Exequatur Pty Ltd v Advanced Components & Peripherals Pty Ltd [1999] VSC 547

5. The background facts of the plaintiffs' claim and the general history of the proceeding to date are described in my ruling made on 9 March 1999 with respect to the summons filed by the defendants seeking to split the trial. On the basis of the facts outlined in my previous ruling, I turn to deal with each of the categories of documents of which the plaintiffs seek further and better discovery from the defendants. I refer to the documents described in the plaintiffs' amended summons:

10. In this category the plaintiffs seek documents from the defendants in relation to payment by the first defendant (ACP) to NSD. NSD is the agent for Intel within Australia and is the company that produces the microprocessor which is the "brain" of the converter. In their affidavits in support of the application the plaintiffs have exhibited invoices that are said to be examples of invoices issued by Intel to ACP. The plaintiffs seek discovery from the defendants of the counterparts of the invoices, that is, evidence of payment of the amounts claimed in the relevant invoices. The defendants' position is that they have no further relevant documents in their possession. Further, the defendants object to the further discovery sought on the grounds that it is too wide. There is the remaining issue that the plaintiffs allege the documents sought are relevant as potentially disclosing the identity of the party paying the amounts claimed in the invoice. The plaintiffs believe that the counterpart documents to the invoices may reveal the correct parties to the licensing arrangement or arrangements and, further, reveal the identity, alternatively, establish the identity of the second defendant as the party who specifically breached the relevant licensing arrangement. In response, the defendants submit that in light of the ruling that the trial be split as to the issues of liability and quantum, the documents sought are not relevant at this point in time. Specifically, they say that the documents are not relevant to the breach of copyright or breach of fiduciary duty. On the face of the affidavit material before me it appears that there is at least a likelihood that the documents sought, being the payment counterparts to the particular invoices, may be relevant with respect to the licensing arrangement or arrangements and the issue of the relevant identity of the party who breached the alleged licensing arrangements. On balance, therefore, I consider that the counterpart documents ought be discovered. The defendants in their affidavits have deposed that they have "no further invoices" in their power, possession or control. However, the nature of the discovery sought by the plaintiffs is not with respect to invoices as such but concerned with counterpart payment documents of the invoices exhibited to the plaintiffs' affidavit. Accordingly, I will order that the defendants provide further and better discovery of the documents described in paragraph 1(r) of the plaintiffs' amended summons.

2. Documents described in paragraph 1(t), (u) and (v) of the plaintiffs' summons

15. The plaintiffs seek further and better discovery of documents relating to the technical details of "NEWAPPL", documents in relation to the software developed by one Mr Grant for "NEWAPPL" and documents in relation to the agreement with Mr Grant for work on "NEWAPPL" and payments made to Mr Grant under this or any other agreement.

18. During the course of argument it was revealed that the sole objection of the first and third defendants was that the documents sought to be discovered were commercially sensitive and of a confidential nature and, accordingly, those defendants were prepared to discover the documents but subject to an appropriate order for confidentiality. Further, during the argument the objection was withdrawn and the first and third defendants indicated that the documents would be discovered without any requirement for protection by way of a confidentiality order. It follows that it is appropriate that an order be made for further and better discovery by the first and third defendants of the documents sought. As for the second, fourth and fifth defendants, their position with respect to this category of documents was that they did not have any such documents in their possession and relied upon the presumption of the completeness of their affidavits of discovery. Their position was not challenged by the plaintiffs presumably because the plaintiffs are now satisfied by the withdrawal of the objection by the first and third defendants. Accordingly, it is unnecessary for an order to be made with respect to the second, fourth and fifth defendants concerning such documents.

23. In this category the plaintiffs seek further and better discovery from the defendants of documents relating to the US dollar bank accounts of ACP. The first and third defendants allege that the documents are confidential but that in any event the request is too wide, vague and oppressive. The second, fourth and fifth defendants have filed affidavits deposing that they do not have any further documents. Mr Levin, one of Her Majesty's counsel, who appeared for the plaintiffs urged discovery partly on the basis that the defendants had already made discovery of this category of documents existing for the period from approximately July 1993 intermittently until 28 June 1996. The plaintiffs claim that the documents they require are the US dollar bank account documents for the relevant period from 1992 and up until and including July 1993.

