Federal Court of Australia|1991-03-08|Before: Heerey J, King J

The applicant ("Merpro") and the respondent ("Conoco") are rival distributors of hydrocyclones used for separating liquids of different densities, and in particular oily water, into their constituent liquids. This rivalry has already given rise to litigation between themselves and their associated companies in the Court of Session in Scotland, in the Supreme Court of Victoria and in this court. They are formidable litigators. The Victorian Supreme Court trial which recently concluded before King J. is believed to be the longest civil trial in Australian legal history.

2. In the present case, Merpro complains of statements by Conoco about the progress of the litigation in Scotland and in the Federal Court. Merpro claims that breaches of s.52 of the Trade Practices Act 1974 (Cth) and s.11 of the Fair Trading Act 1985 (Vic) have been committed by Conoco. Merpro sought leave to serve out of the jurisdiction under Order 8. In the first instance, such an application is made ex parte and on 8 February 1991 I granted leave to Merpro to serve the application and statement of claim on Conoco at an address in Houston, Texas in the United States of America. Service was in fact effected, and a conditional appearance entered but Conoco now apply under O.9 r.7(1)(d) to discharge the order giving leave.

"1. Subject to rule 2, originating process may be served outside

the Commonwealth in the following cases -

(a) where the proceeding is founded on a cause of action

arising in the Commonwealth;

(b) where the proceeding is founded on a breach of an Act,

where the breach is committed in the Commonwealth;

(c) where the proceeding is founded on a breach, wherever

occurring, of an Act and is brought in respect of, or

for the recovery of, damage suffered wholly or partly

in the Commonwealth;

(d) - (n) .....

2. (1) Service outside the Commonwealth of originating

process is not valid under this Order unless -

(a) the service is in accordance with the prior

leave of the Court given under sub-rule (2);

(b) ....

(c) ....

(2) Where the Court is satisfied of the following matters -

(a) that the proceeding is a proceeding in which the

Court has jurisdiction;

(b) that the proceeding is a proceeding to which

rule 1 applies; and

(c) that the applicant has a prima facie case for

the relief of which he seeks,

the Court may, by order, grant leave to serve

originating process outside the Commonwealth under

this Order."

4. It was not seriously contested before me that this proceeding answered the description in one or more of O.8 r.1(a), (b) or (c). However Mr Archibald QC, who appeared with Mr John Middleton for Conoco, contended that the Court could not be satisfied that the prima facie case requirement of O.8 r.2(2)(c) had been made out.

5. I was referred to the statement of principle by Megarry J. in G.A.F. Corporation v Amchem Products Inc. (1975) 1 Lloyd LR 601 at 604-605, which was adopted by the Court of Appeal and followed by Sheppard J., when a member of the NSW Supreme Court, in Stanley Kerr Holdings Pty Ltd v Gibor Textile Enterprises Ltd (1978) 2 NSW LR 372, 375. However, G.A.F. Corporation was concerned with the question whether the claim could be properly characterised as one of the kind for which service out could be ordered, that is to say the question which arises here under O.8 r.1. Since the present application is concerned with the prima facie case issue, it will be useful to turn at once to Stanley Kerr. Mr Archibald relied on this authority in support of his argument that Merpro had not made out a prima facie case either in form or substance.

6. Speaking of the material in the case before him, Sheppard J. said (at page 375):

"The affidavit was sworn by the plaintiff's solicitor. In par. 1

he referred to the fact he was a member of the firm who were the

plaintiff's solicitors. The only other paragraph to which I need

refer is par. 2 which is as follows: 'The statement of claim

issued herein relates to an action for damages for wrongful

repudiation of an agreement. The proceedings are founded on a

breach in the State of a contract that renders impossible the

performance of any part of the said contract which ought to be

performed in the State.'"

7. After commenting on the incomprehensible nature of the sentence just quoted and an allegation of non-disclosure on the ex parte application, his Honour continued:

"... but to my mind the vice that there is in the way that the

plaintiff has proceeded is not so much in its failure to make full

and frank disclosure, but in the presentation of its evidence in

the motion which was put on pursuant to Pt.10, r.2. The evidence

is of a most formal kind. Plainly the facts are not within the

knowledge of the deponent; he is merely stating what his

instructions are. And the form of par. 2, quite apart from the

difficulty of understanding what it really means to which I have

referred, is simply to state a conclusion upon the basis of

undisclosed facts which may or may not give rise to the

conclusion. I make it quite clear that it is my view that to

proceed in this way is wrong, and that the jurisdiction which is

exercised under Pt.10 ought only to be exercised upon proper

evidence of the facts, that is to say, evidence from persons who

are able to speak directly of them, and evidence which discloses

in a little detail what the facts are, so as to enable the

judicial officer who deals with the matter to come to a conclusion

as to whether, if r.1(b) is relied upon, a breach of the contract

really was committed within the State."

8. In my opinion, his Honour's comments have to be read in the context of the case before him and in particular the egregiously defective affidavit relied on by the plaintiff. I do not read the passage as indicating that an applicant seeking an order under O.8 r.1 cannot rely on statements of information and belief under O.33 r.2 or that such affidavits cannot be made by the applicant's solicitor.

9. Counsel on both sides suggested that an appropriate analogy was the serious triable issue test which a court applies as part of the discretionary exercise in determining whether to grant an interlocutory injunction. But there are dangers in substituting a seemingly helpful analogy for the words of the rule itself, particularly as the concept of a prima facie case is one well known to the law. Its meaning was explained by the High Court in May v O'Sullivan [1955] HCA 38; (1955) 92 CLR 654. Dixon CJ, Webb, Fullagar, Kitto and Taylor JJ said (at p 658):

"When, at the close of the case for the prosecution, a submission

is made that there is "no case to answer", the question to be

decided is not whether on the evidence as it stands the defendant

ought to be convicted, but whether on the evidence as it stands he

could lawfully be convicted. This is really a question of law.

Unless there is some special statutory provision on the subject, a

ruling that there is a "case to answer" has no effect whatever on

the onus of proof, which rests on the prosecution from beginning

to end. After the prosecution has adduced evidence sufficient to

support proof of the issue, the defendant may or may not call

evidence. Whether he does or not, the question to be decided in

the end by the tribunal is whether, on the whole of the evidence

before it, it is satisfied beyond reasonable doubt that the

defendant is guilty. This is a question of fact. In deciding

this question it may in some cases be legitimate, as is pointed

out in Wilson v Buttery [1926] SAStRp 30; (1926) SASR 150 for it to take into

account the fact that the defendant has not given evidence as a

consideration making the inference of guilt from the evidence for

the prosecution less unsafe than it might otherwise possibly

appear: cf. Morgan v Babcock and Wilcox, per Isaacs J. (1929) 43

CLR 163, 178. But to say this is a very different thing from

saying that the onus of proof shifts. A magistrate who has

decided that there is a "case to answer" may quite consistently,

if no evidence is called for the defendant, refuse to convict on

the evidence for the prosecution. The prosecution may have made

"a prima facie case", but it does not follow that in the absence

of a "satisfactory answer" the defendant should be convicted."

(Their Honours' emphasis.)

10. The same considerations apply, mutatis mutandis, in a civil case. Indeed the High Court in May v O'Sullivan (at p 658) expressly approved part of a passage from Wilson v Buttery (at p 153) where the South Australian Full Court, in discussing the requirements of a prima facie case, said "... we cannot find that there is any distinction between civil and criminal cases".

11. It need only be added that the requirement of O.8 r.2(2)(c) has to be met at the outset of the proceedings. It does not suggest the kind of scrutiny that would occur in a submission of no case to answer following the closure of an applicant's case at trial. As a matter of practicality, one is here concerned with, in Sheppard J.'s words, "evidence which discloses in a little detail what the facts are..." (Stanley Kerr, supra). It may be therefore that a court at this stage might draw inferences more readily in favour of an applicant, bearing in mind, amongst other things, that the applicant will not have had the advantage of discovery, subpoena and other procedural aids to the making out of a prima facie case at trial.

12. This was constituted by two affidavits. The first was sworn by Merpro's solicitor Mr Stephen Amendola and principally consisted of the exhibiting of an exchange of correspondence between his firm Dunhill Madden Butler and Arthur Robinson and Hedderwicks who were acting for Conoco. This correspondence was largely taken up with Merpro's solicitors' allegations of misleading and deceptive conduct and demands for corrective statements and other remedial action and Conoco's requests for information as to the alleged publication of the document complained of together with arguments that the document was not misleading or deceptive.

13. Mr Archibald argued that such means of proof is not acceptable. He says that assertion is not proof. In general terms, that is without doubt correct. As I have said, I think an applicant for leave to serve out can rely on material under O.33 r.2, but the present affidavit does not satisfy the requirements of that rule in that the deponent does not depose to his belief or give the source and ground of his information.

14. However the nature of the present case is such that I think the requirement of establishing a prima facie case on proper material is made out. My reasons for this conclusion will necessitate examination of the facts in a little more detail. Before doing so I should note that the argument proceeded on the common assumption of counsel that the issues raised in the statement of claim and for which the applicant has to make out a prima facie case were, first, did Conoco make the representation alleged? (the publication issue) and secondly, was that representation deceptive or misleading? (the falsity issue).

15. Para. 8 of the Statement of Claim alleges the publication to BHP Petroleum Pty Ltd in or about August 1990 of a document in the following terms ("the statement"):

"Conoco Specialty Product Inc: Current Litigation

As requested, we set out below details of litigation which is

currently proceeding in relation to the hydrocyclone business

operated by Conoco.

1. Proceedings in Scotland

Conoco has been successful in obtaining interlocutory

injunctions (known as "interim interdicts" in Scotland)

against Merpro Montassa preventing Merpro Montassa from

selling its liquid/liquid hydrocyclones. The basis of these

injunctions is Conoco's claim that Merpro has infringed

certain of its patents relating to liquid/liquid

hydrocyclones. This matter is to proceed to trial later

this year.

2. Prendergast Litigation

The Prendergast litigation involves a claim by B.W.N.

Vortoil Pty. Ltd. against certain ex-employees (Gavan

Prendergast, Thomas Winter and David Webb), a private

company, Delawood Pty. Ltd., and two Merpro Montassa

companies that information which was confidential to B.W.N.

Vortoil (since sold to Conoco) has been misused in the

development of the product now sold by Merpro Montassa. The

relief sought in that action includes injunctions against

all of the Defendants to prevent use of the confidential

information and a declaration that certain patent

applications lodged by Delawood containing B.W.N. Vortoil

confidential information are held on trust for B.W.N.

Vortoil. If so, the Applications are to be assigned to

Conoco. The trial has been continuing since May, 1989, and

is likely to continue until at least September, 1990, on

current estimates.

3. Federal Court Proceedings

On 3rd November, 1989, Conoco and Du Pont (Australia)

Limited issued proceedings out of the Federal Court of

Australia against Merpro Montassa Limited and Merpro

Montassa (Aust.) Pty. Ltd. alleging in infringement of the

patents relating to liquid/liquid separating hydrocyclones.

This matter is continuing through its interlocutory stages

and is not expected to come on for trial until, on present

estimates, early 1991. The relief sought includes an

injunction to restrain the Merpro Montassa companies from

infringing the patent, delivery up of infringing units and

damages. The patents in suit include claims relating to the

use of the hydrocyclones as well as to their manufacture and

sale. If, therefore, you become aware of anyone using these

liquid/liquid hydrocyclones, we would recommend that you

bring the existence of the patents and the Federal Court

proceedings to their attention.

The above reflects a statement of the facts as at the present

time. Care should be taken when communicating these facts to any

person that no threat or implied threat of legal proceedings be

made to the party receiving the information. If you show this

letter to any person, then it should be made clear to that person

that it has been sent only for the purposes of providing

information.

Please let us known if you require any further or more detailed

information."

