FEDERAL COURT OF AUSTRALIA

CPL Notting Hill Pty Ltd v Microsoft Corporation [2017] FCA 1385

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal be refused.

2.    The applicants pay the respondents’ costs of the application for leave to appeal, as agreed or taxed.

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

REASONS FOR JUDGMENT

ROBERTSON J:

1    This is an application for leave to appeal from certain orders of the Federal Circuit Court of Australia given on 4 August 2017, as amended by order of 7 August 2017. I shall refer to the applicants on the application for leave to appeal as CPL Notting Hill. I shall refer to the respondents on the application for leave to appeal as Microsoft.

2    In the substantive proceedings, CPL Notting Hill is the respondent. The causes of action in respect of which CPL Notting Hill is sued are: infringement of copyright; contravention of the Australian Consumer Law; and infringement of trademarks.

3    The orders made by the Federal Circuit Court were as follows:

THE COURT DECLARES THAT:

1.    It is appropriate in the interests in (sic) the administration of justice to allow and require verified discovery by the respondents, including any further respondent joined to the proceedings in accordance with order 4 below, pursuant to s. 45(1) of the Federal Circuit Court of Australia Act 1999 (Cth) as identified below.

THE COURT ORDERS THAT:

1.    Grant leave to the applicant to file and rely on the amended application in a case and the Court dispenses with the need for the electronic filing of the same.

2.    The application in a case filed by the respondents on 22 June 2017 is dismissed.

3.    The applicants file and serve a further amended statement of claim on or before 24 August 2017.

4.    Grant leave to the applicants to join any further party or parties to that further amended statement of claim.

5.    Directs the respondents to file and serve a defence to the further amended statement of claim on or before 14 September 2017.

6.    That pursuant to regulation 14.02 of the Federal Circuit Court Rules 2001 (Cth) and subsection 45(1) of the Federal Circuit Court of Australia Act 1999 (Cth) the Respondents to give verified discovery in respect of the following categories of documents:-

a)    copies of all purchase orders issued by any of the Respondents to any person or entity for the importation into, purchase or distribution in Australia, of any Microsoft Windows 7 Professional and Microsoft Windows 7 Home Premium programs in the period 1 January 2014 to date;

b)    copies of all invoices issued to any of the Respondents by any person or entity in relation to the sale or supply by such person or entity in Australia, of any Microsoft Windows 7 Professional and Microsoft Windows 7 Home Premium programs in the period 1 January 2014 to date;

c)    copies of all sales ledgers and invoices which evidence the sale or supply of any Microsoft Windows 7 Professional and Microsoft Windows 7 Home Premium programs (with or without a computer system) by any of the Respondents to any person or entity in Australia in the period 1 January 2014 to date;

d)    copies of all invoices issued to any of the Respondents by any person or entity in relation to the importation into, purchase or distribution in Australia by such person or entity, of certificates of authenticity for any Microsoft Windows 7 Professional and Microsoft Windows 7 Home Premium programs for the period 1 January 2014 to date; and

e)    copies of all invoices which evidence the sale or supply of certificates of authenticity for Microsoft Windows 7 Professional and Microsoft Windows 7 Home Premium programs by any of the Respondents to any person or entity in Australia for the period 1 January 2014 to date; and

f)    copies of ledgers and bank statements evidencing the receipt and deposit of the sales of Microsoft Windows 7 Professional and Microsoft Windows 7 Home Premium programs and/or certificates of authenticity for Microsoft Windows 7 Professional and Microsoft Windows 7 Home Premium programs identified in category 1. c. and 1.e. above.

7.    The applicants to file and serve any affidavit evidence in respect of liability, damages or additional damages on or before 1 February 2018.

8.    Directs the respondents to file and serve any affidavit evidence on which they wish to rely on or before 29 March 2018.

9.    Directs the applicants to file any affidavit evidence in reply on or before 27 April 2018.

10.    Directs the applicants file and serve a list of objections to the respondents’ evidence on or before 27 April 2018.

