Traxon Industries Pty Ltd ACN 009 318 987 v Emerson Electric Co

REASONS FOR JUDGMENT Introduction 1 On 18 April 2006 Traxon Industries Pty Ltd (Traxon) filed an application against Emerson Electric Co (Emerson) claiming damages for misleading or deceptive conduct in contravention of the Trade Practices Act 1974 (Cth), at common law for breach of contract and, alternatively, in equity for breach of confidence and breach of fiduciary duty. Traxon is a company incorporated in Australia which carries on the business of manufacturing, marketing and selling oil level control devices. One of these devices is known as the TraxOil Management System (the TraxOil Device). Emerson is a company incorporated in Missouri. It currently trades under the business name Emerson Climate Technologies. It previously traded as Alco Controls. 2 Traxon seeks leave, by notice of motion, to serve its application, statement of claim and supporting affidavit on Emerson in the United States of America. It does so pursuant to O 8 r 2 of the Federal Court Rules. In considering that motion it is necessary to have regard to the causes of action alleged and the relief claimed in the application and statement of claim. It is also necessary to have regard to the evidence relied upon as establishing a prima facie case sufficient to support the grant of leave to serve the application in the United States of America. 3 For the reasons that follow, I am not satisfied that the proceeding is one to which O 8 r 1 applies. The application of O 8 r 1 to the proceeding is a necessary condition of the grant of leave to serve out of the jurisdiction under O 8 r 2. I also have some concerns about the sufficiency of the evidence going to the creation of the agreement relied upon by Traxon. I will adjourn the application for leave to 19 May 2006 to allow Traxon time to consider amending its statement of claim and supplementing the evidentiary material which has been put before the Court. The statement of claim 4 After pleading its own incorporation and the nature of its business and that of Emerson, Traxon alleges that at all material times Underwriters Laboratories Inc (Underwriters) which, according to the affidavit evidence, is a non-profit organisation incorporated in the United States, performed a compliance function to certify that products offered for sale in the USA complied with safety laws in force there. Such certification, according to the statement of claim, was at all material times a necessary precondition to the offering of the TraxOil Device for sale in the USA. 5 Traxon says that before November 1997 it had an agreement with a United States company called Sporlan Valve under which Sporlan Valve would market and sell the TraxOil Device in the US. During the currency of its arrangements with Sporlan Valve, Traxon 'owned' a file maintained by Underwriters in the name of Sporlan Valve in relation to the TraxOil Device (UL File). The nature of the ownership of the file is not explained. The Distribution Agreement with Sporlan Valve ceased in November 1997 and in 1998 Traxon and Emerson agreed that Emerson would be the exclusive distributor for the TraxOil Device in the USA. At that time the largest single user of the device in the USA was Hussman, a company which carried on business in that country and used the TraxOil Device on Copeland compressors. They are manufactured by Copeland, a company which also carries on business in the USA and is associated with Emerson. 6 The Distribution Agreement between Traxon and Emerson is said to have been partly written and partly oral. The oral terms were agreed during the course of a meeting between Mr Barry Waller and Mr Wayne Cattach of Traxon and Mr Robert Kensinger of Emerson held in May 1988 at Perth in Western Australia. The written part of the agreement comprised a document titled 'Confidentiality Agreement' dated 7 May 1998 and a document titled 'Distribution Agreement' executed in or about May 1998. 7 Traxon alleges that the 1998 Agreement contained a number of express terms including the following: 1. Emerson agreed not to disclose any data or information it received from Traxon which Traxon designated as proprietary or confidential. Nor would Emerson use that data or information for its own benefit for a period of five years after receipt of it without first obtaining written permission from Traxon. 2. Emerson would undertake any formalities and make any payments required to be made in relation to any necessary amendments to the UL File which flowed from the 1998 agreement. The UL File was to be owned and maintained by Underwriters in the name of Traxon. It is said to be an express term of the agreement that Traxon and Emerson would jointly participate in a program of further development and refinement of the TraxOil Device. They are also said to have agreed that the 1998 agreement would be governed and construed in accordance with the laws of the State of Western Australia. 8 Traxon alleges that by entering into the 1998 Agreement Emerson represented to it, in Western Australia, that Emerson would comply with its terms. In reliance upon that representation, Traxon entered into the agreement, purchased capital equipment for the production of the TraxOil Device for the purpose of selling it in the USA and, between May 1998 and November 2003, provided Emerson with confidential information about the device. Particulars of the confidential information are given in the statement of claim. 9 In February 2000 it is said that Traxon and Emerson Electric agreed to vary the 1998 Agreement. The variation agreement was oral and made in the course of a meeting held on 2 and 3 February 2000 in St Louis. Mr Wayne Cattach of Traxon was present and a number of persons from Emerson. It was agreed under the variation that Traxon and Emerson would jointly participate in a program of further development and refinement of the TraxOil Device and would jointly participate in the development of a new model of it. 10 In the alternative, it is alleged that the 2000 Sgreement was a substitute for the 1998 agreement and included the following express terms: