[1993] FCA 324; (1993) 44 FCR 88

Practice and Procedure - stay - service out of the jurisdiction - foreign jurisdiction clause - test applicable - primacy of clause - discretionary factors - prima facie case O.8, r.2 - location of witnesses - public interest immunity

Voth v Manildra Flour Mills Pty. Ltd. and Anor [1990] HCA 55; (1990) 171 CLR 538

The Eleftheria; v. Owners of Cargo Lately Laden on Board the Ship or Vessel

Eleftheria v. The Eleftheria (Owners) (1969) 2 All ER 641

Re Hamilton-Irvine and the Companies Act 1985 (1990) 94 ALR 428

Pearce v. Federal Commissioner of Taxation 85 ALR 359

Foord v. Whiddett and Anor [1985] FCA 158; 60 ALR 269

Victoria v. The Commonwealth [1971] HCA 16; 122 CLR 353

Aratra Potato Co. Limited v. Egyptian Navigation Co. ("The El Amria") (1981) 2 Lloyds Rep 119

Lewis Construction Co. Pty. Limited v. M. Tichauer Societe Anonyme [1966] VicRp 45; (1966) VR 341

Mackender and Ors. v. Feldia A.G. and Ors (1967) 2 QB 590

The Bremen et al v. Zapata Off-Shore Co. [1972] USSC 129; 407 US 1

Oceanic Sun Line Special Shipping Co. Inc. v. Fay (1987) 8 NSWLR 242

MacShannon v. Rockware Glass Ltd (1978) AC 795

Castanho v. Brown and Root (UK) Ltd (1981) AC 557

Batchelor v. Dahlia Mining Co. Ltd (Court of Appeal, 19 August 1986 unreported)

Oceanic Sun Line Special Shipping Company Inc. v. Fay [1988] HCA 32; 165 CLR 197

Bradshaw v. Hair Transplant Pty Limited (1986) 13 FCR 1

Hospital Products Ltd. v. United States Surgical Corporation and Ors. [1984] HCA 64; (1984) 156 CLR 41

State of Western Australia v. Vetter Trittler Pty. Limited (1991) 30 FCR 102

The Repatriation Commission v. Kirkland [1923] HCA 18; (1923) 32 CLR 1

State of Western Australia and Anor v. Vetter Trittler Pty. Limited (in liq) (Receiver and Manager Appointed) and Ors (1991) 30 FCR 102

Tycoon Holdings Limited v. Trancor Jetco Inc [1992] FCA 25; (1992) 34 FCR 31

Contracts Review Act 1980 (NSW)

Counsel for the Applicant: R. Ellicott QC, T.J. Hancock

Solicitors for the Respondent: Middletons Moore and Bevins

2. The applicant pay the first respondent's costs.

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

BEAZLEY J The first respondent has brought a notice of motion to set aside service out of the jurisdiction of the application herein pursuant to an ex parte order of Davies J made on 17 December 1992, and to strike out certain parts of the applicant's amended statement of claim. The second and third respondents have also filed notices of motion seeking orders that the proceedings be stayed or that the statement of claim be struck out against each of them. This judgment deals with the first part of the first respondent's notice of motion.

2. The applicant commenced proceedings in this court on 8 December 1992, initially against the first and second respondents. The third respondent was joined as a party on 5 March 1993. On 6 May 1993 the applicant filed an amended application and statement of claim. The first respondent has filed a conditional appearance only, pending resolution of the notice of motion.

3. The first respondent is a corporation incorporated in Delaware in the United States of America. Its principal offices are located in Virginia. The second and third respondents are subsidiaries of the first respondent and were incorporated in Australia and the United States respectively. The second respondent carries on business in Australia. The third respondent is registered in Australia as a foreign company but has not carried on business in Australia since 1984. Its continued registration here is apparently an oversight.

4. The applicant's claim arises out of an agreement entered into with the first respondent dated 18 June 1991, which has been referred to during the course of the hearing of the notice of motion as the "teaming agreement". The first respondent described the concept of a teaming agreement as one which "creates an enforceable agreement in a limited respect to bring the parties together towards a mutual hope, it creates a team". Under such an agreement the parties retain the right to agree or not to agree to enter into a contract which the parties had in contemplation when entering into the teaming agreement. The purpose of the teaming agreement in this case is set out in Article 1 to which I shall refer shortly. The essence of the applicant's claim is that the second respondent's entry into a contract with Australian Defence Industries Limited (ADI) for the supply of a Digital Document Management System (DDMS) and an agreement with Digital Equipment Corporation to supply support services to ADI in respect of DDMS put the first respondent in breach of its obligations and duties under and arising from the teaming agreement. In support of this claim the applicant alleges variously that the teaming agreement was repudiated by the first respondent, that the first respondent breached the agreement, that as a result of certain representations made by the first respondent it is estopped from denying that the scope of the teaming agreement is as alleged by the applicant, that it acted in breach of its fiduciary duty and engaged in conduct in contravention of s.52 of the Trade Practices Act 1976 (the TPA). The applicant alleges that the second and third respondents also repudiated and breached the teaming agreement.

5. In the recitals to the teaming agreement, the parties stated:

"that it is in their respective interests to establish a

relationship to co-operate in the pursuit of government

contracts associated ... particularly with respect to the

Engineering Data Management Information System (EDMICS), in

Australia or the fulfilment of Foreign Military Sales (FMS)

contracts relating to Australia which are entered into in

the United States".

6. "Foreign Military Sales" (FMS) involve a system whereby other countries purchase defence and weapons systems from the United States Department of Defence. EDMICS is described in Article 1, which provided for the purpose of the agreement, in the following terms:

"1. The Engineering Data Management Information System (EDMICS)

is the United States Navy's designation for an optical storage

system for scanning, storing, distributing, viewing, and editing

technical data within the scope of United States Department of

Defense CALS standards. PRC is the United States Navy's prime

contractor for EDMICS. This Agreement is intended to be for the

pursuit of a contract to provide the Royal Australian Navy with an

EDMICS-compatible system with the same functional capabilities,

using CALS standards. The resulting system may have hardware or

software differences from the United States Navy EDMICS, but will

have substantial functional equivalency and all system data will

be able to be exchanged with the United States Navy EDMICS.

Leigh-Mardon and PRC, acting independently in their respective

countries, agree to cooperate in the marketing and sale to the

Australian Department of Defence, whether directly or as a Foreign

Military Sales (FMS) case, of a computer-aided logistics and

support system known as or similar to the Engineering Data

Management Information System (EDMICS) to support the Royal

Australian Navy (RAN). In the event that a contract is awarded

pursuant to an FMS case, PRC will include Leigh-Mardon as a

proposed subcontractor for that portion of the work agreed upon by

and between the parties. In the event that a contract is awarded

directly by the Government of Australia, Leigh-Mardon will include

PRC as a proposed subcontractor for that portion of the work

agreed upon by and between the parties, in accordance with Article

2, Role of the Parties and Compensation."