11.    Directs the respondents to file and serve any objections to the applicant’s affidavit evidence on or before 11 May 2018.

12.    The matter is stood over for directions at 9:30 am on 25 May 2018.

13.    Upon completion of the affidavit evidence, the Court grants leave to either party to ascertain from the Court the range of potential hearing dates and the parties have leave to provide consents (sic) orders in relation to the hearing dates if they are agreed.

14.    Directs any further application for a transfer be heard and determined on 25 May 2018 of such application is filed.

15.    Directs the respondents to file and serve any further application for transfer on or before 11 May 2018.

16.    Liberty to apply on 2 days’ notice.

17.    The applicants pay the respondents’ costs of the occasion by reason of the amendment.

18.    The Court reserves the issue of costs in respect of the application in a case on which the order for partial discovery has been made and reserves the question of costs in relation to the application of (sic) in a case that has been dismissed.

4    The grounds set out in the application for leave to appeal concern three matters, as follows: A: ordering verified discovery in certain categories by CPL Notting Hill; B: dismissing CPL Notting Hill’s application seeking compliance by Microsoft with an order made in the Federal Circuit Court on 7 September 2016; and C: dismissing CPL Notting Hill’s application for the transfer of the proceeding from the Sydney Registry to the Melbourne Registry of the Federal Circuit Court:

A.    In declaring and ordering verified discovery by the Applicants:

1.    His Honour erred in declaring that the administration of justice required verified discovery.

2.    His Honour erred in admitting unverified (and contradicted) evidence of purported invoices from a third party (LDS Pty Ltd in Liq.) which were obtained under subpoena by the Respondents from the Commissioner of Police, Victoria.

3.    His Honour erred in failing to give any or any proper regard to the Applicants' affidavit material which deposed to the fact that the purported invoices of LDS (which were inadmissible) obtained by the Respondents’ Subpoena from the Commissioner of Police, Victoria were false and unreliable.

4.    His Honour failed go have (sic) any or any proper weight to the Applicants affidavit evidence which deposed that the only Microsoft Windows software ever purchased by the First Applicant from LDS Pty Ltd was a single purchase of 50 Microsoft Windows 7 Professional licences (“50 licences”).

5.    His Honour erred in holding that a merging of product codes on the First Applicant's computerised inventory system gave rise to a need for discovery when there was otherwise no evidence to suggest an alleged infringement had occurred beyond the 50 licences.

B.    In dismissing the Applicants’ application in the case seeking compliance by the Respondents with Order 1 of His Honour Judge Street’s Order of 7 September 2016:

6.    His Honour failed to have regard to the failure of the Respondents swearing an affidavit:

(a)    exhibiting ; and

(b)    explaining changes for-

all versions of Microsoft Windows 7 software labels both past and present used in Australia.

7.    His Honour failed to have regard to the Applicants’ Defence filed in the original proceeding and the issues raised therein as relevant to the Applicants’ application for the Respondent’s compliance with the said Order of 7 September 2016 including that there had been a labelling error in the labelling system of Windows 7 labels for “Refurbished PC”.

C.    In dismissing the Applicants’ application for the transfer of the proceeding from the Sydney Registry to the Melbourne Registry:

8.    His Honour failed to have regard to the fact that all alleged infringing conduct occurred in or about Melbourne in the State of Victoria;

9.    His Honour failed to have regard to the fact that all the Applicant's witnesses and legal representatives are located in Melbourne;

10.    His Honour failed to have regard to the fact that the Applicants do not and have not traded or carried on business in Sydney or the State of New South Wales and there was no factual nexus of the Respondents’ claim to Sydney or the State of New South Wales;

11.    His Honour failed to have regard to the fact that the application for the transfer of the proceeding to Melbourne was brought at the most opportune time to ensure the expeditious determination of the proceeding and at a time when no arrangements had yet been put in place for the setting down of trial of the proceeding in Sydney.

5    The parties were agreed that leave to appeal was required by s 24(1A) of the Federal Court of Australia Act 1976 (Cth). In substance, an appeal may not be brought from an interlocutory judgment of the Federal Circuit Court exercising original jurisdiction, other than in family and child support matters, unless this Court or a judge of this Court gives leave to appeal.

