33 South Pty Ltd v Fitzgerald

REASONS FOR JUDGMENT 1 These proceedings involve an appeal against a decision of the Federal Magistrates Court that the appellants pay damages of $26,000 for breach of the Trade Practices Act 1974 (Cth) and costs, as well as associated orders for delivery up of items associated with the sale of a t-shirt known as the yellow 33 South t-shirt. The appellants have filed a notice of motion seeking a stay of the orders of the Federal Magistrates Court. The respondents have filed a notice of motion seeking an order that the appellants provide security in the sum of $37,963 within 14 days failing which the appeal should be dismissed (relying on s 56 of the Federal Court of Australia Act 1976 (Cth) and s 1335 of the Corporations Act 2001 (Cth)). The appeal is to be heard by a single judge as provided for in s 25(1A) of the Federal Court of Australia Act. 2 The principal claims in the amended notice of appeal filed 26 September 2008 are that the primary judge erred in finding that: - (i) the use of Terry Fitzgerald's name and image on the yellow 33 South t-shirt conveyed a representation that there was an association between Terry Fitzgerald and the production and offering of the t-shirt, and (ii) a reasonable consumer in the relevant class would assume that Mr Fitzgerald had sanctioned, permitted or allowed the production and sale of the impugned t-shirt. 3 The primary judge found (amongst other things) that: - (i) the relevant class of consumer was purchasers of surfboards and surf related products, (ii) amongst this group Mr Fitzgerald is well known as is his association with Hot Buttered International Pty Limited, (iii) with reference to all of the evidence, the use of Mr Fitzgerald's name and image on the yellow 33 South t-shirt was conduct misrepresenting to a reasonable member of the relevant class that Mr Fitzgerald had some association with the production and sale of the t-shirt. 4 The appellants submitted that the grant of a stay does not require special or exceptional circumstances and a court will ordinarily grant a stay where the appeal would otherwise be rendered nugatory (Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 693 and 695). In this case the issue of misleading and deceptive conduct "must be answered by an objective assessment of the overall impression" created by the impugned t-shirt on the relevant class (Honey v Australian Airlines Ltd (1990) 18 IPR 185 at 193). There is a need to show error on appeal but demonstrating error depends "not only on the evidence, but also on the nature of the findings or conclusions made by the primary judge" (Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [24]). Further, "even if the question is one of impression or judgment, a sufficiently clear difference of opinion may necessitate" the conclusion that the decision is wrong (Branir v Owston Nominees at [29]). In this case there were real prospects of success. There is no dispute on the evidence that the appellants are impecunious. The litigation had materially contributed to the appellants' parlous financial situation. Denying a stay or ordering security would deny the appellants the capacity to appeal. The respondent's submissions about the interests of unsecured creditors and the licensor of the magazine covers shown on the 33 South t-shirts were unrealistic. The factors relied on by the respondents as relevant to the making of an order for security on an appeal set out in Cultivaust Pty Ltd v Grain Pool Pty Ltd [2004] FCA 1366 at [13] in fact favoured the appellants. 5 The respondents submitted that: - (i) they had succeeded at first instance but neither their costs nor damages had been paid, (ii) the position on appeal is different from initial proceedings as explained in Tait v Bindal People [2002] FCA 322 at [3] and [4], (iii) in this case there would be unfairness to the respondents as they are unlikely to be able to recover their damages and costs in any event and yet will be put to the cost of a further appeal, (iv) the amended notice of appeal does not identify any error of principle or the application of any incorrect test but concerns findings of fact based on the whole of the evidence, (v) accordingly, the prospects of success on appeal were poor and the proceedings involved no question of public interest, (vi) the evidence did not prove that the respondents caused the appellants to become impecunious, (vii) the appellants had managed to fund the hearing below whilst in a parlous financial state, (viii) many cases involved the making of an order for security on appeal even where the result would be to stifle the appeal, and (ix) the appeal would benefit creditors and the licensor of the magazine covers printed on the yellow 33 South t-shirt and it had not been demonstrated that they could not fund the appeal. 6 In Tait v Bindal People [2002] FCA 322 at [2] - [4] Spender J said: 2 The position in relation to security for costs in the present matter is governed by s 56 of the Federal Court of Australia Act 1976 (Cth). Section 56 provides that security is to be of such amount and given at such time and in such manner and form as the Court or Judge directs. As to whether security for costs should be ordered, Cowell v Taylor (1885) 31 Ch D 34 at 38, a case of more than 100 years ago, sets out the fundamental principle: "The general rule is that poverty is no bar to a litigant, that, from time immemorial, has been the rule at common law. There is an exception in the case of appeals, but there the appellant has had the benefit of a decision by one of Her Majesty's Courts, and so an insolvent party is not excluded from the Courts, but only prevented, if he cannot find security, from dragging his opponent from one Court to another". 