FEDERAL COURT OF AUSTRALIA

Gearhart United Pty Ltd v Omni Oil Technologies (Asia) SDN BHD

[2010] FCA 401

THE COURT ORDERS THAT:

1.                  The applicant be heard as to the terms of the appropriate orders in light of these reasons.

 Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                     This is an application for leave to serve a process issued in the Court in a foreign country. The relevant rules of Court are O 8 r 2 and r 3. The principal questions on the application are whether the process is an originating process, whether the Court has jurisdiction in the proceeding, whether the proceeding is of a kind mentioned in O 8 r 2 and whether the applicant, who is the party seeking leave, has a prima facie case for the relief it claims in the proceeding. As I understand O 8 r 3, even if these questions are answered favourably to the applicant, I have a discretion to refuse leave to serve.

The facts

2                     The application was heard ex parte. The summary of the facts which follows is based on the evidence put before me by affidavit by the applicant.

3                     The applicant is the owner of Australian Patent Number 675186. The patent is for a piece of equipment called an improved rotary roller reamer. A rotary roller reamer is a piece of equipment used for borehole drilling. The applicant sells a roller reamer, including improved cutters, called a Redback throughout the world and imports used products back into Australia for inspection.

4                     The respondents or their subsidiaries or agents make, market and sell a product called an Omni Cutter. This product is designed or intended to be used as the roller (or cutter) part or component of a rotary roller reamer for borehole drilling. The first respondent describes its reamer as the “Omni Roller Reamer” and the roller or cutter as the “RR Cutter”. The first respondent is a company which is incorporated in Malaysia and the second respondent is a company which is incorporated in Australia. The second respondent carries on business in this country. In correspondence from the first respondent’s patent attorneys in February of this year, the second respondent is described as its agent in Australia. At the same time, it has to be said that there is correspondence from the second respondent in February 2010 in which it denies it is the first respondent’s Australian agent.

5                     The applicant believes that the respondents’ Omni Cutter infringes its patent. It is aware of Omni Cutters located in a workshop in Darwin. The applicant states that the Omni Cutter embodies all of the integers of a claim or claims in its patent with the exception of one integer. That feature of the patent relates to the presence and use of pistons as part of the lubrication system, achieved through pressure equalisation inside and outside the cutter. The feature is internal and hidden, and its presence or absence can only be determined by examining the internal workings of a cutter or by depiction of the internal workings and structure through drawings and specifications. The applicant has put forward evidence supporting the proposition that this feature is present in the Omni Cutter.

6                     The application brought by the applicant is an application for orders under O 15A r 6 and r 12 of the Federal Court Rules. Those rules are in the following terms:

“6        Discovery from prospective respondent

Where:

(a)        there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained;

(b)        after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and

(c)        there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision;

the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).

…

12        Power to order inspection, preservation etc of property

The Court may also make an order providing for any one or more of the following matters:

(a)        the inspection, measurement, photocopying, preservation, custody and detention of property:

(i)         which relates to the subject matter of the proceedings; or

(ii)        as to which any question arises in the proceedings;

(b)        any of the following:

(i)         taking of samples;

(ii)        observation;

(iii)        carrying out of any experiment;

(iv)       making, playing or screening of tape recordings and films and other means of recording sight or sound;

(v)        making and reproducing or displaying other instrumental recordings and tracings;

            with respect to any such property mentioned in paragraph (a).”

7                     For the purposes of the application for leave to serve, I can concentrate on the application under O 15A r 6 for what has been called in the authorities, information discovery.

8                     The application is for leave to serve the application under O 15A on the first respondent. The second respondent has been served with the application under O 15A and has entered an appearance.