6    A major question on applications for leave to appeal is whether substantial injustice would result if leave were refused, assuming the decision below to have been made erroneously: Hogan v Australian Crime Commission [2009] FCAFC 71; 177 FCR 205 at [64]. It is also relevant that in a matter of practice and procedure, rules of restraint are applied by the Court and there is a high bar to clear to obtain leave: In re the Will of F B Gilbert (dec.) (1946) 46 SR (NSW) 318 at 323. In my opinion, this is particularly the case where the interlocutory judgment is a matter of practice and procedure of another court.     An example is the factors relevant to a transfer of proceedings within that court to another registry.

The order for verified discovery

7    The order in respect of which leave to appeal is sought is order 6, set out at [3] above.

8    The reasons of the primary judge were as follows:

6.    This Court does not ordinarily order discovery in proceedings before the Court and the Court must be satisfied and make a declaration that is appropriate in the interests of administration of justice to allow discovery. On the evidence before the Court, the Court is satisfied that this is an appropriate case for limited discovery to be made in accordance with the amended application in a case filed by the respondent.

7.    The Court is satisfied that it is appropriate for the orders to extend to both Microsoft Windows 7 Professional and Microsoft Windows 7 Home Premium Programs, and that the extent of the discovery requested is both reasonable and proper, taking into account the apparent issue in respect of the ability of the respondents to distinguish between alleged infringing sales and non-infringing sales.

8.    Taking into account r.14.02 of the Federal Circuit Court Rules 2001 (“the Federal Circuit Court Rules”), the Court is satisfied that this is an appropriate case in which there should be a declaration to allow the limited discovery identified in the amended application in a case filed by the applicant.

9.    The Court has taken into account the matters identified in s.45(2) Federal Circuit Court of Australia Act 1999 (Cth) in determining whether this application should be granted, and the Court is satisfied that the making of the order for discovery in the circumstances of the present case, will contribute to the fair and expeditious conduct of the proceedings.

10.    The Court has taken into account the burden placed on the respondents in that regard, and proposes to allow the time requested for compliance with the obligation. The Court is satisfied it is appropriate in the interests of the administration of justice to make the orders sought in the amended application in a case filed by the applicants.

9    CPL Notting Hill submitted that, once certain impugned evidence was removed, there was no proper basis for the primary judge to declare that discovery was appropriate. In particular, it was difficult to see how without such evidence it was open to the primary judge to conclude that the documents the subject of the discovery orders were likely to contribute to the fair and expeditious conduct of the proceedings. Alternatively, even if the documents were to be admitted, permitting discovery based on unproved documents from a dubious source would not seem likely to contribute to fairness, in circumstances where CPL Notting Hill had already put in evidence what it said were its relevant records.

10    The references to “appropriate” and “the fair and expeditious conduct of the proceedings” are to s 45 of the Federal Circuit Court of Australia Act 1999 (Cth) which is in the following terms:

45    Interrogatories and discovery

(1)    Interrogatories and discovery are not allowed in relation to proceedings in the Federal Circuit Court of Australia unless the Federal Circuit Court of Australia or a Judge declares that it is appropriate, in the interests of the administration of justice, to allow the interrogatories or discovery.

(2)    In deciding whether to make a declaration under subsection (1), the Federal Circuit Court of Australia or a Judge must have regard to:

(a)    whether allowing the interrogatories or discovery would be likely to contribute to the fair and expeditious conduct of the proceedings; and

(b)    such other matters (if any) as the Federal Circuit Court of Australia or the Judge considers relevant.

Rule 14.02 of the Federal Circuit Court Rules 2001 (Cth) provides:

14.02    Declaration to allow discovery

(1)    A declaration may be made under subsection 45(1) of the Act to allow discovery on the application of a party or on the Court’s own motion.

Note:    Discovery is not allowed in relation to a proceeding unless the Court or a Judge declares that it is appropriate in the interests of the administration of justice: see section 45 of the Act.

