Prosnow International Pty Ltd v Polar Technologies Pty Ltd

[1997] FCA 1032

FEDERAL COURT OF AUSTRALIA

DISCOVERY - “pre-action” discovery - identity of prospective respondents - whether “pre-action” discovery is available when cause of action is known to the applicant.

Copyright Act 1968 (Cth)

Federal Court Rules O 15A r 3

Paxus Services Ltd v People Bank Pty Ltd (1990-1991) 99 ALR 728
Gerard Industries v Wee (1986) 43 SASR 562
Caltex Refining Co Pty Ltd v The Amalgamated Metal Workers Union (1990) 51 IR 113
Dunning v Board of Governors of United Liverpool Hospitals [1973] 2 All ER 454

PROSNOW INTERNATIONAL PTY LTD ACN 050 166 124 v POLAR TECHNOLOGIES PTY LTD ACN 003 978 247 & POLAR TECHNOLOGIES INTERNATIONAL PTY LTD ACN 060 576 025

NO SG 49 OF 1997

O’LOUGHLIN J
ADELAIDE
3 OCTOBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 49  of   1997

BETWEEN:

PROSNOW INTERNATIONAL PTY LTD ACN 050 166 124
APPLICANT

AND:

POLAR TECHNOLOGIES PTY LTD ACN 003 978 247
FIRST RESPONDENT

POLAR TECHNOLOGIES INTERNATIONAL PTY LTD ACN 060 576 025
SECOND RESPONDENT

JUDGE:

O'LOUGHLIN J

DATE OF ORDER:

3 OCTOBER 1997

WHERE MADE:

ADELAIDE

THE COURT ORDERS THAT:

1. This matter stand adjourned sine die.

1. Any party be at liberty to list the matter for further hearing upon first giving to the other parties seven days’ notice.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 49 of 1997

BETWEEN:

PROSNOW INTERNATIONAL PTY LTD ACN 050 166 124
APPLICANT

AND:

POLAR TECHNOLOGIES PTY LTD ACN 003 978 247
FIRST RESPONDENT

POLAR TECHNOLOGIES INTERNATIONAL PTY LTD ACN 060 576 025
SECOND RESPONDENT

JUDGE:	O'LOUGHLIN J
DATE:	3 OCTOBER 1997
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

Application for “Pre-Action” Discovery.

The applicant in these proceedings, Prosnow International Pty Ltd (“Prosnow”), carries on business as the developer of indoor snow centres.  As an adjunct to its business, and as part of its promotional material, Prosnow has produced a video tape (“the Prosnow video”) for distribution to potential investors in indoor snow centres.  That video includes footage of Prosnow’s Indoor Snow Centre at Thebarton South Australia; it also includes footage of another centre developed by Prosnow for investors in Tamworth, United Kingdom.

The respondents to the present application, Polar Technologies Pty Ltd and Polar Technologies International Pty Ltd may be referred to collectively as “Polar” for the purpose of this application.  According to the affidavit of Thomas George Swift, the Managing Director of Polar, it is the owner of a patented process which produces cryogenic snow with liquid nitrogen, compressed air and water utilising portable snow making equipment.  It would seem to be common ground that in some areas Polar is in direct competition with Prosnow but that there are other activities in which Polar engages which are quite different to the activities of Prosnow.

There are three video tapes that must be considered.  The first is the Prosnow video.  A copy of this tape was allegedly sent by Prosnow to a Mr Charles Calitz who operates a business called “Snow Fun Resorts” in South Africa.  The Prosnow video was forwarded to Mr Calitz, presumably for the purpose of attempting to persuade him to engage in a business relationship with Prosnow.  However, it would seem that Mr Calitz preferred to deal with Polar.  Apparently Mr Calitz took it upon himself to prepare the second video (“the Calitz video”).  It is said that it has incorporated in it part of the Prosnow video.  In his affidavit of 22 August 1997 Mr Swift has deposed that Mr Calitz forwarded a copy of the Calitz video to Polar.  Mr Swift continues in his affidavit as follows:-

“At that time Mr John Edwards who was then the Marketing Manager of Polar caused to be prepared a promotional video for the Polar business.  I was informed by Mr Edwards and believed that he incorporated footage from the Calitz video into a promotional video for Polar (“the Polar promotion video”).  This footage is of the Polar process being used to make snow and contains images of places where Polar has made snow including Mt Thebarton.  There is also footage of the Tamworth project.  Many other examples are included in the video and these include beachside parties, promotional and recreational events and the like.”

Prosnow complains that the references to “Mt Thebarton” and to the “the Tamworth project” are references, not only to its projects, but also to footage extracted from the Prosnow video.

Mr Swift goes on to depose that 100 copies of the Polar promotion video were produced; eighty three of those copies were distributed to prospective Polar customers in Asia and Australia.  Seventeen copies of the video remain in the possession and control of Polar.  Mr Swift claims that most of the eighty three copies were distributed to “promotion-based inquirers”, that is, to parties who intended to use the process for making snow on site or for discrete advertising and promotions exercises.  Such operators are to be compared with those such as Prosnow who make indoor snow for indoor skiing recreation centres.  In other words, Mr Swift is there deposing to a belief that the recipients of the eighty three Polar promotional videos would be engaging in business activities different to the business activities of Prosnow.

