Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241 | Case summary

Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd [1999] FCA 1241 | Case summary | Zoe

The Proceedings and Contentions 1 On 22 June 1999, Termi-Mesh Australia Pty Ltd ("Termi-Mesh") commenced proceedings in this Court against Josu Manufacturing Pty Ltd ("Josu Manufacturing") claiming injunctions, damages and declaratory relief. By its statement of claim Termi-Mesh says it manufactures, supplies and installs subterranean stainless steel termite barriers under the name "Termi-Mesh". It has franchisees carrying on business under the name "Termi-Mesh" in forty nine licensed territories. Josu Manufacturing is said to be a manufacturer, supplier and installer of termite barriers under the name "JOSU" in competition with Termi-Mesh. Termi-Mesh says it has an exclusive licence dated 9 November 1992 from Vasilios Toutountzis to exploit Patent 639256, which is referred to in the statement of claim as the Termi-Mesh Patent. 2 Termi-Mesh asserts that Josu Manufacturing has, since 16 April 1999, published or caused to be published a document entitled THE JOSU LICENCE. The document is said to make a number of representations concerning the Termi-Mesh business and products. These representations, which are set out in the statement of claim, are said to reflect upon the Termi-Mesh products, their installation, their prices compared with the prices of Josu products, the validity of the Termi-Mesh Patent, its vulnerability to challenge and the desire of the Commissioner of Patents to see the patent revoked. All these representations are said to be untrue and to constitute misleading or deceptive conduct on the part of Josu Manufacturing in contravention of s 52 of the Trade Practices Act 1974 (Cth). Alternative pleas of injurious falsehood are also raised. 3 The relief claimed by Termi-Mesh includes: 1. An injunction restraining Josu Manufacturing from publishing or distributing the offending document. 2. An order for retrieval and delivery up of the document. 3. An injunction restraining repetition of the alleged representations. 4. Damages at common law and under the Trade Practices Act. 5. Declaratory relief in relation to the validity of the Patent and other matters. 4 A first directions hearing was held on 25 June and adjourned to 2 July. Mr Broomhead, a director of Josu Manufacturing, appeared on behalf of that company, having filed a number of affidavits. On 2 July an interlocutory injunction was granted restraining Josu Manufacturing from publishing the document entitled THE JOSU LICENCE. The injunction also restrained the company from making any further statements or representations to any party attributing to IP Australia and the Commissioner of Patents particular views as to the validity of Patent 639256. 5 To that point in the proceedings Mr Broomhead had been permitted to appear on behalf of Josu Manufacturing, although he is not a legal practitioner. However, on 19 July the following orders were made: "1. The respondent on or before 2 August 1999 do file and serve any affidavit and submissions in support of the grant of leave for the respondent to defend the proceedings without a solicitor. 2. The applicant do file and serve any affidavit and submissions in reply by 9 August 1999." The directions hearing was adjourned to 23 August in Brisbane to hear argument on the leave application. Although Termi-Mesh is based in Perth, Josu Manufacturing is based in Brisbane and the 23 August happened to coincide with the date of Full Court sittings in Brisbane at which I was present. A further order was made on 19 July that Josu Manufacturing had leave to defend the application without a solicitor for the limited purpose of complying with the directions. It was also required to file and serve a defence by 16 August. 6 A defence was filed on 16 August. It failed, for the most part, to meet directly the allegations in the statement of claim. It showed plainly enough the difficulties faced by Mr Broomhead in seeking to defend the action without legal advice. It is not easy to distil from the document any clear line of thought which would enable identification of the basis of the defence. It appears, however, to be asserted that the document, the subject of the Termi-Mesh statement of claim, was a confidential document produced in connection with negotiations between Termi-Mesh and Josu Manufacturing and was never published by Josu Manufacturing. 7 By an affidavit sworn on 2 August 1999, Mr Broomhead described Josu Manufacturing as "a small company, which was set up to control licenses and manufacturing of the JOSU Termite Control Fitting and to help sell patents held by others." Allegations were made in correspondence from Termi-Mesh's patent attorneys in October 1998 that Josu Manufacturing was infringing Termi-Mesh's patents. At or after that time Termi-Mesh, through one Tony Sala, is said to have approached an organisation called Action Negotiators to organise a meeting with a view to Termi-Mesh acquiring the licence for the JOSU Termite Control Fitting. According to Mr Broomhead, it was in the light of these meetings that Josu Manufacturing, which he intended to wind up, was to be kept in existence until the end of the financial year. It had no more business other than a probable sale of a licence. It had, he said, no assets or funds. 8 Mr Broomhead went on to say in his affidavit: "The intention is to close the company and the first hint that the company will incur costs the company will be placed in liquidation." The only point in keeping the company in existence, according to his affidavit, was to "refute the untruths presented by Termi-Mesh". There was further affidavit material, in part argumentative, going to the bona fides and conduct of Termi-Mesh, the correctness of things which Josu Manufacturing had said and the content of without prejudice negotiations between the two companies. 9 The question whether Mr Broomhead should have leave to represent Josu Manufacturing was heard on 23 August in Brisbane and judgment reserved until today.

[3]

The Principles and their Application 10 Order 9 rule 1 of the Federal Court Rules provides, in the relevant parts: "1(1) A respondent may enter an appearance and may defend a proceeding by a solicitor or in person. . . . (3) Notwithstanding sub-rule (1) and subject to any Act, a corporation may not without the leave of the Court or a Judge enter an appearance or defend any proceeding except by a solicitor." It should also be noted that O 4 r 14(2) provides that: "Except as provided by or under any Act, a corporation may not, without the leave of the Court, commence or carry on any proceeding otherwise than by a solicitor." 11 The burden of authority in the Federal Court relates to the latter rule. Equivalent rules in other jurisdictions and particularly England and other Australian States set up an "exceptional circumstances" or like test before leave can be granted - Arbuthnot Leasing International Ltd v Havelet Leasing Ltd [1991] 1 All ER 591; Bay Marine Pty Ltd v Clayton Country Properties Pty Ltd (1986) 8 NSWLR 104. In the latter case, Samuels JA in the New South Wales Court of Appeal, saw the court's discretion to dispense with its rules about representation as one to be exercised "only with the most meticulous care" and in exceptional circumstances. 12 The position under the Federal Court Rules however is not as restrictive as that under the English Rules and various of the State Supreme Court Rules. In this respect I refer to what I said in Simto Resources Limited v Normandy Capital Limited (1993) 11 ACLC 856. Although the rationale for the restriction is basically the same in all jurisdictions, the power of the Federal Court to grant leave to a corporation to carry on a proceeding, otherwise than by a solicitor, is conferred as an integral part of the Rules in O 4 r 14 and O 9 r 1. There is no threshold requirement of special or exceptional circumstances. As Smithers J said of O 4 r 14(2) and O 9 r 3 in Molnar Engineering Pty Ltd v Burns (1984) 3 FCR 68 at 73: "Those rules proceed on the basis that there is a discretion in the court to permit a company to commence and carry on any proceedings other than by a solicitor and to enter an appearance or defend any proceeding without a solicitor and, it would seem, it is a discretion to be exercised by reference to all relevant considerations." 13 Nevertheless the policy of the rule is clear that ordinarily a corporation will be required to be represented by a solicitor. Relevant factors for dispensing with that requirement include the financial capacity or lack of capacity of the corporation and those standing behind it, the effect of diverting company resources to paying legal expenses, the nature of the company's undertaking, its financial structure, its ability to retain and pay its staff and the identity and spread of its shareholders. The factual complexities of the case and the capacity of the proposed representative to conduct it effectively are also relevant - VN International Video Pty Ltd v West End HK TVB Video & Others (1996) 14 ACLC 1308. 14 There is no doubt that those who chose to carry on their businesses through corporate structures enjoy advantages that those carrying on business on their own account do not enjoy. They also acquire disabilities and obligations. One of the disabilities is that which is imposed by the Rules of Court under consideration in this case. A distinction may be drawn between the case in which the company in question is applicant and that in which it is respondent. In the latter case it may be a more liberal approach to the grant of leave is warranted. Be that as it may, in my opinion, leave is not warranted in this case. The considerations which lead me to that conclusion are: 1. The potential factual complexity of the case. 2. The failure of Mr Broomhead to provide any detailed financial information about his company or those who stand behind it and their ability to engage legal representation. 3. The obvious difficulty that Mr Broomhead will have in dealing efficiently with the legal and factual issues involved. 15 In my opinion, and notwithstanding Mr Broomhead's thinly veiled threat to wind up the company, I am of the view that leave should be refused for the company to be represented other than by a solicitor. Although the Court has a discretion which does not require to be enlivened by the demonstration of exceptional or special circumstances, the ordinary rule is that a company is to be represented by a solicitor. A departure from that ordinary rule does require the Court to be satisfied that there is a reason for so doing. In my opinion, no such reason has been demonstrated in this case. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.

Termi-Mesh Australia Pty Ltd v Josu Manufacturing Pty Ltd

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