FEDERAL COURT OF AUSTRALIA

Herold v Seally (No 2) [2017] FCA 543

ORDERS

THE COURT ORDERS THAT:

1.    The outstanding paragraph 1 of the applicants’ amended interlocutory application dated and filed 9 January 2017 be dismissed.

2.    The respondents’ interlocutory application dated and filed 30 January 2017 be dismissed.

3.    Each party bear their own costs.

4.    The parties have liberty to apply within 14 days for a different costs order.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BROMWICH J:

1    The parties to these proceedings are involved in a highly polarised dispute as to who should take the dominant credit for the development of a particular concept for driverless vehicles, and thereby be able to develop the concept commercially, principally overseas. The applicants contend that the litigation to resolve that dispute should be conducted only in this Court and that an anti-suit injunction should be granted to restrain the continuation of parallel proceedings brought against them (and others) by the second respondent in the United States of America. The respondents contend that the litigation should be conducted only in the United States, or alternatively, that key parts of these proceedings should be stayed to reduce or eliminate the main areas in which the two proceedings overlap or clash.

The parties

2    The first applicant, Lars Herold, is a dual Australian and German citizen and long-time resident of Australia. He is a director and shareholder of the second applicant, a Singaporean company, Green Light Group Pte Ltd. It is convenient to refer to the applicants as Herold and GLG.

3    The first respondent, Jonathan Seally, is an Australian citizen, presently resident in Australia, but deposing to an intention to relocate in the United States for the purpose of advancing his commercial interests in the driverless vehicles concept. He is the sole director and shareholder of the second respondent, a Hong Kong company, Podway Ltd. It is convenient to refer to the respondents as Seally and Podway.

Overview of the dispute

4    The facts upon which the competing and opposing cases are based are deposed to in affidavits from Herold and Seally, as briefly summarised below. Their positions, although having some common ground, reflect two entirely different perspectives of events that cannot sit together, and will have to be resolved at trial unless some other compromise is arrived at. It was common ground that this was not an exercise that could or should be carried out at this stage, especially as there was no cross-examination of any witness.

5    Between 2014 and 2015, Herold and Seally were involved in some form of collaboration directed to developing a start-up project concerning the use of driverless “pod”-style vehicles in urban transportation. Following the end of their involvement with one another in late 2015, each appears to have taken steps to advance a business model in that area.

6    On 30 August 2016, the two men had a lunch together in Sydney which ended acrimoniously, culminating with an accusation by Seally that Herold had stolen his ideas. On 29 September 2016, Podway commenced proceedings in the Superior Court of California at Santa Clara, against Herold, GLG and others (California proceedings), primarily asserting misappropriation of trade secrets. While those proceedings are brought only in the name of Podway, that seems to be no more than a means by which Seally seeks to vindicate his litigious and commercial interests, reflective of how his asserted intellectual property and commercial interests are held and sought to be advanced. It is in any event convenient to refer to the case for the respondents by reference to Seally.

7    On 12 December 2016, Herold and GLG commenced proceedings in this Court, apparently in response to the California proceedings, seeking declarations and injunctions to the effect that no copyright infringement has occurred, together with removal from the Australian register the trade marks “Podway” and “Podways” held by Seally or alternative relief. GLG seems to be a vehicle for advancing Herold’s interests, both commercial and litigious. It is in any event convenient to refer to the case for the applicants by reference to Herold.

8    By way of competing interlocutory applications in this Court, Herold (and GLG) seek an anti-suit injunction in respect of the California proceedings, and Seally (and Podway) seek a complete or alternatively partial setting aside of these proceedings, or at least the setting aside of the case against Podway, including as to service of process (by leave) upon it in Hong Kong.

9    The remaining evidence is from solicitors for the parties and from an expert in the area of the law relied upon by the respondents for the purpose of the California proceedings, Howard Holderness, introducing into evidence various documents and an expert report, to which reference is made below.

Summary of the evidentiary cases for the parties

10    Without proposing to adjudicate in any way on the merits of the parties’ factual contentions, it is useful to outline the competing versions of events advanced. There is some common ground in the factual landscape to note from the outset.

11    Both Herold and Seally have experience in consulting on transport infrastructure, and met in 2011 while working in Sydney at McKinsey Implementation in its transport practice group.

12    In 2013, Herold approached Seally to work as a subcontractor on a project for Sydney Trains, Transport for NSW, which gave rise to informal discussions about the potential for use of autonomous vehicles, referred to as “pods”, to improve urban transportation. By January 2014, those discussions appear to have crystalised into a concerted effort towards developing a start-up project in that area. This project came to be referred to as “Podway” or “Podways”. The parties’ collaboration, the precise nature of which is disputed, continued until late 2015 and was primarily focused on compiling a series of PowerPoint slides referred to as the Deck, which recorded ideas for a pod-based system of transport and included a subset of slides for making pitches to investors. During that period, the parties also made two brief trips to California to present their concept to venture capitalists. With the exception of the meetings in California, all meetings and discussions between the two men took place in Sydney, Australia.

