CATCHWORDS

Practice and Procedure - application for leave to serve process outside jurisdiction - claims all based on agreement, the terms of which state that it is subject to the laws and exclusive jurisdiction of England - whether Court is a clearly inappropriate forum - whether sufficient circumstances in case to displace prima facie rule that effect be given to an exclusive jurisdiction clause - whether fact that the applicant is an Australian company, the applicants witnesses and documents are in Australia and claims under the Fair Trading Act are dependant on the jurisdiction of an Australian court are enough to displace the prima facie rule in circumstances where the respondents are English residents, the respondents witnesses and documents are in England, the subject of the agreement was developed in England and the claims under the FTA are dependant on determination of the agreement.

Federal Court Rules O 8 r 2, r 1

Diamond v Bank of London and Montreal Ltd [1979] QB 333

Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538

Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197

Leigh‑Mardon Pty Ltd v PRC Inc (1993) 44 FCR 88

Leigh‑Mardon Pty Ltd v PRC Inc 19 December 1992 unreported

Akai Pty Ltd v The People's Insurance Co Ltd (1995) 8 ANZ Insurance Cases 61‑254

CSP Computer Security Products Pty Ltd v FCA (Heerey J) 12 March 1996 unreported

APSCORE INTERNATIONAL PTY LTD v GRAND CANYON TECHNOLOGIES PTY LTD AND ORS

No. NG909 of 1996

CORAM:       Lehane J

PLACE:          Sydney

DATE:            12 December 1996

IN THE FEDERAL COURT OF AUSTRALIA                               )

NEW SOUTH WALES DISTRICT REGISTRY                              )

GENERAL DIVISION                                                                    )             No. NG 909 of 1996

                      BETWEEN:          APSCORE INTERNATIONAL PTY LTD

                                                                                                                                 First Applicant

                      AND:                     GRAND CANYON TECHNOLOGIES PTY LTD

                                                                                                                            Second Applicant

                                                     CLIVE A KETTERIDGE

                                                                                                                             First Respondent

                                                     MARTIN JAMES IDLE

                                                                                                                        Second Respondent

                                                     JAMES ANTHONY COMPUTING LIMITED

                                                                                                                            Third Respondent

CORAM:     Lehane J

PLACE:        Sydney

DATE:          12 December 1996

                                                       MINUTE OF ORDERS

THE COURT ORDERS THAT:

1.         The motion be dismissed.

NOTE:            Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA                               )

NEW SOUTH WALES DISTRICT REGISTRY                              )

GENERAL DIVISION                                                                    )             No. NG 909 of 1996

                      BETWEEN:          APSCORE INTERNATIONAL PTY LTD

                                                                                                                                 First Applicant

                      AND:                     GRAND CANYON TECHNOLOGIES PTY LTD

                                                                                                                            Second Applicant

                                                     CLIVE A KETTERIDGE

                                                                                                                             First Respondent

                                                     MARTIN JAMES IDLE

                                                                                                                        Second Respondent

                                                     JAMES ANTHONY COMPUTING LIMITED

                                                                                                                            Third Respondent

CORAM:     Lehane J

PLACE:        Sydney

DATE:          12 December 1996

                                                  REASONS FOR JUDGMENT

LEHANE J:  The applicants commenced these proceedings against the respondents, all of whom are resident in the United Kingdom, by an application filed on 15 November 1996 (now superseded by an amended application filed in Court on 28 November).  A statement of claim was filed the same day (it also is now superseded by an amended statement of claim).  So also was a notice of motion seeking leave under O 8 r 2 of the Federal Court Rules to serve the application and statement of claim on the respondents in the United Kingdom.  It is that motion which is now before the Court; it was heard ex parte on 28 November 1996.

The applicant relied, in support of the motion, on an affidavit of James Edward Murray sworn on 28 November 1996.  Mr Murray is a director and the chief executive officer of each of the applicants.  The circumstances, as they appear from material before me, are as follows.  The first applicant (Apscore) wrote and sold computer programmes.  Its principal product, in 1994, was a programme called "CUEBIC"; that was what is known as an application programme for use in businesses.  It was designed to operate under an operating system called "PICK"; an operating system is a programme which controls a computer and enables it to function.  Well known examples of operating systems are UNIX, MS‑DOS and Microsoft Windows.  Generally, application programmes are designed to run "under" particular operating systems; if they are to run under other operating systems then usually adaptations are required.

Obviously the marketing of an application programme designed for use in businesses is impeded if it cannot be operated under operating systems commonly used in business.  By 1991 UNIX was such a system.  Apscore wished to find a product which would convert its application programmes, particularly CUEBIC, for use with UNIX and other operating systems.

For that purpose Apscore entered into a contract with the first two respondents, who carried on business in partnership under the name James Anthony Consulting (JAC).  The agreement was dated 1 March 1991 and was called a Software Development Agreement.  Under that agreement JAC was to develop a programme known as JBASIC, the purpose of which was to enable Apscore's application programmes to be used with operating
systems other than PICK.  Apscore was to make regular monthly payments to JAC; Apscore was to retain all copyright and other intellectual property rights in relation to JBASIC; JAC was given what was described as a limited licence to sub‑license JBASIC in certain circumstances, subject to payment of a royalty to Apscore; the agreement was expressed to be governed by the law of New South Wales.

JAC proceeded to develop the programme "JBASIC", which later became known as "JBASE".  Payments were made by Apscore to JAC, in accordance with the Software Development Agreement, until 12 November 1991.  On 13 November 1991 Mr Murray told the first respondent, Mr Ketteridge, that Apscore could no longer afford to fund the development of JBASE.  He asked that the development be put "on hold".  Further conversations and correspondence took place between the parties during the ensuing two years.  On 10 September 1992 JAC wrote to Mr Murray claiming that Apscore had repudiated the Software Development Agreement, but the repudiation was not accepted: in the same letter JAC informed Mr Murray of its intention to enter into a sub‑licence of the kind permitted by the agreement and of accounting to Apscore for royalty in accordance with the agreement.

Further negotiations led ultimately to the execution, apparently in December 1993, of an agreement described as an Assignment Agreement between Apscore and JAC.  By that agreement Apscore assigned "any and all copyright or intellectual property rights of whatsoever nature that it holds in the software product known as JBASE to JAC absolutely".  In return for that, JAC granted Apscore a perpetual non‑exclusive licence to sub‑license, with its own products, what was described as the software object code of JBASE.  JAC was to make available to Apscore enhancements or modifications to the product; the first delivery, in source code form, was to be made on 25 December 1993.  There was provision for termination on material breach by either party; because that provision assumed some importance, I shall set it out in full:

            6.         TERMINATION

                        Any termination of this Agreement by JAC may only occur following a material breach by Apscore as stated herein.  Except for non delivery of the jBASE software, in any form or at any time as described herein, termination of this Agreement by Apscore or termination Apscore's right to sub‑licence jBASE, shall not invalidate the assignment of any rights to JAC for jBASE by Apscore hereunder.  Any termination by Apscore of this Agreement on the grounds of material breach by JAC shall not invalidate the grant of the licence of jBASE by JAC, to Apscore herein.

                        This Agreement may be terminated forthwith by either party if the other commits a material breach of the terms hereof and fails to remedy the same following 30 days notice of the breach by the other party.  Apscore may terminate this Agreement at any time upon giving JAC 30 days notice in writing.

There was then a provision forbidding either party to assign rights under the agreement without the prior written consent of the other, with the exceptions that JAC might without comment assign to a company in which the majority shareholding was held by either or both of its partners and that Apscore might assign without consent to a company of which at least two shareholders in Apscore at the date of the agreement were substantial shareholders.  Finally, there was a governing law and exclusive jurisdiction clause, as follows:

            This Agreement is subject to the laws of England and to the exclusive jurisdiction of the English courts.

