Guttershield Systems v LBI Holdings Pty Ltd

5724/02 GUTTERSHIELD SYSTEMS v LBI HOLDINGS PTY LIMITED JUDGMENT - Ex tempore 1 HIS HONOUR: This is the hearing of a notice of motion brought by the defendant in proceedings seeking the transfer of these proceedings to the Supreme Court of Victoria. The transfer is sought under s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross Vesting) Act 1987. That provides that: "Where (a) a proceeding in this sub-section referred to as the relevant proceeding is pending in the Supreme Court of a State or Territory (in this sub-section referred to as the 'first court'); and (b) It appears to the first court that ... (iii) is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of another State ... the first court shall transfer the relevant proceeding to that other Supreme Court." 2 The parties before me are in agreement that the relevant principles have been stated by Howie J in his judgment in Patrick Badges Pty Ltd v. Commonwealth of Australia [2002] NSWSC 221, where his Honour said: "3. The subsection requires this Court to decide which is the more appropriate court to determine the proceedings brought by the plaintiff: Bankinvest AG v Seabrook (1988) 14 NSWLR 771 at 714E, 727 B ; James Hardie & Coy Pty Ltd v Barry (2000) 50 NSWLR 357 at 379. A court will be more appropriate than another if in that court the case may be "tried more suitably for the interests of all the parties and the ends of justice": Spiliada Maritime Corporation v Cansulex Limited [1987] AC 460 at 476 applied in James Hardie at 378. It has been held that a broad view is to be taken as to what are the interests of justice in this respect including both procedural and substantive law questions as well as the convenience of the parties. It has been suggested that there is strictly no burden or onus upon either party to persuade the Court either to transfer the proceedings or not to take that course: Bankinvest at 727C. However, as the defendant has brought this application, it has to persuade the Court to make the order it seeks : James Hardie at 380 par [100]. 4. In James Hardie at 379 par [95] reference was made to what was described as "a useful checklist" in deciding an application for a transfer of the proceedings and which is contained in the decision of Higgins J in Dawson v Baker (1994) 120 ACTR 11 at 22. It is as follows: · application of substantive law · forensic advantage or detriment conferred by procedural law · the choice made by the plaintiff of the forum and the reasons for that choice · balance of convenience to parties and witnesses; and · convenience to the court system." 3 The proceedings are ones which were begun by summons on 29 November 2002. All of the parties are involved in an industry which involves putting plastic devices into the guttering of buildings, so as to keep leaves out. The plaintiff are companies which carry on that business in New South Wales. The second defendant is a company which carries on that business in, amongst other places, Victoria. The first defendant is a company which holds certain patents which relate to devices which are useful for keeping leaves out of gutters. The relief which is sought in the principal proceeding is a declaration that the plaintiffs are beneficially entitled to a one-third share in five such patents, together with some consequential orders to give effect to any such beneficial entitlements. 4 The plaintiffs and the second defendant were involved in a loose arrangement from 1993 onwards whereby they co-operated in obtaining material which was suitable for use as a leaf protector, and installing it in their respective territories. There were another two companies, connected with a Mr De Graaf, who operated in South Australia in that industry. In 1999 a document was executed. It was, it appears to be common ground, a document which was drawn up by Mr Wickett, who is prominent in the affairs of the plaintiff. It is entitled "Agreement of the Alliance". It defines some terminology at the beginning. "The Alliance" is "the grouping of the six companies to act as a united body for all future business dealings within the gutter protection industry". There were then six companies identified, of which the plaintiff was one. The second defendant was another. There was an allocation of territories within Australia between the various members of the Alliance. The agreement said that each member of the Alliance agreed to restrict mesh sales and fitted gutter protection system sales to within the boundaries of their allocated territory. It continued: "Each member of the Alliance agrees to give support to the Alliance, both financially and intellectually for the following categories, as governed by paragraphs five and six: … E. Research and development of new meshes, fastening systems or any development that will improve the function of the Alliance members businesses within the Alliance F. All costs associated with the development of contracts, patents, trademarks or any intellectual property developed by the Alliance."

Clause 3: "All intellectual and real property developed by the Alliance remains the common property of all members of the Alliance." 5 Broadly, the case which Mr Wickett puts forward in his affidavit is that there were some discussions between himself and Mr Groom, of the second defendant where they discussed changes which needed to be made to some mesh which was already manufactured by Nylex Corporation, so as to make it suitable for their purposes. Mr Wickett says that he told Mr Groom that he had tested a sample of the mesh, told Mr Groom about certain changes which he had identified as ones which needed to be made to the Nylex mesh, and Mr Groom said he would see Nylex to make the changes. Mr Wickett's evidence is that Mr Groom spoke to him a week or so later saying that he had spoken to Nylex, and that Nylex had suggested some suitable materials for manufacturing the product, and that, about two weeks later, a sample of the modified mesh was received from Mr Groom. Thereafter, according to Mr Wickett, Mr De Graaf carried out some tests, and found the modified product suitable. According to Mr Wickett, there was a consensus between himself and Mr Groom that they should go ahead with that type of mesh. 6 The evidence of Mr Wickett continues: "30. I heard nothing further from Mr Groom about the registration of a patent until about eight months after the conversation referred to in paragraph 28. I had a telephone conversation with Mr Groom where the words were said to the following effect: I said: 'What is happening with the registration of patents for our design and specifications for the mesh and methods of attachment.' Mr Groom said: 'Patents have been lodged. It is a long process and we will see how it goes.' I said: 'Good. The patents will protect us.' 31. About six months later I had a telephone conversation with Mr Groom where words were said to the following effect: Mr Groom said: 'Good new, the patents for the mesh have come through. I have put the patents in the name of L.B.I. Holdings Ltd.' I said: 'Why did you do that?' Mr Groom said: 'It is a separate company outside the Alliance members. If something financially goes wrong with any Alliance Member the patents cannot be touched.' I said: 'Good as long as the patents are held on behalf of the Alliance Members.' Mr Groom said: 'Of course the patents are held on behalf of the Alliance Members. A licence will be given to Nylex to manufacture.' Exhibited to me at the time of swearing this Affidavit and marked with the letter 'E' is a company extract of L.B.I. Holdings Pty Ltd showing that Mr Groom is the Sole Director and Shareholder of that Company." 7 Of course, that is evidence which has not been cross-examined on, or tested. Mr Groom has prepared an affidavit in which he says, concerning those paragraphs: "That in respect of paragraph 30, I deny any such conversations took place. In the course of discussions, I did advise Mr Wickett of the progress of the lodgment of the patent on behalf of the Firstnamed Defendant, but nothing was either said by him or by me that would suggest that the patent was held on behalf of the Plaintiffs. That in respect to paragraph 31, I agree that a conversation along the lines of the first three allegations took place, but it was in a different context. The separateness of the Firstnamed Defendant from the Secondnamed Defendant was explained as a normal asset protection program in which I engaged on professional advice, and Mr Wickett said he would follow that advice and discuss with his accountant the establishment of a separate entity to hold his intellectual property, such entity to be separate from his trading entity and thanked me for alerting him to that. This conversation took place in respect of my advising him of the patent for the 2G mesh, being patent number 741254. I am unable to say whether this is the patent to which the Plaintiffs are referring, and merely assume this." 8 The case which the plaintiffs seek to present is that the mesh which is the subject of these patents falls within cl 3 of the agreement of the Alliance, and that this has been acknowledged by Mr Groom. They say that the substance of Mr Wickett's affidavit in paragraph 31 is not really contested by Mr Groom, and that the conversation deposed to in that affidavit is the basis for an express trust. 9 The defendants, for their part, say that the inventions which are the subject of the patents, were not developed for the Alliance at all, but rather were developed for some other purpose. 10 The defendant companies are ones which have their registered office in South Australia, but I do not regard that as a matter of any particular importance in deciding whether to transfer this matter to Victoria. 11 The defendant has put on evidence that it executed the agreement in Melbourne (and this seems to be common ground), that Nylex, the manufacturer of the product, is located in Melbourne, that all the face to face meetings of the companies making up the Alliance occurred in Victoria, except for one which took place in Thredbo, and that all research and development on the patents was carried out in Victoria, so that is where the evidence in support of the defendants' claim is located. The defendants also point to the fact that on 21 November 2002, that is a week before the summons was issued, their Victorian solicitors wrote to the solicitors for the plaintiff, saying that they had instructions to "admit" (by which I assume they mean "accept") service of proceedings instituted in Victoria on behalf of Leafbusters and LBI Holdings. 12 In an affidavit filed for the purpose of this motion, Mr Groom said that at the final hearing of these proceedings the defendants proposed to call twelve witnesses, apart from Mr Groom himself, in respect of the central issue in the case. (Mr Groom had, earlier, said in his affidavit that he regarded the central issue as involving the question of ownership of the intellectual property comprising the patents the subject of the plaintiffs' claim, and that a central factual issue would be whether or not those patents were developed for the purpose of the alliance between inter alia the plaintiffs and the defendants, or were developed separately and individually by the defendants.) 13 Mr Groom says that of those witnesses twelve reside in Victoria (including himself) and two reside in South Australia. The evidence which is proposed to be called includes design documents and specifications, production specifications and notes held by Nylex in Victoria. The defendants also propose to rely on tooling specification and other manufacturing documents. Mr Groom says the defendants propose to call four to five current employees of Nylex, who are amongst the twelve witnesses resident in Victoria. The defendants also propose to put on evidence from a Victorian patent attorney, who is also amongst the twelve Victorian resident witnesses. 14 Of the factors which were listed by Howie J in Patrick Badges v. Commonwealth of Australia, the parties agree that there is no relevant difference between New South Wales and Victoria so far as the application of substantive law goes. They do not put that there is any relevant forensic advantage or detriment conferred by procedural law in New South Wales as opposed to Victoria. No submissions were put to me about convenience to the court system. That leaves the only two factors which are applicable in the present case as being the choice made by the plaintiff of the forum and the reasons for that choice, and the balance of convenience to parties and witnesses. 15 So far as the choice made by the plaintiff of the forum is concerned, the plaintiff is a New South Wales company which operates on the Central Coast. Whilst no explicit reasons for choice of the New South Wales forum were put forward in evidence, it is a reasonable inference that it was a simple matter of convenience to itself which led the plaintiff to choose a New South Wales forum. 16 So far as the balance of convenience to parties and witnesses is concerned, the evidence is quite clear that the preponderant number of witnesses proposed to give evidence are resident in Victoria. What is not clear is what is the consequence of that fact. The nature of the plaintiff's case is such that it is likely that the plaintiff will be submitting that any subjective evidence that the defendant had about the purpose for which the patented product was being developed is irrelevant - that given the circumstances in which the patents came about, the defendant will be subjected to a trust concerning them, regardless of what it did to develop the patented inventions, and regardless of what it subjectively thought it was doing. That argument is separate to the argument that, regardless of what intention the defendant might have in the course of developing the patents, there was an effective declaration of trust in the conversation deposed to in par 31 of Mr Wickett's affidavit. 17 When that is the nature of the case which the plaintiff is likely to be presenting, I cannot assume that all the witnesses from whom evidence will be put forward will be required for cross-examination. If all those witnesses were to be required for cross-examination that is a circumstance where there would be a very serious argument in favour of the interests of justice favouring the case proceeding in the Supreme Court of Victoria. However, as things stand at present, I am not persuaded that it is likely that all those witnesses will be required for cross-examination. While various documents presently located in Victoria are proposed to be tendered, there is no reason to believe that the owner of those documents would be subjected to any greater amount of inconvenience if the documents were required to be produced at a court in Sydney than if they were required to be produced at a court in Melbourne. As Howie J put it in Patrick Badges it is for the party who brings the application to persuade the court to make the order that it seeks. I am, on the basis of the material before me now, not persuaded. The notice of motion is dismissed. 18 The plaintiff seeks the costs of the motion. In my view it is appropriate that as the defendant has brought an application and lost, and as there are no circumstances which suggest that its entitlement to receive costs should be contingent upon the eventual outcome of the action, it is appropriate to order that the defendant pay the plaintiffs' costs of the motion. **********

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