CATCHWORDS

PRACTICE & PROCEDURE - Leave to appeal against interlocutory order - principles - discovery - whether fishing expedition.

Federal Court of Australia Act 1976, s 25(2)

Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397

Trade Practices Commission v Rank Commercial Ltd (1994) 53 FCR 303

Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170

Associated Dominion Assurance Society Pty Ltd v John Fairfax and Sons Ltd (1952) 72 WN(NSW) 250

Trade Practices Commission v TNT Australia Pty Limited (1994) 16 ATPR 41,960

W.A. Pines Pty Ltd v Bannerman (1980) 41 FLR 175

MICROSOFT CORPORATION & ANOR -V- ADELONG ELECTRONICS PTY LIMITED trading as ADE COMPUTERS

NG 422 of 1996

Burchett J

Sydney

9 April 1997

IN THE FEDERAL COURT OF AUSTRALIA)  

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    NG 422 of 1996

                                  )

GENERAL DIVISION                  )

              BETWEEN:  MICROSOFT CORPORATION

                             First Applicant

               AND:     MICROSOFT PTY LIMITED

                             Second Applicant

               AND:     ADELONG ELECTRONICS PTY LIMITED                      trading as ADE COMPUTERS

                             Respondent

CORAM:    Burchett J.

PLACE:    Sydney

DATE:     9 April 1997

                MINUTE OF ORDER OF THE COURT

THE COURT ORDERS THAT:

     The application for leave to appeal be dismissed with costs.

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)    NG 422 of 1996

                                  )

GENERAL DIVISION                  )

              BETWEEN:  MICROSOFT CORPORATION

                             First Applicant

               AND:     MICROSOFT PTY LIMITED

                             Second Applicant

               AND:     ADELONG ELECTRONICS PTY LIMITED

                        trading as ADE COMPUTERS

                             Respondent

CORAM:    Burchett J.

PLACE:    Sydney

DATE:     9 April 1997

                    REASONS FOR JUDGMENT

BURCHETT J.:

     This is an application, made on notice of motion, that leave be granted to the respondent to appeal from an interlocutory judgment given by Lindgren J on 11 February 1997, when his Honour gave leave to the applicants to amend their statement of claim, and ordered the respondent to give particular discovery.  The jurisdiction I am called upon to exercise is appellate in nature, though exercised by a single Judge:  see s 25(2) of the Federal Court of Australia Act 1976. 

     The principles which inform the exercise of the jurisdiction to grant leave to appeal against an interlocutory
order were expounded in the joint judgment of the Full Court (Sheppard, Burchett and Heerey JJ) in Decor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397, a decision which has since been followed on many occasions (see for example the joint judgment of Black CJ, Jenkinson and Branson JJ in Trade Practices Commission v Rank Commercial Ltd (1994) 53 FCR 303 at 313).  "[A]n appropriate litmus test," it was held in Decor Corporation at 399, "for the general run of cases in which leave to appeal from an interlocutory decision is sought" is to be found in two major considerations:  whether, in all the circumstances, the decision challenged is attended with sufficient doubt to warrant its reconsideration by the Full Court; and whether substantial injustice would result if leave were refused, supposing the decision to be wrong.  There may be special cases, and the Court has a discretion conferred on it in unqualified terms by s 24(1A) of the Federal Court of Australia Act.  In the exercise of the Court's discretion, the distinction must be observed between interlocutory decisions on points of practice and interlocutory decisions determining substantive rights.  The latter are much more likely to satisfy the second major consideration held applicable in Decor Corporation.  In the case of decisions of the former type, attention was drawn in Decor Corporation at 400 to the strong warning reiterated by the High Court in Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc (1981) 148 CLR 170 at 177 that "a tight rein" should be kept on appeals of a procedural nature.

     The present motion for leave relates, as I have indicated, to an order allowing an amendment and an order requiring discovery to be given.  These interlocutory orders were made in an action brought by Microsoft Corporation and Microsoft Pty Limited (to both of which I shall refer as "Microsoft") against Adelong Electronics Pty Limited (to which I shall refer as "Adelong").  The action arose out of a "trap" purchase which included unauthorized copies of Microsoft software alleged to have been sold in breach of copyright and under circumstances involving contravention of s 52 of the Trade Practices Act 1974.  As the statement of claim was originally drafted, it was arguably limited to the one transaction involving the trap purchase.  The amendments which his Honour has allowed to be made have had the effect of widening the statement of claim to embrace expressly other unspecified transactions.  Adelong contends that the inclusion of these was entirely without basis, and was for no other purpose than to attempt to provide support for a wide discovery order.  The order in respect of discovery that was in fact made embraced all transactions involving Microsoft equipment during a period of some three years, the period during which Adelong has traded.  Such an order, Adelong complained, simply enabled Microsoft to engage in "a fishing expedition", as that expression has been understood in the law of discovery for more than a century:  see Bray on Discovery (1885) 13, 16, 461. 