The requirements of the Rules

9                     The power of the Court to give leave to serve an originating process in a foreign country is contained in O 8 r 3 which is in the following terms, relevantly:

3          Application for leave to serve originating process outside Australia

     (1)   Service of an originating process on a person in a foreign country is effective for the purpose of a proceeding only if:

(a)        the Court has given leave under subrule (2) before the application is served; or

…

     (2)   The Court may give leave to a party to serve an originating process on a person in a foreign country in accordance with a convention or the law of the foreign country, on such terms and conditions as it considers appropriate, if the Court is satisfied that:

(a)        the Court has jurisdiction in the proceeding; and

(b)        the proceeding is of a kind mentioned in rule 2; and

(c)        the person seeking leave has a prima facie case for the relief claimed by the person in the proceeding.

Note   The law of a foreign country may permit service through the diplomatic channel or service by a private agent.

     (3)   The evidence on an application for leave under subrule (2) must include the following:

(a)        the name of the foreign country where the person to be served is or is likely to be;

(b)        the proposed method of service;

(c)        a statement that the proposed method of service is permitted by:

(i)         if a convention applies — the convention; or

(ii)        in any other case — the law of the foreign country.”

10                  Order 8 r 2 is in the following terms, relevantly:

“2        When originating process may be served outside Australia

Subject to rule 3, an originating process may be served on a person in a foreign country in a proceeding which consists of, or includes, any 1 or more of the kinds of proceeding mentioned in the following table:

11                  The items which I have set out are the items relied on by the applicant.

12                  Order 8 r 4 deals with leave to serve a document issued by the Court, other than an originating process. The applicant relied on it in the alternative to O 8 r 3. It is not relevant because the applicant’s application under O 15A r 6 is an originating process. That term is defined in O 8 r 1 as follows:

“In this Order, unless the contrary intention appears:

originating process means an application commencing a proceeding, and includes a cross-claim in the proceeding against a person who was not previously a party to the proceeding.”

13                  There is a similar definition of “originating process” in O 1 r 4. The word, “proceeding”, is defined in s 4 of the Federal Court of Australia Act 1976 (Cth) as follows:

“proceeding means a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal.”

14                  An application under O 15A r 6 is a proceeding in the Court, and the application itself commences the proceeding. I follow the decision of French J (as his Honour then was) on this point in Carnegie Corporation Limited v Pursuit Dynamics Plc (2007) 162 FCR 375 (“Carnegie Corporation”) at 387-388 [48]-[53].

15                  The requirement in O 8 r 3(2)(a) (ie, that the Court has jurisdiction in the proceeding) is satisfied whether the “proceeding” is considered to be the application under O 15A or the possible proceeding for infringement of the applicant’s patent. Either way, this Court has jurisdiction in the proceeding.

16                  The next requirement is that the proceeding be of a kind mentioned in O 8 r 2. As I have said, the particular items which the applicant relies on for the purposes of meeting this requirement are set out above. It will be apparent from those items that the applicant’s submission is that, in characterising the proceeding, I should have regard not only to the application under O 15A r 6, but also to the possible proceeding for infringement of the applicant’s patent. On the hearing of the application, I questioned counsel for the applicant as to whether that was the proper approach. The prima facie case requirement seemed to be firmly linked and only linked to the application under O 15A r 6. Furthermore, this being an ex parte application, the applicant quite properly drew my attention to the decision of French J in Carnegie Corporation. In that case his Honour said (at 389 [56]-[57]):

“The applicants in this case assert, for the purposes of O 8 r 2, that their application for preliminary discovery is to be regarded as an originating process in a proceeding which consists of or includes one or more of the following kinds of proceeding set out in O 8 r 2:

1.         Proceeding based on a cause of action arising in Australia.

2.         Proceeding based on a breach of contract in Australia.

3.         Proceeding in relation to a contract that is made on behalf of the person to be served by or through an agent who carries on business in Australia.

4.         Proceeding based on a breach of a provision of an Act committed in Australia.

5.         Proceeding based on a breach of a provision of an Act (wherever occurring) seeking relief in relation to damage suffered wholly or partly in Australia.

6.         Proceeding in which the subject matter, so far as it concerns the person to be served, is property in Australia.

