Seeker Aircraft America Inc v Seabird Aviation Australia Pty Ltd & Anor [2013] QSC 121

[1] Each of the defendants applies for orders by which some of the documents to be disclosed by it to the plaintiff could be seen only by its lawyers and expert witnesses. Each says that there is a risk that the plaintiff company, or someone working for it, would misuse information within the documents, to the commercial detriment of the defendants.

[2] The plaintiff opposes these applications, saying that there is no real risk of such a misuse of the documents and that the defendants' proposals would substantially and unfairly impede the plaintiff in its preparation for, and conduct of, the trial.

[3] The plaintiff is a company incorporated in the United States with its place of business in New Mexico. The first defendant is a company carrying on business in Queensland, in the development and building of light aircraft. In 2005, the plaintiff and the first defendant made a written contract by which the first defendant granted an exclusive licence to the plaintiff to exploit in the United States a certain aircraft, there described as the "SB7L-360 Seeker" and "its variants and successors." The licence was unlimited in its duration. It provided for the sale of a SB7L-360 Seeker by the first defendant to the plaintiff for use as a demonstrator and for the provision by the first defendant to the plaintiff of certain engineering services. As consideration for the licence, parties agreed that the first defendant would be issued with a 39 per cent shareholding in the plaintiff, although with an acknowledgement that that proportion might be diminished by the issue of further stock. Consequently, the present position is that the first defendant is a shareholder in the plaintiff company and has a representative on its board of directors.

[4] Since 2005, the first defendant has further developed the Seeker aircraft. More recently it has developed an aircraft which it calls the Seeker 3, which has a number of advantages over the Seeker as it was when the licence agreement was made in March 2005. The essential question in this litigation is whether, as the plaintiff claims, its licence agreement extends to the Seeker 3. The defendants dispute that it does so, upon several grounds.

[5] The second defendant is involved in this dispute because it has agreed with the first defendant in terms which, it is said, have the effect that any of the rights in respect of the Seeker 3 belong to the second defendant. This is the alleged result of agreements which were made between the defendants commencing in March 2010. By those agreements the first defendant was engaged by the second defendant to develop an aircraft with certain characteristics and this led to the creation and development of drawings, reports, manuals, design data, schematics and other documents by the first defendant. It appears that these are the documents, or at least some of the documents, which the defendants wish to keep from the plaintiff (other than the plaintiff's lawyers and independent expert witnesses).

[6] Each of the defendants applies for orders restricting access to documents which are to be disclosed by it. But the applications are in different terms. The first defendant identifies the subject documents by some 17 categories, which are very generally described by terms such as "production worksheets" and "parts catalogue." The application by the second defendant is made in even more general terms, in that the subject documents are identified as "the documents to be set out in Schedule 3 of the second defendant's list of documents." Because that list is yet to be provided, the content of Schedule 3 is not yet revealed.

[7] The defendants' concerns are that documents containing confidential information about the development and content of the Seeker 3 could be misused (assuming, of course, that the plaintiff is not entitled to that information as it claims). The particular risks are the subject of affidavit and oral evidence from Mr Adams, the managing director of the first defendant. He sought to explain the first defendant's concerns in paragraph 4 of his affidavit.

[8] In paragraph 4(a), he expressed the concern that the implied undertaking of the plaintiff, namely to use disclosed documents only for the purpose of these proceedings, would not be readily enforceable against the plaintiff because it is a company incorporated and carrying on business in the United States and with no presence in this jurisdiction. It may be accepted that there would be at least some practical difficulties for the defendants in that respect.

[9] Then in paragraph 4(b) of his affidavit, Mr Adams referred to two types of risk of the misuse of the documents. The first is in the possible circumstance of negotiations between the parties, following the determination of these proceedings in the defendants' favour. It is said that in that event, the plaintiff would be unfairly advantaged in negotiating some further licence in that the plaintiff's "officers and employees will inevitably be influenced in those negotiations by what they see and know from these documents." As to that concern, it may be accepted that there is a potential advantage for the plaintiff in that respect. However, that does not seem to be a risk of any serious detriment to the defendants, by having to negotiate for the use of intellectual property with a party who knew what it was getting.

