Burden & Ors V ESR Group (NZ) Limited & Anor

Facts:

In 2014 (the 2014 proceedings) the plaintiffs successfully bought a copyright infringement claim against the first defendant ESR in respect of its actions in importing items of furniture from Vietnam and selling these in New Zealand.  At first instance Duffy J issued declarations, an injunction restraining ESR from further importing, selling or dealing with the infringing products, an order for delivery up and a direction for filing affidavit evidence as to the extent of importation.  The Judge reserved issues relating to damages or an account of profits.

ESR appealed and the plaintiffs cross appealed.  The Court of Appeal allowed the plaintiffs’ cross appeal as to the ownership of the copyright works and consequently their qualification to sue in New Zealand.  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 for importation and sale of goods after dates in August and September 2014 (when it was put on notice).

In 2018 the plaintiffs’ solicitors commenced a separate set of proceedings (the 2018 proceedings) in which they alleged both primary and secondary infringement by ESR and its director.  The proceedings also claimed against ESR for breach of the Fair Trading Act 1986.

Strike out application of 2018 proceedings by defendants

The defendants to the 2018 proceedings sought to strike out the 2018 proceedings on the basis of res judicata, abuse of process and insufficient particulars to establish a cause of action.  The plaintiffs accepted that the Fair Trading Act cause of action should not be pursued and that, having succeeded in the secondary infringement claims in the 2014 proceedings, these should be struck out.  Argument focused on striking out of the claim for primary infringement ie issuing infringing copies to the public.

Amendment application in respect of 2014 proceedings by plaintiffs

At the same time the plaintiffs sought leave to amend their claim against ESR in the 2014 proceedings to allege (as part of the adjourned remedies claim) a new cause of action alleging primary infringement.  This primary infringement was the issuing to the public of infringing copies of the furniture from May 2013. 

The proposed amendment application also included further infringing items that had not been expressly pleaded in the 2014 proceedings.  ESR accepted that a number of these items had shape similarity in material aspects to the plaintiffs’ copyright works. 

The plaintiffs relied on authorities in UK intellectual property cases where, at the remedies phase, the court will often permit the plaintiff to extend the inquiry as to damages or account of profits to new causes of action (and different infringing copies) if it is fair and convenient to do so.  The plaintiffs further claimed that it was consistent with the overriding objective of the High Court Rules (r 1.2) to secure the just, speedy and inexpensive determination of the proceeding to permit the amendment at this stage. 

Held, refusing the amendment to the 2014 proceedings but also refusing the defendants’ strike out application of the 2018 proceedings.

The amendment application

(i)      The scope of the proceedings before Duffy J was a claim for secondary infringement and there was no claim for primary infringement [34].  The wording of the injunction granted was consistent with the pleading of secondary infringement – not of primary infringement which was not pleaded in the 2014 proceedings [35].

(ii)      There was good reason to distinguish between permitting an amendment to enable all possible infringements that might follow from the initial liability phase and amendments which seek to plead and raise a separate basis for liability.  The first should be permitted, the second should not.  There was no finding in the 2014 proceedings that ESR had committed primary infringement [36].  It was quite a different issue to suggest that a fresh cause of action requiring proof of different elements should be permitted [37].  It was open to amend the pleadings at the inquiry as to damages stage to encompass the additional items of furniture as particulars; it was 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 [44].

Unilin Beheer  BV v Berry Floor  NV [2007] EWCA Civ 364; AP Racing  Ltd v Alcon Components Ltd [2016] EWHC 815 (Ch), [2016] FSR28; Nokia Corporation v Liu [2009]  FCAFC 138, (2009) 179 FCR 422; and Fabio Perini SPA v LPC Group PLC [2012] EWHC 911(Ch) referred to;  Jeans West Corporation (NZ) Limited v G-Star Raw CV [2015] NZCA 14 distinguished.

(iii)     ESR would be unfairly prejudiced at this stage of the 2014 proceedings by having to face a new cause of action at the inquiry as to damages phase [51].

(iv)    As to the extent of evidence required, while the evidence might be limited to proving primary infringement, issues might arise on the subject of “issue to the public” under s 9 [52].

(v)     The consideration of efficient use of judicial resources was neutral.  If the plaintiffs succeeded in opposing the strike out (as they did), there would be two separate hearings, but the focus of the first hearing on damages arising from the 2014 proceedings should be relatively straight forward [53].

(vi)    Leave to amend the 2014 proceedings to cover primary infringement was declined but granted so as to represent the Court of Appeal findings as to the ownership of copyright and to include secondary infringement in relation to the additional items of furniture identified in the schedules to the proposed amended claim (with one exception) [54].

The 2018 proceedings

(vii)    It was wrong to hold that because a matter could have been raised in earlier proceedings, it was necessarily abusive to raise it in later proceedings.  That was too dogmatic an approach.  What was required was a broad merits-based judgment.  The issue was whether in all the circumstances the plaintiffs’ claim is an abuse [67].

Johnson v Gore Wood & Co [2000] UKHL 65; 2001 1 All ER 481 at 498 – 499 applied.

(viii)   It would not be an abuse of process to permit the plaintiffs to pursue ESR with a claim for primary infringement [70].  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 plaintiffs 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.  It would be draconian to prevent the plaintiffs 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 [71].

(ix)    To deny the plaintiffs the right to pursue a claim for primary infringement in the circumstances of the 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 [72].

(x)     ESR was not able to satisfy the court that the proposed claim for primary infringement was legally untenable.  The test for strike out was different for the test on the application for leave to amend pleadings.