In my opinion the proceedings contemplated by the items on which the applicants rely in O 8 r 2 do not include proceedings by way of an application for preliminary discovery.  Such proceedings are directed to determine who should be sued and alternatively whether some ascertained person should be served.  The proceedings contemplated by the items relied upon in this case, in my opinion, involve originating processes seeking relief in such proceedings.  They refer to, in my opinion, claims for substantive relief dependent upon the establishment of the causes of action identified or defined in those items. The applicants’ submissions appeared to be posited upon the assumption that the relevant proceedings are those which they might ultimately bring under the TPAand for breach of contract.  But those are not the proceedings which have been commenced in this Court.”

17                  With respect, I think that a broader approach may be taken to the question of whether the proceeding is of a kind mentioned in O 8 r 2. That broader approach involves taking into account, when assessing the nature of the proceeding, the possible proceeding which must be identified by the applicant for the purpose of satisfying O 15A r 6(a). For the reasons which follow, I do not think it is appropriate to draw a clear line between the application under O 15A r 6 and the possible proceeding.

18                  First, the nature of an application under O 15A r 6 must be considered. This Court only has jurisdiction with respect to a “matter” within s 77(i) of the Constitution. The Full Court of this Court has held that O 15A r 3 (identity discovery) and O 15A r 6 (information discovery) are valid and give rise to a matter within s 77(i) of the Constitution: Hooper v Kirella Pty Ltd; Transfield Pty Ltd v Airservices Australia(1999) 96 FCR 1. A party who is able to bring himself within O 15A r 6 is a party who asserts a claim resting on an immediate right or liability which has arisen out of events which have occurred. The fact that the party does not have sufficient information to enable it to make a decision on whether or not to commence proceedings does not mean (assuming a federal element) that it does not assert a claim which is capable of determination in this Court. There is a justicable controversy between the parties and an order under O 15A r 6 enables the claimant to pursue his claim for substantive relief in this Court. Another way of putting the point is that an application under O 15A r 6 (and O 15A r 3) is incidental to a justicable controversy being the claim for substantive relief.

19                  Secondly, the very nature of an application under O 15A r 6 directs attention to the possible proceeding which may follow the application. That is because one of the elements of such an application is that, as a matter of objective fact, there must be reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court in relation to the possible proceeding.

20                  Thirdly, the words “based on” in a number of items in O 8 r 2 are wide words which, although they may not dictate a broader approach, certainly allow for it.

21                  Finally, it seems that the broader approach was taken by Beaumont J in Western Bulk Carriers (Australia) Pty Ltd v Cosco Bulk Carrier Co Ltd [2002] FCA 1520, although I recognise that the particular point now under consideration does not appear to have been argued before his Honour.

22                  When the application under O 15A r 6 and the applicant’s possible proceeding for the infringement of an Australian patent in Australia are considered together, it is clear that the proceeding is of a kind mentioned in O 8  r 2.

23                  The next requirement is that the applicant has a prima facie case for the relief claimed in the proceeding. It seems that the words in O 8 r 3(c) do specifically direct attention to the relief sought under O 15A r 6. I do not propose to recite the evidence directed to this requirement. It is set out in the affidavits put before me. I am satisfied that the applicant does have a prima facie case for relief under O 15A r 6.

24                  I am satisfied that the requirements of O 8 r 3 and r 2 are satisfied. Even so, I have a discretion to refuse leave to serve if that is appropriate in the circumstances. This is a case where the same application under O 15A r 6 has been brought against two parties, one of whom has been properly served within Australia. If I could be satisfied that the merits of the application and the relief which might follow are the same against both respondents then that might be a reason to exercise the discretion against granting leave to serve. In other words, if there was no prospect of the applicant obtaining relief, or greater relief from the first respondent than it could obtain from the second respondent, then that might be a discretionary reason to refuse leave to serve. However, I am not certain of that being the case on the evidence before me and I would not refuse leave to serve on this ground.

Conclusion

25                  In my opinion, it is appropriate to grant leave to serve the originating process on the first respondent and I will hear the applicant as to the terms of the appropriate orders.

Associate:    

Dated:         29 April 2010