KC & Ors v Shiley Inc & Anor [1997] FCA 769 (12 August 1997)

FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE - anti-suit injunction - application by respondents to restrain applicants from continuing proceedings in the United States District Court - where United States District Court had previously granted a conditional stay of proceedings and retained jurisdiction in relation to conditions imposed - whether Federal Court has sole and exclusive jurisdiction with respect to the matter - whether proceedings before United States District Court will interfere with proceedings pending before Federal Court - where obstacles to discovery in Federal Court proceedings exist under United States law - consideration of international comity.

Hilton v Guyot [1895] USSC 185; 159 US 113 (1895), cited

Peruvian Guano Company v Bockwoldt (1893) 23 Ch D 225, cited

Bank of Tokyo Ltd v Karoon [1987] AC 45, cited

CSR Limited v Cigna Insurance Australia Limited (High Court of Australia, unreported, 5 August 1997), applied

National Mutual Holdings Pty Ltd v The Sentry Corporation (1989) 22 FCR 209, cited

Allstate Life Insurance Co v Australian and New Zealand Group Ltd (No 4) (1996) 42 FCR 61, cited

Societe Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] AC 871, cited

KC, KS, KF, and KL - v -

SHILEY INCORPORATED & PFIZER INCORPORATED

NO NG 633 OF 1993

TAMBERLIN J

SYDNEY

12 AUGUST 1997

IN THE FEDERAL COURT OF AUSTRALIA	)
	)
NEW SOUTH WALES DISTRICT REGISTRY	) NG 633 of 1993
	)
GENERAL DIVISION	)

BETWEEN:	KC First Applicant KS by her next friend KC Second Applicant KF by her next friend KC Third Applicant KL by her next friend KC Fourth Applicant
AND:	SHILEY INCORPORATED First Respondent PFIZER INCORPORATED Second Respondent

JUDGE:	TAMBERLIN J
PLACE:	SYDNEY
DATED:	12 AUGUST 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

The motion be dismissed with costs.

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	) NG 633 of 1993
	)
GENERAL DIVISION	)

BETWEEN:	KC First Applicant KS by her next friend KC Second Applicant KF by her next friend KC Third Applicant KL by her next friend KC Fourth Applicant
AND:	SHILEY INCORPORATED First Respondent PFIZER INCORPORATED Second Respondent

JUDGE:	TAMBERLIN J
PLACE:	SYDNEY
DATED:	12 AUGUST 1997

REASONS FOR JUDGMENT (ANTI-SUIT INJUNCTION)

The respondents have filed a Notice of Motion to restrain the applicants from continuing proceedings in California concerning the gathering of evidence in relation to proceedings before this Court.

The principal action before me is set down for hearing on 25 August 1997.

In 1994 the United States District Court for the Central District of Californian ("the Cailfornian Court") conditionally stayed, but did not dismiss, proceedings between the applicant and the second respondent ("Pfizer") on the ground of forum non conveniens. It expressly retained jurisdiction with respect to the matter.

Pfizer agreed to a number of conditions on the stay. These are known as the Stangvik Conditions. They include the following:

1. Submission to jurisdiction in Australia;

2. Compliance with discovery orders of the Australian courts;

3. Agreement to make past and present employees reasonably available to testify in Australia at defendants' costs if so ordered within the discretion of the Australian courts;

4. ......

5. Agreement to make documents in their possession in the United States available for inspection in Australia, as required by Australian law, at defendants' expense;

6. Agreement that depositions in the United States might proceed under section 2029; and

7. ......

On or about 21 July 1997 the applicant instituted proceedings in the Californian Court for orders that:

"1. Defendants in the Australian Federal Court proceedings KC et al. v. Shiley Inc. and Pfizer Inc. (hereinafter "Defendants") shall produce all lists of documents and indexes of documents in their possession.

2. Defendants shall produce all images and other computer records of documents in their possession.

3. Defendants shall produce the employee records of all persons who were involved in the welding, manufacturing and fabrication of the C/C artificial heart valve serial number 31ABCB 10039 which was implanted in the late `KA'.

4. Defendants shall produce all employee records of persons with the following employee numbers: 2295; 2500; 1056; 422, 1248.

5. Defendants shall produce all depositions taken in Dairyland Insurance Company v. Pfizer and Shiley Inc. and Seamen, et al. v. Pratt and Pfizer Inc. et al.

6. Defendants shall produce all documents produced on discovery by defendants in Dairyland Insurance Company v. Pfizer and Shiley Inc. and Seamen, et al. v. Pratt and Pfizer Inc. et al.

