This because of the nature of the proceedings and because of the complexity of the proceedings and because of the delicate nature of the subject matter of the proceedings.
  6. Having carefully studied the respective positions, the principled exercise of the material discretion is to disallow the following paragraphs of the defendant's sixth further amended commercial list response:

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