Pioneer Water Tanks (Australia 94) Pty Ltd v Delat Pty Ltd
[1997] FCA 1367
•10 NOVEMBER 1997
FEDERAL COURT OF AUSTRALIA
CORPORATIONS - external administration - leave to proceed - applicant owned certain patents - administrators of respondent allegedly continuing to infringe those patents in carrying on respondent’s business - lengthy extension obtained from Supreme Court of Western Australia for convening second meeting of creditors - applicant sought leave to proceed against respondent for infringement of patents and for misleading or deceptive conduct - whether application should be transferred to Supreme Court of Western Australia - application not so transferred - leave granted to institute and prosecute proposed proceedings to the extent of applying for interlocutory relief against the respondent.
Corporations Law s 440D
Western Australia v Vetter Trittler Pty Ltd (1991) 30 FCR 102 referred to
Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1 referred to
Foxcroft v The Ink Group Pty Ltd (1994) 12 ACLC 1063 considered
BBC Hardware Ltd v. G.T. Homes Pty Ltd (1997) 15 ACLC 431 considered
Wallabah Pty Ltd v Navillo Pty Ltd (1997) 15 ACLC 396 considered
J & B Records v Brashs Pty Ltd (1994) 12 ACLC 534 considered
Re Behan; Ex parte Pioneer Concrete (Qld) Pty Ltd (1995) 13 ACLC 1644 considered
Pasdale Pty Ltd v Concrete Constructions Ltd (1996) 14 ACLC 554 considered
Roder Zelt-Und Hallenkonstruktionen GMBH v Rosedown Park Pty Ltd (1995) 13 ACLC 776 considered
Simoon Pty Ltd v Renbay Systems Pty Ltd (1995) 13 ACLC 1792 considered
Australian Liquor, Hospitality and Miscellaneous Workers’ Union v Terranora Lakes Country Club Pty Ltd (1996) 19 ACSR 687 referred to
PIONEER WATER TANKS (AUSTRALIA 94) PTY LTD v
DELAT PTY LTD
No. WAG 3022 OF 1997
CARR J
PERTH
10 NOVEMBER 1997
| IN THE FEDERAL COURT OF AUSTRALIA | |
| WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION | WAG 3022 of 1997 |
BETWEEN: | PIONEER WATER TANKS (AUSTRALIA 94) PTY LTD |
AND: | DELAT PTY LTD |
| JUDGE: | CARR J |
| DATE OF ORDER: | 10 NOVEMBER 1997 |
| WHERE MADE: | PERTH |
MINUTE OF ORDERS
THE COURT ORDERS THAT:
The applicant file a minute of orders which reflect these reasons.
The respondent pay the applicant’s costs of the application.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
| IN THE FEDERAL COURT OF AUSTRALIA | |
| WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION | WAG 3022 of 1997 |
BETWEEN: | PIONEER WATER TANKS (AUSTRALIA 94) PTY LTD |
AND: | DELAT PTY LTD |
| JUDGE: | CARR J |
| DATE: | 10 NOVEMBER 1997 |
| PLACE: | PERTH |
EX TEMPORE JUDGMENT
This is an application under s 440D of the Corporations Law for leave to commence proceedings against the respondent company, which is under administration. The applicant is the owner of Australian Patent No. 631410 relating to a water storage tank (“the Pioneer Tank”) and Australian Patent No. 642822 relating to a roof for a water storage tank (“the Pioneer Roof”) (“the Patents”). It seeks leave to enforce rights which it claims under those Patents, against the respondent.
