AARDWOLF INDUSTRIES LLC v RIAD TAYEH

Solicitors: Actuate IP (Plaintiffs) Wotton + Kearney (Defendants) File Number(s): 2019/205840

Judgment

1. HER HONOUR: This is an application by the plaintiffs, Aardwolf Industries LLC and Aardwolf Australia Pty Ltd, for leave nunc pro tunc to commence proceedings against the defendants, Riad Tayeh and Antony de Vries, who were the liquidators of two companies related to the plaintiffs, Herdgraph Pty Limited and Aardwolf Pty Limited. The plaintiffs' directors are James Corbett and his son Mark Corbett. They were also the directors of Herdgraph and Aardwolf. Another son, Benjamen Corbett, was also peripherally involved.
2. The plaintiffs wish to sue the liquidators for damages for negligence and misleading and deceptive conduct arising out of the liquidators' sale of Herdgraph and Aardwolf's trade marks to the plaintiffs' arch enemy, Nhon Hoa Nguyen, for $5,000. The plaintiffs wish to contend that Herdgraph and Aardwolf did not, in fact, have any right to the trade marks and the sale caused no end of trouble to the plaintiffs in seeking to enforce their trade marks internationally, with attendant legal costs. The plaintiffs' right to use the trade marks is said to have been thereby seriously infringed, causing loss.
3. As to why it is said that Herdgraph and Aardwolf had no trade marks to sell, the plaintiffs contend that: 1. in 2003, Herdgraph abandoned a registered trade mark and Aardwolf used it instead; 2. in 2007, Aardwolf abandoned its use of the registered trade mark and its use of an unregistered logo and Aardwolf Industries used the trade marks instead; and 3. in 2011, Aardwolf Industries assigned, by oral agreement, its common law right to use the trade marks to Aardwolf Australia. The plaintiffs say that the liquidators would have been aware of this if they had only asked, albeit in circumstances where the liquidators were experiencing great difficulty extracting books and records and information from the directors of Herdgraph and Aardwolf and were concerned - with some justification may I add - that the directors were 'phoenixing' these assets of the companies, including to Aardwolf Australia.
4. This application traverses the Corporations Act 2001 (Cth), the Trade Marks Act 1995 (Cth), tort law and Australian Consumer Law. The facts are complex and the subject of judgments both here and abroad. Nonetheless, I will endeavour to be succinct.

Facts

1. In 1991, Herdgraph was incorporated. In 1996, Herdgraph was granted a patent for a lifting device for slab, panel or sheet materials, called "lifting clamps", which Mr Corbett Snr had invented.
2. In 1995, Abaco Machines (Australasia) Pty Limited was incorporated. Four brothers hailing from Vietnam, including Mr Nguyen, were directors and shareholders. In 1999, Mr Corbett Snr also became a director of Abaco Machines. Abaco Machines' goods were promoted and sold under the "Abaco" brand and trade marks.
3. By 2001, Mr Corbett Snr no longer wished to be in business with the Nguyen brothers in Abaco Machines. On 2 July 2001, Abaco Equipment Pty Ltd was incorporated, with Mr Corbett Snr as sole director and shareholder. On 12 July 2001, Mr Corbett Snr ceased to be a director of Abaco Machines and sold his shares in the company to the Nguyen brothers. Abaco Equipment began to sell the patented lifting clamps under the name "Abaco Lifters". In February 2002, Mr Corbett Snr became the sole director and shareholder of Herdgraph.

Creation of trade marks

1. In January 2003, Mr Corbett Snr says he became aware that the Nguyen brothers were attempting to register the name "Abaco Equipment" in the United States (US) and he wished to differentiate his brand from theirs. To achieve this: 1. on 28 January 2003, Abaco Equipment registered the business name "Aardwolf" (the Name); 2. on 31 January 2003, Benjamen Corbett designed a logo for the Name (the Logo); 3. on 26 February 2003, Herdgraph applied to register the Name as an Australian trade mark, which registration was accepted and became Trade Mark 945207; 4. on 18 March 2003, Abaco Equipment changed its name to Aardwolf; 5. on 29 June 2003, Aardwolf began to use the Logo in Australia (the date comes from a certificate of registration later issued by the US Copyright Office); 6. on 7 July 2003, Herdgraph filed to register the Name as a trade mark in the US, which registration was accepted and became US Trade Mark 76530214; 7. on 5 August 2003, Herdgraph filed to register the Name as a trade mark in the European Union, which registration was accepted and became Community Trade Mark 003371556.
2. To pause briefly to consider the significance of Herdgraph's registration of Trade Mark 945207, a trade mark is a sign used to distinguish goods or services provided in the course of trade from the goods and services of others: section 17, Trade Marks Act. Only a person claiming to be the owner of a trade mark may apply for its registration: section 27(1), Trade Marks Act. On registration, the registered owner has the exclusive right to use, or authorise others to use, the trade mark in relation to the goods or services in respect of which the trade mark is registered: section 20(1), Trade Marks Act. The registered owner of a trade mark has the right to obtain relief under the Trade Marks Act if the trade mark is infringed: section 20(2). These rights are taken to have accrued to the registered owner from the date of registration of the trade mark: section 20(3), Trade Marks Act.
3. Section 21 of the Trade Marks Act provides: 21 Nature of registered trade mark as property (1) A registered trade mark is personal property. (2) Equities in respect of a registered trade mark may be enforced in the same way as equities in respect of any other personal property. A registered trade mark may be assigned or transmitted, in which event application must be made to the Registrar of Trade Marks for the assignment or transmission to be recorded: sections 106 and 107, Trade Marks Act. Other interests or rights in respect of the registered trade mark may also be recorded on the Register of Trade Marks: section 113, Trade Marks Act.
4. Mr Corbett Snr said that, whilst Herdgraph held the trade mark to the Name, the business was conducted by Aardwolf, which manufactured goods in Vietnam and shipped them to Australia for sale using the Name and Logo. Pausing again to consider the significance of Aardwolf's use of the Logo, rights in a trade mark can be established either by use or by registration; the Trade Marks Act supplements rather than displaces the common law: EOS Australia Pty Limited v Expo Tomei Pty Limited (1998) 42 IPR 277 at 286. At common law, a person who uses a trade mark may thereby acquire the right to preclude its use by others: Re "GE" Trade Mark [1972] 1 WLR 729; (1972) 1B IPR 543 per Lord Diplock at 571. Thus, Aardwolf's use of the Logo from 2003 presumably gave rise to common law rights notwithstanding that the Logo was not a registered trade mark.

Federal Court proceedings

1. In November 2006, Herdgraph and Aardwolf commenced proceedings in the Federal Court of Australia against Abaco Machines for infringement of Herdgraph's patent in respect of the lifting clamps.
2. In 2007, Mr Corbett Snr moved to Vietnam and re-centred business operations there. On 7 May 2007, Aardwolf Industries was incorporated in Vietnam to manufacture and distribute the items which Aardwolf had been selling. There is some contemporaneous evidence of this: 1. On 5 July 2007, Mr Corbett Snr wrote to James Woodyatt of CDK Stone Pty Limited advising that he had put a new business structure in place: Aardwolf had restructured its business in Asia and all new orders were to be sent to Aardwolf Asia Limited, a Singapore company, and futures payments made to that company's bank account. According to Mr Corbett Snr, Aardwolf Asia was a related company to Aardwolf Industries and acted in an administrative capacity only; goods were manufactured and shipped by Aardwolf Industries to CDK Stone. 2. On 1 August 2007, Mr Corbett Snr wrote to a customer advising that Aardwolf was no longer trading and suggesting that Mark Corbett was willing to take over the supply and delivery of the particular items required by this customer. In September 2007, Aardwolf Industries began to distribute its goods in Australia through CDK Stone.
3. In April 2008, Mark Corbett also became a director of Herdgraph and Aardwolf.
4. On 18 March 2009, Herdgraph and Aardwolf discontinued the Federal Court proceedings. On 27 September 2010, Bennett J ordered Herdgraph and Aardwolf to pay Abaco Machines' costs of the proceedings on a party and party basis until 7 November 2007 and on an indemnity basis thereafter.
5. On 29 March 2011, Aardwolf Australia was incorporated. Mark Corbett was sole director and shareholder. Aardwolf Australia became the main supplier of Aardwolf Industries' goods in Australia, which were advertised and sold using the Name and Logo.