7. Defendants shall, insofar as any order is precluded by the operation of any protective order, take immediate steps to seek a modification or rescission of any such protective order as may be necessary to facilitate production pursuant to the terms of this court's order.

8. Defendants shall, insofar as any documents may be precluded from being produced by operation of any privacy law, take immediate steps, or take such steps as may be legally necessary, to overcome such legal barrier to the production of such records or documents.

9. Defendants shall file with the court an affidavit from Mr. Scott Pfifer, corporate counsel with Pfizer, Inc., detailing why documents in the defendants possession have not been produced in Australia in accordance with the terms of this Court's earlier order, the orders for discovery of the Australian Federal Court and the notices for production of documents served on the defendants in the Australian proceedings.

10. Defendants in the Australian litigation shall unconditionally comply with the Stangvik conditions."

Pfizer has now filed, in the Californian Court, a Memorandum of Points and Authorities in Opposition to the Motion. This is dated 28 July 1997. The matter is set down for hearing, as I understand it, before the Californian Court today, 12 August 1997.

Anti-Suit Injunctions

An anti-suit injunction is, of course, not directed against a foreign court but against the party who would invoke the court's jurisdiction. Nevertheless, the practical effect of the injunction impacts on the foreign court's exercise of jurisdiction and should not be granted without sufficient grounds being made out. In considering an application for such an injunction, it is important to bear in mind the need for comity between courts of different nations. This is especially so where the grant of an anti-suit injunction may violate orders made by a court of a foreign nation or breach the civil rights of citizens of that nation.

In Hilton v Guyot [1895] USSC 185; 159 US 113 at 163-164, the Supreme Court described comity as follows:

"`Comity', in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and goodwill upon the other. But it is the recognition which one nation allows with in its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws."

The power to grant an anti-suit injunction derives from equity and is not restricted to any fixed categories of circumstances. The discretion of the Court is wide and flexible.

The simple fact that there are coexistent proceedings in two or more different countries does not by itself justify the grant of an anti-suit injunction: Peruvian Guano Company v Bockwoldt (1883) 23 Ch. D 225 at 234. Normally, an applicant must establish that the proceedings sought to be stayed are vexatious, oppressive or involve harassment. A foreign proceeding will be held vexatious or oppressive if there is nothing which can be gained from its addition to what may be sought in the local proceeding: Bank of Tokyo Ltd v Karoon [1987] AC 45.

The principles which apply in respect of anti-suit injunctions were recently examined by the High Court in CSR Limited v Cigna Insurance Australia Limited (unreported, 5 August 1997). In that case the Court decided that proceedings instituted in New South Wales should be stayed because the respondent's dominant purpose in instituting those proceedings was to prevent the appellant from pursuing remedies available in the United States proceedings which were not available in the New South Wales proceedings. The majority held that the New South Wales proceedings were therefore oppressive.

In their judgment the majority, which comprised six members of the Court, said at 41:

"The counterpart of a court's power to prevent its processes being abused is its power to protect the integrity of those processes once set in motion. And in some cases, it is that counterpart power of protection that authorises the grant of anti-suit injunctions. Thus, for example, if "an estate is being administered ... or a petition in bankruptcy has been presented ... or winding up proceedings have been commenced ... an injunction [may be] granted to restrain a person from seeking, by foreign proceedings, to obtain the sole benefit of certain foreign assets". Similarly, as Gummow J pointed out in National Mutual Holdings Pty Ltd v The Sentry Corporation, a court may grant an injunction to restrain a person from commencing or continuing foreign proceedings if they, the foreign proceedings, interfere with or have a tendency to interfere with proceedings pending in that court.

The inherent power to grant anti-suit injunctions is not confined to the examples just given. As with other aspects of that power, it is not to be restricted to defined and closed categories. Rather, it is to be exercised when the administration of justice so demands or, in the context of anti-suit injunctions, when necessary for the protection of the court's own proceedings or processes."

The principles relating to anti-suit injunction have also been expounded and discussed in decisions of this Court. See National Mutual Holdings Pty Ltd v The Sentry Corporation (1989) 22 FCR 209; Allstate Life Insurance Co v Australian and New Zealand Banking Group Ltd (No 4) (1996) 64 FCR 61 at 65. Two other important authorities are Societe Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] AC 871; and Bank of Tokyo Ltd v Karoon (supra).

The Present Case

The respondents submit that this Court has sole and exclusive jurisdiction with respect to all aspects of the matter before me. I do not accept that this is the case. This Court clearly has jurisdiction and power to determine the matter but this does not of itself mean that no other court retains jurisdiction with respect to any aspect of the matter. In the present case the interpretation, effect and enforcement of the Stangvik Conditions involve, for example, matters in respect of which both this Court and the Californian Court have jurisdiction. The dispute as to exercise of such jurisdictional power depends on discretionary considerations as to appropriateness rather than issues of jurisdiction or power. In my view, it is not inappropriate for the Californian Court to determine questions concerning conditions imposed by it on United States corporations in relation to a proceeding which that Court has expressly retained jurisdiction.

The Stangvik Conditions were imposed by Judge Taylor of the Californian Court. He was the judge who granted the stay, but retained the Californian Court's jurisdiction, on the forum non conveniens application by Pfizer. His Honour noted that the Stangvik Conditions were the subject of unqualified agreement between the parties. The conditions on their face are directed to ensure that the applicants would not be placed under any undue procedural disadvantage if the stay of the United States proceedings was granted.

Since the conditions were integral to the granting of the application it is not inappropriate to enforce compliance with those conditions by application to the Californian Court where a proper case can be made out.

There is a dispute between the parties as to whether the Stangvik Conditions bind the first respondent ("Shiley"). This is also an appropriate matter for determination by the Californian Court.

The respondents further submit that the Motion before the Californian Court has a tendency to interfere with proceedings pending in this Court. Specifically the Motion seeks to "preempt, displace and interfere with the role of this Court as the maker and enforcer of its own interlocutory orders". The applicants should not be permitted to litigate the respondents' compliance with the orders of this Court before the Californian Court, particularly given the fact that this issue is currently before this Court. It is for this Court to decide whether its orders have been complied with. It is submitted that there are no circumstances which justify the applicants proceeding in two jurisdictions for what is the same, or substantially the same, relief.

In the present circumstances there appear, on the submissions and evidence, to be some obstacles to unqualified discovery under Californian or United States law arising from privacy rights and protective orders imposed in United States litigation involving Shiley or Pfizer. These reservations are in my view appropriate for consideration by the foreign courts. It is not appropriate for this Court, consistently with general principles of comity, to compel the production of employee records where there may be a breach of privacy rights of United States citizens conferred by the Constitution or laws of that country.

Likewise, it would not be in accordance with international comity to issue an order for production, which may violate a protective order made by a superior court of a foreign nation. There may of course be extreme circumstances where such action may be appropriate but the circumstances of the present proceedings do not disclose any such basis.

An important consideration is that this is not a case where there is nothing to be gained by the application to the Californian Court over and above what may be granted in the local proceedings. For example, only the relevant United States Court, not this Court, has the power to modify the protective orders. In the light of this consideration it cannot be said, as submitted by the respondents, that the United States proceeding merely duplicates the discovery motion presently before this Court.

The orders sought in the Californian proceedings do not interfere with the integrity of this Court or with the exercise of jurisdiction by this Court. Nor can they be said to be vexatious or oppressive. There is no suggestion of harassment. The orders sought are designed to obtain material in the United States from United States corporations some of which appear to be subject to constraints under United States laws concerning production of documents. The orders are also designed to ensure compliance with the Stangvik Conditions imposed by Judge Taylor as a condition of the earlier stay.

The respondents have filed their Memorandum and Points and Authorities in Opposition to the Motion. There is no sound reason why the questions cannot properly be argued and determined by the Californian Court. No doubt, the respondents will have full opportunity to advance their submissions before that Court and there can be no suggestion of any unfair advantage to the applicant if the anti-suit injunction is not granted by this Court.

The refusal of an anti-suit injunction to restrain the gathering of evidence cannot, of course, be taken as any indication or decision that any material gathered as a result of any order of the foreign court will be admitted into evidence in the Australian proceedings. Admissibility is another question entirely.

In summary, in my opinion, the respondents have not demonstrated any equity or sufficient basis to warrant this Court granting an anti-suit injunction against the applicants in relation to the motion presently pending before the Court in California. I therefore dismiss this motion with costs.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin

Associate:

Dated: 12 August 1997

Counsel for the Applicant:	Mr B H K Donovan QC Mr M L Williams
Solicitor for the Applicant:	Cashman and Partners
Counsel for the Respondent:	Mr R J Ellicott QC Mr J V Nicholas
Solicitor for the Respondent:	Freehill Hollingdale & Page
Date of Hearing:	8 August 1997
Date of Judgment:	12 August 1997