Yperion Technology SAS v Luminex Pty Ltd

REASONS FOR JUDGMENT 1 I have before me an interlocutory application, brought by the respondents in the proceeding, seeking an order that the proceeding be stayed. The basis for the interlocutory application is a provision in an exclusive distribution agreement (the Agreement). The Agreement was made on 8 July 2003 between the applicant in the proceeding, which is now known as Yperion Technology SAS (Yperion), and the first respondent in the proceeding, which is now known as Luminex Pty Limited (Luminex). In order to put the interlocutory application in context, it is necessary to say something about the Agreement and the allegations made by Yperion in its statement of claim. 2 The Agreement recites that Yperion had designed, developed and manufactured a device known as an L600, being a pulsed light unit intended for hair removal. The Agreement recites that the L600 devices are solely operated through the use of smart cards or chip cards loaded with a number of units or pulses, and that those cards were sold exclusively by Yperion. Next, the Agreement recites that Yperion had filed an application in France for the grant of a trademark. Finally, the Agreement recites that Luminex was willing to purchase the L600 devices and cards exclusively from Yperion, in order to distribute them in Australia and New Zealand. 3 Article 1 of the Agreement provided for the grant by Yperion to Luminex of the exclusive right to distribute the L600 devices and cards within Australia and New Zealand, according to the terms and conditions set forth elsewhere in the Agreement. By art 2.1, Luminex agreed to distribute the L600 devices within Australia and New Zealand, and agreed to act as an independent contractor. By art 3.1, Luminex agreed that it would faithfully, vigorously and diligently make all its best efforts to distribute the L600 devices and cards and enhance the goodwill of Yperion and the L600 in Australia and New Zealand. Luminex also agreed that it would perform all its obligations in such a manner as to promote successfully the mutual intentions and objectives of the parties. By art 3.3, Luminex agreed that it would not, for the term of the Agreement, either manufacture or distribute any products directly competing with the L600 devices, nor take part, directly or indirectly, in the production, marketing, distribution, sale or lease of such competing products in Australia and New Zealand or elsewhere. By art 4.1, Yperion agreed to inform Luminex regularly of any changes regarding the L600 devices, the cards, or its general business policies. 4 Articles 5 to 12 of the Agreement dealt with a number of machinery provisions concerning the supply of the L600 devices and cards. Article 5 contained a minimum purchase requirement. Article 6 dealt with the manner of placing orders for L600 devices and cards, art 7 dealt with delivery, art 8 dealt with the price to be paid for the items supplied under the Agreement and art 9 dealt with arrangements for payment of the price. Article 10 dealt with warranties given by Yperion that the L600 devices would be free from defects. Article 11 dealt with Yperion's obligation to provide Luminex with modules of which the L600 devices were composed, and its obligations in the event that a defective module was provided. Article 12 required Yperion to provide Luminex with spare parts. 5 Article 13 of the Agreement then dealt with intellectual property rights, and provided that Luminex could not, for its own purpose, use any word, phrase, trade name or trademark likely to be confused with those belonging to Yperion, without the express written consent of Yperion. Yperion reserved the right to review all materials, printed or otherwise, used by Luminex in order to ensure compliance with that requirement. Article 13.2 provided that the right to use Yperion's L600 trademark, and other distinctive marks and trade names, was to be strictly limited to the purpose and duration of the Agreement. Luminex agreed that it would not apply, in any form, any other trademark, distinctive mark or trade name alongside those applied by Yperion on the L600 devices. 6 Article 17 dealt with the duration of the Agreement, which was to be for an initial period of three years, and thereafter was to be renewed for successive three-year periods, unless terminated by Yperion no later than six months prior to the end of the initial term of the Agreement. Article 18 dealt with early termination in the case of breach or failure by Luminex to perform any of its obligations. Article 18.3 conferred on Yperion the right to terminate automatically, in the event that Luminex was involved with products deemed by Yperion to be in direct competition with the L600 devices, or in the event of violation by Luminex of art 3.3. Article 19.2 provided that, upon termination of the Agreement, Luminex was not to adopt, use, register or otherwise claim or have rights to Yperion's trademarks, package designs or labels for the L600 devices or smart cards, Yperion's commercial names, or any closely similar marks, designs, labels or names. 7 Finally, and relevantly for present purposes, art 24 provided that the parties agreed to submit to the Commercial Court of Paris all disputes arising out of or in connection with the validity, interpretation or performance of the Agreement. The present application turns on the effect to be given to that article. 