Appointment of liquidators

1. On 3 June 2011, Abaco Machines filed an application to appoint a liquidator to Herdgraph and Aardwolf by reason of their failure to pay the costs ordered in the Federal Court proceedings. On 8 August 2011, the Court appointed the defendants as liquidators.
2. On 17 August 2011, the defendants wrote to the officeholders of Herdgraph and Aardwolf requesting that they complete a Report as to Affairs (RATA) and a questionnaire and also deliver the company's books and records. There was no reply.
3. According to the liquidators' later correspondence, the Australian Securities and Investments Commission (ASIC) commenced a prosecution in respect of the directors' failure to answer the liquidators' requests. Section 475 of the Corporations Act obliged the officeholders of a company to submit a RATA to the liquidator within 10 business days after a winding up order is made; failure to do so is an offence of strict liability. Section 530A of the Corporations Act obliges the officeholders to deliver to the liquidator all books in their possession as soon as practicable after the winding up order is made and to tell the liquidator where other books are. Further, the officer of the company "must do whatever the liquidator reasonably requires the officer to do to help in the winding up": section 530A(3). Failure to do either is an offence of strict liability: section 530A(6A). Mark Corbett was required to attend Sutherland Local Court and was charged with various offences for which he was convicted. The plaintiffs' evidence is silent on this subject.
4. A year later, on 13 August 2012, Mr Corbett Snr sent a letter to both the liquidators and ASIC enclosing the last bank statements for Herdgraph and Aardwolf and advised: These companies have been dormant for more than five years; therefore there are no books to submit. Herdgraph Pty Limited was a company for holding patents only and did not trade. Aardwolf Pty Ltd has not traded for more than 5 years and does not hold any assets.
5. On 21 September 2012, Herdgraph's registration of the Name in the US expired as Herdgraph did not file a declaration of continued use. In later correspondence, the liquidator advised that he was not aware of US Trade Mark 76530214 at the time.
6. On 10 December 2012, the defendants wrote to Mr Corbett Snr again pressing for delivery up of the companies' books and records and requesting a completed RATA by close of business on 24 December 2012.
7. On 8 January 2013, according to government records maintained by IP Australia (an agency of the Commonwealth Department of Industry, Innovation and Science which administers intellectual property rights in Australia), a renewal reminder was sent in respect of registration of Trade Mark 945207 as it was due to expire on 26 February 2013. The registration of a trade mark expires ten years after the filing date of the application for its registration: section 72(3), Trade Marks Act. If the Registrar has not received a request for renewal, the Registrar must notify the registered owner of the trade mark that the renewal is due: section 76, Trade Marks Act. The address for service for Herdgraph was in the Australian Capital Territory and not the liquidators' address so, presumably, it was the address of Herdgraph's agent as required by section 215 of the Trade Marks Act.
8. Some six weeks after the renewal reminder notice was sent by IP Australia to Herdgraph's agent - and some 18 months after the appointment of liquidators - on 18 February 2013 Mr Corbett Snr and Mark Corbett finally completed RATAs for Herdgraph and Aardwolf. In both cases, they declared that neither company owned any assets. This might have been a curious thing to declare in circumstances where they likely had been recently reminded that Herdgraph was the registered owner of Trade Mark 945207. Mr Corbett Snr and Mr Corbett also completed a questionnaire in respect of Aardwolf. They advised that Aardwolf ceased trading in 2007, and: [Aardwolf] used the rights of the patent held by Herdgraph Pty Ltd. No questionnaire is in evidence for Herdgraph.
9. Mr Corbett Snr says that he had only two telephone calls with the liquidators' office sometime before he provided the RATAs, in which he was accused of "phoenixing" activity in relation to Herdgraph and Aardwolf. A member of the liquidators' staff mentioned that the domain name, www.aardwolf.com.au, was registered in the name of Benjamen Corbett, which was said to suggest phoenixing activity. "Phoenixing" is winding up a company to avoid paying liabilities but transferring assets and employees to a new company: Cmr of Taxation v Iannuzzi (No 2) [2019] FCA 1818 per Stewart J at [114] and [123]; Ausmart Services Pty Ltd (In Liq) v Zheng [2019] FCA 2162 per Anderson J at [16]. Mr Corbett Snr told the liquidators' staff that the companies had been dormant for years and the transfer of the business to Aardwolf Industries was done for legitimate commercial reasons. Mr Corbett Snr does not suggest that he told the liquidators' staff that the trade mark rights of Herdgraph and Aardwolf had been abandoned. Mr Corbett Snr and Mark Corbett did not hear further from the liquidators after they submitted the RATAs.

Aardwolf Australia applies for trade mark

1. On 26 February 2013, Herdgraph's registration of Trade Mark 945207 expired. However, section 79 of the Trade Marks Act provides: Renewal within 6 months after registration expires If, within 6 months after the registration of a trade mark has expired, a person asks the Registrar, in accordance with subsection 75(2), to renew the registration of the trade mark, the Registrar must renew the registration of the trade mark for 10 years from the day on which the registration expired. Mr Corbett Snr was aware that there was a six month 'grace period' for renewal of trade mark registrations after expiry. Mark Corbett deposed that, although Herdgraph's registration of the Name had lapsed, it was still possible to renew it upon the payment of late fees. Notwithstanding this shared understanding, less than a week later and with apparent unseemly haste, on 4 March 2013, Aardwolf Australia applied to register the Name and the Logo. The applications were numbered 1544189 and 1544186 respectively (these applications will be referred to as the Parent Applications, for reasons which will become clear). The applications are not in evidence and thus the basis on which Aardwolf Australia claimed to be the owner of the Name and Logo is not known.
2. Section 44(1) of the Trade Marks Act provides that an application to register a trade mark must be rejected if the trade mark is substantially identical with, or deceptively similar to, a trade mark already registered by another person in respect of similar goods. On 19 and 24 April 2013, a trade mark examiner at IP Australia informed Aardwolf Australia that the Parents Applications could not be accepted for registration as the Word and Logo resembled the registered trade mark of Herdgraph. The trade mark examiner advised: Your trade mark is identical to or closely resembles trade mark number 945207. This trade mark has an earlier priority date and is for the same or similar goods or services. … Note: I note that the address of the earlier trade mark and your trade mark is the same. It appears that the two companies may be related. If you are able to bring the ownership in line, I will reconsider the ground for rejection. In addition, the examiner advised that the description of goods and services provided by the trade mark for which application was made included "dollies and trolleys", which should be submitted in a different class (being Class 12 rather than Class 7).
3. The trade mark examiner suggested ways that Aardwolf Australia could overcome this problem, including by supplying evidence under subsections 44(3) or 44(4) of the Trade Marks Act 1995, which provide: Identical etc. trade marks (3) If the Registrar in either case is satisfied: (a) that there has been honest concurrent use of the 2 trade marks; or (b) that, because of other circumstances, it is proper to do so; the Registrar may accept the application for the registration of the applicant's trade mark subject to any conditions or limitations that the Registrar thinks fit to impose. If the applicant's trade mark has been used only in a particular area, the limitations may include that the use of the trade mark is to be restricted to that particular area. (4) If the Registrar in either case is satisfied that the applicant, or the applicant and the predecessor in title of the applicant, have continuously used the applicant's trade mark for a period: (a) beginning before the priority date for the registration of the other trade mark in respect of: (i) the similar goods or closely related services; or (ii) the similar services or closely related goods; and (b) ending on the priority date for the registration of the applicant's trade mark; the Registrar may not reject the application because of the existence of the other trade mark.
4. The trade mark examiner provided, with each letter, a three page guide, "HOW TO SUPPLY EVIDENCE OF HONEST CONCURRENT USE, PRIOR USE and/or OTHER CIRCUMSTANCES". The trade mark examiner invited Aardwolf Australia to contact her if it believed it could supply evidence of its use of the trade mark or a declaration containing such evidence, which would be accepted in confidence. Of potential relevance to Aardwolf Australia's application were "honest concurrent use" and "other circumstances". The guide set out what kind of evidence could be supplied in respect of these matters, how much evidence might be needed and what any declaration ought contain. Any declaration was required to contain the name of the person or organisation using the trade mark (being the applicant), someone authorised to use the trade mark, or a person or company from whom the applicant acquired the trade mark (being a predecessor in title). Where a declaration was to be submitted supporting "honest concurrent use", the guide suggested: For honest concurrent use, the declaration should include: • A brief history of the trade mark, including: • When the trade mark was chosen (this must be a significant period of time before you filed your application). • Why the trade mark was chosen. • Whether you knew of the earlier filed trade mark when you chose your trade mark. • Whether you know of any confusion between the trade marks. • When the trade mark was first used in Australia to sell goods or services (please give the year and, if possible, the month). • Whether it has been used continuously. If it has not been used continuously, when or for how long it has been used. • The area/s where the trade mark has been used to sell goods or services (please give States or regions in Australia). • The specific goods or services sold using the trade mark. • Examples of how the trade mark has been used to sell those goods or services (please refer to and attach copies of packaging and/or advertising and/or promotional materials). • The annual figures in Australian dollars spent on advertising and promoting the trade mark. • The annual turnover figures in Australian dollars for goods or services sold using the trade mark. These figures must cover only the goods or services claimed in your application. • Any other information or materials which will help show how the trade mark has been used (please refer to and attach copies of these materials).
5. Where "other circumstances" were advanced, the guide suggested: There may be other relevant circumstances which may allow your application to be accepted. For example: • If you have been using your trade mark with the permission of the owner of a conflicting trade mark. • If the owner of a conflicting trade mark agrees to your trade mark being registered, and gives you their written consent. If you believe these or other circumstances apply, and if you wish to discuss how to proceed, please phone me.
6. On 13 May 2013, a trade mark examiner sent an email to Mark Corbett advising, As discussed to overcome the ground for rejection raised due to the existence of a previously applied for trade mark with different ownership, a letter of consent can be provided. An example of an acceptable format for a letter of consent was provided. Mr Corbett was also reminded to address the query about the classification of the goods.
7. In later proceedings, Mark Corbett said he spoke to his father about the letter of consent, and Mr Corbett Snr thought he would be able to give consent to speed the acceptance of the Parent Applications along. On 27 May 2013, Mr Corbett Snr sent a letter of consent to IP Australia on behalf of Herdgraph stating: As owner of trade mark Aardwolf (logo) & Aardwolf (word) … I hereby consent to the use and registration of the trade mark Aardwolf (logo) & Aardwolf (word) … by Aardwolf Australia Pty Limited under application 1544186 and 1544189 … Mark Corbett forwarded the letter of consent to IP Australia and, in regards to the classification query, requested that IP Australia remove the words "dollies and trolleys" from the description. The letter of consent is significant as it does not accord with Herdgraph having abandoned Trade Mark 945207 and, further, suggested that Herdgraph's trade mark rights extended to the Logo.
8. On 31 May 2013, according to the records of IP Australia, the trade mark examiner accepted the Parent Applications as the problem posed by section 44 of the Trade Marks Act had been resolved by the letter of consent provided by the owner of Trade Mark 945207 and the classification issue had been resolved by deletion of "dollies and trolleys". On 31 May 2013, IP Australia wrote to Herdgraph - not to the address of the liquidators but to the address of the Corbetts - advising that the Parent Applications had been accepted for registration and would soon be advertised. On 27 June 2013, IP Australia advertised the registration of the Parent Applications.

