FEDERAL COURT OF AUSTRALIA Zapf Creation AG v OWT Australia Pty Ltd [2001] FCA 759 PRACTICE AND PROCEDURE – discovery – documents in the possession, power or control of third parties – whether there is a real likelihood that the party against whom discovery is sought would be given access to the documents by a third party upon request – where close relationship between the party against whom discovery is sought and a third party Federal Court of Australia Act 1976 (Cth) s 23 Sabre Corporation Pty Ltd v Russ Kalvin's Hair Care Co (1993) 27 IPR 372, followed F Hoffmann–La Roche AG v Chiron Corporation (2000) 47 IPR 516, cited Twentieth Century Fox Film Corporation v South Australian Brewery Co Ltd (1996) 66 FCR 451, considered ZAPF CREATION AG and ZAPF CREATION (HK) LTD v OWT AUSTRALIA PTY LTD N 740 of 2000 BRANSON J 28 JUNE 2001 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 740 of 2000 BETWEEN: ZAPF CREATION AG FIRST APPLICANT ZAPF CREATION (HK) LTD SECOND APPLICANT AND: OWT AUSTRALIA PTY LTD RESPONDENT JUDGE: BRANSON J DATE OF ORDER: 28 JUNE 2001 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The respondent take all reasonable steps available to it to obtain copies of documents which are in the possession, power or control of any of: (a) Oriental World Trading Company Limited; (b) OWT International Ltd; (c) OWT (Europe) Ltd; and which fall within the categories of documents numbered (ii) and (iii) in the letter from the applicants' solicitor to the respondent's solicitor dated 3 October 2000. 2. The respondent by one of its directors, with personal knowledge of the matters deposed to, file and serve an affidavit within 21 days of the date of this order in which he or she: (a) deposes to the efforts it has made to obtain the documents or copies of the documents referred to in order 1 above, including details of each of its requests to any of the said companies and any other person or entity and their responses thereto; (b) annexes any of the responses referred to in sub-paragraph (a) which are in writing; and (c) exhibits all documents produced within the category and which have been furnished to it in response to the requests made in accordance with order 1 hereof. 3. Costs of and incidental to the notice of motion of 3 May 2001 be reserved. 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 740 of 2000 BETWEEN: ZAPF CREATION AG FIRST APPLICANT ZAPF CREATION (HK) LTD SECOND APPLICANT AND: OWT AUSTRALIA PTY LTD RESPONDENT JUDGE: BRANSON J DATE: 28 JUNE 2001 PLACE: SYDNEY REASONS FOR JUDGMENT INTRODUCTION 1 In this proceeding the applicants allege that the respondent has passed off products as being those of the applicants or as being associated with the applicants' products or as having the endorsement, approval or sponsorship of the applicants when they do not. The applicants seek declaratory relief, orders restraining the respondent from continuing to engage in the conduct of which they complain and, at the applicants' option, an account of profits or an award of damages. The applicants' claims based on the allegations of passing off are mirrored by claims made under the Trade Practices Act 1974 (Cth). For present purposes it is sufficient to note that the applicants, or one of them, manufacture, distribute, market and sell dolls known as "Baby Born" and "New Born Baby" dolls. The respondent has imported or caused to be imported into Australia, distributed and sold dolls known as "New Born Baby" dolls. 2 The applicants have moved the Court, pursuant to a notice of motion dated 3 May 2001, for orders intended to ensure the production to them of documents in the possession of companies other than the respondent. The companies from which the applicants seek to obtain documents are not registered in Australia. However, the applicants contend that they are companies closely connected with the respondent. The orders sought by the applicants would require the respondent to take steps to obtain possession of copies of the relevant documents from the other companies and then to make discovery of the copy documents in this proceeding. 3 Section 23 of the Federal Court of Australia Act 1976 (Cth) ("the Federal Court Act") provides: "The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate." 4 It is not in dispute that s 23 of the Federal Court Act gives the Court power to make an order of the kind here sought (see Sabre Corporation Pty Ltd v Russ Kalvin's Hair Care Co (1993) 27 IPR 372). However, the respondent contends that it would not be an appropriate exercise of the Court's power for the Court make the orders sought by the applicants. 5 The categories of documents which the applicants seek are the following: All documents, including internal and external memoranda, notes, minutes, e‑mails, correspondence, reports and communications recording, evidencing, relating to or concerning: · The development and design of any functional and play dolls and related clothing and other accessories, including but not limited to products marketed under the NEW BORN BABY mark (the "Products") · The Applicant and its products sold under the BABY BORN and NEW BORN BABY marks, including the extent to which the information concerning such products was referred to or used in developing, designing or marketing the Products. 6 The applicants seek orders which include an order that the respondent take all reasonable steps available to it to obtain copies of documents which fall within the above categories which are in the possession, power or control of any of: · Oriental World Trading Company Limited (incorporated in Hong Kong); · OWT International Ltd (incorporated in the British Virgin Islands); and · OWT (Europe) Ltd (incorporated in the British Virgin Islands). 7 It is necessary to consider whether it is likely that an order of the kind sought by the applicants would have any utility in this case. 8 The applicant placed reliance on catalogues published in respect of dolls associated with the respondent. The NEW BORN BABY 1999 and 2000 catalogues each carry a distinctive mark ("the Mark") with "OWT International" beneath it. Beside the Mark and "OWT International" are details under the respective headings "ASIAN HEADQUARTER", "EUROPEAN OFFICE" and "AUSTRALIAN OFFICE". The address appearing under the heading "AUSTRALIAN OFFICE" is the principal place of business of the respondent. The address appearing under the heading "ASIAN HEADQAURTER" is the address of Oriental World Trading Company Limited. 