16. Merpro relied principally on an affidavit sworn on 26 February 1991 by Mr Gavin James Joseph Prendergast, the director of a wholly owned subsidiary of Merpro. This affidavit of course was not in existence at the time the ex parte order was made, but I should have regard to it since the present application is in substance a re-hearing. Mr Prendergast relevantly deposes as follows:

"In or about July 1990 I did receive from BHP Petroleum Pty. Ltd.

a facsimile transmission of a document in the course of commercial

discussions that I was having with BHP Petroleum Pty. Ltd. on

behalf of Merpro Montassa (Aust.) Pty. Ltd. the Applicant herein.

I was informed by Mr. Kevin Black of BHP Petroleum Pty. Ltd. prior

to my receiving the document that it was an extract of the

document provided by Conoco Specialty Products Inc. to BHP

Petroleum Pty Ltd."

17. There is produced as an exhibit a document which is in identical terms to the statement already referred to save only that it is marked: "Attention: Gavin Prendergast" together with his fax number.

18. Also, in the course of the correspondence exhibited to Mr Amendola's affidavit, Merpro's solicitors had attached a copy of the statement (but without reference to Mr Prendergast and his fax number). Conoco's solicitors in a letter dated 25 October 1990 said:

"The copy document attached to your facsimile appears to be a cut

and paste version of a letter we have on file. We need to know

exactly what you and your client know of its circumstances before

we can get instructions to respond."

19. The letter then proceeds to ask a number of questions about the document provided by Merpro's solicitors and the circumstances in which it was obtained.

20. It may be readily accepted that the document which was sent to Mr Prendergast was not a copy of the same document received by BHP Petroleum Pty Ltd from Conoco and that a "cut and paste" exercise had been undertaken in the meantime. Nevertheless, for present purposes it seems to me that Merpro has made out a prima facie case that a document containing at least those words contained in the facsimile received from Mr Prendergast was published by Conoco to BHP Petroleum Pty Ltd. In the correspondence, Conoco's solicitors do not suggest that the full document in its possession contains a context which puts a different meaning on the words in the statement. Therefore I think the applicant has made out a case to the requisite standard on the publication issue.

21. The statement of claim also alleges a separate publication in October 1990 to a Mr K.C. Hunter, the engineering manager of BHP Petroleum Pty Ltd. This was presumably an oral communication. I accept that there is no material establishing this separate and discrete allegation but the fact that this part of Merpro's claim is not established at this stage is not necessarily fatal to its case for leave to serve out.

22. After pleading the publication of the statement to BHP Petroleum Pty Ltd the statement of claim alleges:

"9. By the statement, Conoco represented that:-

(a) the statement was a statement of facts;

(b) the interim interdicts in the Scottish action

prevented Merpro from selling its liquid/liquid

hydrocyclones;

(c) Conoco was successful in obtaining the interim

interdicts on the basis of Conoco's claim that Merpro

had infringed Conoco's hydrocyclones;

(d) the relief sought in the Federal Court proceeding

obliged non-parties not to use Conoco's hydrocylones.

Particulars

Each representation was expressed, alternatively

implicit, in the contents of the statement.

10. Each of the representations was false, in that:-

(a) the interim interdicts did not prevent Merpro from

selling it hydrocyclones, but only apparatus described

in the specifications of the UK patents. The

interdicts were expressed not to apply to existing

contracts. Further, Merpro continued to sell

hydrocyclones to the knowledge of Conoco without

Conoco's objection;

(b) the basis upon which the interim interdicts were

granted was not that Conoco was likely to succeed at

trial, but to preserve the status quo pending trial;

(c) the relief sought in the Federal Court proceeding did

not oblige non-parties not to use Merpro's hydrocyclone."

23. Thus Merpro alleges that the statement conveyed certain representations and that those representations were false and that as a result there was a breach of s.52 of the Trade Practices Act 1974 (Cth) and s.11 of the Fair Trading Act 1985 (Vic).

24. In the correspondence exhibited to Mr Amendola's affidavit, and in particular in a letter dated 1 November 1990 (Exhibit "SA9"), Conoco's solicitors argued that the representations alleged in Merpro's solicitors' letters (which were substantially the same as those which were later alleged in the statement of claim) did not arise from the statement. In relation to most of the representations alleged in para 9 of the statement of claim those arguments seem to me to be fairly compelling, although obviously I would not wish to express a concluded view about the matter at this stage. However in relation to the representation in para 9(b) (which obviously is said to proceed from para 1 in the statement) the letter said:

"This means (in its context) that the interlocutory injunctions

applied to prevent the sale of the hydrocyclones the subject of

the action. An order which purported to deal with hydrocyclones

not the subject of the action would plainly be bad. So far as the

exceptions of existing work (Chevron and Shell) were concerned,

they were irrelevant to the issue addressed which was - what does

the interdict apply to prevent"

25. In my opinion, the question is what is the meaning that the statement would have conveyed to a reasonable reader in the position of BHP Petroleum Pty Ltd. I do not think for present purposes there is any basis for crediting such a reader with any knowledge of the details of the litigation beyond that which is contained in the statement itself. On the contrary, read as a whole, the statement seems to be designed to convey information to a person who knows merely that there is litigation relating to "the hydrocyclone business operated by Conoco" but no more than that.

26. Thus read, I think it is at least arguable that the reference in the statement to "preventing Merpro Montassa from selling its liquid/liquid hydrocyclones" (emphasis added) would be taken as referring to all hydrocyclones sold by Merpro. The letter of 1 November 1990, in the passage quoted, seems to me to convey that the Scottish litigation was not in fact concerned with all of Merpro's hydrocyclones. Indeed that is its whole point. The passage in the letter necessarily accepts that there were other Merpro hydrocyclones but that they were not the subject of the litigation. I think therefore that the passage in the letter constitutes an admission sufficient for the purposes of establishing a prima facie case that, if the statement conveys the representation alleged in para. 9(b), as I think arguably it does, such representation was false. Therefore the applicant can make out this case notwithstanding that the reasons for judgment of the Court of Session or even its formal Order have not been produced before me.

27. Miss McMillan on behalf of Merpro submitted that even if I was not satisfied that there was a prima facie case for the purpose of O.8 r.2(2)(c) I should nevertheless dispense with that requirement under the power conferred by O.1 r.8. In support of that proposition she relied on Apple Computer Inc v Apple Corps SA (1989) 16 IPR 329, a decision of Wilcox J. However that was a very different case. The respondent was the Australian proprietor of a registered trademark and the case involved the entitlement of the respondent in that case to maintain the registration of its trademarks on an Australian register. His Honour pointed out (at p 332) that "....to require the production of a prima facie case is to impose a burden on an applicant in this type of case which would not be present were the respondent an Australian proprietor of an registered trademark... I can see no justification for a discriminatory Rule such as that." Obviously that case turned on its special facts. In the present case I would see no basis for dispensing with the requirement of establishing a prima facie case.

28. I should add that there remains one discretionary question, viz whether this court is an inappropriate forum as that concept has been expounded in recent decisions of the High Court: Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197, Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 65 ALJR 83, 91-92; see also Rosler v Hillbery (1925) Ch 250, 259. This aspect was not argued, but I think I should record my view that this court does seem to be the forum conveniens. The alleged publication took place in Australia. The cause of action is based on alleged breaches of Australian statutes. It was not suggested that any relevant witness would not be a person who normally resides in Australia. So far as the nature of the Scottish proceedings need to be before this court in order to determine the issue of falsity, that can readily be done one would think without the necessity of calling witnesses from Scotland. The courts of Scotland or Texas do not appear to be realistic alternatives for the trial of this proceeding.

29. I therefore order that the application be dismissed with costs.

Re Merpro Montassa Ltd v Conoco Special Products Inc [1991] FCA 70; 28 FCR 387 (8 March 1991)

Oceanic Sun Line Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197

Voth v Milandra Flour Mills Pty Ltd [1990] HCA 55; (1990) 65 ALJR 83

Re Merpro Montassa Ltd v Conoco Special Products Inc [1991] FCA 70; 28 FCR 387

At a glance

Court

Decision date

Before

Source

Judgment (38 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (9)

Re Merpro Montassa Ltd v Conoco Special Products Inc [1991] FCA 70; 28 FCR 387 (8 March 1991)