A Nelson & Co Limited v Martin & Pleasance Pty Ltd

FLICK J: 1 This proceeding was commenced by the filing in this Court of an Originating Application and Statement of Claim on 2 March 2021. 2 The matter first came before the Court as presently constituted on 10 March 2021 when an application for interlocutory relief was made by the Applicants. The matter proceeded to hearing on that day and judgment and reasons in support of the grant of interlocutory relief were published on 17 March 2021: A Nelson & Co Limited v Martin & Pleasance Pty Ltd [2021] FCA 228. Later on that day an application was made on behalf of the Respondents for a stay of the orders then made. 3 In support of the application, the Respondents provided a document titled Proposed Grounds of Appeal. A draft of Proposed Orders was also provided. The application has been made in advance of any Application for leave to appeal having been filed. 4 The application for the stay was heard this morning. It was an application quite properly made to the Court as previously constituted (cf. Jennings Construction Limited v Burgundy Royale Investments Pty Ltd (No 1) (1986) 161 CLR 681) and was made pursuant to r 41.03 of the Federal Court Rules 2011 (Cth) (the "Federal Court Rules"). A comparable power to grant a stay in circumstances where an appeal has been filed is to be found in r 36.08(2) of the Federal Court Rules. For the purposes of the application this morning it was common ground that the principles guiding the exercise of the discretionary power to grant a stay were the same whether it was r 36.08(2) or r 41.03 which was invoked. 5 A party seeking a stay, it is to be recognised, seeks to deprive the successful party of the "fruits" of the existing judgment in their favour: Stefanovski v Digital Central Australia (Assets) Pty Ltd [2017] FCA 1121 at [4] per Derrington J. But the party seeking the stay need not demonstrate "special circumstances": George v Fletcher [2011] FCA 952 at [12] per Logan J; Nichol v Discovery Africa Limited [2016] FCA 254 at [7] per McKerracher J ("Nichol v Discovery Africa"). However, there must be some reason sufficient to justify an exercise of the discretion to grant the stay. In Philip Morris Limited v Nixon [1999] FCA 1281 ("Phillip Morris v Nixon"), Sackville, Hely and Gyles JJ summarised the position as follows: [17] The general principles governing an application for a stay pending the determination of an appeal or application for leave to appeal are not in doubt. The party seeking a stay must demonstrate a reason, or an appropriate case, to warrant the exercise of a discretion in his or her favour. This requirement is not satisfied by the mere filing of an appeal or an application for leave to appeal: … The Court has a discretion whether or not to grant the stay, and if so, as to the terms that will be fair. In the exercise of the Court's discretion, it weighs consideration such as the balance of convenience and the competing rights of the parties, in particular whether prejudice will be caused by reason of the grant or withholding of a stay: … Within this framework, the Court exercises a broad discretion, and the party seeking a stay does not have to establish "special" circumstances: … In general, a party which has succeeded at the trial is entitled to the benefit of a judgment and thus to commence with the presumption that the judgment is correct: … (citations omitted) The Court is thus "given a discretion which is only circumscribed by the need to be satisfied that there be a reason sufficient in the circumstances to warrant the exercise of the discretion in favour of the grant of the stay": Australian Workers' Union v Pilkington (Aust) Ltd [2000] FCA 1169 at [10], (2000) 101 FCR 35 at 38 to 39 per Goldberg and Weinberg JJ. 6 A more recent summary of the principles to be applied is that provided as follows by Finkelstein J in Australian Competition and Consumer Commission v BMW (Australia) Limited (No. 2) [2003] FCA 864 ("ACCC v BMW"): [5] The principles which govern a court's discretion in granting a stay pending the determination of an appeal are well known: see generally Alexander v Cambridge Credit Corp Ltd (Receivers Appointed) (1985) 2 NSWLR 685. Although it is not possible to state exhaustively the considerations that may be taken into account in the exercise of this discretion, it is appropriate that I mention those that bear on this application. The general rule is that a stay will be granted where there is a likelihood that a successful appeal will be rendered nugatory: … A court will also consider the balance of convenience and the competing rights of the parties as well as whether either party will be prejudiced by the stay: …. Even though a judge will generally not be required to speculate about the appellants prospects of success, it is well established that a stay will not be granted in the absence of arguable grounds of appeal, or if the appeal is not bona fide: … It necessarily follows that a stay will not be granted if an appeal has no prospect of success: … … [10] Given the remote possibility of success on the appeal, I am of opinion that BMW should only be entitled to a stay of a limited kind. The stay should be confined to those orders whose effect could not effectively be reversed if BMW were to succeed on its appeal… (some citations omitted and without alteration) A further decision is that of McKerracher J in Nichol v Discovery Africa. His Honour there also provided the following summary of the principles to be applied: [7] … the relevant principles include the following: • The general principle is that the successful party is entitled to the fruits of judgment and the appellants must give sound reasons to justify a suspension of that right: …; • The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties: …; • It is not necessary for the grant of a stay that special or exceptional circumstances should be made out. It is sufficient that the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of discretion in his favour: …; • The now commonly accepted test - that a reason or appropriate case to warrant the exercise of the discretion must be demonstrated - may be satisfied where there is a real risk that it will not be possible for a successful appellant to be restored substantially to its former position if the judgment is executed: …; • The financial position of the respondent to the application may be a relevant consideration: see for example, …; • The general rule is that a stay will be granted where there is a likelihood that a successful appeal will be rendered nugatory: …; and • The Court has a discretion whether or not to grant the stay and, if so, as to the terms that would be fair. In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it: … 7 The application for a stay is granted, albeit subject to an undertaking and only up to 4.00pm on 25 March 2021. The question of costs is reserved. 8 The Respondent, it must be recognised, confronts a number of difficulties in seeking to challenge the 17 March 2021 orders. The decision of that date, of course, is an interlocutory decision and leave to appeal is thus required: Federal Court of Australia Act 1976 (Cth), s 24(1A). And the decision involved an exercise of a discretion. An error of the kind identified in House v The King (1936) 55 CLR 499, most probably, needs to be made out. But so much is stating the obvious. 9 Further problems emerge if consideration is given to the Proposed Grounds of Appeal which also suffer, with respect, from a number of difficulties. 10 First, those Proposed Grounds fail to recognise the fact that the published reasons are in respect to an interlocutory and not a final judgment. To the extent that the Proposed Grounds focus on that which is not expressly mentioned in the reasons for decision, it is respectfully considered that not even a final judgment need necessarily make reference to each and every submission which has been advanced by a party. Nor need any finding be made in respect to each of every factual matter which may have been put in dispute for the purposes of the interlocutory hearing. The more so is this the case where the published reasons are in respect to an interlocutory decision. 11 Second, to the extent that the Proposed Grounds assert a failure (for example) "to consider the following differences between the parties' respective packaging", those Proposed Grounds fail to address the fact that that part of the reasons which addressed the similarities and differences between the different product lines of the Applicant and the Respondent did not purport to be an exhaustive statement of either the similarities, or an exhaustive statement of the differences. Those reasons were expressed in terms of the differences and similarities as "including" those expressly mentioned. Those competing differences were then weighed or compared one against the other. To the extent that the Proposed Grounds (for example) seek to contend that there was a failure to weigh harm to the Respondents as against harm to the Applicants, it is respectfully considered that the reasons do not expose any such failure. 12 Third, an application for a stay is not the opportunity for a Court to supplement such reasons as have been provided with those which could potentially have been provided with the not inconsiderable benefit of hindsight. But an application for a stay is an opportunity to make an assessment as to whether the arguments proposed to be advanced in support of a proposed application for leave to appeal would - or could - have led to any different conclusion. Although it has been respectfully concluded that the Proposed Grounds do not expose deficiencies in the reasons, each of the arguments sought to be advanced have been again reconsidered. Although others may take a different view, none of the matters raised in the Proposed Grounds of Appeal would have led to any different conclusion. Interlocutory relief would still have been granted. The "balance of convenience and the competing rights of the parties" (cf. ACCC v BMW at [5]) have again been reconsidered. That further balancing exercise has not led to any different conclusion. 13 In short, none of the Proposed Grounds of Appeal provide any reason to depart from or reverse any of the conclusions previously reached. Specifically rejected is the emphasis given in the oral submissions of the Respondents upon a perceived failure in the reasons for decision to weigh: what were said to be finding as to the harm which would be suffered by the Respondents being shut out of the market, the harm to third parties such as the Respondents' distributors and harm to the public, as against: the harm that the Applicants would suffer or, indeed, the public would continue to suffer by being exposed to the likelihood of misleading or deceptive statements being made by the Respondents in the marketing of their products. Any reading of the reasons published on 17 March 2021, it is respectfully considered, would expose these matters being weighed one against the other, with the Respondents' submissions - like Belshazzar - being "found wanting". 