8 It is necessary to observe, first, that Luminex is one of six respondents joined in the proceeding. The second and third respondents are David Hammer and Eva Karpati. The sixth respondent is Karpati Corporation Pty Limited. The fourth and fifth respondents are named respectively as the Hammer Family Trust trading as Luminex (H Trust), and the Karpati Family Trust trading as Luminex (K Trust). Paragraphs 1 to 7 of the statement of claim specify the status and standing of the parties to the proceeding, being Yperion, Luminex, and the other respondents to whom I have referred. Paragraphs 8 to 12 make assertions concerning the L600 devices and smart cards, although in the statement of claim, the L600 device is referred to as an IPL machine. 9 Paragraphs 13 to 16 of the statement of claim make allegations concerning a trademark of which Yperion is the registered proprietor in Australia. The goods in relation to which that trademark is registered include electric hair removal apparatus and instruments, electric skin care apparatus and instruments, and apparatus and instruments for medical purposes for body and skin care. The statement of claim asserts that the L600 devices and the smart cards are within the categories of goods in respect of which that trademark is registered. Next, paragraphs 17 to 20 assert that Yperion is the owner of the copyright in a photograph which forms part of the get-up of the smart cards. Paragraphs 21 to 24 assert the entering into of the Agreement and various terms of the Agreement, including terms which I have briefly described. 10 Paragraphs 26 and 27 then assert breaches of the Agreement. Paragraph 26 asserts that, during the term of the Agreement and in breach of its terms, Luminex sold, and distributed to customers in Australia and New Zealand, L600 devices and smart cards that had not been made, provided or authorised by Yperion. The statement of claim asserts that that conduct was in breach of articles 3.1, 3.3, 13.1 and 13.2 of the Agreement. Paragraph 27 asserts loss and damage by reason of that conduct. 11 Paragraphs 28 to 46 of the statement of claim make allegations of misleading and deceptive conduct on the part of Luminex, H Trust, K Trust and Karpati Corporation Pty Limited. The conduct is said to have contravened the Trade Practices Act 1974 (Cth) (the Trade Practices Act) and the Competition and Consumer Act 2010 (Cth) (the Competition and Consumer Act), according to when the conduct occurred. Paragraphs 29 and 30 allege that Luminex sold and distributed to customers in Australia and New Zealand, for use in L600 devices, counterfeit smart cards that had not been made, provided or authorised by Yperion. That is followed by an allegation that that conduct infringed either the Trade Practices Act or the Competition and Consumer Act. 12 Paragraphs 34 and following assert that the impugned conduct involved representing to third parties, who purchased the counterfeit smart cards, that they were made by Yperion, that they were being distributed by Luminex with the sponsorship or approval of Yperion, that the distribution was with the licence, sponsorship or approval of Yperion, and that the counterfeit smart cards were affiliated with Yperion. The statement of claim asserts that those representations were false, by reason of which Yperion has suffered loss and damage. 13 Curiously, the statement of claim alleges that, to the extent that the representations alleged to have been made by Luminex were, in fact, made by H Trust, K Trust or Karpati Corporation Pty Limited, they are also misleading and deceptive. The pleading suggests that there is some doubt on the part of Yperion as to who was actually engaged in the distribution business contemplated by the Agreement. The inference that one might draw from the form of the pleading is that H Trust, K Trust or Karpati Corporation Pty Limited was the entity performing the obligations of Luminex under the Agreement. That has some significance in terms of the operation of art 24 of the Agreement. 14 Next, paragraphs 47 to 55 of the statement of claim allege that an exact copy of Yperion's trademark appears on the counterfeit smart cards, and that that has involved an infringement of the trademark, by reason of which Yperion has suffered loss and damage. Paragraphs 56 to 63 assert infringement of Yperion's copyright in the Yperion photograph, by reason of which Yperion has suffered loss and damage. 15 Paragraphs 64 to 66 then assert that, by the sale, manufacture, distribution and importation of the counterfeit smart cards by Luminex after the termination of the Agreement, Luminex has engaged in conduct in breach of art 19.2 of the Agreement, by reason of which Yperion has suffered loss and damage. Finally, paragraphs 67 to 70 allege accessorial liability on the part of David Hammer and Eva Karpati, on the basis that each was knowingly concerned in the conduct of Luminex, authorised the use of the infringing trademark by Luminex, authorised the use of the infringing photograph by Luminex, and was a joint tortfeasor in the conduct of Luminex. The statement of claim asserts that, by reason of those matters, each of Mr Hammer and Ms Karpati contravened the Trade Practices Act, the Competition and Consumer Act, and the Trade Marks Act 1995 (Cth), and infringed the copyright in the Yperion photograph. 