FACTUAL BACKGROUND
Affidavits filed on behalf of the applicant are to the following effect:
.From about April 1989 to about January 1997 the respondent, which trades under the name of “Watson’s Water Tanks”, manufactured on behalf of the applicant about 8,000 water tanks and roofs, the majority of which were water tanks and roofs manufactured in accordance with the Patents. The applicant then sold those tanks and roofs throughout Australia and overseas;
.The applicant owns certain engineering drawings, confidential know-how relating to the manufacture of the Pioneer Tanks and Pioneer Roofs, bolting patterns, material gauges and lamination details, and various other documentation and materials relating to the Pioneer Tanks and the Pioneer Roofs. It also claims some rights in a specialised punching machine;
.Since about January 1997 the respondent has manufactured and offered for sale and sold, on its own account, to third parties what the applicant claims to be infringing copies of the Pioneer Tank and the Pioneer Roof without the applicant’s consent (“the alleged infringements”);
.For a period between 14 July 1997 and mid August 1997 the applicant’s solicitors maintained correspondence first with the respondent and thereafter with the respondent’s solicitors in which the applicant complained about the alleged infringements and threatened to bring proceedings to restrain the alleged infringements and for an account of profits, or damages. Proceedings were foreshadowed under the Patents Act 1990 (Cth) and the Trade Practices Act 1974 (Cth);
.The respondent, through its solicitors, has challenged the validity of at least the Pioneer Tank Patent;
.On 25 August 1997 the respondent’s board of directors appointed three chartered accountants to be joint and several administrators of the respondent under s 436A of the Corporations Law;
.The respondent, while continuing in administration, proposes to manufacture and sell water tanks and roofs which, so the applicant claims, fall within the scope of the claims in the Patents;
.The applicant claims that by so doing the respondent will infringe its (the applicant’s) Patents and cause it damage. In particular, it says that the rights and goodwill which it has invested time, money and effort to secure over the past eight years are and will continue to be infringed and diminished, its ability to licence its patent rights to third parties and to sell its products are and will be detrimentally affected and, so it alleges, the information and materials provided to the respondent for the purpose of manufacturing the water tanks and roofs on behalf of the applicant are now being used without the applicant’s consent resulting in loss and damage to the applicant;
.The first meeting of the respondent’s creditors was held on 1 September 1997. Shortly thereafter the respondent applied to the Supreme Court of Western Australia for an extension of the time within which it would otherwise have been obliged to convene the second meeting of its creditors; and
.On 15 September 1997 the Supreme Court of Western Australia granted the respondent an extension, not exceeding 120 days from that date, in which to convene the second meeting of its creditors unless creditors make an application to that Court to amend that order.
A solicitor employed by the administrators’ solicitors (in fact, Mr John Derwent who appears as counsel today) has sworn an affidavit deposing to the fact that the respondent disputes the validity of the applicant’s patents.
The applicant seeks leave to institute proceedings against the respondent for an injunction, an account of profits or damages arising from the alleged infringements and any proposed continuing infringements by the respondent. It has annexed to the first supporting affidavit filed by it, a draft of the application and statement of claim which it wishes to file in the principal proceedings.
There is what I consider to be a threshold question. That question is whether it is appropriate for this Court to decide the application for leave under s 440D, given the involvement of the Supreme Court of Western Australia to which I have just referred. It might be said that the Supreme Court is already, to some extent, seized of this matter because it has started to exercise some supervisory powers in relation to the administration of the company. Neither party has submitted that this matter should be remitted to that Court. Nevertheless, I have considered whether that would be an appropriate course to take. I have decided not to remit this application to the Supreme Court. My basic reason for so deciding is that the question of whether the applicant should have leave to proceed against the respondent for the relief described above is a preliminary matter. In my opinion, it is a sufficiently discrete and separate matter from the general supervision of the administration of the respondent for it to be appropriate that this Court should hear and decide it. In my view, neither comity nor the interests of justice require this application to be remitted to the Supreme Court of Western Australia. For discussion of this general subject see Western Australia v Vetter Trittler Pty Ltd (1991) 30 FCR 102; Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1.
SHOULD LEAVE BE GRANTED?
Section 440D is a relatively new provision. It was inserted into the Corporations Law in 1992 with effect from 23 June 1993. In just under four and a half years about ten reported cases have involved consideration of the factors which bear upon the exercise of the Court’s discretion whether to grant leave to proceed against corporations under administration. There appears to have been a degree of reluctance towards the grant of such leave (see for example Foxcroft v The Ink Group Pty Ltd (1994) 12 ACLC 1063 where Young J expressed the view that an application under s 440D would “rarely be granted”. I have considered various other reported cases involving such applications. They include BBC Hardware Ltd v. G.T. Homes Pty Ltd (1997) 15 ACLC 431, Wallabah Pty Ltd v Navillo Pty Ltd (1997) 15 ACLC 396, J & B Records v Brashs Pty Ltd (1994) 12 ACLC 534, Re Behan; Ex parte Pioneer Concrete (Qld) Pty Ltd (1995) 13 ACLC 1644, Pasdale Pty Ltd v Concrete Constructions Ltd (1996) 14 ACLC 554; Roder Zelt-Und Hallenkonstruktionen GMBH v Rosedown Park Pty Ltd (1995) 13 ACLC 776 and Simoon Pty Ltd v Renbay Systems Pty Ltd (1995) 13 ACLC 1792.
In my view, none of the above cases is precisely in point. I accept that sometimes the relevant factor against granting leave is that there is a substantial dispute about the matter in respect of which the relief is claimed. Another theme which runs through the cases is that an administrator should not be distracted from his or her statutory duties and be obliged unnecessarily to incur substantial legal costs. I have considered both the detailed written submissions made on behalf of the respondent and the oral submissions which Mr Derwent, who as I say appeared as counsel for the respondent this morning, put to me by way of supplementary submissions. I shall refer to some of the written submissions and some of the oral submissions which are not otherwise dealt with in these reasons. The respondent contends that the applicant must demonstrate a disadvantage which it would or might suffer if leave were denied and that I should balance any disadvantage so demonstrated by any disadvantage which would accrue to the respondent, bearing in mind the objects of the statutory scheme reflected in Part 5.3A of the Corporations Law. I have done this. I have regard to the fact that unless leave is granted, the applicant is shut out from applying to the Court for an order restraining the respondent from (on the applicant’s case) continuing to infringe the Patents. I think there is considerable merit in the submission made by Mr Michael Ferguson, counsel for the applicant this morning, that this is not a case in which a creditor (whether secured or unsecured) is seeking to advance its position in relation to a debt existing at the time when the administration commenced. Apart from the expense to which the respondent may be put in resisting an application by the applicant for injunctive relief (a subject to which I will return below) I do not think that the prejudice to which the respondent refers outweighs the prejudice to the applicant in being shut out from even approaching the Court for remedies under the Patents Act and the Trade Practices Act in respect of ongoing conduct. The prejudice to the respondent, as I understand it, is said to be a restraint upon the respondent and its administrators from continuing to exercise rights which may infringe the Patents. In my view, that is a matter which can be more fully canvassed if and when the applicant applies for an interlocutory injunction.
Next the respondent submits that the applicant must approach the Court with “clean hands”. It says that the Court should be reluctant to grant leave when “the applicant has refused or failed to pursue an alternative means of resolving the dispute between the parties which would not require an application for leave under s 440D(1)”. The respondent cites BBC Hardware Ltd as authority for such a proposition, admittedly by extension. First, I must say that BBC Hardware Ltd was a very different case to the present matter. Secondly, I really have no way of deciding who out of the parties to these proceedings (if anyone) has been more or less uncooperative or forthcoming so far as resolving the dispute is concerned. The same could be said of the requests passing between the solicitors on either side seeking particulars of prior sales which form the basis for the respondent’s challenge to the validity of the Patents. That was another basis upon which the respondent opposed this application. The respondent further advanced arguments based upon prejudice to it and to its creditors in the event that the respondent is restrained from producing and selling the tanks and roofs. Once again, I do not consider that to be an issue for today; it is a matter which can be canvassed as and when the applicant seeks interlocutory relief. Finally, Mr Derwent relied upon the provisions of s 440C of the Corporations Law. He submitted that the applicant, by seeking leave to enforce its rights under the Patents, was attempting to take possession of property used or in the possession of the respondent. I think it is fair to say that this contention was not the subject of substantial submissions. My present view is that the respondent, by seeking leave to institute proceedings to enforce any rights which it may have under the Patents cannot be said to be seeking to take possession of property “or otherwise recover it” within the meaning of the Corporations Law. If I am wrong in that tentative view, the same factors which have persuaded me that leave should be granted under s 444D, would have caused me to grant leave under s 440C.