(2)    If a declaration is made, the Court or a Registrar may make an order for disclosure:

(a)    generally; or

(b)    in relation to particular classes of documents; or

(c)    in relation to particular issues; or

(d)    by a specified date.

11    As to the “impugned evidence”, CPL Notting Hill submitted that the issue which arose related to evidence of business records under the Evidence Act 1995 (Cth). In answer to a subpoena, the Victorian Police had produced some documents arising out of criminal proceedings against a Mr Felix Chen in which he had been convicted of offences of dishonesty, and those documents were said to show additional sales of Microsoft licences to CPL Notting Hill by interests associated with Mr Chen. CPL Notting Hill submitted that where there was a real doubt about the authenticity of the documents it was not open to the primary judge to conclude that the documents were business records. There was no description of the “source” of the documents beyond that they were “part of” criminal proceedings against Mr Chen. There was no proper basis to conclude that the documents were a business record. If the primary judge had s 75 of the Evidence Act in mind, the evidence of the “source” of the documents did not identify the source for the police. The reference to “source” in s 75 was to be understood to be a reference to an ultimate source, not merely a proximate source. This last submission was modified in CPL Notting Hill’s reply and oral submissions by reference to a sufficient disclosure of sources to be decided according to the exigencies of each particular case and that there was not sufficient disclosure of the source or sources in the circumstances.

12    Microsoft submitted that CPL Notting Hill’s complaint regarding the discovery order rose no higher than that the order put CPL Notting Hill to an effort and cost which it said it should not be troubled to do. That was not a sufficient basis upon which such a discretionary order might be set aside. In any event, Microsoft submitted, CPL Notting Hill led no evidence suggesting that it would be onerous to comply with the discovery order.

13    In relation to the evidentiary issue, Microsoft submitted that the documents in question were produced to the Federal Circuit Court in response to a subpoena issued to the Commissioner of Police, Victoria Police. It was submitted that four invoices so produced corresponded with four invoices produced in an affidavit by Ms Li, a director of CPL Notting Hill. This, it was submitted, assisted in casting doubt on the veracity of CPL Notting Hill’s asserted position that any infringement of Microsoft’s rights was limited to 50 “licences” for Windows 7 Professional acquired from LDS International Pty Ltd (LDS). The application here was interlocutory for the purpose of s 75 of the Evidence Act such that authenticity of the documents could be shown by hearsay evidence of the source of the documents. The immediate source of the documents was the Commissioner of Police, even if the Commissioner of Police was not the ultimate source. Microsoft also referred to an affidavit of Mr Pan dated 22 June 2016 at [8] for the contention that there was here evidence of source, Mr Chen being from LDS.

14    In my opinion, speaking generally, it is not for this Court to enter into questions of the admissibility of evidence in the Federal Circuit Court in relation to interlocutory applications in that Court. The ultimate issue on this limb of the test in an application for leave to appeal is whether, here, there is sufficient doubt as to the exercise of discretion under s 45 of the Federal Circuit Court of Australia Act to order limited discovery to warrant it being reconsidered. Evidence is not generally necessary to found an order for discovery. This was accepted by Senior Counsel for CPL Notting Hill. I also accept that the evidence before the primary judge was not limited to the documents produced by the Victorian Police: I refer to the evidence set out in the submissions on behalf of Microsoft, which were before the primary judge, dated 27 July 2017.

15    I am by no means persuaded that the primary judge failed to have regard to whether allowing the limited discovery would be likely to contribute to the fair and expeditious conduct of the proceedings or that the exercise of the primary judge’s discretion otherwise miscarried. However it is unnecessary to reach a final conclusion on that question. It is particularly inappropriate to do so given the unsettled state of authority in relation to ss 69 and 75 of the Evidence Act.

16    I do not need to reach a final conclusion on the question whether the primary judge failed to have regard to whether allowing the limited discovery would be likely to contribute to the fair and expeditious conduct of the proceedings or that the exercise of his discretion otherwise miscarried. This is because the substantial injustice contended for is that CPL Notting Hill “is put to the cost and trouble of substantial unwarranted discovery”.

