South State Food & Beverage Pty Ltd (ACN 083 873 312) v Chanda Kaur trading as Desaron Singapore

THE FACTUAL SETTING 4 South State supplied alcoholic beverages first to Desaron and then to Euro Pacific from September 2001 to March 2004. These included beverages already produced by South State as well as a product called Long Island T ("LIT") which is central to the present matter. 5 According to Simon Williams, South State's Chief Executive Officer for Export, the company first entered into negotiations with Desaron in February 2001. It was then approached by Dave Randhawa, a representative of Desaron, to discuss the possibility of South State manufacturing LIT for import by Desaron. 6 South State did not manufacture LIT within its product range until its dealings with the respondents. Desaron had the brand name for LIT but was unhappy with its current manufacturer, a New Zealand company Independent Liquor Limited. The parties also had preliminary conversations via telephone and email about the possibility of Desaron distributing other products for South State as well. 7 Mr Randhawa met face-to-face with South State representatives on 9 and 10 March 2001 in Adelaide. 8 South State claims that at this meeting Mr Randhawa agreed that South State would own the intellectual property in all aspects of the LIT product - its labels, design, logo and recipe. It claims that to facilitate LIT's manufacture Mr Randhawa produced a manufacturing certificate outlining details of LIT's ingredients and their quantities which Independent Liquor had prepared, as well as a copy of a simple label for the LIT bottle. 9 At this meeting the parties also signed a Confidentiality Agreement in (inter alia) the following terms: "WHERE AS: A. [South State] agrees to provide confidential information relating to South State's products known as DNA Alcoholic Spring Water, 'Q' Vodka (all flavours), Tequila 'Slamma' and Long Island Tea to [Desaron] or [sic] the purpose of making an assessment of the suitability of the product to meet [Desaron's] requirements. B. [Desaron] hereby acknowledges the contents of the following Confidentiality Undertaking given by [Desaron] in favour of [South State] and agree to be bound thereby. NOW THIS AGREEMENT WITNESSES AS FOLLOWS: 1. [Desaron] acknowledges that all of the information provided to [Desaron] by [South State] is confidential and is being provided to [Desaron] in order to enable an assessment as specified above. 2. [Desaron] acknowledges that it is a condition of [South State] supplying this confidential information to [Desaron] that [Desaron] gives this undertaking both on behalf of itself and on behalf of any other person who is under its control. 3. [Desaron] agrees to treat as confidential all such information including, but without limiting the general nature and extent of this undertaking, relating to the technology know-how, trade secrets, plans, patents (including patents pending), feasibility studies, business plans, marketing plans and customer lists relating to the product of [South State]. 4. [Desaron] undertakes that it will not, without the prior written consent of [South State], disclose any of the confidential information to any other person, nor will it use or permit the use of any such information by any officer, employee or agent of [Desaron] or any other person under its control for any purpose other than in respect of evaluating such confidential information for the purposes for which it is intended." 10 The trading terms of the relationship said by South State to have been agreed at the Adelaide meeting, were confirmed via a facsimile to Desaron from South State on 12 March 2001. Those of present relevance are: "7. LIT formulation and the manufacturing process to remain the intellectual property of South State Food & Beverage Pty Ltd. 8. The signed 'Confidentiality Agreement' (09/03/01) forbids Desaron and or its nominees to circulate any information regarding the production know how, intellectual property rights or manufacturing data of the products to any party without the written authority of South State. 9. Any amendments made to the LIT label design and/or packaging remain the property of South State, unless fully funded by Desaron." The products included LIT and existing South State products DNA Alcoholic Spring Water, Tequila Slamma, Espri Spritzer and Q Vodka (all flavours). There is no evidence before me that Mr Randhawa or Desaron expressly agreed to these terms. 11 Desaron was appointed the exclusive distributor of South State's products in Singapore and Malaysia. 12 LIT and its packaging were developed between April and September 2001. A graphic designer employed by South State improved the LIT label that Mr Randhawa is said to have provided at the Adelaide meeting. South State arranged for South Australian Brewing Company Pty Ltd ("SAB") to formulate a recipe and manufacture LIT as well as manufacture the other products that were to be supplied to Desaron. An agreement between South State and SAB, which is not in evidence, is said to provide that SAB would own the intellectual property in respect of the recipe and the formulation of the LIT product once it was developed. It is claimed that SAB analysed samples of LIT provided by Mr Randhawa to discern ingredients and quantities before developing its own formulation. According to South State, both the final recipe and labelling developed some months later were substantially different from the initial recipe, label and samples Mr Randhawa had provided at the Adelaide meeting. Significant development costs were incurred by both South State and SAB. 13 LIT was ready for export to Singapore in about September 2001. There were two formulations: one that was 8 per cent alcohol and one that was 10 per cent alcohol. Desaron then imported LIT and other South State products into Singapore and on-sold them to retailers for approximately two and a half years. Normally one container a month was ordered. South State's sales approximated to $15,000 per month over the period. 14 In March 2004, Euro Pacific was incorporated in Singapore and Desaron Beverages Pty Ltd was incorporated in Australia to distribute South State's products in place of Desaron. South State agreed with the request to deal with these companies on what it says were the same terms as those on which it dealt with Desaron. 15 South State's last shipment of stock to Singapore took place in June 2004. On 29 June one of the major retailers of South State products in Singapore, 7-Eleven, indicated to South State via an email that it was having a number of problems dealing with Euro Pacific. Supply problems continued into August. South State claims it was unable to contact Desaron during this period despite numerous attempts. 