13    For reasons that are disputed, the parties ceased collaborating towards the end of 2015.

14    Following the end of their involvement, the two men each appear to have taken steps to advance independently a business model based on a driverless pod system: Herold deposes to having developed further ideas, hired staff and sought interest from investors; and Seally deposes to having registered the trade marks “Podway” and “Podways” in Australia and incorporated Podway in Hong Kong.

15    As noted above, the critical breakdown of the parties’ relationship occurred on 30 August 2016, when the two men met for lunch in Sydney. Although the content of the discussion at that meeting is disputed, both accounts of the exchange end with Seally accusing Herold of stealing his ideas. The present and California proceedings have ensued.

Herold’s factual case

16    The key distinguishing features of Herold’s factual case include assertions that he authored the majority of the Deck; that in late 2015, Seally grew dispirited with the project and withdrew; and that Herold’s subsequent independent efforts do not give rise to any copyright infringement, as they are based on first principles and not the “basic concepts” developed in parties’ collaboration. Contentiously, Herold also claims to have conceived the name “Podways” and first used that name in September 2014 by inserting it in documents shared with Seally.

17    Some elaboration is helpful. Herold claims that both parties contributed to authorship of the Deck. In that regard, Herold’s understanding was that ownership of the material created would remain with the author of each particular page, the majority of which he claims to have been responsible for.

18    On Herold’s account, the reason for the end of the parties’ collaboration on the project was that Seally had become dispirited and given up. In Seally’s absence, Herold claims to have continued development of a pod-based concept, periodically making contact with Seally and suggesting that he resume his involvement. Herold’s independent efforts are said by him to have been based on first principles, and not “Podways” ideas, which he characterises as “basic concepts”. Herold deposes to having begun recruiting a team in March 2016 and entering discussions with investors. It seems that those investors include Highland Capital Partners LLC and Mark Seeger, who are also defendants in the California proceedings.

19    Upon meeting with Seally at the lunch on 30 August 2016, Herold says that he updated Seally on his further efforts to commercialise a pod-based concept and offered him an equity of 14% in the venture to come back onboard. Seally is then said to have gone “berserk” and accused Herold of stealing his ideas.

Seally’s factual case

20    The key distinguishing features of Seally’s factual case include the assertions that he developed the Podway concept independent of Herold; that he has been working on this project since at least 2005; that the substantive work of developing the system took place in California prior to returning to Australia in 2007; that he conceived the name “Podway”; and that the nature of his collaboration with Herold was largely one-sided, with Seally sharing his ideas with Herold on an agreed confidential basis. Critically, Seally alleges that Herold has unlawfully used his confidential information and trade secrets, including by disclosure to investors in California, to set himself up in competition with Podway, including Highland Capital Partners LLC and Mark Seeger.

21    Seally filed two trade mark applications for “Podway” and “Podways”, apparently sometime in 2015 and 2016.

22    Seally gives a very different account of the nature of his relationship with Herold. He says that Herold had a limited role in working on the pod system and the Deck, only undertaking jobs delegated by Seally consisting of administrative tasks and conducting analysis of the capacity of the system and the costs for rolling it out. Seally deposes to having had significant concerns about restricting the flow of his ideas to Herold, and having sought Herold’s oral agreement to keep the information confidential. In relation to Herold and Seally’s efforts to obtain funding for their project in California, Seally is also highly critical of Herold’s performance in meetings with potential investors. In Podway’s application in California it is alleged that Herold has at some point disclosed trade secrets to some of those investors, including Highland Capital Partners LLC and its employee Mark Seeger.

23    Seally denies having grown dispirited with the “pod” based project, claiming instead to have continued without Herold because he found him to be of little assistance.

24    In relation to the meeting with Herold in Sydney, Seally rejects the assertion that he lost his composure. It appears that Herold’s advice that he had been in discussions with investors, apparently Highland Capital Partners LLC and Mark Seeger, has given rise to the subsequent allegations that they have obtained Seally’s confidential information. Seally, however, corroborates Herold’s offer of a 14% equity and that he accused Herold of stealing his ideas.

The competing proceedings

Podway proceedings in California

25    The amended application in California by Podway against Herold pleads misappropriation of trade secrets in violation of California Civil Code 3426 and breach of an oral contract of confidence. Herold is asserted to have wrongfully disclosed proprietary “trade secrets” to GLG, Highland Capital Partners, and Mark Seeger, who are listed as further defendants. The defendants, including unnamed defendants referred to as “Does” as detailed below, are said to have used Seally’s trade secrets to acquire funding and form a business to compete unfairly with Podway. The primary relief sought by Podway is compensatory damages, statutory damages and restitution for profits earned by the defendants. No royalty claim is made.