[10] The second risk identified by Mr Adams was that there might be others, apart form the plaintiff but including an employee or officer of the plaintiff setting up their own business, who would misuse the information as a competitor of the defendants. I accept that there is a risk of that kind.

[11] Notably Mr Adams's affidavit did not refer to the possible misuse of the information by the plaintiff itself, by manufacturing or causing to be manufactured the Seeker 3 for the American market. But in cross-examination, Mr Adams expressed concern in that respect also. As to that risk, the evidence is that the plaintiff is presently without the capital which it would need to acquire the capacity to manufacture this aircraft. I accept that there is a risk of this kind, although the weight to be given to this particular evidence of Mr Adams is diminished by the fact that it was not within his affidavit.

[12] The defendants rely upon the Court's power to relieve a party of the duty of disclosure to any specified extent,[1] and the authorities upon the exercise of that power of which the most cited case in Queensland is Ex parte Fielder Gillespie Limited.[2] They refer also to the extensive discussion by White J (as her Honour then was) in Magellan Petroleum Australia Limited v Sagasco Amadeus Pty Ltd[3] and to the judgment of Ambrose J in Digi International Inc v Stallion Technologies Pty Ltd,[4] particularly for its recognition of the Court's power to subsequently vary orders of this kind where a party can demonstrate a need to have unrestricted access to one or more of the subject documents.

[13] The plaintiff says that the applications are flawed for several reasons. One is that they are said to assume that the plaintiff, or someone working within it, will misuse the documents. But that overstates the defendants' arguments, which are that there is a risk, which is substantial and not negligible, that the documents will be misused. Next the plaintiff submits that this is not a case for a Fielder Gillespie order, because the parties are not "trade rivals." That is correct for the present, but the jurisdiction here does not depend upon the existence of that rivalry, but rather upon the risk of a breach of the implied undertaking in relation to the use of disclosed material and an abuse of the Court's process. It is said that this order would go further than that made in Fielder Gillespie, because here the access to the documents would be denied to any person within the plaintiff company. But that particular restriction is sometimes imposed in orders of this kind and its availability, in an appropriate case, was acknowledged in Fielder Gillespie.[5]

[14] But two further submissions of the plaintiff were more persuasive. The first, which is based upon the unchallenged affidavit evidence of the plaintiff's solicitor, is that the plaintiff's preparation for and conduct of its case would be disadvantaged by the orders which are sought. The solicitor says that it will be necessary to prepare the plaintiff's evidence as to what passed between the plaintiff and the first defendant, over the years from 2005, about the further development of the Seeker to the end of proving that the Seeker 3 is, or by an estoppel should be treated as being, within the licence agreement. Now it is not said that there were discussions about the detail of the development of the Seeker aircraft, such that the plaintiff's witnesses would know already of the content of these documents. But it is said that the documents will be relevant in the task of obtaining evidence, "as to whether and how various improvements on the Seeker A3 represent the improvements discussed between [the parties'] representatives to be made to the basic Seeker to enable it to be effectively marketed and sold in the United States ...".[6]

[15] The defendants say that evidence of this kind could be prepared and presented without the witnesses having access to these documents. Because they did not have them at the time of their dealings with the first defendant, it is said that they could not be relevant to their evidence. That submission seemed unpersuasive. The documents in question must be disclosed only if they are directly relevant to an issue and although the plaintiff's witnesses have not yet seen them, it seems to be quite probable that one or more of these witnesses would have something to say about the contents of at least some of the documents which is probative of an issue.

[16] A further submission for the plaintiff was that, in effect, the applications were made prematurely. It was said that they should be made only by reference to specific documents, which could be inspected by the Court in order to rule upon whether they should be made available to the plaintiff. As to that, I do not think that it should be regarded as the usual approach in this context for the Court to examine each and every document in question. Whether that will be appropriate will depend upon the facts and circumstances of the particular case. It must also be recognised that an examination of that kind might have been more practical when the extent of discoverable material was less than usually occurs in modern commercial litigation. However, this submission did reveal a particular problem with these applications, which is a matter to which I have already referred, namely the absence of any specificity in the identification of the subject documents. The submission then drew attention to the question of whether at least much of this material is directly relevant to an issue.