Mr Nguyen gets involved

1. On 17 July 2013, Mr Nguyen filed an intent-to-use application in the US for the Name, which was approved by the US Patent and Trade Mark Office. On 26 July 2013, Mr Nguyen obtained various records from ASIC in respect of Herdgraph, including the RATAs. On 29 July 2013, Mr Nguyen obtained a search of Herdgraph's Trade Mark 945207 from IP Australia, which recorded that the trade mark had been due for renewal on 26 February 2013. The status of the trade mark was recorded by IP Australia as: "Expired - Renewal Possible". Such a notation is consistent with Herdgraph's right, conferred by section 79 of the Trade Marks Act, to apply for renewal of registration notwithstanding it had expired.
2. On 27 August 2013, Abaco Machines filed a Notice of Opposition with IP Australia in respect of the Parent Applications. Section 52(1) of the Trade Marks Act provides that, if the Registrar has accepted an application for the registration of a trade mark, a person may oppose the registration by filing a notice of opposition. Mr Nguyen later said that Abaco Machines opposed the Parent Applications because discussions were taking place with the liquidator of Herdgraph to sell all of Herdgraph's rights, title and interest in the trade mark "Aardwolf", including Trade Mark 945207.
3. On 12 September 2013, IP Australia removed Trade Mark 945207 from the register for non-payment of renewal fees. On 19 September 2013, IP Australia published the fact that this had occurred. Section 78 of the Trade Marks Act provides that, if registration of a trade mark is not renewed within six months after registration expires, the Registrar must remove the trade mark from the Register.
4. Section 58 of the Trade Marks Act provides that the registration of a trade mark may be opposed on the ground that the applicant is not the owner of the trade mark. On 27 September 2013, Abaco Machines served a Statement of Grounds and Particulars, objecting to registration of the Parent Applications on the basis that it was substantially identical with or deceptively similar to Herdgraph's trade mark and Aardwolf Australia was not the owner or first user of the trade mark in Australia but Herdgraph and / or Aardwolf. Further, the application was opposed on the ground that it was made in bad faith: Herdgraph Pty Ltd is currently being liquidated. In its presentation of accounts and statement to the ACCC (sic), Herdgraph Pty Ltd failed, refused or neglected to list Australian trade mark no. 945207 for AARDWOLF as personal property. It should have been included in the assets of the business and dealt with by the liquidator. Nevertheless, Herdgraph Pty Ltd has purportedly "consented" to the filing of AARDWOLF by [Aardwolf Australia], despite that consent being contrary to law. The opposed application was made in bad faith, possibly as a means of avoiding the AARDWOLF mark from being subject to the liquidation process and creditors.

Deed of assignment

1. On 29 November 2013, the liquidators, on behalf of Herdgraph and Aardwolf, executed a "Trademark Deed of Assignment" with Mr Nguyen. Mr Corbett Snr and Mark Corbett were unaware that the liquidators were proposing to enter into this deed. The recitals to the deed noted: A. Herdgraph is the registered proprietor of the Trade Mark registration number 945207. B. Hergraph [sic] has not paid its renewal fee and the registration is currently expired with renewal being possible. C. Herdgraph at the date of liquidation was the registered proprietor of Trade Mark registrations number 1544186 and 1544189. D. Herdgraph is the registered proprietor of Trade Mark Community Trade Mark 003371556. E. Herdgraph also has common law rights to marks associated with the Trade Marks. F. Aardwolf may have common law rights associated with the Trade Marks. G. It has come to the attention of Herdgraph that on or about 27 May 2013 a person not from the Liquidators office nor with the approval or authority of the Liquidators purported to consent to the registration of an assignment of the Trade Mark registrations number 1544186 and 1544189 to Aardwolf Australia Pty Ltd ACN 150 123 952. H. The Liquidators have not consented to any matter or thing in connection with Trade Mark registrations numbers 1544186 and 1544189. The letter that appears in Schedule 2 was not a letter authorised or consented to be sent by the Liquidators and the date that appears on the letter is a date that is of a time in which the Assignors were the registered proprietors of the Trade Marks. I. Assignor being the registered proprietor of the Trade Marks set out in Item 1 of the Schedule ("the Trade Marks") wishes to assign to the Assignee all their rights and title in the applications, the Trade Marks and any and all common law rights that Assignor may have. The parties warranted that each of the recitals was true and correct and acknowledged that each entered into the deed in reliance thereon: clause 6.10.2.10. The only recital which appears to be obviously incorrect is Recital C. The Parent Applications were made by Aardwolf Australia in March 2013 and long after liquidators were appointed.
2. Clause 1.1 of the deed provided: For the consideration of $5,000.00, receipt of which is hereby acknowledged, Assignor hereby assigns to the Assignee all its rights and title to the Trade Marks, the applications, and common law rights. The Trade Marks were defined in Schedule 1 to the deed as Trade Mark 945207, the Parent Applications and Herdgraph's registration of the Name in the European Union. Obviously, to the extent that the liquidators purported to assign rights which Herdgraph and Aardwolf did not have, then the deed failed to assign such rights. The drafting is consistent with Herdgraph and Aardwolf endeavouring to transfer whatever rights those companies may have had in the Name and Logo to Mr Nguyen, including in the event that the matters set out in Abaco Machines' Statement of Grounds and Particulars were made out.
3. Under the deed, Herdgraph and Aardwolf also agreed to do all acts as may be reasonably necessary to enable Mr Nguyen to apply for and obtain registration as the registered proprietor of the Trade Marks, the applications, and common law rights: clause 1.4. For his part, Mr Nguyen agreed to procure the execution of a Deed Poll by Abaco Machines, subordinating its right to priority for its costs of the application to wind up Herdgraph and Aardwolf.
4. On 3 January 2014, Mr Nguyen filed an intent-to-use application in the US for the Logo, which was approved by the US Patent and Trade Mark Office. On 16 January 2014, Mr Nguyen filed an application in Australia to register the Name, being Trade Mark Application 1601206.
5. On 30 January 2014, Mr Tayeh signed a declaration in support of Abaco Machine's opposition to the Parent Applications. Mr Tayeh confirmed that Mr Corbett Snr had no authority to sign the letter of consent as all powers of directors ceased on the date of Mr Tayeh's appointment as liquidator. Mr Tayeh also confirmed that, by the Trademark Deed of Assignment, Herdgraph assigned its entire rights in the Aardwolf trade mark, including common law rights and registered rights, to Mr Nguyen.
6. Thereafter proceeded something of an international scramble to register the Name and Logo, although Mr Nguyen had something of a head start by having already lodged an intent-to-use application in the US for the Name and Logo. On 24 February 2014, Aardwolf Industries applied to register the Name and Logo in the European Union. On 6 March 2014, IP Australia received an application for assignment of Trade Mark 945207, presumably from Mr Nguyen.

Abandonment

1. On 24 March 2014, Mark Corbett signed a declaration in answer to Abaco Machines' opposition to the Parent Applications. Mr Corbett stated that, as Mr Tayeh was the administrator of Herdgraph and Aardwolf, he should have known that those companies had not traded for the previous six years. For this reason it would be obvious to an administrator that any trademarks held by the companies are abandoned. For Riad Tayeh to draw up a Deed of Assignment and sell to a rival company is an act of bad faith. The following are the facts: • Both the companies Herdgraph Pty Ltd and Aardwolf Pty Ltd were dormant companies that had not traded in more than 4 years prior to the appointment of a liquidator on 8 August 2011. • Both the companies Herdgraph Pty Ltd and Aardwolf Pty Ltd did not used [sic] any trademark or logo in more than 4 years prior to the appointment of a liquidator on 8 August 2011. • The registration of the trademark no. 945207 as previously registered by Herdgraph had lapsed. • The Aardwolf logo, trademark no. 1544186, as registered by myself was never the property of either Herdgraph Pty Ltd or Aardwolf Pty Ltd. • The Aardwolf logo, trademark no. 1544186, as registered by myself was designed by my brother, Benjamen James Corbett and had not been registered by any party previously. It was specially designed for Aardwolf products, products that Aardwolf Australia Pty Ltd sells. Mr Corbett referred to the statements made in the Trademark Deed of Assignment as "grossly irresponsible, false and mischievous". Mr Corbett proceeded to address each of the recitals in the deed and concluded by saying, "The Liquidator is dishonest and is engaging in deceit and fraud". This declaration contained the first suggestion that Trade Mark 945207 and any common law rights to use the Logo had been abandoned.
2. Pausing here, title conferred by the Trade Marks Act is not contingent upon actual use of the trade mark. Once registration is achieved, the ownership of a trade mark is sustained by the terms of the Trade Marks Act itself: Mark Davison and Ian Horak, Shanahan's Australian Law of Trade Marks and Passing Off (5th ed, 2012 Thomson Reuters) at [10.1505]. Section 92(4)(b) of the Trade Marks Act provides a mechanism for a person to remove a trade mark from the Registrar for non-use. Such an application may be made where the trade mark has been registered for three years and, at no time during that period, has the registered owner used the trade mark in Australia. On receipt of such an application, the Registrar must provide a copy to each person who, in the Registrar's opinion, should receive one: regulation 9.6, Trade Marks Regulations 1995 (Cth). The Registrar must also advertise the application in the Official Journal: section 95(2), Trade Marks Act.
3. An applicant for registration of a trade mark may be able to avoid the requirement that only an owner of a trade mark may apply to register it by demonstrating that the prior user has abandoned its trade mark, consistently with the general rule that an owner may voluntarily relinquish his or her ownership of personal property. Robert Burrell and Michael Handler, Australian Trade Mark Law (2nd edition, 2016, Oxford University Press) note at page 268, "…although there are only a handful of trade mark cases in which abandonment has been claimed successfully, the proposition that abandonment is possible has invariably been accepted in trade mark cases. … that abandonment is possible has been accepted in at least four Federal Court cases." The four Federal Court cases cited by the authors were Riv-Oland Marble Co (Vic) Pty Limited v Settef Spa (1988) 19 FCR 569, 571-2; (1998) 12 IPR 321; (1988) AIPC 90-517; Marcus v Sabra International Pty Limited (1995) 30 IPR 261, 266-7; Malibu Boats West Inc v Catanese [2000] FCA 1141; (2000) 51 IPR 134, 146-7 [35]-[42]; and King Par LLC v Brosnan Golf Pty Limited [2014] FCA 795; (2014) 106 IPR 457.
4. Whether a trade mark has been abandoned is fundamentally a factual question: King Par, LLC v Brosnan Golf Pty Ltd per Greenwood J at [14]. As Chitty J explained in Mouson & Co v Boehm (1884) 26 Ch D 398 at 405 "the question of abandonment is one of intention to be inferred from the facts of the particular case". Mere non-use of a trade mark is insufficient to prove abandonment; intention must be shown: Malibu Boats per Finkelstein J at [40]. As Bowen CJ observed in Riv-Oland at 571-2: … [I]n my opinion, to show abandonment of the mark in circumstances such as the present it would be necessary to demonstrate more than slightness of use. There would have to be some evidence indicating an intention to abandon the trade mark to result in the right to proprietorship being lost… The requirement for intention was followed by Marcus v Sabra International at 267 per Burchett J; King Par at [188]-[189] per Greenwood J; Aobao International Pty Ltd v Action North American, Inc (2018) 143 IPR 358; [2018] ATMO 133 per I C Thompson at [25].
5. Having regard to these principles, Mark Corbett's declaration (at [44]) indicated he was aware of the possibility of abandonment of trade marks but did not yet appreciate that the fact that Herdgraph and Aardwolf had not used the trade marks for some time did not suffice to establish abandonment.

International activity continues

1. On 22 April 2014, Mr Nguyen filed an application to register the Name and Logo in Canada. On 2 May 2014, Aardwolf Industries applied to register the Logo in India. On 16 July 2014, Aardwolf Industries registered the Name and Logo in the European Union. On 29 and 30 September 2014, Aardwolf Industries applied to register the Name and Logo in the US. On 2 October 2014, Benjamen Corbett registered copyright in the Logo in the US. On 24 October 2014, Mr Nguyen incorporated Aardwolf LLC in California and, on 10 November 2014, assigned all of his rights in the trade marks to Aardwolf LLC. Mr Nguyen also registered various domain names containing "Aardwolf" in Vietnam.

Another deed of assignment

1. On 8 April 2015, Aardwolf Industries and Aardwolf Australia executed a "Confirmatory Trade Mark Deed of Assignment". The purpose of the deed was stated to be, "to confirm the previous oral assignment of ownership of the Trade Marks (as defined) from Aardwolf Industries … to Aardwolf Australia". According to recital B: On 29 March 2011 (Effective Date), the Assignor agreed (by way of an oral agreement with the Assignee) to assign its entire benefit, right, title and interest in and to the Trade Marks in Australia (Territory) to the Assignee. The Trade Marks were defined as the Name and Logo. How it was that Aardwolf Industries had any rights in the Trade Marks in the first place, orally assigned to Aardwolf Australia, was not laid bare by the Confirmatory Trademark Deed of Assignment.

Further applications by Aardwolf Australia for trade marks

1. On 23 April 2015, Aardwolf Australia lodged divisional applications with IP Australia to register the Name and Logo, being applications 1689002 and 1689004 respectively (Divisional Applications). Section 45 of the Trade Marks Act provides that if an application for the registration of a trade mark is pending (the "parent application"), the applicant may make another application (a "divisional application") for the registration of the trade mark in respect of some only of the goods or services for which registration is sought under the parent application. Divisional applications are often made where an objection to the parent application is raised in relation to some specified goods and services and the applicant wishes to obtain registration for the mark in relation to the unaffected goods or services expeditiously: Australian Trade Mark Law at page 27. Perhaps oddly, Aardwolf Australia also lodged a fresh application for registration of the Name and Logo in Australia (numbered 1689023 and 1689027 respectively, the Fresh Applications).
2. On 26 and 27 May 2015, Mr Corbett Snr and Mark Corbett signed declarations which Aardwolf Australia sought to have considered at the upcoming hearing of the Parent Applications. These declarations are not in evidence but a summary of their contents in Aardwolf Australia's outline of submissions dated 27 May 2015 indicates that the contents were by and large the same as declarations later signed by the Corbetts in March 2016 in respect of the Divisional Applications and described at [64]. That being the case, it was the first time that Mark Corbett's suggestion that Herdgraph's intellectual property rights had been abandoned - made in his declaration on 24 March 2014 referred to at [44] - was given form. As summarised in counsel's submissions of 27 May 2015, it was said that during 2003, Herdgraph formed an intention to abandon any ownership of the Name and its trade mark registration. In 2007, Aardwolf ceased trading including any further commercial use of the trade marks. In 2011, Aardwolf Industries orally assigned its common law rights in the trade marks to Aardwolf Australia. Aardwolf Australia contended that Herdgraph and Aardwolf abandoned any common law rights either of them had to the trade marks prior to the Trademark Deed of Assignment and, after abandonment, the trade marks were first used by Aardwolf Industries in Australia in relation to its goods such that there were no common law rights capable of being assigned by Herdgraph and Aardwolf to Mr Nguyen.
3. On 29 May 2015, the Parent Applications were heard by a Delegate of the Registrar of Trade Marks. Aardwolf Australia conceded that Mr Corbett Snr had no authority to execute the letter of consent as Herdgraph was then under external administration. Aardwolf Australia also conceded that section 62(b) of the Trade Marks Act applied, which provides that registration of a trade mark may be opposed where the Registrar accepted the application for registration on the basis of evidence or representations that were false in material particulars. Nonetheless, Aardwolf Australia argued that the Registrar had a discretion to register the trade marks. The Delegate did not agree. On 24 June 2015, in Abaco Machines (Australasia) Pty Limited v Aardwolf Australia Pty Limited [2015] ATMO 55; (2015) 114 IPR 204, the Delegate held at [15]: … the Applicant has, in effect, executed a falsehood upon the Registrar of Trade Marks which has led to two applications being accepted for registration when they ought not to have been. It is not in the public interest that this behaviour be in any way condoned or encouraged. The Registrar must be able to place full reliance on material placed before her, or one of her delegates. … The Delegate did not address Aardwolf Australia's contentions in respect of abandonment.
4. Also on 24 June 2015, the defendants ceased to be liquidators of Herdgraph and Aardwolf.
5. On 5 May 2015, IP Australia accepted the Divisional Applications for registration. On 6 July 2015, Mr Nguyen filed Notices of Intention to Oppose the Divisional Applications on the grounds that the owner of the trade mark was Herdgraph or Aardwolf, and those companies had assigned their rights to Mr Nguyen as part of the liquidation process.

Enforcement activities abroad

1. On 9 July 2015, the Government of Canada approved Mr Nguyen's application to register the Name and Logo. On 17 July 2015, Aardwolf LLC (Mr Nyugen's company) commenced proceedings in the US District Court, Central District Court of California against Aardwolf Australia, Aardwolf Industries, Benjamen Corbett and Mr Corbett Snr to determine the parties' respective rights to use the Name and Logo. On 27 July 2015, the US Patent and Trade Mark Office sent a notice of refusal to Aardwolf Industries in respect of its application to register the Name and Logo in the US.
2. On 7 September 2015, Herdgraph and Aardwolf were deregistered.
3. On 8 September 2015, IP Australia accepted the Fresh Applications for registration.
4. On 17 September 2015, the US proceedings were dismissed against Mr Corbett Snr for lack of personal jurisdiction. On 18 September 2015, the US proceedings against Benjamen Corbett for copyright invalidity of the Logo were summarily dismissed. On 7 October 2015, Aardwolf Industries notified its opposition to registration of the Name and Logo by Mr Nguyen in Canada.
5. On 29 October 2015, Aardwolf Industries filed an answer, counterclaim and third party complaint in the US proceedings. Amongst the pleading, it was contended that in 2007 "Herdgraph and licencee Aardwolf Pty Ltd. entirely ceased using the AARDWOLF mark in United States commerce" (emphasis added). I note that this may be considered an admission by Aardwolf Industries that, until 2007, Aardwolf used the trade marks under a licence from Herdgraph rather than by reason of any abandonment by Herdgraph, in 2003, of the trade mark. Further, Aardwolf Industries contended that the Trademark Deed of Assignment did not address or contemplate the transfer of US trade mark rights as none existed to transfer. Mr Nguyen, therefore, did not receive any rights to the trade marks in the US as the deed could not have transferred marks or rights that did not exist. Aardwolf Industries sought a declaration that the deed failed to transfer any common law or statutory rights to the trade mark in the US.
6. On 17 November 2015, Mr Nguyen filed a Notice of Intention to Oppose registration of the Fresh Applications. On 9 December 2015, Mr Nguyen filed his evidence in opposition to the Divisional Applications. On 17 December 2015, Mr Nguyen filed a Statement of Grounds of Opposition in respect of the Fresh Applications, including because the trade mark was substantially identical to his Trade Mark 1601206 (referred to at [41]).
7. On 29 December 2015, the plaintiffs filed a Statement of Opposition to Mr Nguyen's application to register the Name and Logo in Canada. On 26 January 2016, the US Patent and Trade Mark Office accepted Aardwolf Industries' applications to register the Name and Logo. On 12 February 2016, the plaintiffs sent a letter of demand threatening to commence copyright infringement proceedings unless Mr Nguyen withdrew his application in Canada. Mr Nguyen's Canadian attorneys responded, advising that the trade mark which Mr Nguyen was seeking to register had been assigned to him by the liquidator of Aardwolf and, … as a practical matter, it turns out that substantially the same issues are already being litigated in the U.S. (in California), where your clients are among the defendants rather than the plaintiffs.
8. In February 2016, in the US proceedings, Aardwolf LLC sought to discontinue the proceedings against Aardwolf Australia as, following discovery, it was apparent that Aardwolf Australia had not engaged in any business in the United States. In March 2016, Aardwolf Industries commenced a second set of proceedings in the US against a company associated with Mr Nguyen to recover domain names on the basis of trade mark infringement. Aardwolf Industries also commenced a third set of proceedings in the US against Mr Nguyen and associated companies alleging trade mark infringement, copyright infringement and cybersquatting violations. 'Cybersquatting' is the practice of registering names, especially well-known company or brand names, as internet domains in the hope of reselling them at a profit: Bing! Software Pty Ltd v Bing Technologies Pty Ltd (No 1) (2008) 79 IPR 454; [2008] FCA 1760, Collier J at [119]. On 25 March 2016, Aardwolf LLC notified its opposition to Aardwolf Industries' registration of the Name and Logo in the United States.
9. On 23 and 24 March 2016, Mr Corbett Snr, Mark Corbett and James Woodyatt (of CDK Stone) signed lengthy declarations in respect of the Divisional Applications. By my count, these declarations comprised some 940 pages of declarations and supporting documents. Mr Corbett Snr signed three declarations: one in his capacity as a director of Herdgraph, one in his capacity as a director of Aardwolf and a third in his capacity as a director of Aardwolf Industries. Mark Corbett signed a declaration in his capacity as the secretary and a former director of Aardwolf Australia. The following propositions emerge: 1. Mr Corbett Snr described his early business dealings with the Nguyen brothers in Abaco Machines and said that, when the company endeavoured to move its manufacturing operations to Vietnam, the Nguyen brothers established a corporate entity in Vietnam and manufactured goods which had the effect of infringing the intellectual property rights of Abaco Machines, to Mr Corbett Snr's disadvantage. 2. Even though Herdgraph had the registered trade mark for the Name - in Australia, the US and the EU - Herdgraph never used the trade marks in Australia or elsewhere. Mr Corbett Snr decided instead that Aardwolf would carry on all trading activities under the Name and the Logo. Mr Corbett Snr said that Herdgraph never used the Name and intended to abandon any rights afforded by these registrations. This abandonment occurred in 2003. 3. Aardwolf then also abandoned its intellectual property rights in about May 2007, when Aardwolf Industries took over the business of manufacturing Aardwolf goods under the Name and Logo. (Mr Woodyatt confirmed Mr Corbett Snr's description of the use of CDK Stone to distribute Aardwolf Industries' goods in Australia.) 4. Father and son declared that, when Aardwolf Australia was incorporated, they spoke and agreed that Aardwolf Industries would assign all rights which it had through use in Australia of the Name and Logo to Aardwolf Australia. (Mark Corbett confirmed the continuing use by Aardwolf Australia of the Word and Logo since 2011.) 5. As to why the letter of consent referred to at [32] did not mention that Herdgraph had abandoned its intellectual property rights in the trade mark or that those rights now resided in Aardwolf Industries, Mr Corbett Snr said that he followed the example letter of consent provided by IP Australia and, on reflection, should have said that he was writing as a former director of Herdgraph as the company had intentionally abandoned any rights afforded by Trade Mark 945207 in 2003 or when the company ceased to trade in 2007. He sent the letter without the benefit of legal advice at the time.
10. The declarations were in essentially the same terms as the affidavits of Mr Corbett Snr and Mark Corbett filed in these proceedings. As is evident from the summary above, the declarations were infused with legal submissions and conclusions of law. Adherence to the Evidence Act 1995 (NSW) was, however, unnecessary in respect of the declarations as regulation 21.15(4) of the Trade Marks Regulations provided: The Registrar is not bound by the rules of evidence, but may be informed on any matter that is before the Registrar in a way that the Registrar reasonably believes to be appropriate. The same position did not apply in the hearing before me where numerous objections and rulings on evidence were made.