16 On 27 August 2004 South State arranged for another Singaporean company, Ban Dee Heng Trading Pte Ltd ("Ban Dee Heng"), to become the exclusive distributor of South State's products in Singapore and Malaysia. South State also changed the design and logo for LIT. 17 On 30 September 2004 South State demanded from Desaron immediate payment of outstanding invoices. No payments were received. I would note that as at 9 November 2004 South State claims the sum of $10,500.00 is due and payable from Desaron. 18 The particular conduct said to form the basis of South State's causes of action occurred in October 2004. 19 On 6 October 2004 Ban Dee Heng received a facsimile from Singaporean solicitors acting for Euro Pacific asserting that Euro Pacific was the owner of the LIT product including its packaging, goodwill and other intellectual property rights. It demanded that Ban Dee Heng immediately refrain from importing, distributing and supplying the product. 20 On 13 and 23 September 2004 Euro Pacific had applied in the Trade Marks Office of Singapore and in the Trade Marks Office of Australia for registration of a trade mark in respect of the LIT logo that appears on its face to be similar to that prepared by South State in 2001. On 7 October 2004 South State lodged an application for registration of the new logo for LIT in the Australian Trade Marks Office. 21 On 11 October 2004 South State received a facsimile from Australian solicitors acting for both Euro Pacific and Ms Chanda Kaur in (inter alia) the following terms: "We act for Euro Pacific Beverages Pte Ltd ('Euro Pacific') and Ms Chanda Kaur. … In particular, our client created and is the owner of the 'Long Island T' 10% Alcohol logo incorporating the distinctive blue 'effervescent' ball device surrounding the letter 'T' at the centre of the label (a copy of which is enclosed). This is a highly distinctive label and is instantly recognisable to consumers in Singapore and other South East Asian countries where it is currently sold. Our client is therefore the owner of the copyright in the label, the logo and all intellectual property rights associated with the Product including its get-up. It has recently come to our client's attention that the Product has been sent to distributors in Singapore without our client's authorisation who are not affiliated or authorised with our client. In particular, our client has evidence from prominent distribution channels in Singapore including the Seven Eleven franchise and the Cheers outlets that they have been approached by a Chinese company, Ban Dee Heng Trading Pte Ltd to acquire quantities of the Product from it. Our client has retained Singaporean lawyers to stop this unauthorised and unlawful activity. Of concern to our client is certain correspondence which your company has sent to Cheers convenience stores stating that the Product 'Long Island Tea' is a registered trade mark and sole intellectual property of South State Food & Beverage Pty Ltd and that Desaron Singapore (the predecessor in title to Euro Pacific) does not own this brand nor have any rights to that brand. Further, the correspondence we have sighted claims that Desaron Singapore is no longer entitled to be an importer/distributor of that brand in Singapore. Our client believes having regard to this and other evidence that [South State] is passing itself off as being the owner of the Product and attempting to sell the Product to retail outlets through unauthorised distributors in Singapore. If it is the case that your company is engaging in such conduct then it is doing so knowingly in an attempt to divert proper custom and to wrongfully trade on our client's goodwill in the Product. Such conduct constitutes passing off and breaches section 52 and sections 53(aa), (c), (d) and (eb) of the Trade Practices Act 1974 (Cth). We further note that the reach of the Trade Practices Act extends to the engaging in conduct outside of Australia by any bodies corporate incorporated or carrying on business within Australia. Further, if the label is being manufactured and applied to bottles that have not been authorised by our client, then such conduct amounts to a breach of copyright under the Copyright Act 1968 (Cth). We are instructed that Euro Pacific as a successor in title to the business is the assignee of the copyright and all other intellectual property rights in the Product from Chanda Kaur. Our client therefore provides you with immediate notice that [South State] is no longer authorised to arrange any manufacturing of the Product whatsoever." 22 The letter went on to demand (inter alia) that South State destroy all copies of the logo and product label within seven days and that it cease authorising the manufacture etc of the LIT product. The respondents reserved their rights to take legal action noting they would "not sit idly by and let another trader pass itself off as the owner of the product". 23 I would note in passing that these and other facsimiles from the respondents' lawyers cast the respondents' role in the production of LIT in a substantially different light to that set out in South State's evidence summarised earlier. 24 Assertions in respect of Euro Pacific's rights were made to South State again by the same solicitors on 21 October 2004 (which this time attached a copy of the LIT logo) and concluded with: "We reiterate our client's demands that South State immediately cease and desist from further activities of passing-off, misleading and deceptive conduct and copyright infringement. Our client reserves it rights to take legal action against your client to recover the damages including on an account of profits in all jurisdictions where South State has, without authorisation, sold the Product infringing copyright in the label and passing off the Product as its own." Similar assertions were also made to SAB on 12 October 2004 in a letter which included a copy of the LIT logo. SAB notified South State on 14 October that they had received a letter from Euro Pacific's lawyers claiming that reproduction of the LIT label would infringe Euro Pacific's copyright. The letter suggested SAB seek legal advice in relation to the copyright and to any request from South State to continue to manufacture LIT. SAB informed South State that its own advisers had advised that it cease any work on LIT "until the uncertainty surrounding the legal matter is resolved". 25 On 22 October 2004 both Ban Dee Heng and 7-Eleven received letters from Euro Pacific's lawyers asserting that their client, not South State, was the owner of LIT and requiring them each to refrain immediately from importing, etc the South State product. 26 It is Mr Williams' evidence that LIT is a highly successful product in the Singaporean and Malaysian markets; sales of South State's product have consistently increased; the correspondence from Euro Pacific to Ban Dee Heng, SAB and 7-Eleven is potentially disastrous commercially; and if the product is withdrawn from the shelves, market share will be lost.