26. The plaintiffs argue that the discovery of the documents will assist them in establishing the identity of the defendant parties who were actually engaged in the relevant transactions that constituted the breaches of the licensing arrangement or arrangements, if any, and the breaches of the fiduciary duty alleged in the further amended statement of claim. The plaintiffs submit that the documents sought are of a similar type or at least the same argument can be made to those documents described in paragraph 1(r) of the plaintiffs' summons. Furthermore, the plaintiffs submit that as the defendants have made discovery in part, indeed, of documents that they were not necessarily required to discover, it follows that they should be required to discover the documents sought with respect to the period from 1992 until July 1993. The defendants submit that these documents are no longer relevant in view of the ruling of the splitting of the trial. In particular, Mr Panna of counsel, who appeared for the first and third defendants, submits that it is unnecessary for the plaintiffs to ascertain the identity of the defendant parties actually engaged in the transactions alleged to constitute the breaches of the licensing agreement. He submits that "all defendants are caught by these causes of action."

29. On the basis of the plaintiffs' affidavit material I cannot be satisfied that the documents sought in this category are relevant. On its face the request appears to constitute no more than a fishing exercise unlike the documents described in paragraph 1(r) of the plaintiffs' summons. These documents on the face of their description do not appear to have anything to do with the plaintiffs' claim against the defendants. Insofar as there may be allegations at trial of breaches of the licensing arrangement or arrangements such breaches would usually be demonstrated or proven by way of evidence as to discussions and actual conduct and the like. As matters stand the disclosure of the documents relating to US dollar bank accounts do not have any bearing on the allegations contained in the further amended statement of claim. It follows that I will not order further and better discovery by the defendants of the documents in this category.

34. In this category the plaintiffs sought discovery of documents in relation to the "new agreement" between ACP and GDT.

37. The defendants have filed affidavits deposing that they have no further documents within their custody, control or possession save for a document generally referred to as the "draft agreement" and which consists of a copy of an early or earlier agreement with some minor annotations. I am satisfied that insofar as the defendants have an obligation to make discovery they have done so. Furthermore, I am satisfied that the defendants are entitled to rely upon the presumption of the completeness of their affidavits of discovery of documents and that the plaintiffs are not entitled to seek to go behind the affidavits and set aside the presumption. During the course of argument it appeared that Mr Levin, in any event, did not press this request for further and better discovery and I will not make orders with respect to this category.

42. In this category the plaintiffs seek further and better discovery of the defendants of trading accounts, balance sheets and profit and loss statements of those defendants who are incorporated. The plaintiffs allege that these documents (similar to those described in category 1(r)) will assist the plaintiffs in establishing the identity of the defendants who have been engaged in the relevant breaches. Furthermore, the plaintiffs allege that the relevant accounts may reveal ownership of assets including intellectual property which of itself would go to the very essence of the causes of action alleged by the plaintiffs in their further amended statement of claim.

45. On the face of the affidavits filed by the plaintiffs in support of their application and given the description of the documents for which further and better discovery is sought, I cannot be satisfied as to their relevance. Furthermore, the very description and nature of the documents themselves discloses that they are clearly and unequivocally documents that would relate to the issue of quantum or damages. In light of my ruling of the splitting of the trial, discovery of those documents at this point in time is unnecessary, indeed, inappropriate. As for the issue of enabling the plaintiffs to further or better identity the particular defendant who has been engaged in the relevant breaches, I have formed the same view as that expressed with respect to the documents described in paragraph 1(y) of the plaintiffs' summons.

50. In this category the plaintiffs sought further and better discovery of documents relating to dividends, superannuation contributions and the like. In the course of argument Mr Levin did not press this category in light of my earlier ruling for the splitting of the trial. It follows that no order for further and better discovery will be made.

