Carnegie Corporation Limited v Pursuit Dynamics Plc

REASONS FOR JUDGMENT ON MOTION FOR LEAVE TO SERVE OUT OF THE JURISDICTION Introduction 1 This is an unusual application. Two Australian companies and their director seek leave to serve an application out of the jurisdiction on two English companies. That is not unusual. What is unusual is that the application they wish to serve in England is an application for preliminary discovery pursuant to O 15A of the Federal Court Rules. It is not in terms limited to documents within Australia. Indeed, it is apparent from the evidence before the Court that the bulk of the documents sought are likely to be found in England and not in Australia. 2 The events which have led to this application began with the development, by a West Australian Mr Alan Burns, of a new form of marine propulsion system. The principal elements of the system were described in a Provisional Patent Application PQ8024 filed in the Australian Patent Office on 7 June 2000. The invention was said to have been devised particularly, although not solely, as a propulsion system for propelling watercraft. It relied upon the expulsion of a jet of water from an outlet to propel watercraft in the opposite direction. It could also have other applications including the pump-like propulsion of a stream of water such as in fire fighting hoses. A claimed advantage of the invention over existing water jet propulsion systems was that it did not require the use of an impeller driven by an internal combustion engine. That system was said to involve cavitation and other efficiency limitations and to involve loss of heat energy. 3 As described, in one of its aspects, the system has an intake connecting with a source of "working fluid" (the water in which the boat floats) and an outlet through which that water is propelled. It provides a means for introducing a jet of "driving fluid" into a mixing zone in a flow direction towards the outlet. The interaction between the driving and working fluids generates a pressure reduction which causes the working fluid to be drawn from its source (the water in which the boat floats) and propelled to the outlet. The driving fluid is typically a gas at high temperature such as steam or the exhaust gases from an engine or a combination of those things. Compressed gas, high pressure water or hot water or any combination of them could also be used. Where the working fluid is aerated by the driving fluid then the density of the two phase mixture is reduced. This was said to assist the transfer of the working fluid towards the mixing chamber. 4 Provisional patent applications for related inventions were filed by Mr Burns in February 2001. They were the following: PR2868 5 February 2001 Heat Exchanger PR3310 23 February 2001 Heat Recovery System PR3311 23 February 2001 Propulsion System PR3312 23 February 2001 Nozzle Means Each of these patent applications concerns aspects of what is described in papers before the Court as the "Burns Propulsion Technology". They represent various elements of a marine drive unit. 5 Companies set up by Mr Burns, Carnegie Corporation Limited (Carnegie) and its subsidiary, New Millenium Engineering Pty Limited (NME) made an agreement in September 2000, providing for the assignment of intellectual property rights associated with his technology to an English company, Pursuit Dynamics Plc (Pursuit Dynamics). The agreement provided, inter alia, for the ongoing payment to NME by Pursuit Dynamics of a royalty of 1% of revenue derived from exploitation of the technology. On its face the agreement conferred royalty rights in respect of the exploitation of widely defined "improvements" to the technology. Variation agreements made in March and June 2001 related to the restructuring of Pursuit Dynamics and the setting up of Pursuit Marine Drive Limited (Pursuit Marine) as its holding company. 6 Carnegie and NME complained to Pursuit Dynamics that it and Pursuit Marine had lodged patent applications and licensed associated rights to third parties without accounting for the revenue generated from those activities on which royalties may have been payable under the agreement. Pursuit Dynamics and Pursuit Marine responded that the subsequent technology which they have developed and licensed falls outside the scope of the agreement with Carnegie and NME. They say they are not liable to pay royalties in respect of that exploitation. 7 Carnegie and NME evidently do not feel they have sufficient material upon which to determine whether they have a reasonable cause of action against Pursuit Dynamics or Pursuit Marine. They seek preliminary discovery against them in order to decide whether or not to commence proceedings and against whom. But Pursuit Dynamics and Pursuit Marine are English companies and have not submitted to the jurisdiction of this Court in respect of the application for preliminary discovery. They maintain, for a variety of reasons that such an application could not succeed. They say that the agreement is explicitly governed by English law and that an arbitration process precludes resort to litigation. They also contend, as a matter going to discretion, that the law of the United Kingdom precludes the use of Letters of Request in aid of the enforcement of discovery orders in that country. 8 Although Pursuit Dynamics and Pursuit Marine have not submitted to this jurisdiction they have sent a letter to the Court through their solicitors outlining their contentions. In the meantime, notwithstanding their invocation of the arbitration clause against Carnegie and NME, they have commenced proceedings in the Chancery Division of the High Court of Justice in England (Patents Court) seeking declarations as to the proper construction of the agreement made in September 2000 and subsequent variations in March and June 2001. 9 The issues for determination in the motion for leave to serve out of the jurisdiction are: