Herold v Seally
[2017] FCA 42
•19 January 2017
FEDERAL COURT OF AUSTRALIA
Herold v Seally [2017] FCA 42
File number: NSD 2139 of 2016 Judge: BURLEY J Date of judgment: 19 January 2017 Catchwords: PRACTICE AND PROCEDURE – application for leave to serve originating application outside Australia under rules 10.42 and 10.43 of the Federal Court Rules 2011 (Cth) – whether Court has jurisdiction – whether prima facie case exists – leave granted Legislation: Copyright Act 1968 (Cth) s 202
Trade Marks Act 1995 (Cth) ss 88, 191
Federal Court Rules 2011 (Cth) rr 10.42, 10.43
Cases cited: Bell v Steele [2011] FCA 1390; (2011) 198 FCR 291
Kadam v MiiResorts Group 1 Pty Ltd (No 2) [2016] FCA 1343
Date of hearing: 19 January 2017 Registry: New South Wales Division: General Division National Practice Area: Intellectual Property Sub-area: Trade Marks Category: Catchwords Number of paragraphs: 51 Counsel for the Applicants: Mr M Hall SC Solicitor for the Applicants: James Beatty & Associates ORDERS
NSD 2139 of 2016 BETWEEN: LARS HEROLD
First Applicant
GREEN LIGHT GROUP PTE LTD (SINGAPORE COMPANY REGISTRATION NO 201215105Z)
Second Applicant
AND: JONATHON SEALLY
First Respondent
PODWAY LTD
Second Respondent
JUDGE:
BURLEY J
DATE OF ORDER:
19 JANUARY 2017
THE COURT ORDERS THAT:
1.Pursuant to FCR 10.43 leave is granted to the Applicants to serve the originating application, the amended interlocutory application dated 9 January 2017, the affidavit of Lars Herold made on 12 December 2016 and a sealed copy of these orders (together, “Documents”) on the Second Respondent by sending the Documents by international registered post with return receipt to the registered office of the Second Respondent at 5, 17/F Bonham Trading Centre, 56 Bonham Strand, Cheung Won, Hong Kong.
2.The Applicants are directed to:
(a)Provide copies of the affidavits of James Douglas Beatty sworn on 19 January 2017 and Malcolm Neil Bell sworn on 16 January 2017, the written submissions of their counsel dated 19 January 2017 and the text of the Hague Convention provided to the Court at the hearing on 19 January 2017, to the Second Respondent by registered post to its registered office; and
(b)Inform the Second Respondent that the proceedings will be returnable at a case management conference on 31 January 2017 before the Federal Court of Australia in Sydney.
3.Costs be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(Revised from transcript)BURLEY J:
These reasons concern an application by the first applicant (Herold) and the second applicant (Green Light) for leave pursuant to r 10.43 of the Federal Court Rules 2011 (Cth) (Rules) to serve the originating application filed on 13 December 2016, an amended interlocutory application dated 9 January 2017, the affidavit of Lars Herold made on 12 December 2016 and any orders made by the Court arising from this application (collectively, the Documents) on the second respondent (Podway) by international registered post at an address in Hong Kong.
Podway is a company registered in Hong Kong which a company search reveals has its registered address at 5, 17/F Bonham Trade Centre, 50 Bonham Strand, Sheung Wan, Hong Kong.
The first respondent to the proceedings is Jonathon Seally, who is the sole director of Podway. Mr Seally has been served with originating process in these proceedings and is represented by Mr Malcom Bell, a legal practitioner and partner of Phillips Ormonde Fitzpatrick Lawyers.
These proceedings were commenced by way of originating application filed on 13 December 2016. The applicants moved the Court on 22 December 2016 and were granted leave to serve Mr Seally, in lieu of personal service, by email and post to a number of addresses, including that of Mr Bell at Phillips Ormonde Fitzpatrick.
The matter was then listed before me as duty judge on 19 January 2017 for the purpose of considering an interlocutory application for an anti-suit injunction which sought to restrain the respondents from seeking to enter judgement or taking any steps in Civil Law Suit no. 16CV300577, commenced in the Superior Court of California, County of Santa Clara on 30 September 2016 in which Podway is named as the plaintiff and the present applicants are named as the first and second defendants (Californian proceedings).