7. Article 20 provided that the proper law of the contract is the law of Virginia and the parties agreed to the courts of Virginia as the forum for the resolution of claims or controversies between them. The effect of the jurisdiction clause is in dispute and accordingly I will set it out in full:

"20. Jurisdiction. This Agreement shall be governed by and

construed in accordance with the laws of the Commonwealth of

Virginia, United States of America. Any judicial proceeding by

one party against the other involving any controversy or claim

arising out of or relating to the performance of services under

this agreement shall be instituted only in the United States

District Court for the Northern District of Virginia, or the

appropriate court of the Commonwealth of Virginia. Both PRC and

Leigh-Mardon agree to submit to the personal jurisdiction of the

above courts in any such proceeding and each waives the right to

trial by jury that it may possess in such civil action".

8. The duration of the agreement was specified in Article 12. Relevantly that Article provided:

12. Duration. (a) This Agreement shall remain in force for a

period of two (2) years from the effective date hereof. The

termination of this Agreement shall not supersede the obligation

of the parties with respect to the protection of proprietary or

confidential information pursuant to Article 10, 10A, and 11.

(b) This Agreement shall remain in force from the effective date

hereof until the Program is awarded by the Government, and if the

award is to Leigh-Mardon or PRC, then this Agreement shall remain

in force throughout the period of negotiations between

Leigh-Mardon and PRC. In any event, however, this Agreement shall

terminate upon the earliest of the following, unless extended by

mutual agreement of the Parties:

(i) The execution of a subcontract under this Program between

Leigh-Mardon and PRC.

...

(iii) Upon the award of a prime contract for the Solicitation to a

contractor other than Leigh-Mardon or PRC.

...

(vii) Inability of Leigh-Mardon and PRC to negotiate in accordance

with this Agreement."

"Program" is not defined in the agreement but in its context referred to the award of a contract for the supply of an EDMICS compatible system.

9. By letter dated 3 June 1992, the first respondent wrote to the applicant's solicitor advising that the teaming agreement was unenforceable, having been executed on its behalf by a person who had no authority to do so; that in any event, as the first respondent had proposed Leigh-Mardon for certain of the EDMICS work in a recent EDMICS tender but was unable to obtain approval of Leigh-Mardon as a sub-contractor, the teaming agreement was at an end pursuant to the provisions of Article 12; further, that as the applicant had entered into an agreement with Kodak for the interchange of imaging technology, it had breached the teaming agreement and the first respondent elected to terminate. The applicant relies upon this letter as a repudiation by the first respondent of the teaming agreement. The applicant accepted the repudiation and by the institution of the proceedings, it terminated the agreement.

10. In early 1992, ADI issued a selective tender for the supply of DDMS to the Royal Australian Navy (RAN). ADI is a corporation, the major shareholding in which is held by the Minister of Defence. Pursuant to an agreement made with the Commonwealth of Australia on 22 May 1991, and subject to exceptions not here relevant, ADI exclusively provides various support services to the RAN, relating to the "through life logistic support of HMA ships, gas turbines, test and monitoring equipment and shore based Naval equipment".

11. The tender required that the system to be supplied comply with the Computer-aided Acquisition and Logistic Support (CALS) initiative. CALS is a United States of America Department of Defense initiative to improve technical data management and exchange through the use of standards and technology for digital data management. The objectives of the proposed system included the conversion of:

"A selected proportion of ADI's technical and engineering

information holding, which are currently on paper and film media,

to optical and magnetic media; and

Provide a document image system comprising good quality hardware

and software".

12. The scope of the work was defined in clause 3.1.2.1 of the tender to include: "the provision of, delivery, installation, set-to-work and commissioning of all equipment, computer hardware and software" and, pursuant to clause 3.1.2.2, the system was to comprise elements of, amongst other things, "document scanning, image storage, workstations, plotting, printing and computing". Clause 3.1.2.4 provided that the contractor "shall supply the components of the DDMS as an integrated system with each component having fully functional hardware and software". It was estimated that ADI currently had in excess of a million documents which could be converted to the system.

13. PRC International Pty. Limited, the second respondent, submitted a tender describing its proposed system as "based on the EDMICS system architecture, extended to respond to the additional capabilities for annotation, redlining and raster-to-vector conversion". EDMICS was described in the tender as "the standard DOD (Department of Defence) program for management of engineering drawings and related technical data".

14. On about 16 April 1992, ADI and the second respondent entered into an agreement-in-principle to negotiate an exclusive collaboration agreement to "memorialize various agreements to be reached" by them for the preparation and submission of proposals to the Australian Department of Defence and to perform any resulting contracts. The essence of the agreement in principle was set out in Article 4 which provided:

"The Parties have considered the resources necessary to design and

build an EDMICS Bureau in Australia. Pursuant to this Agreement

in Principle the Parties shall negotiate to formalize the

Collaboration Agreement, the primary purpose of which is to reach

agreement on the necessary ways and means and wherewithal to

design, finance and build the EDMICS Bureau".

15. On 11 June 1992, the second respondent was awarded the contract for the provision of DDMS to ADI ("the ADI contract"). The second respondent also reached agreement with Digital Equipment Corporation for the establishment of local support services to ADI for DDMS. The applicant asserts that it should have been given the opportunity to provide such services pursuant to the teaming agreement. Shortly after the ADI contract was entered into, PRC announced that the Garden Island installation was to be the first of several envisaged by ADI, that the core DDMS software was "based on similar successful US applications in EDMICS", and the trials being conducted were said to mark the starting point for "a long-term alliance between Australian Defence Industries and PRC". PRC stated that pursuant to the June agreement "ADI will market and deliver PRC CALS-compliant systems and products to the Australian Department of Defence and related industries. Executed by PRC International ... the collaboration will result in joint marketing and engineering initiatives in Australia and across the Pacific Rim".

16. On 29 July 1992, ADI issued a news release announcing the purchase of DDMS from the second respondent in which it stated:

"... Initial use of DDMS will be the conversion of naval

engineering drawings and technical information to an optical

disk-based storage and retrieval system. ADI will offer new support

services made possible by the system to the Australian Defence

Force before the end of the year".

17. In June 1992, the second respondent also entered into a memorandum of understanding with ADI setting out the basis upon which they agreed to collaborate "to identify CALS/DDMS Project opportunities" which included the development of a "Marketing Plan for the Australian Department of Defence and Pacific Rim Countries Defence Markets and non-defence markets in Australia and the (Pacific Rim)". In October 1992, the second respondent and ADI entered into a teaming agreement, in respect of the provision of Integration and data Conversion Services for customers of PRC software in a specified area.

18. In November 1992, PRC announced that testing of DDMS had been completed at the Garden Island facility of ADI, thus marking "the first international delivery by PRC of a CALS-compliant imaging system".

19. The two central issues which are raised on the application for a stay are: (i) whether the controversy between the parties which is the subject of proceedings in this court is caught by the foreign jurisdiction provision in Article 20 of the teaming agreement; and (ii) what is the test to be applied in determining whether a stay should be granted. There then remains the question of how the court ought to exercise its discretion, whatever be the answers to (i) and (ii), given the circumstances which present themselves in this case. The parties accept that the applicant effectively bears the onus of demonstrating that a stay should not be granted: Voth v Manildra Flour Mills Pty. Ltd. and Anor. [1990] HCA 55; (1990) 171 CLR 538 at p 564.

20. As to the first issue, the applicant says that Article 20 of the teaming agreement is limited to matters arising under Article 2 thereof, so that the controversy between the parties here does not arise under that provision. The first respondent submits that Article 20 extends to claims and controversies arising under the whole of the agreement. As to the second issue, the applicant says that whether or not the answer to the first issue is in its favour, the appropriate test to be applied is that enunciated by the High Court in Voth v Manildra Flour Mills, namely, whether the local court is a clearly inappropriate forum for the determination of the dispute. The first respondent contends that the traditional rule that the court should give primacy to a foreign jurisdiction clause remains the applicable principle: The Eleftheria; v. Owners of Cargo Lately Laden on Board the Ship or Vessel Eleftheria v. The Eleftheria (Owners) (1969) 2 All ER 641.

21. Article 20 has already been set out. Article 2 is in the following terms:

"2. Role of the Parties and Compensation (a) It is recognized

by both parties that EDMICS is an area of particular expertise by

PRC, and that Australian Defence documentation is an area of

particular expertise to Leigh-Mardon. It is the present intention

of the parties that their respective functional roles in an

initial contract to establish an EDMICS capability to support the

RAN, whether through an FMS case or directly with the Australian

Department of Defence, will be generally as follows:

PRC - Requirements Analysis, Hardware Procurement, Systems

Integration, Installation, Data Base Creation (particularly

the import of data from the United States), Testing, Support

Services, and Program Management within the United States.

Leigh-Mardon - Assistance with Requirements Analysis, Data

Base Creation (particularly the scanning of data in

Australia), participation in Support Services, and Program

Management with Australia.

It is expressly agreed that the actual allocation of work on a

particular contract will be subsequently agreed in writing between

the parties prior to bid preparation, and that this summary

description is intended simply to identify the primary areas of

work associated with an EDMICS contract.

(b) In making a determination as to the pricing of services and

the appropriate division of the work to be performed pursuant to

any particular contract award, the parties agree that their

respective contributions may be compensated in one or more of the

following ways:

(i) Quantifiable Effort - Time and materials expended for

a particular portion of work.

(ii) Value Added - A fee based upon the value of PRC's

proprietary information, technical know-how, or

disproportionate contribution toward the preparation

of a proposal or the award of a contract.

(iii) Minimum Percentage of Contract Award - A specified

minimum percentage of the contract award, together

with a corresponding commitment to perform the work,

including all changes, modifications, and follow-on

awards".

22. Counsel for the applicant, in submitting that Article 20 is confined in its operation to matters arising under Article 2, placed particular emphasis upon the words "the performance of services" in Article 20, and argued that the only term in the teaming agreement which relevantly referred to "services" was contained in Article 2(b), so that when Article 20 referred to "the performance of services" it was referring to the "services" specified in Article 2. (The word "services" also appears in Article 15, but not in a context which is relevant to the construction of Article 20).

23. In my opinion, the applicant's submission as to the construction of Article 20 is not correct. The effect of Article 2 is that the actual allocation of work in respect of a proposed contract will be subsequently agreed in writing prior to a bid preparation for such contract. The particular reference to "services" in Article 2 is as to the manner in which the "services", which may be provided by either party in respect of a contract which is awarded to one or other party, may be priced and paid for. Should a contract be entered into "pursuant to any particular contract award", disputes may arise in respect of matters specified in Article 2 and the jurisdiction provision of Article 20 would apply. That is not sufficient, however, for the operation of the jurisdiction provision of Article 20 to be confined to Article 2. Other terms of the agreement specify rights and obligations of the parties under the agreement. Those obligations properly fit the description of "performance of services", even though the word "services" is not used within the provisions in question. Articles 3, 4, 5, 7, 8, 9, 10, 10A and 11 are such provisions.

24. Further, the applicant's submission does not take into account the words of Article 20 as a whole. Article 20 does not refer only to a controversy or claim as to "the performance of services", as the applicant effectively requires the Article to be read, (even though on such a construction I do not consider the Article is limited to Article 2). It refers to "any controversy or claim arising out of or relating to the performance of services under this agreement". The words "arising out of" are words of wide import. As Beaumont J observed in Re Hamilton-Irvine and the Companies Act 1985 (1990) 94 ALR 428 at 432 "the words 'arising out of' import a relationship which has some causal element, even if not direct or proximate, in it". The words "in relation to" are usually words of wide import, the construction of which is determined by the context in which the words appear. There is nothing in Article 20 which would require these words to be read in any limited sense: Pearce v. Federal Commissioner of Taxation 85 ALR 359 at p 366, Foord v. Whiddett and Anor [1985] FCA 158; 60 ALR 269 at 282; Victoria v. The Commonwealth [1971] HCA 16; 122 CLR 353 at 399.

25. Accordingly, I am of the opinion that Article 20 is not confined to the provisions of Article 2, so that the controversy between the parties is governed by the jurisdiction clause.

26. The applicant submits that the test to be applied on an application for a stay of proceedings which required service outside the jurisdiction, whether or not there is a foreign jurisdiction clause, is that laid down in Voth v. Manildra Flour Mills, and that the test laid down in The Eleftheria is no longer applicable. In The Eleftheria, Brandon J set out the principles which apply where there is a foreign jurisdiction clause:

"(I) Where plaintiffs sue in England in breach of an agreement to

refer disputes to a foreign court, and the defendants apply for a

stay, the English court, assuming the claim to be otherwise within

its jurisdiction, is not bound to grant a stay but has a

discretion whether to do so or not.

(II) The discretion should be exercised by granting a stay unless

strong cause for not doing so is shown.

(III) The burden of proving such strong cause is on the plaintiffs.

(IV) In exercising its discretion, the court should take into

account all the circumstances of the particular case".

27. His Honour then referred to particular matters which might, in an appropriate case, be taken into account in the exercise of discretion, including:

"(a) In what country the evidence on the issues of fact is

situated, or more readily available, and the effect of that on the

relative convenience and expense of trial as between the English

and foreign courts; (b) Whether the law of the foreign court

applies and, if so, whether it differs from English law in any

material respects; (c) With what country either party is

connected, and how closely; (d) Whether the defendants genuinely

desire trial in the foreign country, or are only seeking

procedural advantages; (e) Whether the plaintiffs would be

prejudiced by having to sue in the foreign court because they

would - (i) be deprived of security for that claim, (ii) be unable

to enforce any judgment obtained, (iii) be faced with a time-bar

not applicable in England, or (iv) for political, racial,

religious or other reasons be unlikely to get a fair trial".

28. Brandon J stated (at p 648) that the court "should give full weight to the prima facie desirability of holding the plaintiffs to their agreement" and that the court should not simply pay lip service to this principle by giving effect to "a mere balance of convenience". See also Aratra Potato Co. Limited v. Egyptian Navigation Co. ("The El Amria") (1981) 2 Lloyds Rep 119.

29. This approach has been consistently applied by the courts. As Hudson J had said earlier in Lewis Construction Co. Pty. Limited v. M. Tichauer Societe Anonyme [1966] VicRp 45; (1966) VR 341 at p 347, courts will approach an application for a stay in a case where there is an exclusive foreign jurisdiction clause "with a strong bias in favour of maintaining the special bargain and holding the parties to their contract". See also Mackender and Ors v. Feldia A.G. and Ors (1967) 2 QB 590 at p 604; and The Bremen et al v. Zapata Off-Shore Co. [1972] USSC 129; 407 US 1 at p 12, 15, where the Chief Justice of the United States Supreme Court, in holding that "... a freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power, such as that involved here, should be given full effect" stated "... in the light of present-day commercial realities and expanding international trade we conclude that the forum clause should control absent a strong showing that it should be set aside".

30. The question of the proper test to be applied where there is a foreign jurisdiction clause, was considered by the New South Wales Court of Appeal in Oceanic Sun Line Special Shipping Co. Inc. v. Fay (1987) 8 NSWLR 242. Each member of the court found there was a foreign jurisdiction clause, however McHugh JA (Glass JA agreeing) found the contract was made in New South Wales, whereas Kirby P held it was made in Greece.

31. McHugh JA held that a stay should not be granted. His Honour found that in circumstances where the contract was made in New South Wales, and the Contracts Review Act 1980 (NSW) gave the court power to strike down unjust provisions in a contract, it was inevitable that the proceedings ought not be stayed, as the plaintiff had a strong case to argue that the provisions of the contract which exempted or limited liability and ousted the jurisdiction of courts other than the Greek courts, in circumstances where the plaintiff had no effective opportunity of considering those terms of the contract, would contravene the Contracts Review Act 1980 (NSW). More significantly for present purposes, was his Honour's consideration of the provisions of Pt.10 of the Supreme Court Rules 1970, which is in substantially similar terms to O.8 of the Federal Court Rules. His Honour said that this rule:

"represent(s) a significant extension of the common law rule that

jurisdiction in an action in personam depends on service of a writ

within the jurisdiction. In determining whether the Court should

accede to an application to stay proceedings based on the

provisions of that rule, its terms cannot be ignored. Principles

of forum non conveniens worked out in other jurisdictions are not

necessarily applicable, at all events in their entirety, to an

action brought in reliance on that rule. In particular, it is not

easy to reconcile the object of Pt.10, r.1(1)(e) with a principle

that an action should be stayed if there exists another

jurisdiction more appropriate for the hearing of the action: cf.

Spiliada Maritime Corporation v. Cansulex Ltd (1986) 3 WLR 972. A

rule which permits service out of the jurisdiction when the

proceedings are founded on the suffering of some damage within the

jurisdiction would be greatly reduced in scope, if proceedings

should prima facie be stayed whenever another jurisdiction was

more appropriate for the hearing of the action". (p 267-268)

32. His Honour considered that as a general rule, to be successful in an application for a stay, a defendant would have to show that the stay "would not deprive the plaintiff of a legitimate personal or juridical advantage which is available to him by invoking the jurisdiction of this Court": cf MacShannon v. Rockware Glass Ltd (1978) AC 795 at p 812; Castanho v. Brown and Root (UK) Ltd (1981) AC 557 at p 575; Batchelor v. Dahlia Mining Co. Ltd (Court of Appeal, 19 August 1986 unreported).

33. Kirby P would have ordered a stay. His Honour echoed the words of the Chief Justice of the United States Supreme Court in The Bremen in saying at p 256-257:

"However, a clause in a binding contract by which a party submits

to the jurisdiction of a foreign court is not invalid as contrary

to public policy. Especially in these times of increasingly

numerous trans-border transactions, courts of this and like

countries will normally hold parties to any such agreement which

they enter".

34. His Honour stated that where the parties have by agreement bound themselves to submit their dispute to a court of another jurisdiction, the court should exercise its residual discretion to refuse a stay sparingly, and only in special and compelling circumstances. His Honour specifically referred to and applied The Eleftheria.

35. An appeal from the Court of Appeal's decision was made to the High Court, (Oceanic Sun Line Special Shipping Company Inc. v. Fay [1988] HCA 32; 165 CLR 197) which held that the exclusive jurisdiction clause was not incorporated into the contract. However, both Brennan and Gaudron JJ considered the effect of such a clause on a stay application. Brennan J observed at p 224

"Where the parties to a contract agree that the courts of a

foreign country shall have exclusive jurisdiction to decide

disputes arising under the contract or out of its performance, the

courts of this country regard that agreement as a submission of

such disputes to arbitration and will, in the absence of

countervailing reasons, stay proceedings brought here to decide

those disputes: Huddart Parker Ltd. v. The "Mill Hill" (1950) 81

CLR 502 at 508; Compagnie des Messageries Maritimes v. Wilson

[1954] HCA 62; (1954) 94 CLR 577 at 582, 585, 589-591."

"If, contrary to the conclusion I have expressed, the exclusive

foreign jurisdiction clause had been a term of the contract of

carriage, it would have been necessary to determine whether there

were circumstances which warranted a refusal of the stay to which

the defendant would have been entitled prima facie: see The "Mill

Hill" at 508-509. It may have been necessary to consider whether

there was any reason why the guidelines affecting the exercise of

the court's discretion which the Court of Appeal laid down in

Aratra Potato Co. Ltd. v. Egyptian Navigation Co. (The "El Amria")

should not be adopted here. Those guidelines have been referred

to without dissent in the House of Lords: The "Sennar" (No. 2)

(1985) 1 Lloyds Rep 521 at 527 and they are consistent with the

broad approach espoused by Dixon J in The "Mill Hill" at p 509.

But, as pointed out by Stephenson LJ in The "El Amria", cases of a

stay to enforce an exclusive foreign jurisdiction clause should

not be assimilated to cases where, in England, a stay is sought on

the principle forum non conveniens: cf Amin Rasheed Shipping

Corporation v. Kuwait Insurance Co. (1984) AC 50 at 72; Spiliada

Maritime Corporation v. Cansulex Ltd.

A case where the plaintiff seeks the exercise of a discretion to

refuse to give effect to a contractual stipulation that a

nominated court should have exclusive jurisdiction requires

justification of a different order from that required in a case

where the plaintiff has simply chosen to sue in one forum rather

than another, both being available to him".

37. Gaudron J was of a like opinion. Her Honour said at p 259:

"A foreign jurisdiction clause in a contract does not operate to

exclude the forum court's jurisdiction, but may constitute a

ground for that court to refuse to exercise that jurisdiction (The

Fehmarn (1958) 1 WLR 159). Where there is an agreement to submit

to another jurisdiction, the power to grant a stay rests on the

principle that the courts will, except where the plaintiff adduces

strong reasons against doing so, require the parties to abide by

their agreement. As Dixon J observed in Huddart Parker Ltd v. The

"Mill Hill" (supra) "the Courts begin with the fact that there is

a special contract between the parties to refer, and therefore in

the language of Lord Moulton in Bristol Corporation v. John Aird and

Co. (1913) AC 241 at 259, consider the circumstances of a case

with a strong bias in favour of maintaining the special bargain or

as Scrutton LJ said in Metropolitan Tunnel and Public Works Ltd v.

London Electric Railway Co. (1926) Ch 371 at 389 "a guiding

principle on one side and a very natural and proper one, is that

parties who have made a contract should keep it." However, this

presumption does not, as Dixon J went on to observe in The "Mill

Hill" (at 509) ... restrict the circumstances which will warrant a

refusal of a stay."

38. Deane J left unanswered the question of what the position would be if there was a foreign jurisdiction clause. However, having found that there was no such clause in the case before the court, his Honour stated at p 241:

"A party who has regularly invoked the jurisdiction of a competent

court has a prima facie right to insist upon its exercise and to

have his claim heard and determined. ... The common law itself has

traditionally recognized certain special categories of case in

which the exercise of jurisdiction must or may be refused in

circumstances where diplomatic custom, international comity,

public policy or considerations of justice require or may support

that course.

39. His Honour did not mention the existence of a foreign jurisdiction clause in the special categories to which he referred as being exceptions to the principle.

40. Shortly after its decision in Oceanic Sun Line, the question of whether a stay should be granted on forum non conveniens grounds arose again in the High Court in Voth v Manildra Flour Mills. The majority of the Court held that the applicable principle was whether the local forum was "clearly an inappropriate forum". This formulation represented a departure from the law applied in England and the United States of America where the principle is that the proceedings should be heard in "the more appropriate forum". However, as Mason CJ, Deane, Dawson and Gaudron JJ stated at p 558

"The "clearly inappropriate forum" test is similar to and, for

that reason, is likely to yield the same result as the "more

appropriate forum" test in the majority of cases. The difference

between the two tests will be of critical significance only in

those cases - probably rare - in which it is held that an

available foreign tribunal is the natural or more appropriate

forum but in which it cannot be said that the local tribunal is a

clearly inappropriate one. But the question which the former test

presents is slightly different in that it focuses on the

advantages and disadvantages arising from a continuation of the

proceedings in the selected forum rather than on the need to make

a comparative judgment between the two forums".

41. Their Honours stated that a significant matter in determining whether the forum was clearly inappropriate was the extent to which the law of the forum was applicable in resolving the dispute, but that the court should not focus on that factor to the exclusion of all others. (See also Gaudron J in Oceanic Sun Line Special Shipping Company v. Fay at p 266).

42. Significantly, for the purposes of the present application, is the statement of the court that the same principles which govern applications for a stay on forum non conveniens grounds apply in respect of applications to set aside service of process out of the jurisdiction. Their Honours made this statement in the context of and immediately after referring to Lewis Constructions, which involved a foreign jurisdiction clause.

43. The position, therefore, is that there is no decision binding on me as to the appropriate test to apply in the case where there is a foreign jurisdiction clause. There are long standing and persuasive authorities that the proper test is that, prima facie, effect is to be given to a foreign jurisdiction clause: The Eleftheria; The El Amria; The Mill Hill. There are the recent statements in Oceanic Sun Line by two members of the High Court and the President of the Court of Appeal that the traditional rule applies. On the other hand there is the statement by McHugh JA in the Court of Appeal in Oceanic Sun Line, that prima facie effect should be given to the Rules of Court which permit service out of the jurisdiction. Deane J's view in Oceanic Sun Line may be to the same effect, although care needs to be taken in attributing any view to his Honour when he specifically declined to deal with the issue. In Voth the High Court not only departed from the English and American cases in relation to the principles governing forum non conveniens, but stated that the principles applicable to an application for a stay on that ground are applicable to applications in respect of service out of the jurisdiction. However, the court was not dealing with a foreign jurisdiction clause.

44. There is a strong and well based practice that a judge sitting at first instance ought not to depart from settled principle (Bradshaw v. Hair Transplant Pty Limited (1986) 13 FCR 1 at 4 per Toohey J). I consider therefore that I should apply the traditional rule that primacy should be given to a foreign jurisdiction clause. In any event, it is not obvious that the High Court would apply a different test. Further, I am of the opinion that the traditional rule is correct, and there are sound policy reasons which support the traditional rule. To apply a different rule would be to undermine the bargain made between the parties, and for no necessary good reason. The residual discretion which the court has, protects against any relative injustice which might otherwise arise from strict observance of the parties' contract.

45. The applicant says the court should exercise its discretion by refusing the application for a stay of the proceedings. It submits that the various causes of action upon which it relies all arise in Australia, and that it has suffered damage in Australia. The applicant further says that it has regularly commenced proceedings, a right which it says is very significant.

46. The applicant further submits that even though the law of the contract is the law of Virginia, that law is similar to Australian law. More significantly, it submits that the jurisdiction under s.52 of the Trade Practices Act can only be exercised by an Australian court. It is said that the principal evidence on which the plaintiff's case is based is substantially Australian on all matters, and that the first respondent has a substantial presence in Australia through a subsidiary, the second respondent. It is submitted that the claims against the second and third respondents are largely the same as those against the first, in that they relate to the same facts although based on slightly different causes of action. The matter can proceed in Australia against the second and third respondents as a matter of right, they being incorporated and registered in Australia respectively. It was said that proceedings could not be commenced against the second respondent in Virginia as it was not incorporated or registered there and did not otherwise have a presence there and the events sued upon arose in Australia. Finally, it was said that as the subject matter of the dispute concerns the provision of services and equipment to the Australian Defence Forces, it is likely that issues of public immunity will arise. It was submitted that this is a matter for an Australian court to determine.

47. The applicant further submitted that the trial of the matter in Virginia would very substantially increase the costs payable by the applicant. Not only is Virginia a strange jurisdiction, there are the problems of distance and those associated with differing procedures, particularly pre-trial procedures such as discovery. It was said that an Australian court can and does handle such matters "a lot more cheaply than a United States court". However, there was no evidence as to this. It was claimed without elaboration, except as to the question of the potential costs for the applicant, that "it would be in the interests of both sides for the pre-trial procedures of this court to be applicable". It was submitted therefore that even if the correct test was that espoused in The Eleftheria, Australia was clearly an appropriate forum. Specific argument was raised in respect of each cause of action and the question of public interest immunity and I shall deal with these matters shortly.

48. In relation to the more general matters which have been referred to above, the first respondent's response is as follows. It denies the first respondent has a substantial presence here through its subsidiary, the second respondent. The second respondent has been described as a "one man band". It says the applicant can bring proceedings against the second and third respondents in Virginia as the second respondent will submit to the jurisdiction of that court and proceedings may be brought there against the third respondent as of right. As to the question of costs, the evidence disclosed that the applicant is part of a substantial and financially stable group of Australian companies and that the cost benefit/detriment of the proceedings being brought in one jurisdiction as opposed to the other is about the same, except that it appears most of the evidence is located in America. Further, there are pre-trial and trial procedures in America, such as taking evidence on commission of a witness who resides more than 100 miles from the court, which are convenient procedures which it ought to be entitled to utilise.

49. The applicant raises a number of issues in respect of its contract claim. First it says the first respondent repudiated the teaming agreement; next it alleges breaches of the teaming agreement, including by the supply to ADI of DDMS; there is said to be an issue as to whether ADI is the Commonwealth for the purposes of the agreement. The scope and extent of the agreement is in issue.

50. Repudiation: The initial issue between the parties is whether the first respondent's letter of 3 June 1992 constituted a repudiation of the teaming agreement. The first respondent contends that the source of most of the evidence in relation to this issue will be the parties' discovered documents. On the evidence before me, that would appear to be the case. Therefore nothing of significance in terms of costs or convenience or other discretionary factors is raised by this issue.

51. Breach of contract: The applicant contends that the teaming agreement, upon its proper construction, was in respect of the supply of an EDMICS system to the RAN and this encompassed supply directly or indirectly, including through ADI, which supplies the RAN with its logistic support. In addition, it was said that the agreement was intended to signify the commencement of a long-term arrangement in respect of the supply of EDMICS to the Australian Department of Defence.

52. The first respondent submits that Article 12 delineates the scope of the agreement, namely that it was a single transaction agreement relating to the supply of an EDMICS system to the Commonwealth, or more particularly the Department of Defence, and was directed to the RAN's frigate program, and also perhaps its Anzac frigate program. It was submitted that the supply of such a system to ADI did not fall within the scope of the teaming agreement. It says that this is the case as a matter of proper construction of the agreement, but if there is ambiguity, the introduction of parol evidence would resolve that ambiguity in favour of the first respondent. The applicant disputes that the first respondent will be entitled to call additional evidence in respect of this issue. The evidence was that the law as to the admission of oral evidence is substantially the same in Virginia as it is in Australia.

53. Whether ADI is the Commonwealth: Another question which, it is said, may arise in relation to the scope of the agreement is whether ADI is the Commonwealth. The applicant submitted, as is apparent from what has been said above, that its case that there had been a breach of contract does not depend upon whether ADI is the Commonwealth, although it says there are cogent arguments that it is. It was submitted that the question of whether ADI is the Commonwealth would have to be interpreted as a matter of Australian law and also raised a constitutional issue, which should be determined by the Australian courts.

54. The first respondent denies that ADI is the Commonwealth. It says that the issue of whether it is the Commonwealth will have to be determined as a question of fact and denies any constitutional issue arises. I agree with the first respondent's submission that the issue of whether ADI is the Commonwealth is to be determined as a factual matter and does not raise a constitutional issue.

55. Breach of the contractual provisions to observe good faith: The applicant says that the entry into the contracts with ADI and Digital Equipment Corporation constituted breaches of the first respondent's obligations that the parties use their best efforts, that they co-operate and not compete. It further submitted that the teaming agreement in effect amounted to a joint venture and that there was a term implied therein that the parties do all things necessary to see that the other party has the benefit of the contract: Greig and Davis, The Law of Contract p 533. I shall return to the question of whether there was a joint venture later in these reasons.

56. The applicant says that the breaches of contract which it alleges, occurred in Australia. This appears to be correct. It further says that it would call 3 witnesses on the breach of contract issue, Mr. Baczyk and Mr. Baldwin who are officers of the applicant, and Dr. McDowell, a solicitor who is advising the applicant in this matter, all of whom are resident in Australia.

57. The first respondent's witnesses in respect of these various contractual issues are all located in America. It is estimated that the first respondent would probably need to call four witnesses. The first respondent further says that Mr. Bowe, who was one of the main players in the formation of the contract, would presumably be called by the applicant and he resides in America.

58. Supply to ADI of DDMS: There is a dispute between the parties as to whether the system acquired by ADI was "an EDMICS-compatible system with the same functional capabilities, using CALS standards" being the specification contained in Article 1 of the agreement. If the system does not fall within that description, the first respondent must succeed on the breach issue. The applicant relies on the numerous references to the EDMICS system supplied to ADI, or to DDMS being EDMICS, in documents emanating from the first and third respondents and ADI, as constituting admissions that the DDMS supplied to ADI falls within Article 1. The first respondent relies upon the evidence of Mr. Oxford, Manager of PRC's CALS Technology Centre, to demonstrate, in a prima facie way, that there are substantial differences between the two systems, such that the system supplied to ADI could not come within the terms of the teaming agreement. It has adduced such evidence at this stage to show that there is substance in its denial of breach of contract, and to indicate that the evidence on this issue will be highly technical, and is located in the United States. The applicant has not yet identified the source of its technical evidence. The first respondent submitted that it was likely that the applicant would have to engage experts from the United States.

59. As a separate submission, the first respondent alleges that the applicant has not made out a prima facie case in relation to paragraphs 18.1 to 18.11 of the amended statement of claim. O.8, r.2(2)(c) requires that the court be satisfied that the applicant has a prima facie case for the relief which it seeks. In Tycoon Holdings Limited and Anor. v. Trancor Jetco Inc and Ors. [1992] FCA 25; (1992) 34 FCR 31 at 35, Wilcox J held that the paragraph requires an applicant to show a prima facie case in respect of each cause of action. A prima facie case is made out in relation to a cause of action if:

"on the material before the court, inferences are open which if

translated into findings of fact, would support the relief

claimed."

State of Western Australia and Anor. v. Vetter Trittler Pty. Limited (in liq) (Receiver and Manager Appointed) and Ors (1991) 30 FCR 102 at 110 per French J.

60. Clauses 18.1 to 18.11 are all predicated upon ADI being part of the Commonwealth Government or the Department of Defence, which, the first respondent asserts, it is not. I do not agree with this submission. The applicant's case in this regard is based upon two premises. One is that ADI is the Commonwealth in the sense of a private arm of the government and relies upon those authorities where it has been held that a government instrumentality is the Crown. The Repatriation Commission v. Kirkland [1923] HCA 18; (1923) 32 CLR 1. The first respondent says these cases relate to a different issue, namely whether such an instrumentality is entitled to the immunity of the Crown. More significantly however, is the applicant's claim that the teaming agreement, upon its proper construction, involved the direct or indirect supply of EDMICS to the RAN, the Commonwealth Government or the Department of Defence. I am satisfied that a prima facie case has been made out sufficient to support this part of the applicant's claim.

61. The applicant alleges that the teaming agreement gave rise to a fiduciary duty. It says that the first respondent's failure to involve the applicant in the ADI contract and the other agreements which were entered into by the second respondent referred to above and its appropriation for itself of the benefit of the agreement between the second respondent and ADI, constituted breaches of this fiduciary duty. In particular, the applicant relies upon the provisions of Article 5, which provides:

"5. General Cooporation and Assistance. The parties are

interested in a long-term relationship which is both mutually

supportive and mutually beneficial. Each party shall furnish to

the other such cooperation and assistance as may be reasonably

required hereunder and consistent with the provisions of this

Agreement; ...

and Article 13, which, it was submitted, underlined the whole character of the relationship. The applicant referred to the first part of the Article which is in these terms:

13. No Competition. Both parties recognize that their respective

companies are engaged in a number of activities involving public

contracts. This notwithstanding, for the duration of this

Agreement, the parties agree that they will not engage in

competition with one another in the areas covered by this

Agreement".

62. The applicant alleges that there may be a divergence between Australian and Virginian law as to the existence of a fiduciary duty and referred to the judgment of Mason J in Hospital Products Ltd. v. United States Surgical Corporation and Ors [1984] HCA 64; (1984) 156 CLR 41. Having regard to the evidence of Virginian law provided in the legal reports to the applicant and first respondent by Mr. Haslam and Mr. Stitt respectively, I do not agree with the applicant's contention. The reference by the applicant to the judgment of Mason J is misguided as his Honour dissented on this issue. In any event, there are significant difficulties with the applicant's claim that the relationship between the parties gave rise to a fiduciary duty. Article 13 must be read as a whole. It further provided:

"(a) The parties will not actively participate in other efforts

to secure contracts from the Australian Department of Defence, or

Australian-sponsored Foreign Military Sales (FMS) contracts from

the Government of the United States, that are competitive to the

proposals or programs associated with an Engineering Data

Management Information and Control System (EDMICS) for the Royal

Australian Navy. The term "active participation", as used herein,

includes the interchange of technical data with potential

competitors.

(b) In the event, however, that either Leigh-Mardon or PRC

determines not to seek or to participate in any particular Request

for Proposals, tender, or procurement, and so notifies the other

party, then the remaining party shall be free to pursue the work

independently or in conjunction with third parties".

"16. No Joint Venture or Partnership. Nothing herein shall be

construed as providing for the sharing of profits or losses

arising out of the efforts of either or both of the parties.

Specifically, this Agreement is not intended by the parties to

constitute or create a joint venture, partnership, or formal

business orangization of any kind, other than a potential or

actual prime contractor-subcontractor relationship, and the rights

and obligations of the parties shall be only those expressly set

forth herein. Neither party shall have authority to bind the

other except to the extent authorized herein. The prime and the

subcontractor shall remain as independent contractors at all times

and neither party shall act as the agent for the other without

express authorization".

64. Haslam has advised the applicant that the existence of Article 16 in the teaming agreement provides a "formidable barrier" to this aspect of the claim. Stitt's advice is to the same effect. On the evidence before me, I am not satisfied that O.8, r.2(2)(c) has been made out.

65. However, assuming that the applicant prosecutes such a claim, the breach, if any, occurred in Australia. The evidence is likely to be largely documentary. The applicant says that it would call three witnesses on this issue, Mr. Baczyk, Mr. Baldwin and Dr. McDowell, all of whom are located in Australia. The first respondent's witness on this issue are located in America.

66. The applicant further alleges that by virtue of the principle of estoppel, the agreement will be held to operate beyond the RAN and to extend to private sector defence ship building operations in Australia, to the Royal Australian Air Force and to the Australian Army, and that the teaming agreement was to be amended to that effect. The evidence of both parties is that the law of promissory and equitable estoppel is recognised in Virginian law. Haslam has advised the applicant that the matters alleged in paragraphs 12 to 15 of the Statement of Claim (the estoppel pleading) "present a claim which is well recognised in the jurisprudence of Virginia". The relief which is available under Virginian law appears to be essentially the same as the relief which is available under the law of estoppel in Australia.

67. The first respondent's case is that there were in fact no representations made to found the estoppel alleged; that if such representations were made they were made by a person without authority to do so, as was well known to the applicant; and that there was no reliance by the applicant. These matters will be issues whether the matter proceeds in this court or in the Virginian court. The first respondent says that the applicant has not made out a prima facie case in respect of this issue so as to satisfy O.8, r.2. I do not consider on the evidence before me that no inference was open to support the relief claimed. In this regard, the fax of 17 February 1992, to which I refer in the next paragraph, is material from which the necessary inference may be raised to support a prima facie case. The first respondent says that the witnesses to be called on this issue mostly reside in America. The applicant does not dispute this.

68. The applicant alleges that the first respondent represented that the teaming agreement extended to private sector defence ship-building operations in Australia, to the RAAF and to the Australian Army and agreed to the amendment of the teaming agreement to that effect. The applicant relies on a fax from Oxford to Baczyk on about 17 February 1992 wherein Oxford states: "my interest has been to foster a broader relationship with Leigh-Mardon than solely the frigate programs specified by the existing agreement. To that end, I solicit your opinions on where Leigh-Mardon might support the Garden Island opportunity". It is also alleged that the first respondent represented that it would perform the teaming agreement and that the second respondent had nothing to do with it.

69. The applicant alleges that in reliance on these representations it did not terminate the teaming agreement and that such representations were misleading and deceptive and the first respondent thereby engaged in conduct in contravention of s.52 of the Trade Practices Act. The first respondent denies there has been any such contravention and says that the material relied upon in support of this claim does not constitute conduct in contravention of s.52, so that O.8, r.2 is not satisfied. For the reasons which I have expressed above, it could not be said that on the evidence no prima facie case has been made out.

70. The significant issue in respect of this claim is that it is based on a statute of the Australian Parliament, the jurisdiction in respect of which is vested in the Federal Court of Australia and, in limited respects, the courts of the Australian States: Trade Practices Act, ss.86(1) and (2); Federal Court of Australia Act, s.19. Haslam advises that if a court in Virginia was determining whether a stay ought to be granted, the existence of a cause of action based upon the laws of Australia, independent of the contract claim, would be a significant matter. However, in dealing with the matter in this way, Haslam seems to be advising the applicant, by way of analogy, of the best argument to put forward to persuade a Virginian court why, as a matter of discretion, a stay of the proceedings should be refused, namely because of the close connection with Australia. Haslam recognised that there were other causes of action which might effectively constitute an equivalent cause of action to the Trade Practices claim, namely the affirmative obligation to act in good faith, with evidence of deceitful conduct supporting a finding of bad faith, and perhaps an independent claim for tortious interference with contract.