The orders sought by Prosnow in these proceedings are two fold.  First, they seek information under O 15A r 3 of the Federal Court Rules which will or might lead to the identity of the person or persons responsible for the production and distribution of the Polar promotional video; they also seek identification of the recipients of the eighty three copies of the Polar promotional video.  Secondly, Prosnow seeks orders under O 15A r 6 for the discovery of documents relating to the question whether Prosnow has the right to obtain any relief.

ORDER 15A RULE 3

The contents of r 3 are as follows:-

“ 3.(1)Where an applicant, having made reasonable inquiries, is unable to ascertain the description of a person sufficiently for the purpose of commencing a proceeding in the Court against that person (in this rule called “the person concerned”) and it appears that some person has or is likely to have knowledge of facts, or has or is likely to have or has had or is likely to have had possession of any document or thing, tending to assist in such ascertainment, the Court may make an order under subrule (2).

(2)The Court may order that the person, and in the case of a corporation, the corporation by an appropriate officer, shall:

(a)attend before the Court to be examined in relation to the description of the person concerned;

(b)make discovery to the applicant of all documents which are or have been in the person’s or its possession relating to the description of the person concerned.

(3)Where the Court makes an order under paragraph (2) (a), it may:

(a)order that the person or corporation against whom or which the order is made shall produce to the Court on the examination any document or thing in the person’s or its possession relating to the description of the person concerned;

(b)       direct that the examination be held before a Registrar.”

Dr Baxter, counsel for Polar submitted that no order should be made pursuant to r 3. First he claimed that Mr Swift had in his affidavit (to which reference has already been made) identified Mr John Edwards as the party responsible for the preparation of the Polar promotional video. Secondly, as to the recipients of the eighty three copies of the Polar promotional video, he submitted that claims based on infringement of copyright were the only relief available to Prosnow and that there was no evidence to suggest that innocent parties possessing a copy of the Polar promotional video were involved or were likely to be involved in the infringement of such copyright (if any) as may be held by Prosnow. The latter point can be disposed of summarily. It is answered, in my opinion, by the provisions of subs 116(1) of the Copyright Act 1968 (Cth) which gives to the owner of the copyright in a work the rights and remedies by way of an action for conversion or detention in respect of any infringing copy. I accept the submission of Mr Hoile, counsel for Prosnow, that provided Prosnow is able to prove copyright has been breached, at the least it might have an action against the innocent holders of the eighty three copies of the Polar promotional video for the delivery up of those copies on the grounds that they have been proved to be infringements of the copyright that Prosnow enjoys in its video.

The identification of Mr John Edwards as the relevant person involved in the preparation of the Polar promotional video raises different considerations.  First, the language of Mr Swift’s affidavit is ambivalent.  Initially there is the statement that Mr Edwards “caused to be prepared” the relevant video.  Then, in the immediately succeeding sentence there is the statement that Mr Swift was informed by Mr Edwards that he (Mr Edwards) “incorporated footage from the Calitz video”.  It is not therefore clear whether Mr Edwards was the active party involved in the preparation of the promotional video or whether he merely caused some other unidentified party to prepare it.  The problem with respect to this issue is exacerbated by conflicting information in the form of letters written by the solicitors for Polar to the solicitors for Prosnow (which letters are exhibited to the affidavit of Mr Neil Williams, a Director of Prosnow).  Thus in their letter of 15 January 1997 Messrs Patterson Houen & Commins, the solicitors for Polar wrote;

“The video in question was not created by our client or on its behalf, having been created outside Australia and supplied to our client.”

It is not clear from the papers to which video the author of the letter is referring.  It could be the Calitz video but if that is the case then the letter is wholly misleading because “the video in question” was relevantly the Polar promotional video.  If the author was referring to the Polar promotional video then the statement that it was “created outside Australia” is at odds with Mr Swift’s affidavit which infers that Mr Edwards caused it to be prepared in Australia.  Finally, the confusion is maintained in a second letter from Messrs Patterson Houen & Commins of the 29 January 1997 when they advised:-

“We are instructed as follows:

(1)     Identity of the maker of the video will not be disclosed.”

It could be that the affidavit of Mr Swift sworn on 22 August 1997 reflects a change of attitude on the part of Polar:  whereas previously it was not prepared to supply any information to Prosnow on the subject of the identity of the maker of the video, it later became prepared to make that information available.  That however, is conjecture at this stage because of the inadequacies in Mr Swift’s affidavit.  Those inadequacies are so significant (having regard to the earlier stated position that the identity of the maker of the video would not be disclosed) that the attendant doubts warrant the disclosure of the relevant information.  Subject to the comments that I make later in these reasons, I intimate that I am prepared to make orders as sought by Prosnow pursuant to the provisions of O 15A r 3.

ORDER 15A RULE 6

The contents of r 6 are as follows:-

“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 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).”

Dr Baxter maintains that there is no justifiable cause for an order to be made under O 15A r 6 for the reason that Mr Williams has asserted in his affidavit that he believes that his company has a cause of action.  It was Dr Baxter’s submission that the right of inspection granted under r 6 exists for applicants who wish to determine whether or not they have a right to claim relief.  If they have already ascertained that they have such a right, there is no need for them for resort to r 6.  Their opportunity to examine documents comes under the general rules for discovery and inspection consequential upon the institution of proceedings.  In support of that proposition Dr Baxter relied upon a passage from the judgment of Burchett J in Paxus Services Ltd v People Bank Pty Ltd (1990-1991) 99 ALR 728 at 733 where his Honour said:-

“I have referred to the terms of the rule as indicating that it is unnecessary (indeed it would put his case outside the rule) for an applicant to show a good cause of action against the respondent.”

Referring to the judgment of James CJ in Dunning v Board of Governors of United Liverpool Hospitals [1973] 2 All ER 454 at 457, his Honour went on to point out that what is required, as the language of the rule shows, is “reasonable cause to believe that the applicant ... may have the right to obtain relief ...”.

Dr Baxter then pointed to par 8 of Mr William’s affidavit sworn 19 June 1997 in which he deposed:-

“In about October 1996 it came to my attention that the respondent was using video film to market its technology to potential investors in recreation centres which offer indoor skiing.  I have seen the video film and have noted that the film used by [Polar] for marketing includes extracts of images and sound recordings from [Prosnow’s] promotional video.”

If, said Dr Baxter, Mr William’s deposition is to be believed and the facts to which he deposed are established, it shows positively that his company has a cause of action.  In other words Prosnow does not merely have “reasonable cause to believe” that it has or may have the right to obtain relief; it is asserting positively that it is entitled to the relief that is nominated in Mr William’s affidavit.  The facts in Paxus Services v People Bank need to be stated briefly to understand why his Honour made the observation that is set out above.  The promoters of the respondent company (People Bank) had been previous employees in senior positions with Paxus Services.  They had left in acrimonious circumstances and set up the business of People Bank in direct competition with the business of Paxus Services.  A Miss Berry was contacted by telephone by someone on behalf of the respondents.  The caller said to her “we’re just updating your details on our data base”.  Miss Berry had given her particulars to Paxus Services for inclusion in their data base but she had never given those particulars to People Bank.  She reported the matter to Paxus Services who viewed the issue with concern.  Earlier incidents had occurred which had made Paxus Services suspicious of the conduct of their former employees and Miss Berry’s advice crystallised those suspicions.  His Honour in the course of his judgment made the following observations:-

“In this case, no precise taking or means of taking of the confidential information of Paxus is suggested.  What is suggested is that some confidential information may have been taken in some manner, and discovery is sought in order to find out both the fact and, if it occurred, how it occurred.”(at 732)

In Paxus Services v People Bank the evidence that was put before the Court merely suggested that the former employees of the applicant may have unlawfully taken confidential information when they left the applicant’s employ.  However, this possibility materially assisted the Court in concluding that an order for “pre-action” discovery was appropriate.  In the instant case the applicant is not faced with that same measure of uncertainty.  It has seen the Polar promotional video.  It has, through Mr Williams, formed the opinion that footage from its video has been unlawfully included in the Polar promotional video.  Its assertiveness, as contained in the affidavit of Mr Williams, indicates that it is not in a state of uncertainty.  It would seem to me, therefore, that Dr Baxter is correct in presenting the submission that the facts of this case are not those that are intended to be assisted by the provisions of O 15A r 6.

Whilst the Court is not to encourage “busy bodies on fishing expeditions” (Gerard Industries v Wee (1986) 43 SASR 562 at 568 per White J) that view must be balanced by the statements of a Full Court of this Court in Caltex Refining Co Pty Ltd v The Amalgamated Metal Workers Union (1990) 51 IR 113. In that case Burchett J said:-

“Modern procedures actually provide as something desirable for what might once have been criticised as fishing - see O 15A of the Rules of this Court, particularly r 6.” (at 116)

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 of Polar and it has assertively alleged breach of copyright against Polar.  Whilst it does not lack certainty on that subject, it does however, lack certainty with respect to the identity of the party or parties who may have been responsible for the infringement and who may possess infringing copies.  But in my opinion, whilst it is appropriate that an order be made under O 15A r 3 it would be inappropriate to make any order under O 15A r 6.  It was put to me during the course of submissions that if I was minded to make any order favouring Prosnow, I should defer entering the terms of that order so as to give the parties an opportunity to consider questions of commercial confidentiality.  That is a reasonable request and I am prepared to accede to it.  Either party is at liberty to bring the matter back on for further hearing on seven days notice.  On that occasion I will consider the question of the orders that should be made and I will also consider the question of costs.

I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Loughlin

Associate:

Dated:            

Counsel for the Applicant:	Mr M E Hoile
Solicitor for the Applicant:	Cowell Clarke
Counsel for the Respondent:	Dr R J Baxter
Solicitor for the Respondent:	Johnson Winter & Slattery
Date of Hearing:	23 September 1997
Date of Judgment:	3 October 1997