CCA Beverages (Adelaide) Ltd v Hansford
[1991] FCA 925
•15 NOVEMBER 1991
Re: CCA BEVERAGES (ADELAIDE) LIMITED
And: SIMON JOHN HANSFORD and SIMON'S NATURAL FRUITS PTY. LTD.
No. S G58 of 1991
FED No. 925
Practice and Procedure
COURT
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
O'Loughlin J.(1)
CATCHWORDS
Practice and Procedure - "pre-action" discovery - conclusion that applicant had not made "all reasonable enquiries" and that application was premature - applicant further sought an order under O.17 r 1(1)(e) permitting nominated persons to observe the process of manufacturing the respondents' product - O.15A dealing with "pre-action" discovery being self-contained applicant not entitled to Order under O.17 - for same reason applicant not entitled to issue Notice to Produce under O.33 r 12.
HEARING
ADELAIDE
#DATE 15:11:1991
Solicitors for the applicant: Messrs Finlaysons
Counsel for the applicant: Dr R.J. Baxter
Solicitors for the respondents: Messrs Baker O'Loughlin
Counsel for the respondents: Mr N. Strawbridge
ORDER
THE COURT ORDERS THAT:
1. The application be dismissed.
2. The applicant pay the respondents' costs to be taxed in default of
agreement.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
Application for "pre-action" discovery.
The applicant manufactures a product that is described as a "soft serve fruit product"; it is sold under the trade name "Vitari". According to the affidavit of Wayne Hage, "Vitari" was developed in the United States of America and is "subject to a patent or patents granted in that country". Mr Hage, a technical manager employed by the applicant, graduated in 1973 from the Institute of Technology with the degree of Bachelor of Applied Science (majoring in chemistry and micro-biology). His academic and practical qualifications, which were not challenged, appear to entitle him to express the opinions that are contained in the papers and to which reference will later be made. The same may also be said of Professor Kenneth Alan Buckle, the Associate Professor in the Department of Food Science and Technology of the University of New South Wales and Dr. Paul Joseph Wyk; Dr. Wyk is an adviser to the applicant in his capacity as an employee of Messrs Collison and Co, Patent and Trademark Attorneys. He holds the qualification of Doctorate of Philosophy awarded for research in the Department of Microbiology and Immunology at the University of Adelaide.
All three men have sworn affidavits which have been filed by the applicant in support of its application for an order for "pre-action" discovery pursuant to the provisions of O.15A of the Rules of Court. The parties against whom the order is sought are Simon's Natural Fruits Pty. Ltd. ("the respondent company") and its managing director Simon John Hansford ("Mr Hansford"); the respondent company is the manufacturer of a product called "Hi-Fruit" and it may be accepted, at this early stage, that "Vitari" and "Hi-Fruit" are not only competitive lines but quite similar: how similar may well be the subject of litigation in due course of time. The order that the applicant seeks, and which is resisted by the respondent company and Mr Hansford is far reaching; it seeks the discovery of all documents relating to "the Hi-Fruit product" including those relating to production, costing and batching; it also seeks discovery of raw material invoices, stock production and costing records, all advertising and promotional material together with "any other records or documents indicating the composition of, and ingredients used in the Hi-Fruit product".
Although denying that the applicant was entitled to the order that it sought, Mr Hansford filed an affidavit deposing in fairly vague and uninformative terms about the existence of a few documents. I would not call it a proper verification of documents but it must be remembered that it was an unsolicited act on his part. In the latter part of his affidavit Mr Hansford made the following offer:-
"The documentation referred to in the subparagraphs of paragraph 3 above are the only documents in the possession of myself and (the respondent company). I am prepared to make all of that documentation available to an independent expert such as Professor Buckle upon condition that he does not reveal to the applicant the names of (the respondent company's) suppliers or the pricing for each of those raw materials or indeed any other information contained on the invoices and analytical reports. The purpose for which I am prepared to make available the raw materials invoices and analytical reports to Professor Buckle or some other mutually acceptable expert is strictly for the purpose of the expert seeking to ascertain information concerning the ingredients that I and the (respondent company) use in manufacturing the product "Hi-Fruit" and for no other purpose."