26    The case was originally also brought against GLG, but that aspect was struck out on 25 January 2017. Podway will be seeking to have GLG re-joined as a party. Because this remains in a state of flux, it is best not to place any particular reliance on GLG being, or not being, a party to the California proceedings.

27    The California proceedings also name as defendants 10 other persons using the placeholder identities “Does 1-20”, in the same sense as “Jane Doe” or “Richard Roe”, long used in various types of proceedings or processes to reflect anonymity, legal fiction or want of a known identity. The “Doe” defendants reflect a pre-proceeding process, apparently widely used in the United States, allowing for further likely defendants to be nominated by a pseudonym pending their proper identification and joinder, somewhat akin to preliminary discovery in this Court. The parties disagreed as to the extent of the difference between the “Doe” process and the process of preliminary discovery. In any event, use of the process indicates that the California proceedings may have some way to go before they will be ready for trial. Podway, via Seally, has agreed, without admissions, to let the California proceedings be held in abeyance pending the outcome of the present applications.

Herold and GLG proceedings in this Court

28    The originating application by Herold and GLG against Seally and Podway seeks removal of the trade marks “Podway” and “Podways” from the Australian register, or alternatively, substitution of Herold as their registered proprietor, together with an injunction restraining the respondents from making any threat of bringing copyright infringement proceedings, and declarations that use of part of the Deck does not give rise to any disclosure of confidential information or trade secrets. In a statement of claim filed on 17 February 2017, the applicants plead to ownership of the copyright subsisting in large parts of the Deck and deny Seally’s right to use the respective trade marks.

29    The defence filed by Seally and Podway admits formal matters and certain procedural matters, but in substance denies the totality of the case brought against them.

30    The pleadings in these proceedings appear to have closed, with the applicants’ reply being filed recently. It would seem likely, if not certain, that most of the evidence is complete and that the matter is substantially ready for trial, subject to the question of how best to adjudicate the factual dispute, including as to how the diametrically opposed factual cases should be required to be proved. For example, it will need to be decided as to whether the conflicting versions of events deposed to by Herold and by Seally, in the absence of anyone else to support either version, can satisfactorily be resolved by competing affidavits and cross-examination. It may be that each will be required to give viva voce evidence of the events, including conversations which are in dispute, followed by cross-examination, with or without reference to prior affidavits dealing with that evidence.

The two interlocutory applications

Applicants’ interlocutory application

31    By an amended interlocutory application dated 9 January 2017, the applicants seek an anti-suit injunction restraining the respondents from directly or indirectly seeking to obtain judgment or taking any other step in the California proceedings.

Respondents’ interlocutory application

32    By an interlocutory application dated 30 January 2017, the respondents seek the following:

(1)    Pursuant to rule 13.01 of the Federal Court Rules 2011 (Cth), orders:

a.    setting aside the whole of the Originating Application filed 12 December 2016 against the Second Respondent;

b.    further, and in the alternative, setting aside prayers for relief 3, 4 and 5 of the Originating Application filed 12 December 2016 as against the First and Second Respondents; and

c.    further, and in the alternative, discharging the orders of 19 January 2017 granting leave to serve the originating application filed 12 December 2016 on the Second Respondent and setting aside service of that originating application on the Second Respondent;

(2)    The Applicants pay the Respondents’ costs of this interlocutory application; and

(3)    Such further and other orders as the Court considers appropriate.

The legal principles for anti-suit injunctions and stays by reason of foreign proceedings

33    In CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 (CSR v Cigna), the High Court held by a 6-1 majority that a judge of the Supreme Court of New South Wales had erred (leave to appeal to the Court of Appeal having been refused) in granting an anti-suit injunction in respect of proceedings in the United States and in failing to order a stay of the proceedings before his Honour. The central reason for CSR’s success was that certain statutory remedies were only available in the United States, and not in NSW. In those circumstances, and having regard to the entire controversy, the NSW proceedings were oppressive, being brought to prevent the additional remedies being sought overseas.

34    CSR v Cigna remains the leading authority on anti-suit injunctions and any related or alternative stay of local proceedings, although prior and subsequent authority illuminates a number of issues. Academic discourse also informs consideration of certain aspects of that decision. The core principles from the majority decision may be stated as follows (from 389-394):

(1)    In some cases, the question of whether a dispute as to legal rights should be litigated in Australia and not overseas may be resolved by one court staying its proceedings in favour of the other, or by it granting an anti-suit injunction restraining a person amenable to its jurisdiction from commencing or continuing the overseas proceedings.

(2)    Sometimes, steps short of an injunction may be appropriate, such as the proceedings in the Australian court being held in temporary abeyance pending resolution of certain issues in the overseas proceedings. Other intermediate remedies may be appropriate, moulded to the circumstances.

(3)    The remedies of a domestic stay and of an injunction in relation to the overseas proceedings are not governed by the same principles. However, in some cases the power to grant an injunction may be an aspect of the power to stay proceedings. In other cases, the Court should not exercise the power to grant the injunction without first considering whether instead the Australian proceedings should be stayed.