     But the principle that excludes discovery for the purpose of fishing out a case has undergone some development since the time when Edward Bray was writing.  Order 15A rule 6 of the Rules of the Court expressly contemplates what might once have been castigated as "fishing".  That rule takes as a sufficient starting point for an order for discovery before action a situation where "there is reasonable cause to believe that the applicant has or may have the right to obtain relief" (emphasis added).  It would be incongruous if the power to order discovery were less extensive in favour of a party to a proceeding properly brought in the Court, than in favour of someone unable for lack of evidence to mount a case, seeking for that reason to resort to Order 15A.  In fact, applicants have been held entitled to discovery where what they showed was just "suspicion that [they had] a good case proof of which [was] likely to be aided by discovery":  Trade Practices Commission v TNT Australia Pty Limited (1994) 16 ATPR 41,960 at 41,962-3, citing W.A. Pines Pty Ltd v Bannerman (1980) 41 FLR 175 at 181 and other authorities.

     Of course, in the present matter, Microsoft claims to be in a stronger position than that of a party forced to rely on Order 15A.  Microsoft says it is not seeking to find out whether there are "fish" in the pool; its trap purchase has already attracted a bite and landed a fish.  In that situation, it claims that a general allegation, as pleaded in the amended statement of claim, is justified, and that discovery in support of that general allegation is entirely in accordance with principle.  Rejection of an application for discovery on the ground that it is of a fishing nature should be confined to cases of the sort described by Owen J in Associated Dominions Assurance Society Pty Ltd v John Fairfax & Sons Pty Ltd (1952) 72 WN(NSW) 250 at 254:

    "A 'fishing expedition', in the sense in which the phrase has been used in the law, means, as I understand it, that a person who has no evidence that fish of a particular kind are in a pool desires to be at liberty to drag it for the purpose of finding out whether there are any there or not."

     In para. 8 of the affidavit in support of Microsoft's application to amend the statement of claim, the deponent, Ms Chatillon, who was its legal administrator, made the following statement:

    "It is my belief that traders who engage in the practice of unauthorised hard disk loading [by this, she meant installing unauthorised copies of Microsoft programmes in the course of dealing in computer systems] often do so over an extended period of time and cease to do so only after their activities have come to the notice of Microsoft and after Microsoft has taken appropriate action against them ... .  I have in the course of my work at Microsoft encountered many unscrupulous traders who have engaged in the practice of hard disk loading systematically and routinely over a period of many months or years before they were detected and action taken against them.  It is often difficult to assess accurately the scale and frequency of such activities due to the absence of any proper or complete business records."

This evidence was objected to, and strong reliance in the application for leave to appeal was placed on the proposition that its admission was wrong, and that his Honour's reasoning
based on it was also wrong.  What his Honour said about it was:

    "The evidence of Ms Chatillon is that personal computers are commonly sold by traders, such as the respondent, with operating systems installed.  I accept that this evidence, and para 8 of Ms Chatillon's affidavit noted earlier, give reasonable cause to believe that the respondent has, in the course of its business, on occasions prior to the 'trap' purchase, sold personal computers with Microsoft programs installed, without the licence of the first applicant."

Earlier in his reasons, the learned Judge had commented:

    "Ms Chatillon is saying that her experience establishes that 'traders' who do the kind of act that the respondent, a 'trader', is alleged to have done on or about 2 April 1996 in connection with the sale to Mr Pedersen [the trap purchase], commonly do so as part of a course of business conduct, rather than as an isolated 'one off' event."

     Counsel's attack on the reasoning based on paragraph 8 relies on the precise language of the paragraph.  He draws attention to the word "practice", and argues that one trap purchase does not constitute a practice.  However, if there be a practice, a single action may involve engaging in that practice.  His Honour, accepting evidence that a practice existed, and on the basis of evidence that Adelong engaged in conduct consistent with its involvement in such a practice on a particular occasion, has held that in the circumstances Ms Chatillon had reasonable cause to believe that which she professed to believe, namely, that Adelong had engaged in the practice described as "hard disk loading".

     In my opinion, his Honour's decision was a clear example of the exercise of discretion in a matter of procedure.  It was open to his Honour to hold that the amendment to the statement of claim, although its immediate object was to facilitate discovery, had a long term ultimate object of the proper pursuit of claims genuinely entertained by Microsoft.  The question then was simply whether, in the Judge's discretion, he should make the order for discovery which he made.  The whole matter was essentially one of procedure, and I do not think there is any sufficiently arguable case that his Honour was in error.

     Accordingly, the application for leave to appeal will be dismissed with costs.

     I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.

     Associate:

     Date: 9 April 1997

     Counsel for the Applicant for leave:  Mr D.M. Yates

     Solicitor for the Applicant for leave:Mr M.S. Smith

     Counsel for the Respondent:           Mr J.V. Nicholas

     Solicitors for the Respondent:        Mallesons Stephen Jaques

     Date of hearing:                      7 April 1997