Diamond v Bank of London and Montreal Ltd

This Agreement is subject to the laws of England and to the exclusive jurisdiction of the English courts. JAC sent Apscore, with a copy of the Assignment Agreement executed by JAC, four diskettes, containing "JBASE 1.5 source code" and a note to the effect that what was contained on the diskettes was a compressed and encrypted version of the source code. Mr Murray obtained what is described as the decryption key and attempted to decrypt the code. He was unable to do so successfully. When he told JAC about the difficulty he was having he was told that version 1.5 was not a commercial release, and that further versions would be sent in accordance with the agreement. Mr Murray's evidence is that no further versions were received. Apparently there have been other versions, because there is evidence of correspondence and conversations about a transaction entered into by JAC with an American corporation relating to source code version 1.8. When asked why version 1.8 had not been forwarded to Apscore, Mr Ketteridge, according to Mr Murray, replied: It is not in a ready enough state as yet to send to you. We have to make more modifications to go into it for [the American corporation]. Wait until we have done that and I'll forward that on to you. In early 1995 Apscore assigned to the second applicant (GCT) its interest in the Assignment Agreement including its interest in JBASE. Notice of the assignment has been given to JAC. Similarly, JAC has notified Apscore that JAC has assigned its interest to a company called James Anthony Computing Limited, the third respondent. There is a suggestion that the assignment was not effective, because it required consent and no consent was given: that may at least be questionable, if it matters, because the correspondence suggests that the assignment was one which might be made without consent. The principal relief sought by the amended application is declaratory: the declarations sought are: 1.1 A declaration that the Respondents have wrongfully repudiated the agreement dated 17 November 1993 ("the Assignment Agreement") between the First Applicant and the First and Second Respondents. 1.2 A declaration that the Assignment Agreement is void and of no effect. 1.3 Alternatively to 1.1 and 1.2, an order pursuant to s.72(5) of the Fair Trading Act 1987, declaring void from its beginning the Assignment Agreement. There are then sought a declaration that GCT is the true owner of the copyright in JBASE, a declaration as to infringement by the respondents and damages or an account of profit; alternatively there is sought a declaration that the respondents, or some of them, hold that copyright in trust for GCT or Apscore and consequential relief; finally, damages are claimed for breach of contract and under s 68 of the Fair Trading Act 1987 (NSW). I can now deal with the requirements of O 8 r 2(2). There is no difficulty about the requirement that the Court have jurisdiction: it has jurisdiction in relation to the copyright claim under s 131C of the Copyright Act 1968 and I can see no reason to doubt (leaving aside the effect of the cross‑vesting legislation which would in any event apply) that the other claims are within the jurisdiction of the Court under s 32 of the Federal Court of Australia 1976. Mr Murray's evidence sufficiently establishes, in my view, a prima facie case of repudiatory breach of the Assignment Agreement (which the applicants accept in the amended statement of claim). It follows that a prima facie case has been established, sufficient in the present purposes, of the entitlement of CGT, or alternatively Apscore, to terminate the Assignment Agreement or that it has been terminated; arguably, in addition, the circumstances deposed to by Mr Murray produce the consequence, as a result of clause 6 of the Assignment Agreement, that the assignment is to be treated as no longer, or possibly as never having been, effective: that was described in argument as the "gateway" to the copyright claims. As to the claims under the Fair Trading Act, Mr Murray's evidence deposes to negotiations leading to the execution of the Assignment Agreement in which, he says, the respondents made representations that they would do (in substance) what the Assignment Agreement, once executed, obliged them to do. It is claimed that Apscore relied on the representations in entering to the agreement and that the representations were misleading or deceptive, so that the applicants are entitled both to damages and to an order avoiding the Assignment Agreement. The question whether the proceeding is one to which O 8 r 1 applies is somewhat more complex. There is little difficulty with the copyright claims: what is alleged is a breach of an Act and the claims are brought in respect of damage suffered in the Commonwealth: O 8 r 2(1)(c); as for the claims under the Fair Trading Act, in my view the cause of action alleged is to be treated as one