JAC sent Apscore, with a copy of the Assignment Agreement executed by JAC, four diskettes, containing "JBASE 1.5 source code" and a note to the effect that what was contained on the diskettes was a compressed and encrypted version of the source code.  Mr Murray obtained what is described as the decryption key and attempted to decrypt the code.  He was unable to do so successfully.  When he told JAC about the difficulty he was having he was told that version 1.5 was not a commercial release, and that further versions would be sent in accordance with the agreement.  Mr Murray's evidence is that no further versions were received.  Apparently there have been other versions, because there is evidence of correspondence and conversations about a transaction entered into by JAC with an American corporation relating to source code version 1.8.  When asked why version 1.8 had not been forwarded to Apscore, Mr Ketteridge, according to Mr Murray, replied:

            It is not in a ready enough state as yet to send to you.  We have to make more modifications to go into it for [the American corporation].  Wait until we have done that and I'll forward that on to you.

In early 1995 Apscore assigned to the second applicant (GCT) its interest in the Assignment Agreement including its interest in JBASE.  Notice of the assignment has been given to JAC.  Similarly, JAC has notified Apscore that JAC has assigned its interest to a company called James Anthony Computing Limited, the third respondent.  There is a suggestion that the assignment was not effective, because it required consent
and no consent was given: that may at least be questionable, if it matters, because the correspondence suggests that the assignment was one which might be made without consent.

The principal relief sought by the amended application is declaratory: the declarations sought are:

            1.1       A declaration that the Respondents have wrongfully repudiated the agreement dated 17 November 1993 ("the Assignment Agreement") between the First Applicant and the First and Second Respondents.

            1.2       A declaration that the Assignment Agreement is void and of no effect.

            1.3       Alternatively to 1.1 and 1.2, an order pursuant to s.72(5) of the Fair Trading Act 1987, declaring void from its beginning the Assignment Agreement.

There are then sought a declaration that GCT is the true owner of the copyright in JBASE, a declaration as to infringement by the respondents and damages or an account of profit; alternatively there is sought a declaration that the respondents, or some of them, hold that copyright in trust for GCT or Apscore and consequential relief; finally, damages are claimed for breach of contract and under s 68 of the Fair Trading Act 1987 (NSW).

I can now deal with the requirements of O 8 r 2(2).  There is no difficulty about the requirement that the Court have jurisdiction: it has jurisdiction in relation to the copyright claim under s 131C of the Copyright Act 1968 and I can see no reason to doubt (leaving aside the effect of the cross‑vesting legislation which would in any event apply) that the other claims are within the jurisdiction of the Court under s 32 of the Federal Court of Australia 1976.  Mr Murray's evidence sufficiently establishes, in my view, a prima facie case of repudiatory breach of the Assignment Agreement (which the applicants accept in the amended statement of claim).  It follows that a prima facie case has been established, sufficient in the present purposes, of the entitlement of CGT, or alternatively Apscore, to terminate the Assignment Agreement or that it has been terminated; arguably, in addition, the circumstances deposed to by Mr Murray produce the consequence, as a result of clause 6 of the Assignment Agreement, that the assignment is to be treated as no longer, or possibly as never having been, effective: that was described in argument as the "gateway" to the copyright claims.  As to the claims under the Fair Trading Act, Mr Murray's evidence deposes to negotiations leading to the execution of the Assignment Agreement in which, he says, the respondents made representations that they would do (in substance) what the Assignment Agreement, once executed, obliged them to do.  It is claimed that Apscore relied on the representations in entering to the agreement and that the representations were misleading or deceptive, so that the applicants are entitled both to damages and to an order avoiding the Assignment Agreement.

The question whether the proceeding is one to which O 8 r 1 applies is somewhat more complex.  There is little difficulty with the copyright claims: what is alleged is a breach of an Act and the claims are brought in respect of damage suffered in the Commonwealth: O 8 r 2(1)(c); as for the claims under the Fair Trading Act, in my view the cause of action alleged is to be treated as one which arose in the Commonwealth paragraph (a): to the extent that representations were made by telephone by the
respondents in the United Kingdom to Mr Murray in Australia, they should be treated as having been made in Australia (Diamond v Bank of London and Montreal Ltd [1979] QB 333 at 345, 346, 349) and the reliance and loss alleged occurred also in Australia.  In passing, I may say that I doubt that the applicant can rely, in relation to the Fair Trading Act, on para (b) of the rule: it may be that the word "Act" should be read as limited to a Commonwealth Act (Acts Interpretation Act 1901 (Cth) s 38(1); Re O'Dowd; ex parte Commonwealth Bank Officers' Association (1984) 3 FCR 150).

The claims based on the Assignment Agreement, and the respondents' alleged breach of it, give rise to more difficult questions.  It was suggested that the Assignment Agreement was a contract made within the Commonwealth (para (ab)), but it is by no means clear on Mr Murray's evidence that that is so: if the contract was formed, as appears to be the case, by an exchange of executed parts, the order of events was on the evidence that a copy of the document was executed by Apscore and sent to JAC in the United Kingdom; JAC subsequently, presumably in the United Kingdom, executed a copy and posted it to Apscore.  If that is right, it may well be that the contract was made when the part signed by JAC was posted in the United Kingdom.  Counsel for the applicants then suggested that the claims were for breach in the Commonwealth of a contract, wherever made, that renders impossible performance of any part of the contract that ought to be performed in the Commonwealth (para (aa)).  It may be accepted that the alleged breach occurred in the Commonwealth: that was, at least by inference, where the material relating to JBASE was to be provided to Apscore by JAC.  It may also be accepted for present purposes that the failure to supply the material meant that Apscore could not use JBASE as
contemplated by the agreement; it is, however, a further and difficult step to say that the breach rendered impossible the performance of any part of the contract which ought to be performed in the Commonwealth.  Particularly, it is not clear that it became impossible for Apscore to do anything which it might have been required by the contract to do in the Commonwealth.  It is, however, unnecessary to pursue this further, in the light of my conclusions on what may be described as discretionary considerations, to which I now turn.

Counsel for the applicant fairly conceded that the applicants' principal claims were those relating to the Assignment Agreement and that those claims were a "gateway" through which the applicants must pass before it could establish its other claims.  It is easy to see that that is so in relation to the copyright claims.  It is, perhaps, less obviously so in relation to the Fair Trading Act claims.  However, the representations relied on were all incorporated as express provisions of the Assignment Agreement.  Accordingly, the fate of the Fair Trading Act claims will depend on whether breach of the Assignment Agreement is established (because, if not, there is no apparent basis on which the Fair Trading Act claims could succeed), on whether that agreement is (or has been) terminated and on whether it is avoided or declared to be void.

It follows therefore that the description of the claims based on the Assignment Agreement as a "gateway" is accurate.  The agreement is expressed to be subject to the laws of England and to the exclusive jurisdiction of the English Courts.  In the light of that provision, the question that arises is whether, having regard to the principles established
by the High Court in Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, this Court is a clearly inappropriate forum for the determination of these proceedings.  The test established in Voth is applicable equally to applications for leave to serve process outside the jurisdiction and applications to set aside service as it is to applications for a stay: see at 563.

There is a clear course of authority supporting the proposition that where parties agree that disputes between them are to be submitted exclusively to the courts of a particular jurisdiction, prima facie effect should be given to that agreement: Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 230 Brennan J at 259; Gaudron J (were early authorities referred to); Leigh‑Mardon Pty Ltd v PRC Inc (1993) 44 FCR 88; Akai Pty Ltd v The People's Insurance Co Ltd (1995) 8 ANZ Insurance Cases 61‑254 at 75,853, 75,854 per Sheller JA with the agreement of Meagher JA); CSP Computer Security Products Pty Ltd v Security Dynamics Technologies Inc, FCA (Heerey J) 12 March 1996 unreported.

