Sheldon & Hammond Pty Ltd v Metrokane Inc [2002] FCA 1561

FEDERAL COURT OF AUSTRALIA

Sheldon & Hammond Pty Ltd v Metrokane Inc [2002] FCA 1561

PRACTICE AND PROCEDURE – video link for testimony from overseas and interstate witnesses – two witnesses too ill to travel by air to Sydney – increase in security for costs.

Federal Court of Australia Act 1976 (Cth) s 47A – 47G Copyright Act 1968 (Cth) s 202(1) Trade Practices Act 1974 (Cth) ss 52 and 53(g)

Laporte Group Australia Ltd v Vatselias (Supreme Court of NSW, unreported, 15 November 1991) cited Lamesa Holdings BV v Commissioner of Taxation (Federal Court of Australia, unreported, 30 July 1998) cited Mewett v Commonwealth of Australia [1998] FCA 1360 cited Tetra Pak Marketing Pty Ltd v Musashi Pty Ltd [2000] FCA 1261 cited Versace v Monte [2001] FCA 1454 cited Australian Competition And Consumer Commission v World Netsafe Pty Ltd [2002] FCA 526 cited SHELDON & HAMMOND PTY LTD v METROKANE INC N 634 OF 2002 CONTI J 16 DECEMBER 2002 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 634 OF 2002

BETWEEN: SHELDON AND HAMMOND PTY LTD (ACN 076 567 989)

APPLICANT

AND: METROKANE, INC

RESPONDENT

METROKANE, INC

CROSS-CLAIMANT

SHELDON AND HAMMOND PTY LTD (ACN 076 567 989)

CROSS-RESPONDENT

JUDGE: CONTI J

DATE OF ORDER: 16 DECEMBER 2002

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. At the hearing of the proceedings commencing 24 March 2003, any testimony of Mr Edward Kilduff to be adduced by the respondent be given in person at the Federal Court of Australia in Sydney. 2. At the hearing of the proceedings commencing 24 March 2003, any testimony of Mr Robert Larimer to be adduced by the respondent be given by video link from New York in the United States pursuant to s 47A(1) of the Federal Court of Australia Act 1976 (Cth). 3. At the hearing of the proceedings commencing 24 March 2003, any testimony of Mr Daniel Simons to be adduced by the respondent be given in person at the Federal Court of Australia in Sydney, or, if so requested by reason of medical circumstances then prevailing, in Brisbane. 4. The respondent provide within 21 days of the date of this order further security for costs in favour of the applicant by way of payment into Court of the sum of $26,000. 5. The respondent produce to the applicant's solicitors on or before 24 December 2002 the documents set out in the schedule to these orders. 6. To the extent that the respondent does not presently have the documents referred to in order 5 above, the respondent make such requests and do such things as may be necessary to obtain from: (a) Mr Kilduff; (b) Link Product Design. Inc. (c) Pollen Design. The documents referred to in the Schedule and produce those documents to the applicant's solicitors on or before 24 December 2002. 7. The costs of the present applications be reserved. 8. Liberty be granted to either party to apply in relation to these orders on 3 days' notice. SCHEDULE (a) Copyright Registration No. V81023-879 referred to in Exhibit "BL-9" to Mr Larimer's affidavit sworn 7 November 2002; and (b) documents evidencing the break-up of the entire design fees and mold fees attributable to the RABBIT corkscrew referred to in paragraph 27 of Mr Kilduff's affidavit sworn 7 November 2002. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 634 OF 2002

BETWEEN: SHELDON AND HAMMOND PTY LTD (ACN 076 567 989)

APPLICANT

AND: METROKANE, INC

RESPONDENT

METROKANE, INC

CROSS-CLAIMANT

SHELDON AND HAMMOND PTY LTD (ACN 076 567 989)