which arose in the Commonwealth paragraph (a): to the extent that representations were made by telephone by the respondents in the United Kingdom to Mr Murray in Australia, they should be treated as having been made in Australia (Diamond v Bank of London and Montreal Ltd [1979] QB 333 at 345, 346, 349) and the reliance and loss alleged occurred also in Australia. In passing, I may say that I doubt that the applicant can rely, in relation to the Fair Trading Act, on para (b) of the rule: it may be that the word "Act" should be read as limited to a Commonwealth Act (Acts Interpretation Act 1901 (Cth) s 38(1); Re O'Dowd; ex parte Commonwealth Bank Officers' Association (1984) 3 FCR 150). The claims based on the Assignment Agreement, and the respondents' alleged breach of it, give rise to more difficult questions. It was suggested that the Assignment Agreement was a contract made within the Commonwealth (para (ab)), but it is by no means clear on Mr Murray's evidence that that is so: if the contract was formed, as appears to be the case, by an exchange of executed parts, the order of events was on the evidence that a copy of the document was executed by Apscore and sent to JAC in the United Kingdom; JAC subsequently, presumably in the United Kingdom, executed a copy and posted it to Apscore. If that is right, it may well be that the contract was made when the part signed by JAC was posted in the United Kingdom. Counsel for the applicants then suggested that the claims were for breach in the Commonwealth of a contract, wherever made, that renders impossible performance of any part of the contract that ought to be performed in the Commonwealth (para (aa)). It may be accepted that the alleged breach occurred in the Commonwealth: that was, at least by inference, where the material relating to JBASE was to be provided to Apscore by JAC. It may also be accepted for present purposes that the failure to supply the material meant that Apscore could not use JBASE as contemplated by the agreement; it is, however, a further and difficult step to say that the breach rendered impossible the performance of any part of the contract which ought to be performed in the Commonwealth. Particularly, it is not clear that it became impossible for Apscore to do anything which it might have been required by the contract to do in the Commonwealth. It is, however, unnecessary to pursue this further, in the light of my conclusions on what may be described as discretionary considerations, to which I now turn. Counsel for the applicant fairly conceded that the applicants' principal claims were those relating to the Assignment Agreement and that those claims were a "gateway" through which the applicants must pass before it could establish its other claims. It is easy to see that that is so in relation to the copyright claims. It is, perhaps, less obviously so in relation to the Fair Trading Act claims. However, the representations relied on were all incorporated as express provisions of the Assignment Agreement. Accordingly, the fate of the Fair Trading Act claims will depend on whether breach of the Assignment Agreement is established (because, if not, there is no apparent basis on which the Fair Trading Act claims could succeed), on whether that agreement is (or has been) terminated and on whether it is avoided or declared to be void. It follows therefore that the description of the claims based on the Assignment Agreement as a "gateway" is accurate. The agreement is expressed to be subject to the laws of England and to the exclusive jurisdiction of the English Courts. In the light of that provision, the question that arises is whether, having regard to the principles established by the High Court in Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, this Court is a clearly inappropriate forum for the determination of these proceedings. The test established in Voth is applicable equally to applications for leave to serve process outside the jurisdiction and applications to set aside service as it is to applications for a stay: see at 563. There is a clear course of authority supporting the proposition that where parties agree that disputes between them are to be submitted exclusively to the courts of a particular jurisdiction, prima facie effect should be given to that agreement: Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 230 Brennan J at 259; Gaudron J (were early authorities referred to); Leigh‑Mardon Pty Ltd v PRC Inc (1993) 44 FCR 88; Akai Pty Ltd v The People's Insurance Co Ltd (1995) 8 ANZ Insurance Cases 61‑254 at 75,853, 75,854 per Sheller JA with the agreement of Meagher JA); CSP Computer Security Products Pty Ltd v Security Dynamics Technologies Inc, FCA (Heerey J) 12 March 1996 unreported. Counsel submitted that the circumstances of this case were sufficient to displace the prima facie disposition to give effect to an exclusive jurisdiction provision. First, it was said that it was open to the