The applicant saw fit to reject this offer and pursued its application for "pre-action" discovery. In addition, it has also sought an order under O.17 r 1(1)(e) permitting nominated persons to observe the process of manufacturing "Hi-Fruit" and it has served upon Mr Hansford and the respondent company a "Notice to Produce" certain nominated documents: O.33 r 12. There is a threshold question whether such procedures are available in the "pre-action" discovery process. On that subject, the applicant argued that this current application amounted to "proceedings" that were before the Court and that the existence of "proceedings" was sufficient to invoke so much of the Rules of Court as relate to orders under Orders 17 and 33. It is true that the word "proceedings" is capable of a very wide meaning and it is true that the rules refer to an application for pre-action discovery as "proceedings" - see for example O.15A r.12(a)(i) and (ii). In Cheney v Spooner (1928-9) 41 CLR 532 Starke J. was of the opinion that a civil proceeding included "any application by a suitor to a Court in its civil jurisdiction for its intervention or action" (pp 538-539). In that case, the High Court unanimously held that a summons to attend for examination concerning the affairs of a collapsed company was a summons to appear and give evidence in a "civil proceeding" within the meaning of s.16 of the Service and Execution of Process Act 1901 (C/W).
But I do not believe that O.15A was ever intended to have effect beyond its own boundaries. It is a relatively new provision giving to potential litigants rights that were not previously available under the general law. For example, an applicant can now obtain the assistance of the Court in ascertaining the identity of a potential respondent (rule 3); any person who is likely to have knowledge of facts or possession of documents tending to assist in identifying the relevant person may be the subject of an order to attend for examination or to make discovery of documents. Other examples are rules 6 and 8. Rule 6, the provisions of which are set out hereunder, deals with the subject of discovery against a prospective respondent whilst rule 8 deals with discovery from a non-party after proceedings have been commenced.
"6. 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)."
The provisions of rule 10 suggest, in my opinion, that Order 15A is self-contained; it expressly incorporates Division 2 of O.15 (dealing with inspection of documents) stating that the Division shall, "with any necessary modifications, apply to the inspection" of the documents that are referred to in the list of documents made and served in accordance with O.15A.
Order 15A also includes in rule 12 a power to order inspection etc of property. This rule is similar to O.17 r 1(1), the provision pursuant to which the applicant has moved the Court for orders permitting its personnel to observe the production process of "Hi-Fruit". Although there are differences in the language of the two provisions, there is sufficient similarity of subject-matter to justifiably ask why there was a need to insert rule 12 as part of O.15A if the general provisions of the Rules of Court and, in particular, the provisions of O.17 r 1 were available at the "pre-action" discovery stage. In my opinion these comments lead to the conclusion that the applicant is not entitled to an order under O.17 and to the further conclusion that it should not have issued the Notice to Produce. I dismiss that application and I direct that the respondents are excused from responding to that Notice.
In coming to the conclusion that the provisions of O.15A should be treated as if it were a self-contained code so that an applicant is limited to the remedies and orders that are contemplated by its rules, I do not believe that I am expressing views that are contrary to those to be found in the judgment of Burchett J. in Richardson Pacific Ltd. v Fielding (1990) 26 FCR 188. In that case, his Honour was of the opinion that O.15A expanded "the Court's armoury" (p 188) and that the exercise of the new-found jurisdiction should not "be fettered by any precise rules not suggested by the terms of O.15A itself".
Although I have come to the conclusion that O.17 r 1 is not available as part of the "pre-action" discovery process there are, of course, the provisions of O.15A r 12 which, although couched in different language, address the same subjects. That rule provides:-
"12. On an application under this Order 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) (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)."
The presence of the word "also" in the preliminary section of the rule indicates, in my opinion, that an order or orders under this rule can only be made if, first, an order has been made for "pre-action" discovery. Mr Strawbridge, counsel for the respondents, suggested however that rule 12 would be of no assistance to the applicant; he argued that references in the rule to samples, observations and experiments were with respect to "property" and that the respondent company's manufacturing process which the applicant wished to observe was not "property". As authority for this argument he relied upon the decision of the Court of Appeal in Tudor Accumulator Co Ltd v China Mutual Steam Navigation Co Ltd (1930) WN 200. In that case the plaintiff claimed damages as a consequence of the faulty consignment of some battery plates. An order was made permitting the defendant's representatives to inspect the method adopted by the plaintiff in manufacturing and packing its plates for shipment. The relevant rule of Court made provision for an order for "inspection of any property or thing...". It was held that the method of manufacturing and packing the plates was neither "property" nor a "thing". Mr Strawbridge argued that this decision should be imported into a restrictive interpretation of this Court's Rules of Court.