I think that there is at least one very significant factor in this matter which sufficiently distinguishes this case from the reported cases to which I have referred above. In this matter, more than just accrued rights are involved. On the applicant’s case, the administrators are causing the company to continue to conduct its business in such a manner as to infringe the applicant’s patents and other rights. The applicant’s managing director, Mr Stephen Nasso, in an affidavit sworn on 23 October 1997, states that the applicant’s principal concern is that infringing tanks, manufactured and sold by the respondent, have been sold with faulty liners whereby the applicant’s reputation in the market place, so it claims, is being damaged. Mr Nasso and the applicant’s patent attorney (Mr Louis Mostert) depose to circumstances which are said to involve infringement by the respondent of the applicant’s patents in July 1997. Mr Mostert in his affidavit, also deposes to searches which confirm the applicant’s registered ownership of the Patents and there is other evidence concerning the current (valid) status of the Patents. Given the apparent insolvency of the respondent, the applicant may never be compensated in damages it if is successful eventually in establishing that its rights are being infringed. There is no evidence before the Court of the respondent’s current financial position, nor indeed of the administrator’s financial position. In my opinion, it would be unjust if the applicant were to be shut out from at least having an opportunity to apply for an interlocutory injunction to restrain the alleged infringements. There is also, to some degree, a public interest in the proposed proceedings to the extent that they will be based on s 52 of the Trade Practices Act. I take into account also the fact that the second meeting of creditors may not be convened until as late as mid-March next year. I do not see anything in the objectives expressed in s 435A of the Corporations Law which would preclude the course which I propose to take in this somewhat unusual case. On the contrary, the resolution (even partially) of the issues arising under the alleged infringements of the Patents may, to some extent, clarify the respondent’s financial position. It may, for example, throw light on whether its business can continue to exist. I think that a sensible practical order, in all the circumstances, would be one which grants the applicant leave to institute proceedings against the respondent for an injunction, an account of profits or damages arising from the respondent’s alleged infringement of the Patents, and alleged contraventions of the Trade Practices Act. However, the order granting leave should be in terms which, until further order, preclude the applicant from proceeding beyond an application for interim relief against the respondent. I mentioned earlier that I would return to the subject of the administrators being put to undue expense. Part of my purpose in imposing the condition which I have just mentioned is to adjust that situation so that the expense to which the respondent and its administrators may be put is to that extent limited. In that manner, I consider that the interests identified in the reported decisions to date may be appropriately balanced against the applicant’s rights, to which I have referred above. The course which I have decided to take is one which I consider to be not-too-dissimilar to the course referred to, in passing, by Davies J in Australian Liquor, Hospitality and Miscellaneous Workers Union v Terranora Lakes Country Club Pty Ltd (1996) 19 ACSR 687 at p 689, where his Honour said:
“It may be that there is an outstanding question as to whether or not the terminations were in breach of the award. If all that was sought was the institution of proceedings in the Industrial Relations Court of New South Wales to resolve that issue, which is obviously a proper issue for the Industrial Relations Court, then consideration could be given to the grant of leave. That is obviously not an issue which can be resolved by the administrator or by a liquidator. If there is doubt about it, then it is an issue which, it seems to me, would be proper to go to the Industrial Relations Court to be ruled upon by that Court.”
The applicant is to bring in a minute of orders which will reflect the above reasons.
| I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Carr |
A/g Associate:
Dated: 4 December 1997
| Counsel for the Applicant: | Mr M.S. Ferguson |
| Solicitors for the Applicant: | Messrs Minter Ellison |
| Counsel for the Respondent: | Mr J.K. Derwent |
| Solicitors for the Respondent: | Messrs Hely Edgar |
| Date of Hearing: | 10 November 1997 |
| Date of Judgment: | 10 November 1997 |
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