respondents to accept the jurisdiction of the Court or to apply for a stay (or, no doubt, to set aside service); the appropriate time to determine those issues was upon the making of such an application by the respondents. I think there are a number of answers to that. One is that Voth makes it clear the same test must be applied on a motion for leave to serve outside the jurisdiction as would be applied on the application for a stay; a second is that if the applicants are unable on an ex parte motion to satisfy the Court that the prima facie rule should be displaced, it hardly seems appropriate to require respondents to undertake the trouble and expense of seeking to overturn that which has not been established; a third is that it is clear that the parties to these proceedings have been in communication, and if it is seriously thought that the respondents might submit to the jurisdiction of the Court it would be easy enough to put the question to them. Next, it was said that the proceedings do not involve a dispute arising under the Assignment Agreement but rather a question as to whether such an agreement exists at all. With respect, I do not think that is right. There is no doubt the agreement was entered into. The question - and counsel did not I think ultimately dissent from this - is one of the construction of clause 6 of the agreement and its application to the facts or, alternatively, whether there has been a repudiatory breach and whether the repudiation has been accepted (and, if so, with what consequence). Thirdly, counsel relied on a number of particular circumstances. They were that the applicants are Australian companies; that the Software Development Agreement, which gives rise to the applicants' claim to copyright, is to be construed according to the laws of New South Wales; thirdly that the applicants' witnesses and documents are (inferentially) in New South Wales; and fourthly, that only an Australian court has jurisdiction to grant relief under the Fair Trading Act and that such relief might not be available in England.

Those considerations do not seem to me sufficient to displace the prima facie rule. If the applicants are resident in Australia, the respondents are resident in the United Kingdom; the Software Development Agreement is of no particular consequence until the effect of the Assignment Agreement is ascertained; if I should infer that the applicants' witnesses and documents are in Australia, so no doubt equally I can and should infer that the respondents' witnesses and documents are in the United Kingdom; and because the Fair Trading Act claims depend, for the reasons I have given, upon the outcome of the contractual claims, and appear in the end highly unlikely to add anything of substance to the relief to which the applicants (if successful) may be entitled, I think they should be given little weight. I was referred to the decision of Davies J in Leigh‑Mardon Pty Ltd v PRC Inc 19 December 1992 unreported, in which his Honour gave leave to serve process outside the jurisdiction in the proceedings later before Beasley J on a contested application for a stay (which, of course, her Honour granted). It is notable that Davies J started with "a strong bias in favour of maintaining the bargain" as to exclusive jurisdiction. His Honour referred, however, to a number of significant factors which pointed the other way. They included a number of matters, which have no counterpart in this case, lending strong support to a conclusion that an Australian forum was a convenient one for the determination of the dispute: for example, because the dispute concerned actions by both parties with respect to an Australian company and an Australian dockyard, the principal evidence, both oral and documentary, was likely to be in Australia; the subject matter of the dispute concerned the provision of services and equipment to the Australian Defence Forces, so that it was likely that the question of public interest immunity would have to be considered in relation, for example, to questions of discovery; the first respondent had a wholly owned subsidiary carrying on business in Australia with a legal department here and the second respondent was an Australian company. Here the development of the software took place in the United Kingdom; that is, I doubt, where a great deal of the relevant evidence will be; each respondent is resident in the United Kingdom and there is no evidence that the respondents have a presence in Australia; no question of Australian public interest arises. For those reasons in my view this is not an appropriate case in which to give leave to serve process outside the jurisdiction. Accordingly the motion is dismissed. I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane. Associate: Dated: 12 December 1996 Heard: 28 November 1996 Place: Sydney Decision: 12 December 1996 Appearances:Mr T J Hancock of counsel instructed by Conway MacCallum appeared for the applicant.