(4)    The test for a stay of the Australian proceedings as stated by the plurality (Mason CJ, Deane, Dawson and Gaudron JJ) in Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 of a “clearly inappropriate forum” derived from the judgment of Deane J in Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197, also applies as a threshold test for the grant of an anti-suit injunction. The summary by the plurality in Voth of Deane J’s views in Oceanic Sun are expanded upon below, because the issue of whether these proceedings have been brought in a “clearly inappropriate forum” applies to the competing relief sought by the parties.

(5)    The power to stay proceedings upon the ground of being an inappropriate forum is to be exercised (from Voth at 554) “in accordance with the general principle empowering a court to dismiss or stay proceedings which are oppressive, vexatious, or an abuse of process and the rationale for the exercise of the power is the avoidance of injustice”.

(6)    The power to stay proceedings on grounds of forum non conveniens (in the absence of statutory power) is an aspect of inherent or implied power to prevent the processes of a court being used to bring about injustice. It is therefore focused on the integrity of the Australian court’s own processes.

(7)    The counterpart of a court’s power to prevent its process being abused is its power to protect the integrity of those processes. This has been the historic rationale for such things as Mareva injunctions to ensure that a judgment debt will be able to be met (now more commonly known as asset preservation orders). In some cases, protection of the Australian court’s own processes will authorise the grant of an anti-suit injunction. While examples may be derived from prior cases, the categories are not closed. The power is to be exercised when the administration of justice so demands as being necessary for the protection of the Court’s own proceedings or processes.

(8)    Independent of protection of its own proceedings or processes, the court may make orders in the exercise of its equitable jurisdiction to restrain unconscionable conduct or the unconscientious exercise of a legal right. Thus, if bringing or continuing proceedings elsewhere has that character, the equitable jurisdiction may be exercised to restrain them being advanced no matter where they are brought.

(9)    The power may extend to protecting legal rights in Australia, such as a contract not to sue, or to sue in a particular way or forum (not in issue in this case, but included for completeness and context).

(10)    A well-established category of case in which an injunction may be granted is when foreign proceedings are, according to principles of equity, “vexatious or oppressive”. The High Court quoted with approval the test in Carron Iron Co v Maclaren (1855) 5 HLC 416 at 437 to the effect that where there are pending local proceedings in which “complete relief may be had”, commencing subsequent proceeding abroad may generally be considered as “a vexatious harassing of the opposite party” and will restrain the continuation of the foreign proceedings [via an order addressed to a litigant in those proceedings].

(11)    A long history of cases arising from competing foreign proceedings establish that the “mere co-existence of proceedings in different countries does not constitute vexation or oppression”, especially if the other proceedings give “other or additional remedies beyond those attainable” in Australia. Foreign proceedings are to be viewed as vexatious or oppressive “only if there is nothing to be gained by them over and above what may be gained in local proceedings”. However, they will be regarded as vexatious or oppressive if there is a “complete correspondence between the proceedings” or if “complete relief” is available in the local proceedings.

(12)    The exercise of the anti-suit injunction power does not involve any determination that the foreign proceedings are vexatious or oppressive in the sense that they are an abuse of that court’s processes or even that they should be stayed on forum non conveniens grounds.

35    In Voth at 552-561, the plurality considered the unresolved and competing views that had been expressed by different justices in Oceanic Sun as against the test of “clearly most appropriate forum” expressed in Spiliada Maritime Corp v Cansulex Ltd [1987] AC 460. As noted above, the approach that was adopted in Voth was that expressed by Deane J in Oceanic Sun at 247-8 to the effect that a stay is only to be granted if the Australian court is a “clearly inappropriate forum”. The test in Spiliada was not approved, although aspects of the reasoning of Lord Goff were considered valuable. The way in which the plurality in Voth described Deane J’s reasoning in Oceanic Sun is of assistance because much the same reasoning was adopted in CSR v Cigna (at 391) for the purposes of applying the “clearly inappropriate forum” part of the test for the grant of an anti-suit injunction. The summary is therefore applicable both to the applicants’ claim for an anti-suit injunction, and the respondents claim for a stay of these proceedings. The plurality in Voth said at 555 and 556 as follows (footnotes omitted):

… Deane J. agreed with the caution uttered by Lord Wilberforce in The “Atlantic Star”, against construing “oppressive” and “vexatious” too rigidly in the context of dismissing or staying an action on inappropriate forum grounds. His Honour said that “‘oppressive’ should, in this context, be understood as meaning seriously and unfairly burdensome, prejudicial or damaging while ‘vexatious’ should be understood as meaning productive of serious and unjustified trouble and harassment”. His Honour also took the view that the words should be read as describing and characterizing the objective effect, on balance, of a continuation of the proceedings and a particular forum as the venue of proceedings rather than as describing the conduct of the plaintiff in selecting or persisting with that forum. …