17    I do not accept that submission. There was no evidence before me, nor, I understand, before the primary judge, as to whether the discovery the subject of order 6 was substantial so as to found injustice. In any event, in those circumstances, an order for discovery which turns out to be unwarranted may be ameliorated or remedied by an application to the Federal Circuit Court for a costs order, if necessary or appropriate an order for indemnity costs.

18    I am not satisfied that there is substantial injustice to CPL Notting Hill in this respect, supposing the decision to be wrong. Leave is refused to appeal from the discovery order of the primary judge, order 6.

The dismissal of CPL Notting Hill’s application seeking compliance with an order made in the Federal Circuit Court on 7 September 2016

19    The order made by the primary judge on 7 September 2016 was as follows:

THE COURT ORDERS THAT:

1.    Direct that the Applicants file and serve on or before 9 November 2016 an affidavit explaining and exhibiting:

a.    The types of licensing labels and instructions for activation codes for licensed Microsoft resellers used previously and currently in Australia by the Applicants in the labelling and product keys for all “Windows 7” products including Windows 7 Professional and Windows Professional 7 Refurbished, and any amendments to the labelling and instruction.

b.    The licensing agreements for licensed Microsoft resellers issued for “Windows 7 Professional” products including Windows Professional 7 and Windows Professional 7 Refurbished.

c.    The instructions for fixing of the certificate of authenticity for the refurbisher program and any amendment thereto.

d.    Any instructions or change of instructions in licensing for use of a license label “Windows 7 Pro for Refurb PCs”.

20    The question of compliance with this order was raised in CPL Notting Hill’s application in a case dated 22 June 2017 seeking an order that, unless within 10 days the applicants file and serve an affidavit in accordance with order 1 of the Orders made, the proceeding stand dismissed.

21    That part of the application in the case was dismissed by virtue of order 2 made on 4 August 2017, set out at [3] above.

22    The reasoning of the primary judge in dismissing CPL Notting Hill’s application in the case on this issue is set out in [11]-[13] of the reasons. Those reasons were as follows:

11.    In relation to the application in a case brought by the respondents, the respondents seek to complain about the applicants’ compliance with the orders made by the Court on 7 September 2016. It is apparent that further steps were taken in purported compliance with that order by the applicants following criticism by the respondents of the extent of compliance.

12.    The order made by the Court on 7 September 2016 was in general intended by the Court to put the parties in a position where the parties were able to meaningfully explore resolution, as well as to put the Court in a position where the Court more fully understood the nature of the issues between the parties, and to ensure that the parties had an adequate understanding of the respective case.

13.    I am not satisfied that the respondents have any relevant lack of understanding of the case that is being advanced. I see no utility in making any further order for compliance with the order I made on 7 September 2016 in the present case.

23    The substantial injustice contended for in relation to these orders is that CPL Notting Hill “is deprived of the benefit of an explanation of the true basis for Microsoft’s proceedings”.

24    CPL Notting Hill submits that the affidavits provided by Microsoft did not explain the instructions given to resellers in Australia for the activation codes for the relevant products, nor set out the relevant licensing labels. It did not set out the terms of the licence with the relevant reseller in the present case. CPL Notting Hill submitted that although at one level the fact that Microsoft may have failed to prove key parts of its case was a concern for it rather than CPL Notting Hill, at another level CPL Notting Hill was being put to the very considerable expense, and other related strains, of this case, without Microsoft taking the trouble properly to identify the necessary integers of the claim it made. CPL Notting Hill submitted that the conclusion of the primary judge that he was not satisfied that CPL Notting Hill had any relevant lack of understanding of the case that was being advanced was not reasonably open to him in circumstances where the information had not been provided, notwithstanding the orders previously made by the Federal Circuit Court.