Several reasons were given for the urgency of the proceedings. It is not presently necessary to canvas all. One was that on 24 January 2017 a significant step was to be taken in the Californian proceedings. It was considered by the applicants desirable to obtain an anti-suit injunction prior to that date.
By the time that the proceedings were listed before me on 19 January 2017, the applicants and Mr Seally had reached an accommodation such that the date of 24 January 2017 was no longer critical. An undertaking was given by Mr Seally to the Court that he would take no substantive step against the present applicants in the Californian proceedings on 24 January 2017, and that he would “cause the second respondent to act accordingly”.
Timetabling orders were then made to return the proceedings before the docket judge for the hearing of the anti-suit injunction after 27 February 2017. A case management hearing is scheduled before the docket judge on 31 January 2017.
However, at present Podway has not been served or joined in the proceedings. In light of the timing of the case management conference and the other orders made on 19 January 2017, it is desirable that the present application be determined in advance of 31 January 2017 to ensure that all parties are present.
In the present application, the applicants relied on the following evidence:
(1)an affidavit of Lars Herold, dated 12 December 2016, which consists of two volumes and 97 annexures. I was not taken to most of the body of this affidavit;
(2)an affidavit of the applicant’s solicitor, James Douglas Beatty, sworn on 19 January 2017; and
(3)an affidavit of Malcom Neil Bell, sworn on 16 January 2017.
The first respondent did not appear in order to oppose the application, which was made ex parte. No explanation has been given as to why the present solicitors acting for Mr Seally could not represent the second respondent, at least conditionally. Perhaps there is a good reason. If no reason is furnished, that may provide a basis upon which a costs order might be considered at a later date.
My decision on the present application is made in the absence of parties who are directly affected by the application. They have not yet had the opportunity to make submissions or to present evidence in opposition. Accordingly, my preliminary findings of fact are limited to tentative conclusions based on the materials to which I have referred above.
I grant the application for leave, pursuant to r 10.43 of the Rules.
Background
The following summary is taken largely from the affidavit of Mr Herold.
Mr Herold is a German national who has lived in Australia for the past 12 years. He is a specialist consultant in rail transport and infrastructure. Green Light is a company incorporated in Singapore. It was created by Mr Herold and his partner as a holding company for the intellectual property created in the course of their activities.
Mr Herold claims that he met Mr Seally, when the two worked together in 2011, and later in 2013, Mr Herold worked with Mr Seally as a subcontractor to another company owned by Mr Seally for a program called “Fixing the Trains”.
During and after the Fixing the Trains project, Mr Herold and Mr Seally had a number of discussions about autonomous transport systems. The two conducted research and shared ideas between January 2014 and June 2015. Mr Herold says that on 9 September 2014, he used the name “Podways” in relation to the project. The two men’s activities during this period are described in great detail in Mr Herold’s affidavit. Mr Herold says that during this time, with very few exceptions, their meetings all took place in Sydney. The exceptions were meetings with investors in Silicon Valley in the United States conducted over two separate weeks in March 2015 and May to June 2015.
Between June 2015 and February 2016, Mr Seally became less involved in the project. First, he said he wanted to take a break from the project, and then by February 2016, Mr Seally had indicated that he was no longer interested in participating at all.
In March 2016, Mr Herold began to recruit a new team, and on 30 August 2016, Mr Herold met Mr Seally for lunch at a Mexican restaurant on Pitt Street in Sydney. Mr Herold disclosed to Mr Seally that he had started recruiting a new team whom he had offered “sweat equity”. He offered Mr Seally the opportunity to rejoin in return for equity of 14%. Mr Seally “went berserk” and accused Mr Herold of stealing his “solution”.
On 16 September 2016, Mr Herold received a letter from Mr Bell entitled “Podways – Potential Breach of Confidence and Copyright Infringement” (POFL letter). The letter asserted that “Mr Seally is the inventor of the Podways system of autonomous ground or air-based vehicles (pods) capable of following a route using a set speed and directional protocol”. It asserted that Mr Seally was either the sole owner or joint owner together with Mr Herold of the copyright in various works related to the project, all of which were confidential. The letter demanded that by 5 pm on 30 September 2016, Mr Herold sign another letter which contained various undertakings and acknowledgements in relation to the allegedly copyright works and allegedly confidential information.
After receiving the letter, Mr Herold discovered that Mr Seally had apparently been undertaking his own activities in relation to the project for some time. The letter itself referred to a US provisional patent entitled “Podway Control System”. Mr Herold’s own researches further revealed that on 15 October 2015, Mr Seally had registered the company Podway Ltd in Hong Kong (that is, the second respondent) and become its sole director. On 29 September 2015, he had filed an application on behalf of Podway for the registration of the trade mark PODWAY in the United States, and on 1 February 2016, he had filed an application to register the trade mark PODWAY in his own name in Australia. On 25 July 2016, Mr Seally had also lodged a further United States trade mark application, this time for the mark PODWAYS.
On 30 September 2016, the Californian proceedings were issued by Podway alleging misappropriation of trade secrets against the present applicants and other parties. Further, and in the alternative, the Californian proceedings alleged breach of an oral contract said to have been formed in conversations between Mr Seally and Mr Herold.
On 15 November 2016, Podway, through Californian attorneys Kaufhold Gaskin LLP sent a letter to Daimler AG in Germany asserting, inter alia, that it had come to their attention that Daimler had been communicating and/or working with the applicants regarding the autonomous transportation system known as the Podways system developed by their clients, Mr Seally and Podway, which incorporates trade secrets and proprietary information owned by Podway. It referred to the Californian proceedings and summarised the proceedings as follows:
The lawsuit alleges that Mr. Herold received information about the Podways system in strict confidence and had an obligation not to disclose this confidential information. It further alleges that he and the other defendants are illegally using the trade secrets to form a competing business and solicit investments under the false pretences that he and companies affiliated with him are owners of the trade secrets, trade mark, and other intellectual property – when in reality, they do not own any of it and are violating numerous laws, both U.S. and international.
In oral submissions, counsel for the applicants, Mr Hall SC, contended that in the proceedings his client would submit that this letter constituted a wrongful threat within s 202 of the Copyright Act 1968 (Cth) (Copyright Act).
On 12 December 2016, Mr Herold and Green Light filed a motion seeking to stay or strike out those proceedings in the Californian proceedings. That motion had a first return date of 24 January 2017. On 12 December 2016, Podway filed an amended summons in the Californian proceedings.
On the same day Mr Herold and Green Light filed their originating application in this proceeding seeking final orders:
(1)pursuant to s 88 of the Trade Marks Act 1995 (Cth) (Trade Marks Act) removing Mr Seally’s PODWAY and PODWAYS trade marks from the register, or alternatively having the register rectified to show Green Light rather than Mr Seally as the trade mark proprietor;
(2)pursuant to s 202 of the Copyright Act restraining Mr Seally and Podway from making any threat of copyright infringement proceedings against any person based on Mr Herold and Green Light’s use of certain documents;
(3)declarations that various documents do not contain any confidential information or trade secret of Mr Seally or Podway and that the applicants in their use of those documents have not breached any obligation of confidence owed to the respondents;
(4)damages, interests and costs.
Counsel for the applicants also drew attention to [5] of the affidavit of Mr Bell, to which I have referred above:
5.On 30 September 2016, proceedings were issued in the Superior Court of California, County of Santa Clara by Podway Ltd and allocated case number 16 CV300577 (US proceedings). Podway Ltd is a company registered in Hong Kong to which Mr Seally has transferred or licensed part or all of his rights, title and interest therein in relation to his intellectual property rights. Mr Seally is the sole director and shareholder of Podway Ltd.
The present application
The applicants contend that leave to serve the Documents should be granted pursuant to rr 10.42 and 10.43 of the Rules on the basis that Hong Kong is a signatory to the Hague Convention. Those Rules are relevantly set out below:
10.42When originating application may be served outside Australia
Subject to rule 10.43, an originating application, or an application under Part 7 of these Rules, may be served on a person in a foreign country in a proceeding that consists of, or includes, any one or more of the kinds of proceeding mentioned in the following table.
[table omitted]
10.43Application for leave to serve originating application outside Australia
(1)Service of an originating application on a person in a foreign country is effective for the purpose of a proceeding only if:
(a)the Court has given leave under subrule (2) before the application is served; or
(b)the Court confirms the service under subrule (6); or
(c)the person served waives any objection to the service by filing a notice of address for service without also making an application under rule 13.01.
Note:A respondent may apply to set aside an originating application or service of that application — see rule 13.01.
(2)A party may apply to the Court for leave to serve an originating application on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country.
(3)The application under subrule (2) must be accompanied by an affidavit stating:
(a)the name of the foreign country where the person to be served is or is likely to be; and
(b)the proposed method of service; and
(c)that the proposed method of service is permitted by:
(i)if a convention applies — the convention; or
(ii)if the Hague Convention applies — the Hague Convention; or
(iii)in any other case — the law of the foreign country.
(4)For subrule (2), the party must satisfy the Court that:
(a)the Court has jurisdiction in the proceeding; and
(b)the proceeding is of a kind mentioned in rule 10.42; and
(c)the party has a prima facie case for all or any of the relief claimed in the proceeding.
Note 1:The law of a foreign country may permit service through the diplomatic channel or service by a private agent — see Division 10.5.
Note 2:Rules 10.63 to 10.68 deal with service of local judicial documents in a country, other than Australia, that is a party to the Hague Convention.
Note 3:The Court may give permission under subrule (4) on conditions —see rule 1.33.
(5)A party may apply to the Court for leave to give notice, in a foreign country, of a proceeding in the Court, if giving the notice takes the place of serving the originating application.
(6)If an originating application was served on a person in a foreign country without the leave of the Court, a party may apply to the Court for an order confirming the service.
(7)For subrule (6), the party must satisfy the Court that:
(a)paragraphs (4) (a) to (c) apply to the proceeding; and
(b)the service was permitted by:
(i)if a convention applies — the convention; or
(ii)if the Hague Convention applies — the Hague Convention; or
(iii)in any other case — the law of the foreign country; and
(c)there is a sufficient explanation for the failure to apply for leave.
It is convenient first to address the requirements for leave by reference to r 10.43(4) of the Rules. The first requirement is that the Court has jurisdiction in the proceeding. I am satisfied that this is made out in the present case.
The action for rectification of the trade mark register arises under the Trade Marks Act. In light of the assertion made in paragraph 5 of Mr Bell’s affidavit, it is probable that Podway has an interest in the trade mark proceedings, either as a transferee or licensee of those rights. There is no doubt that the Court has jurisdiction over this subject matter; see s 191 of the Trade Marks Act.
The action for wrongful threats arises under s 202 of the Copyright Act. That section relevantly provides that where a person threatens a person with an action or proceeding in respect of an infringement of copyright, a person aggrieved may bring an action and may obtain a declaration that the threats are unjustifiable, and obtain an injunction against continuance of the threats and damages. It is a defence to such an action if the person making the threats satisfies the Court that the acts in respect of which the threats were made constituted, or would constitute, an infringement of copyright.
The POFL letter alleges, inter alia, that Mr Seally is either the sole owner of copyright in the written works relating to the collaboration between Mr Seally and Mr Herold or a joint copyright owner. It says (emphasis in original):
Mr Seally is either the sole owner of copyright in the Works, or joint copyright owner with you. It is an infringement of copyright under Australian (and Singapore law where Green Light Group is incorporated) for one joint owner to do any of the exclusive acts comprised in copyright (or permit anyone else to do these things) without the permission of the other joint owner.
You must not copy, publish, perform, communicate by any means in any medium, adapt, make derivative works or otherwise use or exploit the copyright in the Works (or any Confidential Information jointly created by you both) without Mr Seally’s express permission, which he unequivocally does not give you.
The applicant submits that at least the POFL letter and the letter addressed to Daimler contain wrongful threats of copyright infringement. Whilst the POFL letter was written on behalf of the first respondent and does not constitute a threat made by Podway, the applicants submit that Podway is a proper party to the proceeding by reason of the subsequent assignment of the intellectual property to it. I accept that the action for wrongful threats pursuant to the Copyright Act falls within the jurisdiction of the Court, and that on the basis of the available evidence Podway would be a proper party to these proceedings.
In relation to the relief sought in respect of the confidential information case, the POFL letter alleges that the information contained in the copyright works identified is confidential information owned by Mr Seally and imparted to Mr Herold under obligations of confidence. The letter states:
You have told our client that you intend to disclose this Confidential Information to investors without his permission. Your goal is to benefit personally by unlawfully appropriating our client’s intellectual property rights and turning them to your own advantage.
If you do this the remedies available to our client are an urgent injunction to restrain an anticipated or continuing breach of confidence and breach of copyright; compensation for economic loss due to the breach or an account of the anticipated profits derived from the breach.
In my view, the Court plainly has jurisdiction in respect of the confidential information case, where the equitable obligation of confidence which is alleged to have arisen and which would be under consideration arose from communications made wholly or substantially in Australia.
The second requirement is that the proceeding be of a kind mentioned in r 10.42 of the Rules, being one of the proceedings identified in the table contained within that rule, of which there are 24 listed. I am satisfied that the proceedings, the effect of which I have summarised above, fall within items 1, 13, 14, 15, 20 and 21 of that table.
The third requirement of r 10.43(4) of the Rules is that the party has a prima facie case for all or any of the relief claimed in the proceeding. This requirement is satisfied if, on the material before the Court, inferences are open which, if translated into findings of fact, would support the relief claimed. The approach as to whether there is a prima facie case “should not call for a substantial inquiry”; see Kadam v MiiResorts Group 1 Pty Ltd (No 2) [2016] FCA 1343 per Edelman J at [53], [54] and the authorities cited therein.
I am satisfied for the purposes of this unopposed ex parte application, and in the context of which it has been made, that there is a prima facie case against Podway.
In relation to the claim concerning the validity and ownership of the Podway trade marks, it is apparent from the affidavit of Mr Herold that he claims to have conceived of and made first use of those marks in relation to the classes in respect of which registration is sought. A prima facie case of ownership has been made out.
In relation to the case made under s 202 of the Copyright Act, the Daimler letter and the POFL letter give rise to an arguable case that a threat has been made.
The case for declaratory relief in respect of confidential information will be determined having regard to the dealings between the parties. The materials in the Herold affidavit satisfy me that, based on that material alone, a prima facie case is made out to the effect that Mr Seally and/or Podway may not be entitled to make the claims that they do as to ownership of the confidential information.
In relation to the requirements of r 10.43(3) of the Rules, the applicants relevantly contend that each of subparagraphs (a), (b) and (c)(ii) are satisfied by the evidence in the affidavit from Mr Beatty.
The applicants propose to serve Podway by sending the Documents by registered post to its registered address in Hong Kong. The evidence given by Mr Beatty indicates that China is a signatory to the Hague Convention, and the Convention was extended to Hong Kong from 19 July 1970. Article 10(a) of the Hague Convention permits, inter alia, the service of judicial documents by postal channels. It also confirms, by reference to a website purporting to provide information supplied by the Chinese Government, that the Government of Hong Kong has no objection to Article 10(a).
Accordingly, I am satisfied that the requirements of r 10.43(3) are made out; see Bell v Steele [2011] FCA 1390; (2011) 198 FCR 291 at [8] – [13].
Finally, the applicants rely on r 10.43(6) which relevantly provides that if an originating application was served on a person in a foreign country without the leave of the Court, a party may apply to the Court for an order confirming the service. Subrule 10.43(7) requires, in effect, that the requirements of subrules (3)(c) and (4) be satisfied and, additionally, that there is sufficient explanation for the failure to apply for leave.
Mr Beatty’s affidavit explains that leave was not sought in advance of service, first, because of the (then) urgency of the application for interlocutory relief and, secondly, because Podway was represented by attorneys in the Californian proceedings and Mr Seally was represented in Australia by Mr Bell. Mr Beatty anticipated that agreement might be reached with Podway such that either the attorneys in California or Mr Bell would accept service on Podway’s behalf.
I accept that explanation. It was, in my view, sensible to seek to avoid the necessity for the present application if Podway was prepared to accept service through a different route.
Mr Beatty deposes that on 19 December 2016, the originating application and the Herold affidavit were sent by registered post to the registered office of Podway. However, since then additional materials have been advanced and relied upon to support the application for leave. Accordingly, I do not consider that it is appropriate to give an order confirming service pursuant to r 10.43(6).
Conclusion and disposition
I am satisfied that the requirements of rr 10.42 and 10.43 have been met. In light of the affidavits read and the submissions made, in my view it is appropriate to make the order sought in the amended interlocutory application at [3], subject to the requirement that, in addition to the documents referred therein, the affidavits of Mr Beatty and Mr Bell, as well as the written submissions provided to me in the present application by the applicants and the copy of the Hague Convention that was supplied to me are also provided by way of service in the manner indicated.
I reserve the question of costs.
I also direct that the second respondent be informed that the return date of the originating application be nominated as the date for the case management conference before the docket judge, which might be anticipated to be the first occasion on which all of the relevant parties appear before the Court.
I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Burley. Associate:
Dated: 31 January 2017
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