55. In this category the plaintiffs seek further and better discovery of the defendants' documents relating to agreements made by the defendants with Australian State or Commonwealth Governments and/or IBM and/or Apple Computers. The defendants object to the request on the grounds that the documents sought are not relevant, are unclear and too wide and, furthermore, none of the defendants have any further documents within their custody, control or possession.

58. On the face of the affidavits filed by the plaintiffs in support of their application I cannot be satisfied as to the relevance of the documents sought. Even if agreements had been entered into between any of the defendants and the government agency or other party, it does not appear to have any bearing on the matters alleged in the plaintiffs' further amended statement of claim. At its very highest, this category of documents could only relate to the issue of quantum of damages. Even so, I am not necessarily satisfied that it will be relevant on that issue in any event. It follows that no order will be made for further and better discovery of this category of documents.

8. Documents for which the defendants claim privilege

63. The next aspect of the plaintiffs' summons was concerned with the claim for legal professional privilege by the defendants for certain categories of documents.

66. There are salient facts surrounding events that the plaintiffs say give rise to a "matrix of facts" that ought lead the court to go behind the veneer of privilege and at least form a suspicion if not make a specific finding as to the conduct of the defendants to the effect that they conspired to avoid and did purport to avoid the application of the law and, consequentially, the discovery of documents.

69. The relevant events are alleged to have occurred between August 1992 and December 1993 as set out in the plaintiffs' further amended statement of claim. A letter terminating the alleged licence arrangements between the plaintiffs and the defendants was dispatched on 19 February 1993. The defendants admit the fact of a letter of 19 February 1993 and that sales occurred of a device (and which device achieved all or much of the purpose of the original converter product described in my ruling of 9 March 1999 achieved). It is further emphasised on behalf of the plaintiffs that one Mr Grant was retained by the defendants to create a modified converter in about August 1992. It is asserted, further, that Mr Grant was succeeded by one Mr Alexander who in turn was supplied with the Mark 1 converter product. It is further alleged as a result of discovery of documents that the defendants obtained patent attorneys, Oberins, who provided advice from about 5 February 1992 onwards. In a discovered document Oberins recommended to the defendants that they obtain trademark protection for the relevant product. It appears that from about 5 February 1992 onwards Oberins gave advice in their capacity as patent attorneys to the defendants with respect to the attaining of intellectual property protection of the product. In the course of advice provided by Oberins they referred the defendants to a firm of solicitors, Messrs Stephens, in particular, Mr Julian Stephens. The defendants seek discovery of virtually all documents created between the patent attorneys and the defendants and also between the patent attorneys and the solicitors, Messrs Stephens, and, further, between the solicitors and the defendants.

72. The parameters of the request are very wide but also give rise to serious legal ramifications.

75. The appropriate starting point with respect to the privilege claimed by the defendants is the relevant provision of the Patents Act 1990. Section 200 of that act provides in part:

(a) is entitled to prepare all documents, transact all business and conduct all proceedings for the purposes of this Act; and

(b) has such other rights and privileges as are prescribed.

(2) A communication between a patent attorney and his or her client, and any record or document made for the purposes of such a communication, are privileged to the same extent as a communication between a solicitor and his or her client."

82. The protection of privilege granted by statute has been applied by the courts (see Sepa Water Treatment Pty Ltd v. JMT Welding Pty Ltd & Ors 6 NSWLR 41; also TPC v. International Technology Holdings & Ors (1995) 31 IPR 466).

85. Clearly, there is a prima facie privilege that operates in favour of a communication between a patent attorney and his or her client. Furthermore, in order to eliminate any possible doubts or suspicions that might lie in the mind of the court with respect to the allegations made by the plaintiffs, Mr Panna on behalf of the first and third defendants, made available in the course of argument the following documents: letter from Oberins to Mr Doherty for the defendants dated 17 July 1992; letter from the solicitors Stephens to Mr Doherty; letter from Oberins to Mr Doherty dated 22 July 1992; letter from Stephens to Mr Doherty dated 27 July 1992; letter from Stephens to Mr Doherty dated 7 August 1992; and letter from Oberins to Mr Doherty dated 28 July 1992. Leaving aside the issue of legal professional privilege as it arises with respect to communications between solicitors and the client and the privilege that arises under s.200 of the Patents Act, having had the opportunity to examine the course of correspondence between the patent attorneys and the defendants and also the defendants' solicitors and the solicitors themselves, I am satisfied that all of the correspondence was standard form correspondence to which privilege is attached. Furthermore, there is nothing contained in any of the correspondence that would lead me to harbour even a scintilla of doubt or suspicion with respect to the bona fides of the defendants in their dealings with their patent attorneys and their solicitors at the relevant period. It follows that I consider that the category of documents relating to communications between the patent attorneys and the defendants together with communications between the defendants' solicitors and the defendants enjoy the protection of privilege. Accordingly, no order for further and better discovery and/or the removal of privilege will be made in this respect.

88. In any event, in the course of endeavouring to establish or create a matrix of facts the plaintiffs have described a scenario of events as follows: the defendants were aware that copyright in the relevant product lay with the plaintiffs and as a result of their desire to steal such copyright they embarked upon a course of retaining patent attorneys and solicitors for the purposes of technical and legal advice in order to evade the application of the provisions of the Copyright Act and the common law so that they, the defendants, could enjoy the benefits of the copyright and confidential information that lay in the product originally devised by the plaintiffs at the cost of the plaintiffs. Such an allegation is a serious matter, particularly with respect to alleged unethical conduct on the part of the defendants' solicitors. To say the least, to attach any plausibility to the scenario described by the plaintiffs in their affidavits, particularly the affidavits of Mr Petch, the court would need to be satisfied that there existed a very sophisticated a sinister plot on behalf of the defendants to, among other matters, defraud and cheat the plaintiffs. Such allegations are serious. Mr Levin on behalf of the plaintiffs referred me to a number of authorities in this regard. However, the relevant authority is a decision of the High Court in Commissioner of Australian Federal Police & Anor v. Propend Finance Pty Ltd & Ors (1996) 188 CLR 501 where in a search warrant case the High Court considered the application of legal professional privilege to particular documents. The High Court broadly applied the principles propounded in Grant v. Downs [1976] HCA 63; (1976) 135 CLR 674. In the course of his judgment in Propend Finance, at 514, Brennan CJ expressed the principle that it is open to a party seeking to resist a claim for legal professional privilege to show reasonable grounds for believing that where the privilege is claimed such privilege was made or created for some illegal or improper purpose and in such circumstances is contrary to the public interest. Gaudron J at 546-547 stated that it is not necessary that illegality be established positively but that a mere allegation of an illegal purpose is not of itself sufficient. The learned judge, in referring to O'Rourke v. Darbishire (1920) AC 581, 604 stated that it is insufficient for a party seeking to set aside privilege to merely allege illegal purpose, rather, there must be "something to give colour to the charge" and "some prima facie evidence that it has some foundation in fact". Gaudron J went on to observe that the presumption of innocence is not lightly displaced and that where privilege is sought to be set aside the material must show, as observed in O'Rourke v. Darbishire "good ground for saying that prima facie a state of things exist which, if not displaced at the trial will support a charge of fraud". Furthermore, Gaudron J at 547 stated that the allegation of fraud and illegal conduct cannot be made by way of mere assertion but, rather, that the evidence must be in an inadmissible form.

91. In the present matter the plaintiffs, in particular in the affidavit of their solicitor, Mr Petch, only go so far as to express suspicion, assertion and assumption. In Commissioner of Federal Police v. Propend Finance Pty Ltd, supra, the views of Gaudron J were echoed by McHugh J at 556. In particular, McHugh J stated quite clearly that where an allegation of illegal purpose or fraud is made for the purposes of displacing a claim of legal professional privilege the party making the assertion bears the onus of proving the assertion. On the face of the affidavit material filed on behalf of the plaintiffs I cannot be so satisfied. More so, in Propend Finance, Gummow J at 576 referred to the classic statement by Sir Owen Dixon in Briginshaw v. Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 361-362 that "reasonable satisfaction" as to allegations of moral turpitude is required. The "matrix of facts" put forward on behalf of the plaintiffs involve serious and sinister allegations. I cannot be satisfied on the face of the affidavits filed on behalf the plaintiffs that their concerns constitute any more than suspicion and assertion. Such suspicion and assertions on the part of the plaintiffs are not sufficient to satisfy the Briginshaw v. Briginshaw test and accordingly I am not persuaded that privilege should be displaced. Furthermore, in the course of considering the application by the plaintiffs for the setting aside of privilege in this matter, I observe that no allegation of fraud has been pleaded against the defendants by the plaintiffs in the further amended statement of claim.

94. The final aspect of the plaintiffs' summons constitutes an application for leave to describe privileged documents in categories or classes of documents rather than make individual descriptions of each and every document. The plaintiffs have referred to five categories of documents (see exhibit MIP27 to the affidavit of Mr Petch sworn 19 November 1998). The categories or classes of documents largely relate to documents said to have been created in the course of obtaining legal advice and/or communications between solicitors and counsel and/or patent attorneys and/or experts. The plaintiffs seek leave pursuant to Order 29.04(b) to describe the documents collectively rather than individually. They seek the indulgence of the court principally on the basis that in toto the documents constitute in the vicinity of 2,000 separate documents. The defendants are in the position that if privilege is claimed on a broad collective basis they have no idea as to the nature of the documents for which privilege is claimed and are placed in the position that they do not know whether it is proper for privilege to be claimed. I have raised with Mr Levin, for the plaintiffs, an initial reservation as to the adequacy of the descriptions of the categories of documents sought to be applied by the plaintiffs. I am informed this morning that the parties have agreed on a form of order to deal with this aspect of the plaintiffs' application, but the defendants state their position quite emphatically that they reserve their position to seek further and better discovery and/or challenge the privilege claimed by the plaintiffs should they consider it appropriate to do so upon receiving the further discovery to be made by the plaintiffs.

97. I will now deal with the issue of the orders to be made arising from my ruling. Mr Levin, leaving aside the question of costs for the moment, the matters that appear ought be dealt with in the orders that I should make this morning, 1, dealing with leave to the plaintiffs to file an amended summons.

100. I now turn to the issue of costs. Mr Panna, on behalf of the first and third defendants, has submitted an extensive written submission objecting to substantial parts of the affidavits of Michael Petch sworn on 7 October 1998 and 3 March 1999 and filed on behalf of the plaintiffs. The affidavits are largely concerned with establishing the trail of inquiry requested by the plaintiffs of the defendants' documents, and the matrix of facts devised to set aside the defendants' claim of privilege.

103. It would take substantial court time to dispose of the objections. In any event, in the course of argument, Mr Levin for the plaintiffs, relied essentially upon documents exhibited to the affidavits of Mr Petch rather than the assertions of fact in the affidavits proper. Indeed, I observe that during the course of argument, when objections were made by Mr Panna, immediately Mr Levin on behalf of the plaintiffs did not press the matter.

106. It is unnecessary for me to attempt to unravel the admissible and non admissible parts of the Petch affidavits. For the reasons already stated, I am satisfied that the plaintiffs have made out about half of the their claim for further and better discovery before me. Ultimately, the objections raised by Mr Panna go to the question of costs. Having considered all aspects of the application by the plaintiffs, and the fact that they have succeeded in part before me, and the fact that the defendants have succeeded in part, I consider on balance each party should bear its own costs of the plaintiffs' amended summons.