25    Microsoft submitted that the primary judge correctly found that the intent of the order made on 7 September 2016 had been met by the three affidavits filed. Since the hearing on 4 August 2017, Microsoft had filed an Amended Statement of Claim. CPL Notting Hill did not make any request for particulars in relation to the Amended Statement of Claim. On 6 October 2017, CPL Notting Hill filed its Defence to the Amended Statement of Claim. If there were any ongoing deficiency in CPL Notting Hill’s understanding of Microsoft’s case against it, it was noteworthy that the primary judge had ordered Microsoft to file its evidence in chief: order 7. There was no substantial injustice visited upon CPL Notting Hill if its appeal was not allowed. It would be receiving Microsoft’s evidence in due course in any event.

26    I reject the submission that there is a substantial injustice because CPL Notting Hill “is deprived of the benefit of an explanation of the true basis for Microsoft’s proceedings”. If that be the case, and it does not emerge clearly from the affidavit of Ms Li affirmed 22 June 2017 which was before the primary judge, there are many ways in which that explanation may be required to be given in the course of case management by the Federal Circuit Court. There is no affidavit before me which establishes this claimed injustice.

27    In my opinion, this is a matter of case management by the Federal Circuit Court in which this Court should not ordinarily intervene. Whether or not there has been compliance with an interlocutory order of the Federal Circuit Court is primarily a matter for that Court. Here the primary judge concluded that the purpose of his earlier procedural order had been satisfied.

28    If CPL Notting Hill’s complaint is as to the state of the evidence put on by Microsoft, then that will be dealt with in the ordinary course of the preparation of the matter for hearing. If the complaint is as to CPL Notting Hill’s understanding of Microsoft’s case, then, as I have said, that may and should be dealt with in the ordinary course of case management. All that has happened, in my opinion, is that the primary judge has formed a view as to the adequacy of Microsoft’s affidavits for the purposes of compliance with the orders of 7 September 2016.

29    I am not satisfied that there is substantial injustice to CPL Notting Hill in this respect, supposing the decision to be wrong. Leave is refused to appeal from the order of the primary judge, order 2, dismissing the application in a case filed by CPL Notting Hill on 22 June 2017 so far as concerns the rejection of the application for an order that there be compliance by Microsoft with the order made in the Federal Circuit Court on 7 September 2016.

The transfer of the proceeding from the Sydney Registry to the Melbourne Registry

30    In relation to the dismissal of CPL Notting Hill’s application that the proceedings be transferred to the Melbourne Registry of the Federal Circuit Court under s 52 of the Federal Circuit Court of Australia Act, with reference to r 8.01 of the Federal Circuit Court Rules, no substantial injustice has been established because, as is made clear by orders 14 and 15, set out at [3] above, CPL Notting Hill has the opportunity to make a further application once the evidence of the parties has been filed. Those orders give effect to the reasons of the primary judge at [14]-[15], as follows:

14.    The respondents have also sought a transfer of the proceedings under r.8.01 of the Federal Circuit Court Rules to Melbourne. At this stage, the Court is not satisfied that it is appropriate to transfer the proceedings. The Court takes into account the considerations identified in r.8.01(2) of the Federal Circuit Court Rules. The Court does not propose to determine the matter on a final basis, and it is open to the respondents to bring a further application for transfer after the evidence in the case has been concluded.

15.    At the present time, the Court is satisfied for the convenience of the parties, limiting expenses, the cost of proceedings and in relation to preparation of the matter, that it is appropriate that the matter remain before the current Court in Sydney. Accordingly, the Court proposes to dismiss the application in a case.

31    I reject the submission that there is a substantial injustice because CPL Notting Hill “is forced to litigate in an inconvenient location, an inconvenience which will only increase over time”.

32    I am not satisfied that there is substantial injustice to CPL Notting Hill in this respect, supposing the decision to be wrong. Leave is refused to appeal from the order of the primary judge, order 2, dismissing the application in a case filed by CPL Notting Hill on 22 June 2017 so far as concerns the application for the proceeding to be transferred.

Conclusion and orders

33    For these reasons, the application for leave to appeal is refused, with costs.

Associate:

Dated:    24 November 2017