I do not accept that argument; it overlooks the expansive language of rule 12 and the very limited language of the rule that was considered in the Tudor Accumulator case. The latter rule made no reference to "observation" for example. Then there are the references to the screening of tape recordings and films and displaying instrumental recordings and tracings. Although they relate to different subject matters, they make it clear that rule 12 extends very much further than a mere inspection of property. I have no doubt that the applicant, if it had been successful in obtaining an order for discovery, would have been entitled to apply for an order, pursuant to rule 12, that certain approved persons be permitted to observe the respondent company's manufacturing and production process. Whether the order would have been made - and on what conditions - is another matter; that issue was not debated and I express no view on it.
I return then to the primary question: whether the applicant should benefit from an order under rule 6.
The dispute between the parties has been on foot for at least two years. The contents of Dr. Wyk's affidavit indicate that an Australian Patent Application in respect of "Vitari" was lodged on 20 August 1986 and a Petty Patent was applied for on 28 July 1989. The Australian Patent application was advertised as accepted by the Australian Patent office on 8 March 1990 but the respondent company has opposed the application. Correspondence exhibited to Dr. Wyk's affidavit shows that the parties' Patent Attorneys have been writing each other about their clients' respective products since at least May 1989. Dr. Wyk also exhibited three statutory declarations that had been made in October 1989 by Messrs Thomas, Jones and Graham, senior employees of or advisers to the respondent company; the declarations had been sent by the Patent Attorneys representing the respondent company to Dr. Wyk's firm under cover of a letter that claimed (and in apparent support of a claim) that "our client has been manufacturing and marketing in Australia, the product in question since about 1980". The justification for the alleged commencement date is not apparent as the three statutory declarations suggest that production might not have started until 1984.
The first claim advanced by the applicant is that there is reasonable cause to believe that it may have the right to obtain relief in this Court because of infringement of the Petty Patent. Dr. Wyk listed seven essential features - sometimes called "integers" - of the "Vitari" product, the first of which was "a fruit juice product having at least one type of fruit juice"; another was that "Vitari" was "free of added refined sugar". Other features were highly technical, dealing as they did with stabilisers, protein weight, brix values and so on. The matter of significance is that despite analyses and tests none of the applicant' witnesses can say that "Hi-Fruit" is the same as, or even substantially the same as "Vitari". Some of the essential features are common to both products but tests conducted to date have been inconclusive about the presence or absence of some ingredients in "Hi-Fruit". For example the three statutory declarations to which I have earlier referred volunteered that the "Hi-Fruit" product included as an ingredient "sugar being either cane sugar or fruit concentrate."
Commenting on that piece of information Dr. Wyk said:-
"Sugar is said to be added either as cane sugar or fruit concentrate. Again it would appear that two different products are being referred to and the one where cane sugar is added would not infringe or invalidate the claim of the Petty Patent by reason of non-compliance with feature F; the other where fruit concentrate is used, may infringe or invalidate the Petty Patent claim depending on whether features D,E and G are met."
In Ex.PJW4 Dr. Wyk sought to collate the views of the experts with respect to the presence or absence of the seven integers in the respondent company's "Hi-Fruit". "Integer Buckle Hage Thomas Jones Graham Overall
A
Fruit juice - - yes yes yes yes
based not proven
B
Stabilizer yes - yes yes yes yes
(0.05-1.0%) likely - - - - likely
proof N.P.
C
type of ? - yes yes yes yes
Stabilizer proof N.P.
D
Protein ? ? Customer - - ?
adds it
0.1-0.50% ? ? - - - ?
proof N.P.
E
Brix yes - - - - yes
F
sugar added ? ? ? ? yes ?
proof N.P.
G
Smooth and - yes - - - yes
KEY:
? an uncertain result
- no result at all, that is, not tested or commented
upon
yes the integer is present
no the integer is not present
proof proof of the integer's presence is not possible
N.P."
The strongest position for the applicant is found in paras 31 and 32 of Mr Hage's affidavit. He says:
"31. As a result of my consideration of all of the material to which I have referred to above I am of the conclusion that two inferences can reasonably be drawn with respect to Hi-fruit. These are: 31.1 That Hi-fruit uses de-ionised grape concentrate as its fruit base, or
31.2 That cane sugar or invert sugar is added to Hi-fruit during its processing.
32. In my opinion, it is more likely that Hi-fruit is now usin g de-ionised grape juice concentrate as its fruit base. If I am correct in this opinion, then in my view there is a strong possibility that Hi-fruit infringes Vitari's patents."
But against this are the views expressed by Dr. Buckle in his report. In addressing the question whether "Hi-Fruit" is substantially similar to or identical with "Vitari", he said:-
"... these products are not identical but are, nevertheless, similar products aiming for the same or similar markets."