US judgment

1. In April 2016, Judge George Wu of the United States District Court in the Central District of California heard various applications, including an application by Aardwolf Industries for summary judgment on the basis that Aardwolf LLC did not own a valid, protectable trade mark as Herdgraph had abandoned any common law rights to the Name and Logo before execution of the Trademark Deed of Assignment and thus had no rights to assign. Aardwolf LLC's position was that, notwithstanding the expiration of Herdgraph's US registration of the Name on 12 September 2012, Herdgraph and its licensee, Aardwolf, continued to have US common law rights to the Name and Logo, which had been assigned to Mr Nguyen and then to Aardwolf LLC.
2. According to Judge Wu's provisional judgment in Aardwolf LLC v Aardwolf Industries Sole Member LLC, et al. (case no. CV 14-9556-GW(JEMx)), Aardwolf Industries proffered evidence that Herdgraph and Aardwolf had entirely ceased using the marks in commerce in the US in 2007. Aardwolf LLC offered no evidence to the contrary, nor any sufficient evidence to establish that Aardwolf Industries had licenced the marks from Herdgraph. The fact that Mr Corbett Snr played a role in each entity at various points in time was considered insufficient to establish an implied licence. Judge Wu noted that the Trademark Deed of Assignment did not refer to Herdgraph's registration of the Name in the US, either in Schedule 1 or at all. Judge Wu concluded that, as Aardwolf LLC could not establish that Aardwolf Industries used the marks pursuant to a licence, Aardwolf Industries had established a prima facie case of abandonment through its unrebutted evidence that Herdgraph and Aardwolf ceased using the marks in 2007. As there was no genuine dispute that Herdgraph abandoned its common law rights to the marks prior to the Trademark Deed of Assignment, there were thus no rights in the US marks to assign.
3. On 21 June 2016, the judgment of Judge Wu was formally handed down and, on 24 June 2016, Mr Nguyen transferred various domain names to Aardwolf Industries. On 11 October 2016, default judgment was entered in the second set of US proceedings (in the District Court for the Eastern District of Virginia, Alexandria Division, Civil Action number 1:16-cv-00234-LO-TCB) and orders made for infringing domain names to be transferred to Aardwolf Industries although it appears that the domain names had largely already been transferred on 24 June 2016. Since the judgment of Judge Wu, Aardwolf Industries has proceeded to register the Name and Logo in the US and Canada. On 27 February 2017, Mr Nguyen dissolved Aardwolf LLC.
4. Back in Australia, on 16 May 2016, Mr Nguyen filed his evidence in opposition to the Fresh Applications. On 29 June 2016, Mr Nguyen filed evidence in reply in the Divisional Applications.

Letters to liquidators

1. In September 2016, the plaintiffs' solicitors wrote to the defendants requesting information about the Trademark Deed of Assignment. Mr Tayeh responded in detail. Mr Tayeh explained: During the initial period of the liquidation the liquidators focussed on investigations into potential uncommercial transactions by the directors following the advice of the petitioning creditors' solicitor of suspected asset stripping namely, involving Mark Corbett setting up a new company with a similar name and trading in the same goods and services. … Given the confluence and timing of events, the liquidators were investigating potential 'phoenix activity' by the former directors of Aardwolf Pty Ltd in transferring assets (including Intellectual Property) to Aardwolf Australia Pty Ltd. I note that the directors did not comply with their duties pursuant to the Corporations Act (2001) for breaches of not attending on the liquidators pursuant to Section 530A, and not lodging a Report as to Affairs pursuant to Section 475 ("RATA"). The directors lodged their RATA over 2 years after the appointment of the liquidators. Prosecution action was commenced against the directors resulting in Mark Corbett facing the local Sutherland Court for being in breach of his duties as director in both companies. The director eventually submitted RATA's in both companies with zero assets and zero liabilities.
2. As to Mr Tayeh's efforts to locate relevant intellectual property of the companies whilst a liquidator, Mr Tayeh advised: General searches were conducted on Intellectual Property indexes in the absence of company books and records being provided by the directors of the company. Given that we did not receive cooperation from the director, the liquidators did not discover the existence of all Intellectual Property in the company until much later and were not able to effect a sale on the trademarks in a timely way which reduced the value of the trademark. Specifically, I note that an EU trademark database search was conducted on Trademark Nos. 003371556 and 945207 soon after appointment showing that the trademarks were registered to Herdgraph from 2005 to 2013. At that time, the liquidators were not aware of any other trademarks or Intellectual Property owned by the company as a result of the directors' lack of cooperation with the liquidators.
3. Mr Tayeh advised that it was only when he came into possession of the letter of consent that he discovered trade marks "which were previously concealed by the companies directors" and proceeded to sell the trade marks based on available information. The liquidators lacked funding in the liquidations to undertake a rigorous advertising campaign, conduct a comprehensive tendering process for the trademarks or an extensive due diligence process. Further, the value of the rights was discounted to reflect the costs the purchaser would incur to mount a legal challenge for the trade marks in dispute. Mr Tayeh stated that Mr Nguyen was aware of these circumstances "and wanted to take action against Aardwolf Australia to oppose their registration".

Australian judgment

1. On 19 April 2017, a further hearing took place before a Delegate of the Registrar of Trade Marks in respect of Aardwolf Australia's Divisional Applications. Aardwolf Australia relied on the declarations described at [64]. On 26 June 2017, in Nguyen v Aardwolf Australia Pty Limited (2017) 130 IPR 209; [2017] ATMO 63, the Delegate of the Registrar of Trade Marks in Australia found at [51]: …both Herdgraph and Aardwolf Pty Ltd had abandoned the AARDWOLF trade marks by 2007. In particular, I accept that both companies had ceased trading by about May 2007. I further accept that [Aardwolf Industries] commenced use of the AARDWOLF trade marks in Australia by about September 2007 when it began using CDK Stones to distribute its goods. The combination of these various actions goes beyond simply a demonstration of slightness of use and is, rather, positive evidence indicating an intention to abandon the trade marks. As a consequence of the abandonment of the AARDWOLF trade marks in 2007 the [Trademark Deed of Assignment], executed some six years later in 2013, is ineffective so far as it purports to assign any rights in the AARDWOLF trade marks to [Mr Nguyen].
2. The Delegate also accepted that Aardwolf Industries' use of the marks following abandonment resulted in it becoming the common law owner of the marks by virtue of that use: at [52]. Further, at [56]: Both James Corbett and Mark Corbett have declared that there was an oral agreement whereby [Aardwolf Industries] assigned all rights which it had acquired through use of the AARDWOLF trade marks in Australia to [Aardwolf Australia]. [Mr Nguyen] has not satisfied me on the balance of probabilities the situation is otherwise. Consequently, I am satisfied that [Aardwolf Australia] is the owner of the Opposed Trade Marks and that [Mr Nguyen] has failed to establish this ground of opposition.
3. In light of this decision, Mr Nguyen withdrew his opposition to Aardwolf Australia's remaining applications to register the Name and Logo.
4. On 13 November 2017, Judge Wu gave judgment in the third US proceedings (United States District Court, Central District Court of California, case number CV 16-1968-GW(JEMx)). Aardwolf Industries complained of Mr Nguyen's attempts to exploit the Name and Logo through websites, Facebook and a YouTube video. However, Judge Wu considered that Mr Nguyen believed that he had acquired the rights to the trade marks when he purchased those rights from the liquidators. There was no evidence that Mr Nguyen had filed the first US proceedings in bad faith or created domain names for any other purpose than to attempt to lawfully exploit the marks which he believed he had lawfully acquired. The Court found that Mr Nguyen did not harbour the requisite bad faith to violate cybersquatting legislation.

Letters before action

1. Shortly after judgment was handed down in the third US proceedings, the plaintiffs' solicitors wrote again to the liquidators seeking further information about the Trademark Deed of Assignment. The plaintiffs provided copies of the recent judgments and asked various questions about the liquidators' previous letter. The liquidators responded in detail, repeating: I also emphasise that the liquidators did not receive any assistance from the directors during approximately the first two (2) years of the liquidations. The directors were consequently prosecuted by the Australian Securities and Investments Commissions. As mentioned in that letter, the lack of assistance from the directors prevented the liquidators from thoroughly obtaining all information that was known by the directors of the trademarks and the liquidators therefore operated on the information that was available to them at the time. Mr Tayeh suggested that the Corbetts may have avoided considerable time, cost and damage had they carried out their duties as directors and attended on the liquidators in accordance with their obligations under the Corporations Act.
2. In May 2018, the plaintiffs sent a letter of demand, to which Mr Tayeh responded in detail disclaiming that, as a liquidator, he owed a duty of care to Aardwolf Industries or Aardwolf Australia in circumstances where neither was a creditor or contributory of Herdgraph or Aardwolf. Mr Tayeh noted that he received no assistance from the directors in his investigations during the first two years of the liquidations. Further: Prosecution action was commenced against the directors against by the Australian Securities and Investments Commissions resulting in Mark Corbett facing the Local Sutherland Court for being in breach of his duties as director in both companies. He was subsequently prosecuted and convicted. The director eventually submitted RATA's in both companies with zero assets and zero liabilities. The lack of assistance from the directors prevented the liquidators from obtaining all information that was known by the directors of the trademarks, and the liquidators therefore operated on the information that was available to them at the time.
3. These proceedings were commenced in July 2019. On this application, the plaintiffs relied on affidavits by Mr Corbett Snr and Mark Corbett in essentially the same terms as those relied on before the Delegate of the Registrar of Trade Marks in Australia and summarised at [64]. As already mentioned, extensive evidentiary rulings were sought and made at the hearing given the legal submissions and conclusions of law contained in the affidavits; Mark Corbett's affidavit was also affected by the problem that he deposed to events which occurred before he became involved in the companies. The affidavits would, largely, be inadmissible at a final hearing but I have broadly assumed that the deponents will be able to attest to the subjects addressed in their affidavits in accordance with the Evidence Act 1995 (NSW) if leave is granted to proceed. Exhibited to these affidavits were three folders of documentary material comprising documents filed in previous legal actions taken in respect of the trade marks, correspondence with the liquidators and documents lodged in the liquidations. No rulings or limitations under the Evidence Act 1995 (NSW) were sought in respect of this material.
4. In addition to what was set out in the declarations before the Registrar of Trade Marks, Mr Corbett Snr and Mark Corbett said that the Trademark Deed of Assignment was exchanged without their knowledge. Mr Corbett Snr says that, if he had known about the Trademark Deed of Assignment, he would have told them that those rights had been abandoned many years ago. Mr Corbett says that he would have told the liquidators that neither Herdgraph nor Aardwolf had any rights to the trade marks after 2007. Such hindsight evidence would likely be inadmissible at a final hearing by reason of section 5D(3)(b) of the Civil Liability Act 2002 (NSW), the law of the forum being the appropriate law: In the matter of Metal Storm Ltd (in liq) (receivers and managers appointed) (No 2) [2019] NSWSC 1682 at [7] and [10]-[30] and the cases cited therein.

Leave to sue a court appointed liquidator

1. Leave of the Court is required to sue a Court appointed liquidator. Leave can be sought nunc pro tunc: McDonald v Dare [2001] QSC 405 at [25]. As McLelland J explained Re Siromath Pty Ltd (No 1) (1991) 9 ACLC 1580 at 1582: It is well established that at least unless the Court's leave has been obtained, the Court "will not allow its officer to be subject to an action in another court with reference to his conduct in the discharge of the duties of his office, whether right or wrong. The proper remedy for anyone aggrieved by his conduct is to apply to the Court in the action in which he was appointed".
2. The rationale was explained more fully by Young J in Re Biposo Pty Ltd; Condon v Rodgers (1995) 13 ACLC 1271; (1995) 120 FLR 399 at 403, who noted that liquidators are given very strong powers under the Corporations Act "virtually as the delegate of the court, or a delegate of [ASIC]" and "until the bulk of the work became so heavy … the matters which under New South Wales law are entrusted to a liquidator were part of the functions of a court official". Thus, at 403: The court will be very jealous of its delegate exercising the powers that it is given. The court will take every precaution to make sure that those powers are used impartially and for a proper purpose. The corollary of this is that the court will not permit its officers to be sued by a creditor or have an inquiry made under s 536 unless it is satisfied that there is a prima facie case: Re Siromath at 1590.
3. These authorities were followed by Tamberlin J in Sydlow Pty Ltd (in liq) v TG Kotselas Pty Ltd (1996) 144 ALR 159; (1996) 65 FCR 234, who observed that one of the rationales for the requirement to obtain leave was the Court's concern, when administering the Corporations Act, to satisfy itself that there is no wrongful interference in, and to protect the integrity of, the winding up under its supervision and control: at 241. Further, at 242: The discretionary power of the Court to grant leave must be exercised having regard to all the circumstances of the particular cases and bearing in mind the need to protect the integrity of its process. It does not necessarily follow that, in order to obtain leave, a prima facie case must be demonstrated. There is no specific threshold appropriate in all cases, however there must be more than mere assertion. The Court's discretion may be exercised on many grounds including, but not limited to, the sufficiency of the evidence adduced as to the prospect of success of the action on the application for leave.
4. More recently, in Eighty Second Agenda Pty Ltd v Handberg [2014] VSC 665; (2014) 32 ACLC 14-081, Croft J reviewed the authorities at [18]-[22]: 18 … The rationale behind this requirement derives from two distinct, yet related, aspects of the protective role that a court often must undertake; in this instance, that role is enlivened to ensure that a court appointed liquidator be unencumbered so as to allow them to perform their official functions, as well as providing a means of protecting the court's own processes. 19 This latter aspect focuses on the role which a court-appointed official - in this case, a court appointed liquidator - undertakes as a representative of the court. When acting in such a position, the court takes the view that the actions of the appointed official are to be deemed as actions of the court. This proposition can be traced back to a decision of Lord Chancellor Brougham in Aston v Heron (1834) 2 My & K 390 at 396-7; 39 ER 993 at 995… 21 The rationale behind the first branch of the principle to which I referred earlier - that a court will act to protect its own officers so as to ensure they may perform their official function - was explained by Robb J in Fortress Credit Corp (Australia) II Pty Ltd v Fletcher (as liquidator of Octaviar Administration Pty Ltd) (in liq) (No 2) [2013] NSWSC 1625, where his Honour said: The … principle is intended to protect liquidators from being subjected to claims against them in their personal capacity in relation to the performance of their duties, so putting their personal assets at risk, by any application made outside the winding up of the company, unless leave be given by the winding up court. 22. As the judicial statements in these cases indicate, there is a close relationship between a court and a court-appointed liquidator; so much so that it will protect the liquidator as one of its officers, through the same processes by which it will protect its own processes. See also Brereton J in Re St Gregory's Armenian School (in liq) [2012] NSWSC 1215; (2012) 92 ACSR 588 at [112].
5. A useful illustration of the application of these principles is Mamone v Pantzer [2001] NSWSC 26; (2001) 36 ACSR 743, where the lessee of commercial premises went into liquidation. The liquidator arranged to sell the assets of the lessee's business but the purchaser was not interested in taking an assignment of the lease. The liquidator sent the lessors a cheque for rent for the period commencing on his appointment as liquidator and ending on the day of sale of the lessee's assets, stating that by banking the cheque the lessors acknowledged that they had no further claim against the liquidator. The cheque was banked and the lessors permitted the purchaser to occupy the premises without a lease and to pay rent for seven months. When the purchaser left the premises, the lessors sought leave to sue the liquidator personally for repudiation of the lease by abandoning possession and ceasing to pay rent. By this time, the liquidation had been completed for some time and only $200 remained in the liquidator's bank account.
6. Santow J noted that two public purposes underlie the requirement for a prospective litigant to obtain leave to sue a court appointed liquidator, being for the Court to protect its officers from spurious or vexatious litigation and to protect the integrity of its winding up process: at [4]. In light of these two public purposes, Santow J noted at [4]: To those ends, a prospective litigant must, to obtain the necessary leave, demonstrate its claim has sufficient merit. What is sufficient is affected by circumstances and timing in which that leave is sought. Moreover courts recognise that liquidators, like administrators, often have to make decisions on the run; to expect perfection in those circumstances is unrealistic.
7. His Honour adopted the approach of Tamberlin J in Sydlow, noting there is no rigid test for when the Court should refuse leave. At [5]: Thus I would not adopt as a universal rule some variant of the test applicable to the setting aside of statutory demands or which draws on the analogy of interlocutory injunctions. This is because the two factors earlier identified will have a significant effect on how the court should exercise its discretion.
8. In that case, Santow J considered it to be a powerful factor that the liquidator completed his tasks with not a word of complaint from the lessors, who were aware from the outset that the lease was abandoned and a new occupier had gone into occupation, happily accepted rent, did nothing to formalise the terms of occupation and only took any steps after the occupant had vacated the premises: at [6]. Santow J considered that the lessors essentially wanted to have it both ways, "to approbate the liquidator's actions leading to the new tenancy whilesoever the rent was paid, but reprobate it after later default": at [8]. Further, at [9]: … litigation brought in such circumstances has all the hallmarks of the spurious. That the litigation does not interfere with the particular current winding up does not detract from its capacity to do so in a broader sense. If leave were to be given following completion of the liquidation and for litigation so weakly grounded no future liquidator could have any sense of safety in carrying the onerous tasks imposed. No liquidator could feel safe that there would not be some belated action brought at the very time when the liquidator has no longer the wherewithal to be indemnified from the company's assets. It would be incongruous indeed if a plaintiff were precluded from bringing such an action during the winding up because of its capacity to interfere with that process, but were to be advantaged by holding back and suing thereafter. Nothing could be more calculated to interfere with the integrity of the liquidation process. Thus, his Honour did not need to consider whether the liquidator could be said to owe the lessors any kind of duty but considered that such a contention faced considerable difficulty; "While that is a factor which may be weighed in the balance, the earlier factors I have identified in my opinion suffice to decline leave to the plaintiffs even without that additional factor": at [11].
9. This approach, and an equivalent outcome, pertained in Armitage v Gainsborough Properties Pty Ltd [2011] VSC 419 where the liquidator sold plant and a forklift truck. The relevant events occurred in 2004, the liquidations were completed in 2007 but proceedings were not commenced until 2010, two days prior to the expiration of the limitation period. His Honour Almond J considered the delay to be lengthy with no reason advanced to explain it and applied Mamone v Pantzer to what his Honour considered to be similar facts: at [62]-[63]. Having done so, Almond J further noted that the liquidator had passed away since the plaintiff had commenced proceedings seeking leave to sue him, and his Estate would be required to defend proceedings about events which occurred some six years earlier and would thus be at a significant disadvantage in defending the proceedings: at [64].

Proposed negligence claim

1. Turning then to the claims which the plaintiffs seeks leave to bring, it is said that the liquidators owed Aardwolf Industries and Aardwolf Australia a duty of care to exercise reasonable care and skill in investigating, inquiring and determining ownership of the trade marks. It is proposed to be contended that the liquidators failed to take any reasonable steps to determine the ownership of the trade marks, make any enquiries of Aardwolf Industries and Aardwolf Australia as to their ownership of the trade marks, failed to have any proper regard to the fact that Herdgraph and Aardwolf had ceased trading by 2007, or to have any proper regard to the declarations in the RATA that neither company had any assets. It is proposed to contend that the liquidators failed to have any proper regard to the fact that Aardwolf Australia claimed to be the owner of the trade marks pursuant to the Parent Applications and failed to make any personal enquiries with Mr Corbett Snr or Mark Corbett in respect of this application, or to obtain appropriate legal advice before entering into the Trademark Deed of Assignment.
2. Loss and damage is said to have been suffered by reason of Mr Nguyen and his related entities relying on the Trademark Deed of Assignment to assert that he was the owner of the trade marks of Aardwolf Industries or Aardwolf Australia, and using those trade marks to promote and sell infringing goods. The plaintiffs have thus incurred costs and expenses in relation to administrative and legal proceedings initiated by or against Mr Nguyen and his related entities including some $700,000 in US dollars in respect of the US proceedings, some $60,000 in Canadian dollars in relation to the dispute in Canada and some $120,000 in trade mark applications in Australia. Further, the plaintiffs say they have suffered a loss of sales as a result of Mr Nguyen and his related entities' extensive use of the trade marks in the promotion and sale of infringing goods, which has caused confusion in the marketplace and damage to the reputation of the plaintiffs' goods and trade marks.

Plaintiffs' submissions

1. The plaintiffs submitted that they have demonstrated that this proposed claim has sufficient merit, putting a substantial amount of evidence in support of their claim before the Court. By contrast, the liquidators had not gone on oath to explain their conduct in relation to the trade marks. From the date upon which they were appointed as liquidators of Herdgraph and Aardwolf, the liquidators were under a duty to exercise reasonable care and skill in investigating, inquiring and determining ownership of the trade marks, and that it was reasonably foreseeable that the plaintiffs would suffer economic loss if the liquidators failed to properly carry out their duty. It is said that the plaintiffs were vulnerable in that they were unable to protect themselves from the consequences of a want of reasonable care on the part of the liquidators: Perpetual Nominees Ltd v McGoldrick & Anor (No 3) (2017) 317 FLR 227; (2017) 120 ACSR 32; Mills v Sheahan (2007) 99 SASR 357; (2007) 214 FLR 367; [2007] SASC 365; Eighty Second Agenda.
2. The plaintiffs submitted that the liquidators were negligent in that they breached their duty of care and failed to take precautions against a risk of harm which a reasonable person in the liquidators' position would have taken in the circumstances. The risk of harm was the risk of economic loss if the liquidators failed to exercise reasonable care and skill in investigating, inquiring and determining ownership of the trade marks and entered into an agreement for the disposal of the trade marks, which risk of harm was foreseeable and not insignificant. The plaintiffs say that they have suffered substantial loss and damage. The plaintiffs relied on the two decisions in favour of the plaintiffs as to their ownership of the trade marks, being the US District Court decision and the Australian Delegate of the Registrar of Trade Marks.
3. Claims for pure economic loss is a developing area of law in Australia, not yet constrained by firm principles, but determined by judicial evaluation of a variety of factors found to be relevant to the particular case at hand: McGoldrick at 240 [86], citing Perre v Apand (1999) 198 CLR 180, 253 [198], 254 [201] (Gummow J); followed in Amcor Ltd v Peter J Ramsay and Associates Pty Ltd [2018] VSC 75 at [92]. On this basis, the plaintiffs submitted that the Court should be reluctant to preclude the plaintiff from bringing an action in factual circumstances which are not closely analogous to those of previous authority: Mills v Sheahan at [110] per Sulan J (Layton J agreeing).

Defendants' submissions

1. The defendants opposed a grant of leave as the claims lacked "sufficient merit" in the sense referred to by Santow J in Mamone v Pantzer having regard to prospects of success and the circumstances and timing of the proposed claim. As to prospects of success, the claim in negligence was said to be unarguable. Whilst the allegations of negligence seek to embrace the concept of vulnerability as explained in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; (2004) 205 ALR 522; [2004] HCA 16, no doubt inspired by McGoldrick in which the concept of vulnerability was applied in the context of an external administration under the Corporations Act, the defendants submitted that this proposed claim had a fundamental and insoluble flaw which dooms it to failure. The plaintiffs could not possibly have been vulnerable to the defendants in the performance of their functions as liquidators as they had a statutory remedy against the liquidators in the form of section 1321 which then provided that a person aggrieved by any act, omission or decision of a liquidator of a company: may appeal to the Court in respect of the act, omission or decision and the Court may confirm, reverse or modify the act or decision, or remedy the omission, as the case may be, and make such orders and give such directions as it thinks fit.
2. Aardwolf Australia would have fallen within the meaning of an aggrieved person under section 1321 as it was, on the plaintiffs' case, the unregistered owner of Trade Mark 945207 and the EU Trade Mark. Section 1321 was not considered by Vickery J in his analysis of vulnerability in McGoldrick and his Honour does not appear to have been referred to this provision. To this, the plaintiffs submitted that section 1321 did not have the consequence that liquidators were not subject to the general law in respect of negligence or the Australian Consumer Law.

Liquidators' duty to third parties

1. The primary question is whether the liquidators may be considered to have owed a duty of care to third parties in the position of the plaintiffs, at least to the level of cogency to support a grant of leave to permit the contention to be fully ventilated in these proceedings. This is to be determined by consideration of the principles by which it is decided whether a party is liable for economic loss it has caused, as expounded in Perre v Apand and Woolcock Street; McGoldrick at [85]; Mills v Sheahan at 361-363, at [15] and [23] per Debelle J with whom Sulan and Layton JJ agreed. As Debelle J noted in Mills v Sheahan at [26]: The vulnerability of the plaintiff is an important requirement: Perre v Apand; Woolcock Street (at [23]). In Woolcock Street (at [80]), McHugh J described it as a critical issue. In this context, vulnerability means more than that the plaintiff is likely to suffer damage if reasonable care is not taken. It is to be understood as a reference to the plaintiff's inability to protect himself from the consequences of the defendant's want of reasonable care, either entirely or at least in a way which would cast the consequences of the loss on the defendant: Woolcock Street (at [23]).
2. By way of illustration, in Mills v Sheahan, the liquidator sold land, plant and equipment. The plaintiffs were liable for the shortfall between what the companies owed and the amount which the liquidator was able to realise from sale of the companies' assets. The plaintiffs asserted that the liquidator had sold the assets at a significant undervalue such that the plaintiffs were liable for more than they would have been if the assets had been sold for their proper value. The Court concluded that the plaintiffs were vulnerable in the sense defined in Woolcock Street as the plaintiffs were not able to protect themselves from the economic consequences of the liquidator's sale of the assets; their liability was entirely dependent on what the liquidator got for the assets; the plaintiffs had no ability to ensure that the liquidator took care to secure the best price reasonably obtainable in all the circumstances: at [26].
3. In McGoldrick, a case factually similar to Mills v Sheahan, guarantors of loans made to a company in liquidation wished to bring a claim against the liquidators. The liquidators had sold properties and used the sale proceeds to reduce the company's indebtedness, and the guarantors claimed that the liquidators had breached their duty by failing to sell the properties at market value and exposing them to liability for a shortfall under the guarantees. Vickery J noted that the vulnerability of the party alleged to have suffered pure economic loss was an important requirement: at [128]. Further, at [129]: The Guarantors found themselves in a position in which they were not able to adequately protect themselves and were left to suffer from the consequences of the sale by the Liquidators of those assets. Their liability to indemnify under their Guarantees was entirely dependent upon what the Liquidators obtained for those assets. They were vulnerable in the sense that they had no ability to ensure that the Liquidators would take care to secure the best price reasonably obtainable in all the circumstances. Vickery J held that the liquidators owed a duty of care to the guarantors to sell the company's property in good faith and with due care and skill to the extent that was reasonable in all the circumstances, including taking reasonable care to secure the best possible price in the commercial context which existed at the time: at [144].
4. In contrast, the Full Court of the Supreme Court of South Australia, in Macks v Viscariello (2017) 130 SASR 1; (2017) 353 ALR 201; [2017] SASCFC 172, cast doubt on Mills v Sheahan and Perpetual Nominees Ltd v McGoldrick (No 3) at [200], [205]-[206], at least where the liquidator's fiduciary duty to the company did not coincide with the asserted duty of care. In Seaman v Silvia [2018] FCA 97, Derrington J considered Macks v Viscariello to be "plainly right": at [39].
5. The alleged vulnerability here is different to that in Mills v Sheahan and Perpetual Nominees v McGoldrick (No 3). The proposed statement of claim contends that the plaintiffs were vulnerable as they were unable to protect themselves from the consequences of a want of reasonable care on the part of the liquidators. Whilst this pleading is a little obtuse, the core allegation, as I understand it, is that, if the liquidators did not exercise due care and skill in ascertaining what the assets of Herdgraph and Aardwolf were, then the liquidators may purport to sell assets which they thought the companies were entitled to sell but in fact the companies were not so entitled.
6. It is difficult to see how the plaintiffs were vulnerable in the manner suggested. The most accurate source of information as to the assets of Herdgraph and Aardwolf was the directors of those companies. As it happened, when the Trademark Deed of Assignment was executed in November 2013: 1. the directors of Herdgraph were Mr Corbett Snr and Mark Corbett and the sole shareholder was Mr Corbett Snr; 2. the directors of Aardwolf were Mr Corbett Snr and Mark Corbett, and the sole shareholder was Mr Corbett Snr; 3. the founder and managing director of Aardwolf Industries was Mr Corbett Snr; and 4. the sole director, secretary and shareholder of Aardwolf Australia was Mark Corbett. That is, there was an overlap between the directors of Herdgraph and Aardwolf, on the one hand, and the plaintiffs on the other.
7. It is uncontentious that the liquidators were seeking information from the directors of Herdgraph and Aardwolf as to what the assets of those companies were. True it is that the directors had provided information, albeit sparse, from which it is said that the liquidators should have figured out that Herdgraph and Aardwolf had abandoned their intellectual property rights. But even accepting, for the moment, that the liquidators should have divined from the scant information provided that the intellectual property rights had been abandoned, the missing piece of information was that Aardwolf Industries had somehow acquired the trade mark rights and then assigned those rights to Aardwolf Australia. That information was not disclosed in any documentary or oral information provided by the directors of Herdgraph and Aardwolf to the liquidators, nor was it to be found on any register. The exclusive repository of that information was Mr Corbett Snr and Mark Corbett, with whom the liquidators were in communication. It would have been a simple matter for them to inform the defendants of this fact, for example, during one of the telephone calls from the liquidators' staff when Mr Corbett Snr was challenged as to apparent "phoenixing" activity. Mr Corbett Snr does not suggest that he took the opportunity which these telephone calls presented to inform the liquidators that the plaintiffs, in fact, were entitled to the intellectual property rights previously held by Herdgraph and Aardwolf and the liquidators would do well not to sell assets which those companies did not own. In circumstances where Mr Corbett Snr had signed the letter of consent, which represented that Herdgraph was the owner of the Name and Logo, only Mr Corbett Snr or Mark Corbett could have 'corrected' this piece of information.
8. Thus, I do not consider that there is any real prospect that the plaintiffs will establish the posited duty as they lacked the vulnerability which they contend formed the basis of that duty. Aardwolf Industries and Aardwolf Australia were able to protect themselves from the consequences of any want of due care by the liquidators; it was entirely within the power of the directors of the plaintiffs to protect their companies by simply telling the liquidators what only they knew - that Herdgraph and Aardwolf having abandoned their rights to the Name and Logo, Aardwolf Industries had acquired common law rights through usage and had orally assigned those rights to Aardwolf Australia. The ability to ensure that the liquidators did not sell assets which did not in fact belong to Herdgraph and Aardwolf was in the hands of Mr Corbett Snr and Mark Corbett.
9. As to the defendants' submission that the plaintiffs were not vulnerable as there was a statutory mechanism to challenge the liquidator's actions, being section 1321 (since repealed with section 90-15 of Schedule 2 Insolvency Practice Schedule (Corporations), Corporations Act now the relevant provision), it is not necessary to consider whether this resoundingly defeats the tort claim given the conclusion I have already reached. The ability of a plaintiff to avail themselves of the various provisions in the Corporations Act to challenge or review a liquidator's action may be relevant to whether a plaintiff has the requisite vulnerability, but I expect that much will depend on the facts of each case.