16 The question now before me is whether, assuming that the assertions made in the statement of claim are put in issue by the respective respondents, the disputes that would then be crystallised can be said to be disputes arising out of, or in connection with, the validity, interpretation or performance of the Agreement. The phrases in connection with and arising out of are of broad import. It is common ground, as I understand it, that art 24.2 is to be treated as an exclusive jurisdiction clause. Such clauses should be interpreted liberally. The intention of such clauses is that all disputes that, as a matter of substance, arise from the contractual relationship between the parties are intended to be determined by the same tribunal. It is not appropriate to give general words in such a commercial context a narrow interpretation, with the consequence that some disputes that, in a practical sense, arise from the contractual relationship, could be determined by courts or tribunals other than that to which the parties have agreed to submit their disputes. Where an exclusive jurisdiction clause uses general and elastic words, such as the phrases arising out of and in connection with, as are found in art 24.2, the clause should be construed by giving the words used liberal width and flexibility. Such a liberal approach is underpinned by the commercial presumption that the parties did not intend the inconvenience of having possible disputes from their transaction heard in two places (see Global Partners Fund Limited v Babcock & Brown Limited (2010) 79 ACSR 383 at [60]-[62]). 17 Yperion sought to draw a distinction between different sorts of breaches of the Agreement. It contended that several of the complaints raised against Luminex in the statement of claim were said not to be "contractual" in nature. The application of the principles to which I have just referred leads to the rejection of any such distinction. So far as Luminex is concerned, the claims against it all arise out of the contractual relationship that flowed from the Agreement. The term performance of the Agreement is wide enough and elastic enough, in my view, to encompass any dispute that arises out of the allegations currently made in the statement of claim. 18 Article 13, as I have said, dealt with any word, phrase, trade name or trademark, and mentioned all materials, printed or otherwise, used by Luminex. The express reference to a trademark indicates that the parties had in mind that a dispute relating to the YPERION mark, whether it was in connection with a deceptively similar trademark, or in connection with precisely the same trademark attached to counterfeit cards, was intended to be dealt with by the Commercial Court of Paris. The language of art 13 also indicates that the photograph in respect of which Yperion claims copyright, and which appears on the smart cards, was a matter that was encompassed by the performance of the Agreement. The statutory claims under the Trade Practices Act and the Competition and Consumer Act also relate to the use of the smart card or counterfeit versions of the smart card. They are sufficiently connected with the performance by Luminex of its obligations under the Agreement to be encompassed by the phrase performance of the agreement for the purposes of art 24.2. I am satisfied that all of the claims made against Luminex, insofar as they give rise to any dispute, can be fairly be characterised as giving rise to disputes arising out of, or in connection with, the performance of the Agreement. 19 The claims against the other respondents are based on precisely the same factual allegations that are made against Luminex in relation to the non-contractual claims. That is to say, the two trusts are sued on the basis that they may have made the representations, being the very same representations that are alleged to have been made by Luminex. The conduct alleged against the two trusts is precisely the same conduct as is alleged against Luminex. The same comment can be applied in relation to Karpati Corporation. The involvement of the individuals, of course, is an accessorial liability dependent on the principal liability of Luminex. 20 I am persuaded that, although the second to sixth respondents are not parties to the Agreement, the disputes with them are disputes that are connected with, or arise out of, the performance of the Agreement. To that extent, Luminex is entitled to have those disputes submitted to the Commercial Court of Paris under art 24.2. As a matter of convenience, the other respondents would also have a right to invite the Court to exercise its discretion to stay the proceeding so that those disputes can be litigated before the Commercial Court of Paris. There is no evidence before me to suggest that the statutory claims against Luminex and the statutory claims against the other respondents would not be justiciable before the Commercial Court of Paris. Had there been evidence to that effect, that might have been a matter that would be relevant to the exercise of the discretion to grant a stay. However, in the absence of any indication that there is no jurisdiction or power for the Commercial Court of Paris to deal with any of the matters alleged in the statement of claim, that is a matter that I can ignore. 21 In all of the circumstances, I consider that it is appropriate to accede to the interlocutory application made on behalf of the respondents. I therefore propose to grant a stay as asked. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.