71. Stitt dealt with the matter differently and has advised the first respondent that the court in Virginia would enforce the Trade Practices claim as a matter of comity. To the extent there is a conflict of laws question, he advises that the Virginian courts would apply Australian law, because that is where the alleged wrongful conduct occurred. Further, Stitt is of the opinion that the law of estoppel would cover the claim which is sought to be made under s.52. This was not disputed by the applicant.

72. One area where there is potentially a difference between the two systems of law is in respect of damages. The first respondent submits that under Virginian law there could be no recovery by the applicant for loss of profits as that claim was too speculative. However, it was further submitted that whilst the law appeared to be different, it was not so in practical terms as the claim for loss of profits was so vague that this court would not come to a different conclusion. The applicant submitted it also seeks an account of profits. It should be noted that the applicant has not yet formulated its claim for damages, except to the extent it did so in submissions. The first respondent further alleges that the contract is not sufficiently certain to support the applicant's claim for damages and loss of profits. Clauses 12(b)(vii) and 13(b) (amongst others) are relied upon in support of this submission. Whilst there is substantial merit in the first respondent's submission that these clauses confine the ambit of the agreement in such a way that it may be difficult to prove that damages were suffered as a result of breach, the obligations of co-operation and the provisions of, for example clause 5, that the parties are interested in a long-term relationship which is both mutually supportive and beneficial, are such that I consider O.8, r.2(2)(c) has been satisfied.

73. The applicant submitted and particularly emphasised that issues of public interest immunity were likely to arise in the course of the hearing of the matter and that was a matter which ought to be decided by an Australian court. It was submitted that the comments of Davies J in his judgment of 17 December 1992 should be adopted, namely that

"The subject matter of the dispute concerns the provision of

services and equipment to the Australian Defence Forces, so that

it is likely that the issue of public interest immunity will have

to be considered when orders for the discovery of documents and

other information are made. This is an important factor, for an

Australian court should deal with such an issue."

74. This submission was developed in some detail during the course of oral submissions. It was submitted: (a) the prospect of going into confidential areas during the course of negotiation of the contract with ADI was not remote; (b) some, or even all, of the documents stored on DDMS are security classified because they relate to defence installations and in this regard, the tender referred to the necessity to store 1 million documents; (c) the configuration of DDMS was likely to be an issue. It was said that the resolution of that issue would involve access to the engineering drawings which were likely to be classified, so that questions as to the security specifications were likely to arise; (d) it was likely that there would be evidence which might impinge on the future plans of the Department of Defence for the upgrading and replacing of ships; (e) it was possible that evidence could extend to the RAAF and to AMECON. The applicant alleges that officers of the Australian Department of Defence, the Victorian State government, AMECON and "others in the Australian ... Defence industry" are witnesses relevant to the issues of performance by the applicant of the teaming agreement, estoppel, reliance and damages. In support of its claim that questions of public interest immunity might arise the applicant adduced evidence by way of correspondence from A.S. Podger, Deputy Secretary, Department of Defence, Acquisition and Logistics in which Mr. Podger expressed the view, after perusing the statement of claim and the judgment of Davies J of 17 December 1992, that the issue of public interest immunity was likely to arise during the course of the proceedings. Three matters were relied upon as supporting this view:

"- Defence holds many commercial - in - confidence and national

security documents concerning its relationships with ADI and

other Defence contractors that could be relevant to the

claim in question.

- Defence personnel could be called upon during the course of

the proceedings.

- A significant matter in dispute, ie. the computer system

(DDMS) for the capture, storage, retrieval and production of

RAN documents at Garden Island, could raise security or

commercially sensitive issues".

75. The first respondent disputes that any question of public interest immunity would arise. It says that it specifically requested the applicant to file evidence by a person in a position to advise the court whether there was in fact such an issue and the applicant had failed to do so, relying merely upon the correspondence from a departmental officer, thus depriving the first respondent of the opportunity to properly test the issue in cross-examination. It submits therefore that little weight should be given to the evidence in the present form. Next, it submits that the applicant has already subpoenaed ADI to produce documents and that no claim for public interest immunity was made in respect of those documents, as would be expected if there was any substance in the applicant's contention. The first respondent says that if there is any substance in the claim, the first respondent will be faced with a like issue in relation to calling American defence personnel. However, it does not consider that any such evidence is necessary.

76. I am not convinced that issues of public interest immunity will arise in this case. The applicant did not point to any specific evidence which was likely to be called or where the claim might arise, other than the possibility that it might arise in cross-examination, or in documents sought to be tendered in evidence. I have carefully read the documents produced by ADI on subpoena and there is nothing in those documents which appears to raise such an issue. A commercial confidentiality issue may arise, but that is a different matter. There is considerable substance in the first respondent's submission that to the extent there is a technical question involved in determining whether DDMS had "substantial functional equivalence" to EDMICS, that issue will not involve an examination of the data stored, or to be stored on the system supplied to ADI. Rather, it will involve an examination of the function and capability of the system.

77. However, it is not possible at this stage to exclude the possibility that the applicant will call Australian defence personnel in support of its case. Those witnesses of course would not be compellable in Virginia and unless they agreed to voluntarily attend there and give evidence or produce documents, their evidence would not be available to the applicant, unless a letter of request or letters rogatory were issued and such evidence taken in an Australian court. In that case, the Australian court would determine any issue of public interest immunity according to its own law and procedures: The Hague Convention on the Taking of Evidence in Civil and Commercial Matters, 1970. It seems to me that the importance of this issue is diminished substantially when these factors are taken into consideration.

78. It seems therefore that the only circumstance in which a problem might arise is if a departmental officer agreed to give evidence in Virginia or government documents were voluntarily produced during the course of proceedings there. However, there was no evidence as to whether any government officials have agreed to give evidence, or produce documents.

79. In all the circumstances I do not consider that the primacy which should be given to the foreign jurisdiction clause has been displaced. In the present case the law of the contract is the law of Virginia; subject to the possibility that Australian and State government officials referred to in Mr. Thompson's affidavit might be called by the applicant and other than Mr. Baczyk, Mr. Baldwin and Mr. McDowell, the witnesses, including at least one witness for the applicant, are located in the United States. There are complex technical questions involved. The first respondent's witnesses on this issue are located in the United States. The applicant has not specified where its technical witnesses will be located, however, the first respondent submits that it is likely that they too will be located in the United States. The bulk of the documentation in relation to EDMICS is located there. It also appears that substantial documentation in relation to DDMS is or may be located in the United States. There are matters of procedure in the court in Virginia which could assist both parties, and which the first respondent says it is entitled to utilise.

80. There are two factors which are significant in the applicant's favour. The first is the claim under s.52 of the Trade Practices Act and the second is the possibility that there may be a claim for public interest immunity. However, for the reasons which I have stated, I do not consider that these matters are sufficient in the circumstances of this case to displace the prima facie rule. Accordingly, I consider that the proceedings should be stayed permanently.