[17] At this point it is necessary to say something of the licence agreement and of the respective pleadings. Clause 4 of the agreement provides as follows:

"4. Subsequent Improvements. All improvements or variants to the Inventions developed or invented by [the first defendant] A and for which [the first defendant] owns the intellectual property rights, in any country, conceived or reduced to practice during the term of this Agreement shall become a part of the Inventions and shall be subject to the Licence granted by this Agreement."

The licence granted to the plaintiff was to exploit by several means "the Seeker or devises based on or relating to the Seeker or the Intellectual Properties in the Seeker (collectively the 'Inventions' related to the Seeker)."

[18] The plaintiff's case is that the Seeker 3 is an improvement or variant to the Seeker as it was at the date of the licence agreement. That allegation would appear to invite a technical comparison between the original Seeker and the Seeker 3, in order to assess whether the latter could be said to be an improvement or variant to the former, or instead some entirely different and distinct aircraft. A comparison of that kind would be likely to make directly relevant many, if not all, of the documents for which these orders are sought.

[19] However, the defendants' pleadings do not seem to make that comparison relevant, because they do not appear to dispute that the Seeker 3 was developed from the original Seeker, so that at least outside the context of the licence agreement, it would be regarded as an improvement or variant.

[20] Rather, the defendants deny that the Seeker 3 became part of "the Inventions" upon these grounds. First it is said that upon the proper interpretation of the licence agreement, it extends only to such improvements or variants which had been developed or invented by the date of the licence agreement. Secondly it is said that upon the proper interpretation of the licence agreement, it extended only to improvements or variants (or "variants and successors" being the term used in a recital to that agreement) of which the first defendant was the owner of the relevant intellectual property. They plead that the intellectual property in relation to the Seeker 3 is held by the second defendant, pursuant to the agreements between the defendants.

[21] Further it is pleaded that the licence agreement, in its extension to a variant or improvement to, or successor of, the Seeker was an unreasonable restraint of trade and thereby void or unenforceable.

[22] None of these pleas would make it relevant to conduct some detailed technical comparison between the original Seeker and the Seeker 3. It would be relevant to ascertain when the Seeker 3 was developed, relative to the agreement or agreements between the defendants. But that matter may not be controversial. In any case, an issue of that kind is unlikely to make directly relevant all of the material which is the subject of these applications.

[23] Therefore it seems to me that the documents in question, insofar as they can be understood because of the generality of these applications, are not directly relevant to a real issue. It follows that there is no need for an order in respect of them because they do not have to be disclosed.

[24] But if the documents are relevant to an issue for which some detailed technical comparison between the two aircraft must be made, there is force in the argument for the plaintiff, supported as it is by evidence, that the preparation of the plaintiff's case could be unfairly compromised by these restrictions. In that context, it is not sufficient, of course, for the defendants to point to the fact that the documents or the information within them is confidential. They must show a real risk of the misuse of the information that, when considered against the potential for an injustice to a party by being denied full access to directly relevant material, warrants a departure from the normal operation of the rules. In this case, the nature and extent of relevant risks is not so great that when put against the likely substantial impact upon the preparation of the plaintiff's case (if there is an issue of the relevant kind), would have persuaded me to grant the applications, especially in their very general terms.

[25] Each of these applications to limit the disclosure to the plaintiff will thereby be refused.

[1] Uniform Civil Procedure Rules 1999 (Qld), r 224.

[2] [1984] 2 Qd R 339.

[3] [1994] 2 Qd R 37.

[4] [2001] QSC 442; (2001) 53 IPR 529.

[5] [1984] 2 Qd R 339 at 341.

[6] Affidavit of Andrew Salgo sworn 5 May 2013, para. 8.