109. As for the defendants' summons, its applications were opposed by the plaintiffs, and which opposition failed. I consider that there is no factor arising from the determination of the defendants' summons to warrant a deviation from the usual course, namely, that costs follow the event. Arising from my ruling, I propose to make the following orders, but I will give the parties the opportunity to make further submissions as to the form of the orders I now outline:

1. The plaintiffs have leave to amend the summons filed 7 October 1999 in the form of the amended summons set out in exhibit MIP31 of the affidavit of Michael Petch sworn 19 November 1998, save that the reference to rule 29.05 be substituted with a reference to rule 29.04(b) (hereafter referred to as "the amended summons").

2. The time for the filing and service of the amended summons is abridged until 4 pm on 12 March 1999.

3. The plaintiffs file and serve the amended summons by 4 pm on 12 March 1999.

4. Subject to further order by the trial judge, the trial of the proceeding, when fixed for hearing, proceed on the basis of a determination of the liability of the defendants only, and the determination of the quantum of damages, if any, be subject to further order and directions by the trial judge.

5. The first and third defendants make further and better discovery of the documents listed in paragraphs 1(r), (t), (u) and (v) of the amended summons by 26 March 1999.

6. The second, fourth and fifth defendants make further and better discovery of the documents listed in paragraph 1(r) of the amended summons by 26 March 1999.

7. Inspection of the documents ordered to be discovered in paragraphs 5 and 6 hereof be completed by the plaintiff by 14 April 1999.

8. The summons of the first and third defendants filed 1 October 1998 and the second fourth and fifth defendants filed 16 October 1998 are otherwise dismissed.

9. The plaintiffs make and serve an affidavit by 26 March 1999 in respect of which they have claimed privilege enumerating in convenient order and describing each document, or in the case of a group of documents of the same nature, describing the group sufficiently to enable the document or group to be identified.

10. Pursuant to rule 50.07, the proceeding is referred for mediation.

11. The mediation shall be attended on behalf of each party by a person with authority to settle the disputes between the parties and to execute terms of settlement at the mediation.

12. The parties are to agree on the costs with the mediator and bear the costs of the mediation equally, but the costs of the mediation shall otherwise be reserved and borne as may be ordered by the court.

13. Subject to further order, on or before 17 June 1999, the mediator shall report in writing to the associate to the judge in charge of the Intellectual Property List whether the mediation is finished.

14. The proceeding be adjourned for further directions on a date as soon as may be convenient to the court after 17 June 1999 and to be fixed by the judge in charge of the Intellectual Property List.

127. I will make orders in accordance with the orders I have just outlined, save that the proposed order number 5 will now be substituted by a new order number 5 as follows:

5. Pursuant to rule 29.08, the first and third defendants make and serve an affidavit on or before 26 March 1999 stating in respect of the following classes of documents whether those documents are or have been in their possession, and if some or all of them have been in their possession but are no longer in their possession, when they parted with them, and their belief as to what has become of them:

(a) Documents described in paragraph 1(r) of the amended summons;

(b) Documents relating to the technical details of "NEWAPPL" (including schematic circuit drawings, bill of materials, technical specification design notes, printed circuit board, art work on floppy disk or hard copy and test instructions;

(c) Documents in relation to the software developed by Grant for "NEWAPPL" including documents containing the software;

(d) Documents in relation to the agreement with Grant for work on "NEWAPPL" and payments made to Grant under this agreement.

135. In substitution for the order I outlined number 6, there will be substituted the following order number 6:

6. That pursuant to rule 29.08, the second, fourth and fifth defendants make and serve an affidavit on or before 26 March 1999 stating in respect of the following class of documents whether those documents are or have been in their possession, and if some or all of them have been in their possession but are no longer in their possession, when they parted with them, and their belief as to what has become of them, those documents being the documents described in paragraph 1(r) of the amended summons.

139. In addition to the orders I have just outlined, I will make further order 16.

16. Each party bear its own costs of the amended summons.

17. The costs of the first and third defendants of their summons filed 15 October 1998 and the costs of the second, fourth and fifth defendants of their summons filed 16 October 1998 be paid by the plaintiffs.