SERVICE OUTSIDE OF THE JURISDICTION 27 The scheme of Order 8 of the Rules limits service outside of the jurisdiction to proceedings falling within a detailed but circumscribed catalogue which includes the following (O 8 r 1): "(a) where the proceeding is founded on a cause of action arising in the Commonwealth; (aa) where the proceeding is founded on a breach in the Commonwealth of a contract, wherever made, whether or not the breach is preceded or accompanied by a breach, wherever occurring, that renders impossible the performance of any part of the contract which ought to be performed in the Commonwealth; (ab) where the proceeding: (i) is for the enforcement, rescission, dissolution, rectification or annulment of a contract; or (ii) otherwise affects a contract; or (iii) is for damages or other relief in respect of the breach of a contract; and the contract: (iv) is made in the Commonwealth; or (v) is made on behalf of the person to be served by or through an agent carrying on business or residing in the Commonwealth; or (vi) is governed by the law of the Commonwealth or of a State or Territory; (ac) where the proceeding is founded on a tort committed in the Commonwealth; (ad) where the proceeding is founded on, or is for the recovery of, damage suffered wholly or partly in the Commonwealth caused by a tortious act or omission, wherever occurring; … (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; … (j) where the proceeding is for an injunction as to anything to be done in the Commonwealth or against the doing of any act in the Commonwealth, whether damages are also sought or not." 28 The particular causes of action relied upon in this proceeding against the first respondent are: (i) under the Copyright Act 1968 (Cth) ("Copyright Act") s 202 (groundless threats of legal proceedings) and s 36 (authorising the doing in Australia of an act constituting a breach of copyright) the relevant threat being contained in the letter to South State of 11 October 2004, and the relevant authorisation being of the publication of the LIT logo in the letters to South State and SAB; (ii) the torts of passing off, that passing off being in the "threat letter" to South State; (iii) misleading or deceptive conduct under s 56 and s 58 of the Fair Trading Act 1987 (SA) ("Fair Trading Act") that conduct being found in the representations made by Ms Kaur's solicitors on her behalf that she owned intellectual property rights in the LIT product; and (iv) a claim in debt in respect of an unpaid invoice relating to a supply on 20 November 2003. 29 The causes of action relied upon against Euro Pacific are similar (save in two respects) but rely as well upon the threats, representations and publications made to SAB in correspondence from Euro Pacific's lawyers. There are two additional claims made against Euro Pacific. The first is for injurious falsehood which also relies upon the latter correspondence and its consequences, which was SAB's suspension of production of LIT. The second is for breach of s 52 and s 53 of the Trade Practices Act 1974 (Cth) ("Trade Practices Act"). 30 I note in passing that all of the causes of action relied upon clearly fall within one or more of the categories listed above of O 8 r 1. In saying this I emphasise that where those categories, or as in the Fair Trading Act, Trade Practices Act and the Copyright Act cases, the causes of action themselves require the wrongful conduct to have occurred in Australia, the applicant's claims have been so limited, reliance not being placed upon conduct occurring in Singapore. 31 O 8 r 2 of the Rules stipulates that: "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 subrule (2); … (2) The Court may, by order, give leave to serve originating process outside the Commonwealth in accordance with Division 2 or 3 of this Order or, subject to subrule (2B), on such terms and conditions as it considers appropriate, if the Court is satisfied that: (a) the Court has jurisdiction in the proceeding; and (b) rule 1 applies to the proceeding; and (c) the party seeking leave has a prima facie case for the relief sought by the party in the proceeding." 32 There is no doubt that the Court has jurisdiction in the proceeding, federal jurisdiction attaching by virtue of the Copyright Act and Trade Practices Act claims. The common law and State law claims fall within the Court's accrued jurisdiction, those claims being part of the federal matter before the Court. 33 I have already indicated rule 1 applies to the proceeding. No case is made in respect of a cause of action falling outside the rule 1 catalogue: cf Tycoon Holdings Ltd v Trencor Jetco Inc (1992) 34 FCR 31. 34 The one remaining matter to be considered is whether the applicant has a prima facie case for the relief sought. 35 The orders sought in the proceeding are:

1. An injunction pursuant to s 202 of the Copyright Actand s 83 of the Fair Trading restraining the first respondents by itself, its agents, servants or howsoever otherwise from claiming or asserting intellectual property rights within Australia in respect of LIT, including but not limited to copyright goodwill and trade mark rights, or passing itself off as having any of those rights.
2. An injunction pursuant to ss 80 and 87 of the Trade Practices, and s 202 of the Copyright Actrestraining the second respondent by itself, its agents, servants or howsoever otherwise from claiming or asserting intellectual property rights within Australia in respect of LIT, including but not limited to copyright goodwill and trade mark rights, or passing itself off as having any of those rights.
3. A declaration pursuant to s 33Z of the Federal Court of Australia Act 1976 (Cth)that the first and second respondents are not and have not been, at least since 9 March 2001, the owners of any intellectual property rights in respect of the product, including but not limited to copyright goodwill and trade mark rights.
4. An order pursuant to s 195AZA of the Copyright Act, s 80 of the Trade Practicesand/or s 86C of the Trade Practices Actthat the second respondent serve on SAB a notice that it withdraws its claims to intellectual property in LIT.
5. A declaration pursuant to Article 64 of the United Nations Convention on Contracts for the International Sale of Goods ("Vienna Convention") that the distribution agreement between the applicant and the first respondent (and its nominees) was lawfully terminated and avoided by the applicant on 27 August 2004.
6. Damages against the first respondent pursuant to ss 115 and 202 of the Copyright Actand s 84 of the Fair Trading Act.
7. Damages against the second respondent pursuant to s 82 of the Trade Practices Act, ss 115 and 202 of the Copyright Act, and at common law for the tort of injurious falsehood and for passing off.
8. Summary judgment against the first and second respondents in respect of debts pursuant to Articles 53 and 62 of the Vienna Convention.
9. Interest in respect of the debts pursuant to Article 78 of the Vienna Convention.
10. Costs. 36 I would note in passing that the Vienna Convention referred to above is the United Nations Convention on contracts for the International Sale of Goods adopted on 10 April 1980. It has the force of law in South Australia in consequence of the provisions of s 4 of the Sale of Goods (Vienna Convention) Act 1986 (SA).

A PRIMA FACIE CASE FOR THE RELIEF SOUGHT 37 I have already set out the factual background to the claims made and the nature of those claims. It is now necessary to determine whether a prima facie case has been made out for the relief sought. As different considerations arise in relation to each respondent, I will consider each in turn.