Counsel submitted that the circumstances of this case were sufficient to displace the prima facie disposition to give effect to an exclusive jurisdiction provision.  First, it was said that it was open to the respondents to accept the jurisdiction of the Court or to apply for a stay (or, no doubt, to set aside service); the appropriate time to determine those issues was upon the making of such an application by the respondents.  I think there are a number of answers to that.  One is that Voth makes it clear the same test must be applied on a motion for leave to serve outside the jurisdiction as would be applied on the
application for a stay; a second is that if the applicants are unable on an ex parte motion to satisfy the Court that the prima facie rule should be displaced, it hardly seems appropriate to require respondents to undertake the trouble and expense of seeking to overturn that which has not been established; a third is that it is clear that the parties to these proceedings have been in communication, and if it is seriously thought that the respondents might submit to the jurisdiction of the Court it would be easy enough to put the question to them.

Next, it was said that the proceedings do not involve a dispute arising under the Assignment Agreement but rather a question as to whether such an agreement exists at all.  With respect, I do not think that is right.  There is no doubt the agreement was entered into.  The question - and counsel did not I think ultimately dissent from this - is one of the construction of clause 6 of the agreement and its application to the facts or, alternatively, whether there has been a repudiatory breach and whether the repudiation has been accepted (and, if so, with what consequence).  Thirdly, counsel relied on a number of particular circumstances.  They were that the applicants are Australian companies; that the Software Development Agreement, which gives rise to the applicants' claim to copyright, is to be construed according to the laws of New South Wales; thirdly that the applicants' witnesses and documents are (inferentially) in New South Wales; and fourthly, that only an Australian court has jurisdiction to grant relief under the Fair Trading Act and that such relief might not be available in England.

Those considerations do not seem to me sufficient to displace the prima facie rule.  If the applicants are resident in Australia, the respondents are resident in the United Kingdom; the Software Development Agreement is of no particular consequence until the effect of the Assignment Agreement is ascertained; if I should infer that the applicants' witnesses and documents are in Australia, so no doubt equally I can and should infer that the respondents' witnesses and documents are in the United Kingdom; and because the Fair Trading Act claims depend, for the reasons I have given, upon the outcome of the contractual claims, and appear in the end highly unlikely to add anything of substance to the relief to which the applicants (if successful) may be entitled, I think they should be given little weight.

I was referred to the decision of Davies J in Leigh‑Mardon Pty Ltd v PRC Inc 19 December 1992 unreported, in which his Honour gave leave to serve process outside the jurisdiction in the proceedings later before Beasley J on a contested application for a stay (which, of course, her Honour granted).  It is notable that Davies J started with "a strong bias in favour of maintaining the bargain" as to exclusive jurisdiction.  His Honour referred, however, to a number of significant factors which pointed the other way.  They included a number of matters, which have no counterpart in this case, lending strong support to a conclusion that an Australian forum was a convenient one for the determination of the dispute: for example, because the dispute concerned actions by both parties with respect to an Australian company and an Australian dockyard, the principal evidence, both oral and documentary, was likely to be in Australia; the subject matter of the dispute concerned the provision of services and equipment to the Australian Defence
Forces, so that it was likely that the question of public interest immunity would have to be considered in relation, for example, to questions of discovery; the first respondent had a wholly owned subsidiary carrying on business in Australia with a legal department here and the second respondent was an Australian company.

Here the development of the software took place in the United Kingdom; that is, I doubt, where a great deal of the relevant evidence will be; each respondent is resident in the United Kingdom and there is no evidence that the respondents have a presence in Australia; no question of Australian public interest arises.

For those reasons in my view this is not an appropriate case in which to give leave to serve process outside the jurisdiction.  Accordingly the motion is dismissed.

                                                     I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane.

                                                     Associate: 

                                                     Dated:  12 December 1996

Heard:                                          28 November 1996

Place:                                            Sydney

Decision:                                       12 December 1996

Appearances:Mr T J Hancock of counsel instructed by Conway MacCallum appeared for the applicant.