Later in his report he added:-
"It is my belief that a generally uninformed member of the public, if provided with the Vitari and Hi-Fruit products of the same flavour, would not believe them to be identical but would regard them as very similar."
He concluded his report by saying:-
"I believe that detailed research and analysis could provide answers to most and perhaps all of the questions raised, but would be costly and time consuming. More analysis of both previous and current Hi-Fruit samples would be necessary to provide more definitive answers.
The information presently available is insufficient to enable me to draw firm conclusions."
At the end of the day, the Court is left with the exercise of a discretionary power. It is quite clear that the applicant does not have to make out a prima facie case; reasonable cause to believe that the applicant may have the right to obtain relief is all that is required. Sometimes there are extraneous circumstances which will assist the Court in coming to a decision. For example, in Paxus Services Limited v People Bank Pty. Limited (an unreported judgment of Burchett J. delivered 12 December 1990) there was evidence that suggested that a former employee of the applicant, who had set up in opposition, may have unlawfully taken confidential information when he left the applicant's employ. This possibility materially assisted the Court in concluding that an order for "pre-action" discovery was appropriate.
Although "it is not necessary for the Court to come to an affirmative conclusion that an applicant is likely to succeed in order that the Court may make an order under (rule 6)" W.R. Pateman Pty. Ltd. v Walker Corporation Pty. Limited. (1990) 12 ATPR 41-016 at p 51,299 per Wilcox J., there must still be sufficient information placed before the Court so that it may feel satisfied that there is reasonable cause to believe that the applicant may have a right to obtain relief. The existence of a coincidence or an improbability, without more, will hardly ever be enough.
Mr Strawbridge claimed that the applicants were only on a fishing expedition. He referred to the comments of Bollen J. in O'Loughlin v Modbury Hospital (1988) 141 LSJS 432 who at p 446 quoted and approved of the remarks of White J. in Gerard Industries v Wee (1986) 43 SASR 562 at p 568:-
"... and busybodies on fishing expeditions ought to be discouraged."
This view must however be balanced by the recent statements of a Full Court of this Court in Caltex Refining Co. Pty. Ltd. v The Amalgamated Metal Workers Union (unreported: judgment delivered 6 December 1990). In that case Burchett J. said:-
"Modern procedures actually provide as something desirable for what might once have been criticised as fishing - see Order 15A of the Rules of this Court, particularly Rule 6. It would be ironic if the Court refused an applicant, on this basis, discovery after action, when discovery could have been obtained (at the expense of incurring extra costs) by an application before action."
Lockhart and Gummow JJ. expressly agreed with Burchett J. Nevertheless that does not mean that an inquirer, properly labelled "a busy body" should be permitted to make use of these procedures. In fairness to this applicant, it is not such a person; it is a genuine competitor and one of its senior employees, Mr Hage, who is both competent and qualified, has expressed opinions that indicate that further enquiries are warranted. But I think that those further enquiries should be made, at least for the time being, in the laboratory. Dr. Buckle has deposed in his affidavit that further tests could be made. At this stage I am not impressed with unquantified statements that further testing would be costly. If the Court were disposed to make the order that the applicant has sought, every effort would be made to afford commercial protection and security of processes to the respondent company. After all, if the applicant's fears are groundless, it is essential that the respondent company's right to secrecy is preserved. But it must be acknowledged that with any disclosure - no matter the security - there may well be a risk that some person may gain information that should not have been made available to him. Such a risk must be taken into the balance when deciding whether an applicant, whose application is wholly genuine, should be entitled to "fish" for further information. I therefore do not agree with Mr Strawbridge that this application should be dismissed because it is merely a "fishing expedition" but I do believe that it should be dismissed because the applicant has not satisfied me that it has made "all reasonable inquiries" as required of it by O.15A r 6(b)).
There remains one final matter. There was evidence of advertising material that was attributable to the respondent company in which it was claimed that there was no added sugar in "Hi-Fruit"; yet the three statutory declarations of Messrs Thomas, Jones and Graham each referred to the presence of cane sugar. This contradiction was used as a separate base for a "pre-action" discovery. I am not inclined to exercise my discretionary power in the applicant's favour. This is not its true complaint; it was only a device to be used to gain access to the documents that it needs to examine for the purpose of questioning patent rights. In any event, if the applicant was minded to institute proceedings against the respondents under the Trade Practices Act because of faulty advertising it already has, so it claims, hard evidence; it has passed the stage of mere enquiry. Hence "pre-action" discovery would not be appropriate.
The application is dismissed with costs.
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