3 What that passage demonstrates is that there is a difference in principle in relation to the ordering of security for costs in a first instance matter and the ordering, or the consideration of the ordering, of security for costs where one is at the appellate level. The difference is that, at the appellant level, there has already been a determination adverse to the person against whom security for costs is sought and, if it be shown that there is a substantial risk that even if successful the respondent to the application for leave to appeal, or to an appeal, will be deprived of his costs, such an outcome would clearly be unjust. 4 In a sense, it would be giving to a person who has been on the receiving end so to speak of a determination by the courts a free hit at great cost to the other party in the appeal proceedings. That consideration, it seems to me, is also reinforced by the judgment of Gummow J in Wiest v Director of Public Prosecutions and Anor (1988) 23 FCR 472. That case involved appeals against extradition with penal consequences. Such consequences were clearly very relevant considerations, but discretionary reasons moved the Court to order security for costs. Such discretionary considerations, which were particularly noted by Gummow J, included the delay between the filing of the papers and the bringing of the applications for security. His Honour referred to a particular circumstance which is relevant here, and that is that the applicant for security has a judgment in its favour. There was a reference by Gummow J to Bethune v Porteous (1892) 18 VLR 493, again an old case. In that case, Hood J said (at 494): "the reason underlying the numerous and varying cases in which appellants have been ordered to give security will be found in the injustice to a successful litigant that may be caused if he be compelled to contest the matter for a second time without a probability of obtaining his costs if ultimately successful." That really is the fundamental question of justice behind my decision to order security for costs. 7 This case involves both a corporate and an individual appellant. The corporate appellant, in substance, is the individual appellant's alter ego. I accept that the making of an order for security is likely to frustrate the appeal (given that the respondents propose to serve a bankruptcy notice on the appellants if a stay is not granted). However, as the respondents submitted, a number of other factors need to be taken into consideration. I consider that the following have particular weight on the facts of the present case. First, the appellants managed to run the proceedings below (with legal representation) when the evidence supports the inference that their financial position was very poor at that time. Secondly, while the legal costs no doubt have adversely affected the appellants' financial position generally, the appellants have not demonstrated that, without the contribution of the litigation costs, they would have had the necessary financial resources to fund the appeal in any event. Thirdly, it must also be remembered that, in terms of conduct, the respondents did nothing other than take proceedings to vindicate their rights. Fourthly, the respondents have the benefit of a damages and costs order both of which remain unsatisfied in circumstances where the appeal exposes the respondents to yet further costs that the appellants will be most unlikely to meet if unsuccessful. Fifthly, there is no public interest involved in the issues raised on appeal. Finally, insofar as the prospects of success can be assessed the respondents are correct in submitting that the appeal involves no question of principle but challenges a factual finding of the primary judge based on a detailed assessment of extensive evidence. The prospects are not such as to outweigh the other considerations to which I have referred. This is a case where granting a stay and refusing to order security would involve a "free hit" for the appellants and substantial unfairness to the respondents (in the sense identified in Tait v Bindal People at [4]). It follows that an order for the provision of security should be made. 8 The appellants submitted that the estimate of costs by the respondents' solicitor was excessive. I consider that the amount of security should be less than claimed by the respondents having regard to various items in the estimate (specifically, counsel's preparation of two days for the appeal and two days for submissions and two and a half days for solicitors, the 20% allowance of total solicitors' costs). For these reasons I consider an order for the provision of security in the sum of $25,000 appropriate failing which the appeal should be stayed rather than dismissed. 9 For these reasons the appellants' notice of motion should be dismissed and an order requiring the provision of security made. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.