14 Such are at least some of the difficulties which it is respectfully considered may confront the Respondents on an application for leave to appeal. But such a conclusion is not a conclusion that the Proposed Grounds of Appeal may not expose some error of principle which may have some prospects of success, if leave to appeal were granted. 15 But the discretion now being exercised is different to that being exercised when granting interlocutory relief. 16 The present exercise of discretion is guided by the principles set forth in Phillip Morris v Nixon, ACCC v BMW and Nichol v Discovery Africa. Included within those principles is the need, in an appropriate case, to consider whether: there is a "likelihood that a successful appeal will be rendered nugatory" if a stay were to be refused (ACCC v BMW at [5]); and there is "a real risk that it will not be possible for a successful [party] to be restored substantially to its former position if the judgment is executed" (Nichol v Discovery Africa at [7]). Although these are not necessarily considerations which must be taken into account in all applications for a stay, they assume importance to the present proceeding. 17 The fact that the Respondents may potentially be forced to rebadge their existing products and thereby be shut out of the market using their existing RestQ badging was, of course, a matter expressly taken into account when granting interlocutory relief. On the application for a stay this morning, Counsel for the Applicants quite properly pointed out that there were no findings of fact made that the Respondents would be forced to rebadge, or that the Respondents would suffer reputational damage or that the Respondents would suffer damage to their relationships with retailers : [2021] FCA 228 at [58] and [60]. The interlocutory application proceeded upon the assumption that these were matters or claims which could not be discounted. These were matters taken into account when concluding that any harm to the Respondents or their claims as to the harm that they would suffer even if made out did not outweigh the harm to the Applicants (or, indeed, the public). They were also matters taken into account and of relevance to the conclusions reached as to whether damages would be an adequate remedy for the Applicants. 18 The same matters nevertheless also assume relevance to the present exercise of discretion to grant or refuse a stay. To that extent there is an overlap in the maters to be taken into account when exercising the discretion to grant or refuse interlocutory relief and when exercising the separate discretion to grant a stay. 19 For present purposes, it is concluded that: "there is a real likelihood that a successful appeal will be rendered nugatory" (ACCC v BMW at [5]), the "real likelihood" being that the Respondents may be forced in the exercise of their commercial judgment to rebadge their products pending the resolution of the Applicants' claims on a final basis, and thereby being shut out from the prospect of re-entering the market using their existing RestQ labelling in the event that their claims ultimately prevail and those of the Applicants fail; and separately concluded that: "there is a real risk that it will not be possible [for the Respondents] to be restored substantially to" their former position (Nichol v Discovery Africa at [7]), the "real risk" being that if the Applicants are ultimately unsuccessful at a final hearing, the Respondents absence from the market pending any final hearing precluding them from regaining the position in the market that they now have. Neither conclusion, it should be noted, is a conclusion reached without some considerable hesitation. On the basis of the reasons for decision as published on 17 March 2021, it has been concluded that the Applicants should be afforded the protection of interlocutory relief from the Respondents passing their goods off as those of the Applicants and from the harm suffered by the Respondents' conduct being misleading or deceptive. Considerable hesitation is expressed in reaching a conclusion that a stay should be granted, even for a short period of time, which permits the Respondents - upon the conclusions reached in the 17 March 2021 - to continue to bolster or exploit their position in the market, which they have only secured upon the basis that a serious question exists as to their having done so by passing off their products as those of the Applicants and by reason of their making false or misleading statements. 20 It is this hesitation which dictates that any stay be for a very limited period of time. 21 Although there has emerged no reason to question the conclusions reached in the interlocutory judgment or the correctness of the orders then made, it is concluded that there remain some prospects of the Respondents being able to persuade a different Judge that leave to appeal from the 17 March 2021 judgment should be granted, and some prospects that any Court on appeal may find that there has been some error of principle in the manner in which the discretion to grant interlocutory relief was exercised. 22 The Respondents, it is thus concluded, should not be shut out from seeking leave to appeal and persuading a different Judge that there has been some error of principle in granting interlocutory relief and that a stay should be extended. 23 A stay should thus be granted.

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