9 An ASIC company extract concerning the respondent discloses that Edgar James Croucher ("Mr Croucher") is a director of the respondent having been so appointed on 12 February 1998. The company extract also discloses that OWT International Limited has a significant shareholding in the respondent. 10 I am satisfied that Mr Croucher, as well as being a director of the respondent, is the Chief Executive Officer of Oriental World Trading Company Limited. I am also satisfied that OWT International Ltd has a significant shareholding in Oriental World Trading Company Limited. 11 Invoices issues by Oriental World Trading Company Limited bear the Mark and describe the company as "An OWT International business". The respondent has used "letterhead" which similarly bears the Mark and describes the respondent as "An OWT International business". 12 I am satisfied that there is an association between the respondent and each of Oriental World Trading Company Limited, OWT International Ltd and OWT (Europe) Ltd. The association between the respondent and Oriental World Trading Company Limited is a close one in that Mr Croucher is both a director of the respondent and the Chief Executive Officer of Oriental World Trading Company Limited. 13 In my view the above facts indicate that it is likely that the respondent would ordinarily be given access to documents for which it would show a legitimate business need by other companies forming part of the "OWT International" group of companies. 14 In Sabre v Russ Kalvin, Lockhart J at 376 said that the power to direct a party to take steps to obtain access to and discover documents which are in the possession, power or control of a third party "may be exercised where there is a real likelihood that the party to the proceeding against whom the order is made would be given access to the documents by the third party upon request" (see also F Hoffmann–La Roche AG v Chiron Corporation (2000) 47 IPR 516 at 520). The justification for the exercise of the power in a case of this kind will ordinarily be that, where companies operate as a group, the purposes intended to be served by orders for discovery ought not to be frustrated because relevant documents are, or may be, held by a member of the group other than the litigants. I do not understand Lockhart J to have intended in Sabre v Russ Kalvin to say that the power of the Court to make an order of the kind here sought is limited to circumstances in which the order is likely to result in the party to the proceeding actually being given access to one or more documents. In litigation it can be of value to one party to learn from another through the process of discovery that there are no discoverable documents within a particular category. His Honour is to be understood, in my view, as indicating that the Court will ordinarily not make an order unless the order is likely to have some utility. That is, on an application such as the present, the Court will not order a party to take steps which are not likely to lead to its becoming known what, if any, relevant documents are in the possession of the third party, and, assuming there to be some relevant documents in the possession of the third party, to copies of such documents being provided to the party. 15 In this case the respondent has placed in evidence correspondence between it and Oriental World Trading Company Limited, OWT International Ltd and OWT (Europe) Ltd respectively which was entered into after the filing of the applicants' notice of motion. The correspondence indicates that the respondent has asked each of the companies whether it has, or can obtain, any documents of the kind that the applicants seek. In each case a negative reply has been received, although in the case of OWT (Europe) Ltd the reply was limited to documents relating to the design and development of the respondent's doll product. I am not satisfied by this correspondence that no utility would attach to the making by the Court of the orders sought by the applicants. The correspondence did not, understandably, make any reference to a Court order and may not have caused its recipients to understand that the respondent had a genuine desire to learn of the existence of the documents identified in the correspondence. Further, neither the respective authors of the correspondence nor any director of the respondent faced, at the time of the correspondence, an obligation to swear to the truth of the facts set out in the correspondence. 16 The respondent has given discovery of documents falling within the categories outlined above. Nonetheless, it contended on this motion that the subjective intent of the respondent is not relevant to any cause of action pleased against it and that for this reason the motion should be dismissed. However, as Tamberlin J observed in Twentieth Century Fox Film Corporation v South Australian Brewery Co Ltd (1996) 66 FCR 451 at 466: "Intention to take advantage of the goodwill of another does not of itself establish a cause of action, nor can there be a monopoly in the use of an ordinary English word. A court will, however, more readily infer where there is intention, that the promoters who know the field of business well, were justified in entertaining the hope or expectation that the attempt would succeed and it assists the conclusion that the public was so influenced …." (citations omitted) 17 If documents produced by a member of the "OWT International" group other than the respondent were to disclose an intention to take advantage of the goodwill of the applicants, or one of them, they would not necessary be inadmissible in evidence in the proceeding on the basis that they could not be used as a basis for imputing any intention to the respondent. The principle to which Tamberlin J referred in the Twentieth Century Fox Film Corporation case is not limited by any requirement that the intention be that of the party defending the claim of passing-off or misleading or deceptive conduct. 18 I am satisfied that in all of the circumstances it is appropriate to make orders of the kind sought by the applicants. The question of the costs of the motion will be reserved until such time as the orders to be made on the motion have been complied with. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson. Associate: Dated: 28 June 2001 Counsel for the Applicants: Mr RJ Webb Solicitor for the Applicants: Baker & McKenzie Counsel for the Respondent: Mr S Burley Solicitor for the Respondent: Mallesons Stephen Jaques Date of Hearing: 12 June 2001 Date of Judgment: 28 June 2001