CROSS-RESPONDENT

JUDGE: CONTI J

DATE: 16 DECEMBER 2002

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 The following motions for interlocutory orders are before the Court for resolution in relation to the final hearing of the principal proceedings set down for hearing for the week commencing 24 March 2003: (i) that the evidence proposed to be adduced by the respondent/cross-claimant ("Metrokane") from Robert Larimer, Edward Kilduff and Daniel Ian Simons by way of cross-examination and re-examination, and also by way of any further examination in chief which may be required, be taken by video link; (ii) that the existing order for security for costs to be provided by Metrokane in favour of the applicant/cross-respondent ("Sheldon") be increased by $26,000.00. 2 The authority of the Court to permit the giving of testimony by video link is conferred and regulated by ss 47A to 47G of the Federal Court of Australia Act 1976 (Cth). By subs 47A(1), it is provided that "[t]he Court or a Judge may, for the purposes of any proceeding, direct or allow testimony to be given by video link, audio link or other appropriate means". 3 Earlier on 22 October 2002, the solicitors for Sheldon and also Metrokane signed a form of consent order to the effect that Metrokane provide security for costs by way of payment into Court of the sum of $50,000.00. That order was formally made in Chambers by the Court on 23 October 2002 in conformity with that signed consent order. Metrokane is an overseas resident corporation, with apparently no assets of substance located in Australia. 4 In the context of the Sheldon's application for increased security for costs, Sheldon also seeks the following further orders: "3. The Respondent on or before 11 December 2002 produce to the Applicant's solicitors the documents set out in the schedule to these orders. 4. To the extent that the Respondent does not presently have the documents referred to in order 3 above, that the Respondent makes such requests and do such things as may be necessary to obtain from: (a) Mr Kilduff; (b) Link Product Design, Inc.; (c) Pollen Design; the documents referred to in the Schedule and produce those documents to the Applicant's solicitors on or before 11 December 2002 … SCHEDULE (a) Copyright Registration No V81023-879 referred to in Exhibit "BL-9" to Mr Larimer's affidavit sworn 7 November 2002; and (b) documents evidencing the break-up of the entire design fees and mold fees attributable to the RABBIT corkscrew referred to in paragraph 27 of Mr Kilduff's affidavit sworn 7 November 2002." I do not understand there to be any opposition to the making of these orders, but in any event, I propose to grant liberty to apply in relation to all orders which I will make in the context of the present applications. 5 The principal cause of action pleaded by Sheldon is that Metrokane has made groundless threats of taking legal proceedings against Sheldon for infringement of Metrokane's copyright in an artistic work, or more specifically a work of artistic craftsmanship, comprising a certain corkscrew, being the cause of action stipulated by s 202(1) of the Copyright Act 1968 (Cth). A further cause of action is pleaded by Sheldon against Metrokane for conduct in contravention of ss 52 and 53(g) of the Trade Practices Act 1974 (Cth). By virtue of the terms of s 202(1) of the Copyright Act, if Sheldon can establish prima facie the making of unjustified threats by Metrokane to take action or proceedings against Sheldon for infringement, the task would effectively devolve upon Metrokane of establishing that Sheldon's conduct complained of constituted an infringement of copyright. Apart from declaratory relief, Sheldon seeks injunctions restraining Metrokane from further making any such threats of infringement proceedings, and additional relief by way of an award of damages. 6 The circumstances propounded as the basis for the taking of the evidence of Messrs Larimer and Kilduff in cross-examination, re-examination and any further examination in chief, are partly stated in the affidavit of Metrokane's solicitor of 3 December 2002, the material provisions whereof reading as follows: "6. Both Mr Larimer and Mr Kilduff are residents of New York City in the United States. The business of the Respondent is situated at 964 Third Avenue New York City. The Respondent's business, which is based in New York, primarily involves the sale and distribution of high quality housewares including home products, wine products and bar accessories. 7. I am instructed that it is necessary for both Mr Larimer and Mr Kilduff to be present in New York City to attend to the requirements of the respondent's business in December. It will be difficult, and costly, for Mr Larimer and Mr Kilduff to leave their respective businesses in New York City to come to Australia for the trial of this action from 15 to 18 December 2002. In particular, I am instructed that: 7.1 the period of the year from Thanksgiving (28 November) to Christmas is the respondent's busiest trading period of the year. Many of the respondent's products are promoted and sold as gifts; 7.2 to promote its sales the respondent conducts substantial television advertising. Mr Larimer oversees and manages this advertising which requires him to be closely involved in the process. For example, the respondent provides "dealer tags" for many of its advertisements. Dealer tags are advertisements which are customised to include the name of the retailer at the end of the commercial. They are an inducement for retailers to place orders for the respondent's products, as the retailer benefits from being named in the respondent's commercial. Negotiation and organisation of dealer tags is typically conducted at the "last minute" throughout the pre-Christmas period. 7.3 Mr Kilduff is also involved in the respondent's advertising program, as he is responsible for designing the graphics for the dealer tags, which is done at short notice, often overnight. 7.4 The biggest trade show in the respondent's line of business is held in Chicago each year. The next trade show will be held from 12 to 15 January 2003. The respondent will conduct its annual sales meeting just prior to the trade show on 11 January. The respondent is in the midst of preparing for the trade show and sales meeting. 7.5 For the upcoming trade show the respondent intends to launch 3 important new products and both Mr Larimer and Mr Kilduff are required to refine the new products and prepare new catalogues and new exhibits for the respondent's exhibit at the show. 7.6 in order to travel to Australia for the trial, Mr Larimer and Mr Kilduff would have to be absent from the respondent's business for 7 full working days from 13 to 20 December 2002; 7.7 the cost of travelling from New York City to Australia at that time is $7,882 per person made up of: (a) $6,932 for an economy fare with Qantas; and (b) five nights accommodation at $190 per night at the Grace Hotel, Sydney." 7 Specifically in relation to Mr Larimer, a statement purportedly made on 4 December 2002 by Dr Goldberg of New York, Mr Larimer's cardiologist, and attached to a further affidavit of Metrokane's Australian solicitor, reads as follows: "Mr Robert Larimer is a patient under my professional care. On August 7, 2002 patient underwent quadruple coronary artery bypass grafting at North Shore University Hospital in Manhasset, New York. He continues to recuperate at home and has been restricted from all travel until further notice." 8 In relation to Mr Simons, who resides in a suburb of Brisbane, Metrokane's solicitor has provided the following material, in relation to Mr Simons, in an affidavit of 6 December 2002 containing the following: "4. On 5 December 2002 I was informed by Daniel Simons, who has sworn an affidavit on behalf of the respondent, which was filed on 12 November 2002, that: 4.1 he has, within the last 6 weeks, been diagnosed with a disease, which is a disorder of the immune system, known as sarcoidosis. 4.2 As a result of having contracted this disease, he has lost between 30-40% of his lung capacity. 4.3 Mr Simons' doctor has prescribed a course of treatment which will involve taking very high doses of steroids. 4.4 The course of treatment will be conducted over a period of several weeks and includes the dates which have been set for trial. 4.5 Mr Simons may experience any number of a range of side effects from the course of treatment. However it is not possible to anticipate how he might be affected by the treatment. 4.6 He has received medical advice to the effect that he will be unable to travel to Sydney for the hearing while undergoing the course of treatment. 4.7 He expects to be well enough to give evidence by video link or by telephone and if an order is made in that regard, will do all things necessary to comply." Mr Simons' affidavit of 8 November 2002 discloses that he has been the exclusive distributor in Australia of Metrokane's product range. 9 On the basis of the evidence of Metrokane's solicitor extracted above, and the authorities cited in support of Metrokane's application, Metrokane contended that it has made out a case for the testimony of Messrs Larimer, Kilduff and Simons to be taken by video link. Metrokane has undertaken to meet the entire cost of arranging and conducting the requested video link facility. Those authorities, and the dicta cited therefrom, include the following: (i) Laporte Group Australia Ltd v Vatselias (Supreme Court of NSW, unreported, 15 November 1991), where Young J said as follows: "It is clear that the plaintiff would be caused great expense in bringing the two witnesses to Sydney for what will probably be a cross examination lasting in each case about an hour. The witnesses themselves will also be greatly inconvenienced. Whilst once such inconvenience to witnesses was thought by courts to be of little significance, I think the prevailing view in the Court is that, consistently with the proper administration of justice, it is most proper to take witnesses' convenience into account." (ii) Lamesa Holdings BV v Commissioner of Taxation (Federal Court of Australia, unreported, 30 July 1998), where Sackville J of this Court said as follows: "On balance, I think that Mr Schneider and Mr Annick should give their evidence in person. Had there been evidence that either of them would suffer disruption to or see (sic) inconvenience in their professional or personal lives I may well have taken a different view. But there was no such evidence. The circumstances of the present case are different from cases to which I have referred in which the court made an order for the taking of evidence by video-link. In B v Dentists Disciplinary Tribunal, evidence was to be given by an eminent medical specialist in Texas, who was unable to leave his practice in order to travel to New Zealand. In Bayer v Minister, the witness was also an expert. In Sunstate the witness was president of a large corporation in the United States and there was evidence that to require his presence in Australia would be disruptive of the business for which he was responsible. Moreover, his evidence was not regarded as crucial. In Woodside, the witness, who was in Texas, was unwell and was likely to find it difficult to travel to Australia. Nothing I have said should be taken as indicating that evidence by video-link will always be inappropriate if a witness' credit is likely to be challenged." (iii) Mewett v Commonwealth of Australia [1998] FCA 1360, where Katz J said as follows: "In the circumstances, I am satisfied that the applicant is presently unable, for health reasons, to travel to Australia to give evidence. If I had not been so satisfied, it appears to me that the appropriate course would have been for me to dismiss the motions both of the applicant and of the Commonwealth. However, as I am so satisfied, I must now decide which of the alternative courses urged by the parties is the more likely to promote the interests of justice in the present proceedings. Should the Court take by video link from England the evidence, restricted to the limitation issues, of the applicant, his wife and Dr Bowman, as the Commonwealth urges, or should it instead travel to England to take the evidence of those witnesses on all issues simultaneously, as the applicant urges? In either event, should the Commonwealth be required to bear, in the first instance at least, the cost of such procedure, excluding the applicant's own legal costs and disbursements? I have decided that the preferable course in all the circumstances is that urged by the Commonwealth, but on the basis that it should bear, in the first instance at least, the cost of such procedure, excluding the applicant's own legal costs and disbursements." (iv) Tetra Pak Marketing Pty Ltd v Musashi Pty Ltd [2000] FCA 1261 where at [25], Katz J said as follows: "… I find a strong current of authority in favour of permitting the relatively new video link technology to be used, in the absence of some considerable impediment telling against its use in a particular case. I do not find in this case, having regard to the matters put to me by counsel for the respondents, anything sufficiently out of the ordinary to cause me not to permit Dr Roulin's evidence to be taken by video link." (v) Versace v Monte [2001] FCA 1454, where at [16], Tamberlin J said as follows: "…Generally speaking, given the advanced state of video link technology and because of the convenience of this procedure and the savings in time and cost it provides, a substantial case needs to be made out to warrant the Court declining to make an order for evidence to be taken by video link, especially where evidence is adduced from various witnesses:…" After citing the passage in Tetra Pak Marketing extracted in sub-par 9(iv) above, Tamberlin J concluded at [17] as follows: "There is no considerable impediment in this instance, nor is the present case out of the ordinary insofar as the use of video link technology is concerned." 10 Sheldon responded first by citing what was said by Spender J in Australian Competition And Consumer Commission v World Netsafe Pty Ltd [2002] FCA 526 at [7] and [10] respectively as follows: "Notwithstanding observations in those cases that there is essentially no real difference between evidence by video-link and viva voce evidence, I disagree, and I think it right to recognise that there are deficiencies when evidence is taken by video-link when compared with evidence given viva voce. … In my opinion, the fact that the ACCC will not be able to rely on Mr McCluskey's evidence at all unless he is cross-examined by video-link is a good reason why cross-examination - with the deficiencies that I believe attend cross-examination by video-link - should be permitted by that method." 11 The respective judicial views extracted above are not in my opinion in substantial conflict. Much may depend on the nature, and implications to either or both parties, of the testimony proposed to be given by video link. 12 Sheldon vigorously opposed the taking of evidence from any of the three Metrokane witnesses identified above by video link, principally for the reason that there will be lengthy and intensive cross-examination of each of the three persons in question by way of challenge to their respective affidavit testimonies, being cross-examination which will necessarily require the presentation to each witness of physical instruments or objects of relevance. Moreover Sheldon has foreshadowed the likelihood of credibility issues being raised in cross-examination of each of those three persons. Incidentally, the affidavit evidence of those three persons comprises the totality of the testimony which Metrokane proposes to adduce at the hearing of the proceedings. 13 I am of the view that in the light of the adverse medical condition of Mr Larimer, I should receive his further testimony by video link, subject to two conditions. The first is that Dr Goldberg should provide an affidavit, and not merely, as at present, an unsworn statement. The second is that any additional or supplementary evidence in chief should take the form of a further affidavit to be provided by Metrokane well in advance of the altered date for commencement of the final hearing, so that Mr Larimer's evidence by video link can be confined to cross-examination and re-examination. Of course, all documents and other exhibits must be in Mr Larimer's hands prior to the day when the video link is to be undertaken. 14 The circumstances appertaining to Mr Kilduff are different, in that although he also resides and carries on business in the United States, he is not subjected to any medical inhibitions in relation to air travel to Australia. Moreover the business inconvenience of which he has complained and which he would sustain by travelling to Australia immediately prior to the Christmas vacation has been substantially ameliorated, so I would infer, by the recent adjournment of the hearing of the proceedings from 16-18 December 2002 to the week commencing 24 March 2003. In all the circumstances, I would not be prepared to make an order for the taking of evidence from Mr Kilduff in the United States by video link. 15 Mr Simons' personal circumstances present more of a dilemma. His serious medical condition would seriously inhibit his capacity for travel to Sydney by aircraft, albeit only from Brisbane where he resides. Yet as Metrokane's distributor in Australia, he will be undoubtedly subjected to lengthy cross-examination. Subject to Mr Simons providing adequate medical evidence by affidavit of his treating medical practitioner (the existing medical evidence taking a hearsay form provided by Metrokane's solicitor), I would be prepared in principle for his cross-examination and re-examination to take place in the Federal Court in Brisbane, if there is no substantial improvement in his physical well being in the meantime. It follows that Mr Simons' cross-examination and re-examination should not take place by way of video link. 16 The remaining pre-trial issue presently required to be resolved relates to the subject of the increased security for costs required by Sheldon. Adopting a broad perspective of the issues arising in this litigation, the pre-trial procedures yet to be implemented, and the inherent likelihood that the hearing will last beyond the original 3 day estimate, I think that Sheldon has established a case on the evidence it has tendered for an increase in security to the further level summarised in [1(ii)] above. Moreover for the reasons indicated in [5] above, Sheldon's status relevantly is that of a respondent. 17 I will therefore make orders to give effect to these reasons. For the time being, the question of the costs of the present applications should be reserved, particularly since it is apparent that further interlocutory proceedings will take place prior to the hearing. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti.

Associate: Dated: 16 December 2002

Counsel for the applicant: R Cobden

Solicitor for the applicant: Sprusons Solicitors

Counsel for the respondent: D Grigg

Solicitor for the respondent: Gadens Lawyers

Date of Hearing: 6 December 2002

Date of Judgment: 16 December 2002