…

… Deane J., looking to a wider range of potentially relevant factors, saw the function as involving “a subjective balancing process in which the relevant factors will vary and in which both the question of the comparative weight to be given to particular factors in the circumstances of a particular case and the decision whether the power should be exercised are matters for individual judgment and, to a significant extent, matters of impression”. In the result, Deane J. concluded that a defendant would discharge the onus of proof which rested on him if he established that, having regard to the circumstances of the particular case and the availability of the foreign tribunal, the local court is a clearly inappropriate forum for the determination of the dispute. The continuation of the proceedings in that forum would then be oppressive or vexatious. …

36    It was further observed in Voth at 554.6 concerning a stay of Australian proceedings, that all the justices in Oceanic Sun were of the following views, which remain highly relevant to the question of whether a stay of Australian proceedings should be granted by reason of foreign proceedings:

First, a plaintiff who has regularly invoked the jurisdiction of a court has a prima facie right to insist upon its exercise. Secondly, the traditional power to stay proceedings which have been regularly commenced, on inappropriate forum grounds, is to be exercised in accordance with the general principle empowering a court to dismiss or stay proceedings which are oppressive, vexatious or an abuse of process and the rationale for the exercise of the power to stay is the avoidance of injustice between parties in the particular case. Thirdly, the mere fact that the balance of convenience favours another jurisdiction or that some other jurisdiction would provide a more appropriate forum does not justify the dismissal of the action or the grant of a stay. Finally, the jurisdiction to grant a stay or dismiss the action is to be exercised “with great care” or “extreme caution”.

37    The High Court in CSR v Cigna also addressed the issue of “comity” that arises by reason that an anti-suit injunction will effectively interfere with the proceedings of a court of another nation. At 395-6, the High Court considered that, because of the recognition beyond mere courtesy and goodwill which one nation allows within its territory to the legislative, executive or judicial acts of another nation, the power to grant an anti-suit injunction should be exercised with caution, having due regard to international duty and convenience and the rights of citizens and others protected by foreign laws. In some cases that may call for restraint until steps are first taken for a stay or dismissal in the foreign court of the proceedings there, but there is no hard and fast rule requiring that, nor can there be. It is case-specific.

38    The High Court in CSR v Cigna was not saying that comity dictates inaction when action is otherwise appropriate. To illustrate this point, the Full Court in Joyce v Sunland Waterfront (BVI) Ltd [2011] FCAFC 95; (2011) 195 FCR 213 at 230 [59] quoted with evident approval the observation of Perram J in Habib v Commonwealth [2010] FCAFC 12; (2010) 183 FCR 62 at 77 [37] that while comity between nations was a “fine and proper thing”, it provided no basis for declining to exercise jurisdiction conferred on it by the Parliament. Viewed in that way, comity may be seen as a relevant, even highly relevant, consideration, but not of itself determinative of whether or not an anti-suit injunction should issue.

39    As to the relationship between interlocutory anti-suit injunctions and stay applications, a key point made by the High Court in CSR v Cigna is that anti-suit injunctions are very different from other forms of interlocutory relief because the matters relied upon can or will be raised as issues in the foreign proceedings. Most injunctions preserve something, usually for the purposes of the proceeding in which the order is made or for future proceedings, but an anti-suit injunction, if granted, has the consequence that the issues to be determined overseas are instead determined locally. The injunction therefore is ordinarily final in effect in relation to the overseas proceedings. It necessarily involves a decision that the entirety of a dispute should not be adjudicated, even in part, elsewhere. That necessarily entails a determination that the Australian court is the appropriate forum in the sense of not being clearly inappropriate, using the test from Voth.

40    Thus, if the Australian court decides that it is clearly an inappropriate forum, the anti-suit injunction application immediately fails, and ordinarily a stay of the Australian proceedings will be ordered. If that gateway is passed, the Australian court must consider whether to require the applicant first to seek a stay or dismissal of the overseas proceedings. If that is not considered appropriate, the ordinary practice for interlocutory injunctive relief is followed of determining whether there is a serious issue to be tried and the balance of convenience. In effect, the question is whether, given that the Australian proceedings are not going to be stayed, both proceedings should continue, or whether the party bringing the foreign proceedings should be restrained from doing so. In this case, that turns upon whether the applicants have established that the California proceedings are vexatious or oppressive, no other basis being relied upon by the applicants (such as enforcement of a contractual right as to choice of forum).

41    A number of the subsequent cases have highlighted some of the points above, and elaborated upon them. In TS Production LLC v Drew Pictures Pty Ltd [2008] FCAFC 194; (2008) 172 FCR 433, the appellant commenced Australian copyright proceedings in this Court while the respondent subsequently commenced United States copyright proceedings in Illinois. The primary judge stayed the Australian proceedings and consequently did not grant an anti-suit injunction in relation to the United States proceedings. The Illinois court declined to grant an anti-suit injunction in respect of an appeal to the Full Court. On appeal the stay was quashed unanimously. Gordon J, with whom Stone J agreed, declined to grant the anti-suit injunction; Finkelstein J in dissent on this point would have granted an anti-suit injunction. Gordon J at 446-7 [47]-[49] identified material differences between the local and foreign proceedings, including as to the nature of the relief sought, in finding that the local proceedings were not in a clearly inappropriate forum.