(i) The cases against Ms Kaur 38 (a) The copyright claims. The material relied upon by South State does establish a prima facie case both of conduct in Australia constituting infringement under s 36 and of groundless threats of legal proceedings under s 202 such as would entitle it to injunctive relief under s 115 and s 202 respectively of the Copyright Act. Only relief under the latter section is sought in the Amended Application. I will give leave to serve accordingly. 39 There is no material before me establishing a prima facie case of damage sustained from Ms Kaur's threat of 11 October. Accordingly I will not give leave to South State to serve originating process seeking relief by way of damages against Ms Kaur. 40 (b) Passing Off. Ms Kaur has not represented to South State that her product was South State's or has some connection with South State. Rather she claimed the product as her own. The evidence is slender indeed to establish that South State has a distinct reputation or goodwill in LIT. Finally there is no evidence of public confusion, misrepresentation or deception or of actual damage suffered by reason of Ms Kaur's representation. 41 I will not give leave to make the passing off case. 42 (c) The Fair Trading Act case. I am satisfied that there is a prima facie case that Ms Kaur has engaged in misleading or deceptive conduct in the 11 October letter such as would attract injunctive relief under s 83 of the Fair Trading Act. There is though, no evidence before me of loss or damage by that contravening conduct to justify a claim for damages under s 84 of that Act. 43 (d) The debt claim. There is a prima facie case for the relief sought both in relation to the debt and interest sought. 44 (e) The declaration sought. A declaration is sought under s 33Z of the Federal Court of Australia Act 1976 (Cth) that Ms Kaur is not, and has not been an owner of intellectual property rights in respect of LIT since March 2001. Section 33Z, which describes the powers of the Court in determining a matter in a representative proceeding is wholly inapt for present purposes. Leave will not be given to claim this relief.

(ii) The cases against Euro Pacific 45 (a) The Copyright Act claims. The conduct relied upon as against Euro Pacific relates not only to the correspondence with South State but also with SAB, who ceased production in consequence of the communication to it. There is a prima facie case of copyright infringement under s 36 and of groundless threats of legal proceedings under s 202 such as would justify claims (a) for damages under s 115 and s 202 of the Copyright Act respectively; and (b) for injunctive relief also under s 115 and s 202. While damages have been sought under the above two sections, injunctive relief has only been sought under s 202. I will give leave in respect of the sections relied upon. 46 (b) Passing Off and Injurious Falsehood. For similar reasons to those given in relation to the claim against Ms Kaur, I refuse to give leave in respect of the passing off case. Euro Pacific's conduct in relation to SAB and SAB's consequent action make out a prima facie case for damages for the tort of injurious falsehood. 47 (c) The Trade Practices Act claims. I am satisfied that Euro Pacific's correspondence (via its legal advisers) with South State and SAB constitute a prima facie case of contravention of s 52 (though not s 53) of the Act such as would justify claims for relief under s 80, s 82 and s 87 of the Act. I will give leave accordingly. 48 (d) The debt claim. Though relief is sought against Euro Pacific in respect of the same debt claimed against Ms Kaur, no basis for that relief is identified save for an unparticularised allegation of assignment of debts by Ms Kaur to Euro Pacific to which South State said it consented. There is no evidence at all of this alleged assignment. I do not give leave in respect of this claim. 49 (e) The Moral Rights order. South State seeks an order under s 195AZA of the Copyright Act in respect of its alleged moral rights as an author. This claim is quite misconceived. Section 190 of that Act makes plain that "[o]nly individuals have moral rights". Leave will not be given in respect of this claim. 50 (f) The Vienna Convention. The declaration sought under cl 64 of the Vienna Convention is similarly misconceived. It is the declaration of the seller which is addressed by that clause not a declaration of the Court.

CONCLUSION 51 I will make the following orders: 52 On the filing of a Further Amended Application and Further Amended Statement of Claim deleting the claims and orders in respect of which I have not agreed to give leave in these reasons, I will order that: (1) Pursuant to Division 3 Order 8 of the Federal Court Rules, the applicant have leave to serve: (a) the Further Amended Application filed as above; (b) the Further Amended Statement of Claim filed as above; and (c) the reasons for this order as published: outside the Commonwealth upon the first and second respondents in the Republic of Singapore. (2) The applicant file a revised request in form 14A to reflect the terms of Order 1. (3) The first respondent and second respondent file an appearance three weeks after the transmittal to the Court through the diplomatic channel by the government or court of the Republic of Singapore that the documents referred to in paragraph 1 above have been personally served or served in accordance with the law of the Republic of Singapore. I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

Counsel for the Applicant: Mr R Ross-Smith

Solicitor for the Applicant: Doman Lawyers

Dates of Hearing: 26 November 2004, 2 December 2004 & 16 December 2004.

Request for Decision on the Papers and Final Submissions: 9 March 2005

Date of Judgment: 12 May 2005