42    Gordon J in TS Production, on the issue of the anti-suit injunction, considered the question of whether the United States proceedings were vexatious or oppressive, noting that CSR v Cigma required more than mere co-existence of the two proceedings. Her Honour at 448 [56] referred to the test from Oceanic Sun at 247. The full version of that test was that “oppressive” meant “seriously and unfairly burdensome, prejudicial or damaging” and “vexatious” meant “productive of serious and unjustified trouble and harassment” (the test for “oppressive” being picked up and applied in CSR v Cigma at 401). By contrast, the only additional thing that the appellant could point to beyond coexistence of proceedings was inefficiency and additional cost if both went ahead. In substance that was no more than burdensome, which was not enough. Once it was appreciated that the rights and relief sought were different, and something more could be gained in the United States proceedings, then it was not arguable that it was either unjustified or unfair to maintain those proceedings simultaneously with the Australian proceedings.

43    The vexatious or oppressive basis for seeking an anti-suit injunction does not appear to arise very often. When it does, the facts and their characterisation, rather than any legal controversy, are generally determinative of the outcome. In those circumstances, academic writing, especially by experienced practitioners or judges, is of assistance in identifying and addressing points of difficulty emerging from CSR v Cigma. In Nygh’s Conflict of Laws in Australia (Ninth Edition, LexisNexis Butterworths, 2014) at 230-2 [9.27], the following six points are made:

(1)    the requirement of “complete correspondence” between the two set of proceedings, or “complete relief” being available locally is “surprisingly absolute”;

(2)    a tension may be discerned between that absolute requirement, and the notion that the categories are not closed in applying the equitable concept of vexatious or oppressive;

(3)    that tension may be resolved to an extent by requiring the absolute test to be met in a substantive rather than merely procedural way – in other words substantive correspondence rather than correspondence in procedure, even extending to procedural advantages (or disadvantages) such as civil trial by jury, for otherwise the relief could only rarely be obtained;

(4)    there is no reason in principle why a foreign statutory claim may not be entertained in Australia; the availability of a remedy overseas not available in Australia will [or at least may] be largely a function of choice of law rules and how “internationalist” the local forum is in its approach to foreign causes of action [such as by way of cross-claim]. By way of example, the conclusion in CSR v Cigma that relief available in the United States was not available in Australia depended upon the application by Australian courts at the time of the “double actionability” rule for tort. However, that rule has since been abolished in Regie Nationale des Usines Renault SA v Zhang [2002] HCA 10; (2002) 210 CLR 491, to the effect that the tort law of an overseas jurisdiction may be applied and litigated in Australia;

(5)    it is unclear whether, even if foreign proceedings are not characterised as vexatious or oppressive by reason of offering a remedy not available in Australia, they may nonetheless be unconscionable and warrant equity’s intervention – for example if proven to be actuated by malice or an improper collateral purpose; and

(6)    the requirement that no advantage exist in the foreign proceedings does not seem to apply where the anti-suit injunction application was based on a breach of a contractual right or an order to protect the integrity of the Australian court’s processes – a residual basis is implicit in the High Court’s reasoning in CSR v Cigma on whether there was a contractual bar to the United States proceedings, albeit not applicable in this case.

The case each party was required to establish

44    For Seally and Podway to succeed wholly or in part for the stay they seek, and the collateral relief as to service on Podway, they would have to establish that these proceedings are in a "clearly inappropriate forum".

45    For Herold and GLG to succeed, they would have to establish:

(1)    that these proceedings are not in a "clearly inappropriate forum”;

(2)    that "complete relief may be had" by the respondents in these proceedings in the sense that nothing of substance is to be gained by them in the California proceedings over and above what may be obtained in these proceedings, such that the California proceedings may properly be regarded as being "vexatious or oppressive" in the sense described by Deane J in Oceanic Sun, and elaborated upon by and applied by the plurality in Voth and in CSR v Cigma, discussed above; and

(3)    that it was neither necessary nor appropriate that they first seek to stay or strike out the California proceedings (or in the case of GLG, successfully resist being re-joined to those proceedings).

The applicants’ anti-suit injunction case

46    In summary, Herold and GLG say that the California proceedings are “oppressive” in the relevant sense because Podway may obtain the entirety of the relief sought in those proceedings by way of cross-claim to Herold’s action in this Court. In support of this proposition, senior counsel for the applicants submitted that there is no substantial difference between the cause of action for breach of confidence under Californian law and what would be available to Seally in Australia, having regard, in particular, to the substantively equivalent definitions of “trade secrets” under the Californian code and the Australian common law. It was submitted further that it would be open to the respondents to argue in any cross-claim that the proper law to apply by this Court would be the law of California, and, if such a course were to be adopted, to seek that this Court apply the statutory measure of damages under the Californian code directly, noting in any event that such damages are available in Australian law without the corresponding statutory restrictions. Finally, it was submitted that the “Doe” procedure relied on in the Californian proceedings is permitted by this Court, although not widely exercised – citing, for example, Tony Blain Pty Ltd v Jamison (1993) 41 FCR 414 – and that any applicant might otherwise apply for leave to join further parties as identified.

47    Herold and GLG place particular reliance on the principles outlined at [43(3)] above in urging a critical examination of the competing proceedings to see if there is a substantive – that is to say, real or tangible – advantage to Podway in bringing the California proceedings, and not just procedural advantages. Reliance was placed on Ace Insurance Ltd v Moose Enterprise Pty Ltd [2009] NSWSC 724, in which Brereton J granted an anti-suit injunction upon a contractual basis, but would also have done so upon the equitable vexatious or oppressive basis because the supposed advantage was illusory upon closer examination: see [75]-[78]. Reliance was also placed on Henry v Henry (1996) 185 CLR 571, in which the High Court overturned a divorce order nisi by reason of foreign matrimonial proceedings in Monaco which rendered the Australian proceedings vexatious or oppressive. However in that case there was such a high level of commonality between the two proceedings that one of them required that label. It went further than the duplication and fragmentation characterisation attributed to it by Herold and GLG.

The respondents’ case for setting aside these proceedings in whole or in part

48    Seally and Podway advanced a number of reasons which were said to compel the conclusion that this Court is a clearly inappropriate forum. First, it was submitted that the wrong complained of by Podway is a foreign civil wrong, arising by way of breaches in California, and, as was considered in Voth, the overseas nature of the tort is a significant factor in favour of this Court being an inappropriate forum. Second, the Australian proceedings are described as “retaliatory”, which is said to be evident having regard to the timing of the proceedings and the reverse or negative relief that is sought. In this regard, it was submitted that the Court should conclude, by inference or otherwise, that these proceedings are intended to stifle the California proceedings and deprive Podway of rights that it may only benefit from in the California proceedings. Third, it was said that this Court does not have jurisdiction to hear breaches of the Californian civil code. And finally, it was asserted that the further defendants to the California proceedings, Highland Capital Partners LLC and Mark Seeger, have no obvious connection to Australia and there is no guarantee that they will appear if joined to these proceedings.

49    It was also advanced on behalf of Seally and Podway that this Court should adjourn the competing interlocutory applications pending the outcome of the applications by Mr Herold and Mr Seeger in the California proceedings. It was submitted that the result of the strike-out applications in those proceedings will be relevant to the anti-suit injunction application in this Court, and that these proceedings may ultimately be rendered otiose if the California Superior Court declines jurisdiction. No prejudice to Herold and GLG in respect of this delay was said to have been demonstrated.

The expert evidence for the respondent

50    The respondents relied upon the expert evidence of a US attorney, Howard Holderness, whose report was referred to extensively at the hearing. Some of the key aspects of that evidence, as dealt with in submissions by both parties, were as follows:

(1)    Mr Holderness indicated that virtually all complaints in complex litigation matters contain “Doe” defendant allegations. Complaints alleging trade secret misappropriation were said to be no different, and that any competently drafted complaint would include “Doe” allegations. Senior counsel for the applicants submitted that this process was largely equivalent to the process of preliminary discovery in this Court, although it was said in answer by counsel for the respondents that the “Doe” procedure offers some advantages considering that there are greater procedural and evidentiary obstacles to obtaining an order for preliminary discovery.

(2)    In relation to the damages that might be available in the California proceedings, Mr Holderness considered that where neither damages nor unjust enrichment are provable, a reasonable royalty may be imposed for a period of time no longer than the use of the secret could have been prohibited. It was submitted by counsel for Seally and Podway that this “royalty” remedy was significant because it was not available in Australia and might offer a greater potential for benefit to a claimant, avoiding the situation where a plaintiff might win on liability but lose anyway because no loss or unjust enrichment is provable.

(3)    Mr Holderness also expressed the view that the trade mark application in this Court might be determined in the California proceedings, the correctness of which was doubted by senior counsel for the applicants. At the hearing, counsel for Seally and Podway conceded that there would be significant obstacles to this approach, namely, the rule expressed in British South Africa Company v Companhia de Mocambique [1893] AC 602 (cited in TS Production by Finkelstein J at 438 [14]) to the effect that intellectual property right ownership will normally be determined by a court of the country or the state from which the right was obtained. On the basis of that concession, it was submitted on behalf of Seally and Podway that their strongest case was for this Court to retain the trade marks aspect of Herold’s application, but to stay the balance of these proceedings.

Resolution of the dispute

Whether these proceedings are in a “clearly inappropriate forum”

51    Taking all of the above competing arguments into account, the only proper conclusion is that these proceedings are not in a clearly inappropriate forum. That is because:

(1)    These proceedings deal with trade marks that were registered in Australia and assigned by Seally to Podway in Australia, being matters that can only be litigated in Australia by reason of the terms of s 88 of the Trade Marks Act 1995 (Cth).

(2)    These proceedings seek to litigate issues concerning Australian copyright under the Australian Copyright Act 1968 (Cth), and although there is no equivalent to s 88 of the Trade Marks Act, determination of Australian copyright in this Court could not be said to be inappropriate, let alone clearly so.

(3)    While the California proceedings allege disclosure in the United States of what is asserted to be Podway’s trade secrets or otherwise confidential information, any such information on Podway’s case was conveyed to Herold in Australia. Even if that information was originally acquired by Seally as a result of work and other activities at least in part in the United States, and even if it is alleged to have been improperly disclosed in the United States, it cannot be said that this Court is a clearly inappropriate forum in which to determine whether or not what was communicated in this jurisdiction was or was not a trade secret or otherwise confidential information capable of being protected both here and perhaps abroad. If Herold did not have disclosed to him by Seally such information in Australia, he could not have been said to have on-disclosed it in the United States because no such information would have been possessed by him in the first place.

52    It follows that Herold and GLG have a proper case to bring in this Court and the respondents must fail in their application for a stay of these proceedings. I therefore turn next to the question of whether the applicants have established that the California proceedings are vexatious or oppressive.

Whether the California proceedings are vexatious or oppressive

53    The following features lead to the conclusion that the California proceedings have not been shown to be vexatious or oppressive when regard is had to substantive differences between these proceedings and the California proceedings:

(1)    It was common ground that the trade secrets and confidential information cause of action sought to be litigated by Podway in the California proceedings is of wider ambit than the trade mark or copyright matters sought to be litigated in this Court and would not necessarily even be unsustainable in the event that both statutory actions were resolved in favour of the applicants in this Court. Even with this limited amount of detail, there is lacking the requisite degree of equivalence of substantive relief as between the two sets of proceedings.

(2)    There are already two other defendants in the California proceedings, namely Mark Seeger and Highland Capital Partners LLC, who have not been shown to be amenable to any cross-claim brought by Podway (and/or Seally) in Australia because there is nothing to connect them to Australia in any way. That is a substantive right, in the sense of additional defendants being sued and able to be sued, that would not be available to the respondents in these proceedings.

(3)    There is alleged to be a number of prospective defendants whose identity is yet to be ascertained, presently identified by the placeholder names "Does 1-20”, who are similarly unlikely to be amenable to any cross-claim brought by Podway (and/or Seally) in Australia because there is similarly unlikely to be anything to connect them to Australia in any way. Although not well advanced, that appears to be at least potentially a substantive right, in the sense of defendants being sued and therefore able to be sued, that is not available to the respondents in these proceedings. It is a sufficient consideration to be properly taken into account.

54    It follows that Herold and GLG have failed to establish that the California proceedings are relevantly vexatious or oppressive.

55    In light of the above, it is not necessary to decide whether the assertion that the California proceedings offer a materially different and additional remedy by way of additional royalties (noting this relief is not presently sought), or whether the “Doe” procedure confers additional benefits that transcend a merely procedural advantage when compared to the capacity for similar processes being made available by this Court. Had either been decisive, I would have been reluctant to resolve them in favour of the respondents by reason of there being insufficient evidence or other material by which to form a sufficiently clear view of the asserted advantages and their necessary substantive character.

Whether the applicants should first seek to strike out or stay the California proceedings

56    Strictly speaking, this question does not arise because of the finding that, on the material before this Court, it has not been demonstrated that the California proceedings meet the still-stringent test of being vexatious or oppressive. However this was an interlocutory proceeding and new matters may emerge and be raised by way of a fresh application. It is therefore of utility to observe that had the vexatious or oppressive test been met, it would have been appropriate in all the circumstances for the applicants first to seek to have the California Superior Court stay or strike out those proceedings. It necessarily follows that such an application should probably first be made, and fail, before any further application for an anti-suit injunction in this Court is contemplated.

Conclusion

57    Herold and GLG have a proper case to bring in this Court and Podway appears to have a proper case to bring in California. There is no proper basis upon which to stay these proceedings in whole or in part. Insufficient grounds have been established to injunct Podway from maintaining its case against Herold (and potentially GLG) in California. However that view of the California proceedings is not intended to suggest in any way that the California Superior Court could not or should not take a different view, given its undoubted superior position and capacity to determine that question more thoroughly and control matters wholly within its jurisdiction. It follows that both interlocutory applications must be dismissed.

Costs

58    As both applications have been dismissed it is not presently apparent that there is any proper basis for either party to have either the burden or the benefit of a costs order. However the parties will be given an opportunity, if sought, to identify a basis upon which any contrary application should be entertained.

Associate:

Dated:    19 May 2017