Proposed misleading and deceptive conduct claim

1. So far as the proposed claim of misleading and deceptive conduct is concerned, it is proposed to be alleged that, by the Trademark Deed of Assignment, the liquidators made representations in trade or commerce to Mr Nguyen that: 1. Herdgraph was the registered proprietor of Australian Trade Mark Number 945207, and the registration was expired with renewal being possible; 2. Herdgraph was the registered proprietor of the Parent Applications; 3. Herdgraph and Aardwolf may have had common law rights associated with these trade marks and were entitled to assign the trade marks, the applications and common law rights.
2. It is proposed to be alleged that Mr Nguyen relied on these representations in entering into the deed. The representations are said to be misleading and deceptive conduct in contravention of section 18 of Australian Consumer Law, by reason of which Aardwolf Industries and Aardwolf Australia have suffered loss and damage, being the same loss and damage pleaded in the negligence suit.

Plaintiffs' submissions

1. The plaintiffs say that in reliance on the representations, Mr Nguyen entered into the deed, noting that clause 6.10.2.10 of the deed provides, "The Parties warrant that each of the recitals is true and correct and acknowledges that the each is entering into this Deed in reliance thereon." Relief under section 236 of the Australian Consumer Law is available to the plaintiffs notwithstanding that the plaintiffs do not have contractual privity with the liquidators. Further, the liquidator's conduct was directed at Mr Nguyen whose reliance has caused loss to the plaintiffs.
2. The plaintiffs contend that the representations made in the deed were false, untrue and misleading. There are said to be a number of serious matters calling for explanation by the liquidators, for example, how they formed the view that Herdgraph at the date of liquidation (8 August 2011) was the registered proprietor of the Parent Applications when these applications did not exist until 4 March 2013 and Aardwolf Australia was the applicant (and therefore registered proprietor) of the applications.
3. As to "trade or commerce", the alleged sale of the trade marks was a commercial dealing, and the representations were in the trade or commerce of the person to whom the representations were made because Mr Nguyen was a direct competitor of the plaintiffs. As to the plaintiffs claim that the liquidators 'engaged in' misleading or deceptive conduct, the plaintiffs contend that the liquidators purportedly investigated the ownership of the trade marks, gave instructions to their solicitors as to the preparation of the deed, signed the deed, knew that the representations were false and untrue, were on notice of Herdgraph and Aardwolf's abandonment of their rights in the trade marks and that the plaintiffs claimed to be the owner of the trade marks, and, in the face of that knowledge, executed the deed. The liquidators have not gone on oath to explain their conduct.

Defendants' submissions

1. There is also said to be a fatal flaw in the proposed misleading and deceptive conduct claim as the conduct of the defendants as Court appointed liquidators cannot even arguably be "in trade or commerce" within the meaning of section 18 of the Australian Consumer Law: Macks v Viscariello at [215] to [236]. Every aspect of the defendants' appointment and their decisions as liquidators was a result of the "statutory construct" as described by the primary judge and approved by the Full Court of South Australia at [225]. The appointment of the defendants occurred by reason of section 472 of the Corporations Act and entry into the deed by Herdgraph and Aardwolf occurred by reason of the defendants exercising their statutory powers under section 477(2)(c) and (d) of the Corporations Act. The exercise of these powers was not so that the defendants could secure a profit or commercial gain either personally or for the companies but for the purposes of realising the assets of Herdgraph as part of the discharge of the liquidator's role described in Macks v Viscariello at [226] as maximising returns to creditors.

'in trade or commerce'

1. Section 2 of the Australian Consumer Law defines 'trade or commerce' to include any business or professional activity (whether or not carried on for profit) within Australia or between Australia and outside places. Statements made by a person that is not engaged in trade or commerce themselves may be in trade or commerce if designed to encourage others to invest in a particular trading entity: Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 at 565 [34], citing Toohey J in Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 92 ALR 193; (1990) 169 CLR 594 at 603-4.
2. Whether liquidators may be engaged in trade or commerce has been considered in relatively few cases. In Baxter v Hamilton (2005) 15 Tas R 59; [2005] TASSC 64, leave was sought to sue a liquidator for misleading and deceptive conduct in relation to appointing a real estate agent to sell property over which a loan by the company was secured. The owner of the property had entered into a contract of sale with the plaintiffs for some $85,000 but the liquidator refused to discharge the mortgage to enable the contract to be completed. The liquidator subsequently entered into a contract to sell the property to a third party for some $380,000. The plaintiffs wished to sue the liquidator for representations made by the real estate agent but leave was refused. In particular, Tennent J concluded that on no interpretation of the conduct of the liquidator could it be said that he was acting 'in trade or commerce': at [67]. The liquidator was appointed by Court order, which gave the liquidator power to wind up the business including by taking control of assets, converting property into money and distributing the proceeds of the winding up for which he would receive specific remuneration: at [64]. At [65]: It must be accepted that Mr Hamilton's business or trade is that of a liquidator. Acting as a liquidator is what he does for a living. As such he oversees the winding up of entities which includes taking control of their assets and, if necessary, converting property into money for distribution to the beneficiaries in the winding up. When he discharges a mortgage as he was asked to do here, it is a function of his winding up role. Where a property is sold as part of any winding up process, he personally receives no payment either by way of profit or remuneration. The sale of a property is simply incidental to the winding up process. Baxter v Hamilton was followed by Gleeson J in Matrix Group Limited (in liq) (Trustee) v Oates (No 4) (2018) 124 ACSR 185; [2018] FCA 22, where it was sought to be suggested that the liquidator had engaged in unconscionable conduct. Her Honour doubted whether the Australian Consumer Law had any application as the liquidator's conduct was unlikely to have been in trade or commerce: at [163].
3. In du Boulay v Worrell [2009] QCA 63, a director of the company in liquidation sought to sue the liquidator in respect of representations made in a notice to creditors and reports in respect of a deed of company arrangement. Keane JA, with whom Muir and Fraser JJA agreed, considered that the liquidator's representations were not in trade and commerce. At [47]: … The conduct complained of by Mr du Boulay did not occur in trade or commerce for the purposes of s 52 of the Trade Practices Act for the simple reason that the voluntary appointment of a liquidator had the consequence of terminating the company's trading and commercial activities, and, in any event, the internal dealings between liquidators and directors cannot be understood as trading or commercial conduct of the company.
4. In Anglo Coal (Dawson Management) Pty Limited v Greig [2011] FCA 941, the applicants sought pre-action discovery from liquidators in respect of a possible claim that the liquidators were accessory to misleading or deceptive conduct by a company of which they were liquidators. Whilst the judgment does not refer to any authorities in respect of obtaining leave to sue a liquidator, Collier J was satisfied on the evidence that the applicant had reasonable cause to believe that it may have the right to obtain relief from the liquidators under the Trade Practices Act and its claim went beyond mere assertion: at [28]-[30]. This case has not been relevantly cited since.
5. In Eighty Second Agenda, the plaintiffs were secured creditors of the responsible entity of a managed investment scheme which raised money from investors and wrote loans to individuals to buy interests in timeshare schemes. On being appointed, the liquidators discovered the responsible entity's bookkeeper had processed 71 fraudulent loan applications totalling some $1 million. The secured creditors sought leave to sue the liquidators for misleading and deceptive conduct in respect of representations said to have been made in an affidavit and a report to creditors. Croft J considered at [49]: … While it may be true that, as the Liquidators submit, the alleged representations were not of themselves an aspect or element of activities or transactions bearing a trading or commercial character, there is some force in the Plaintiffs' submissions that the current proceeding involved a "complex relationship of duties, which arose by reason of the Liquidators having entered into various agreements". … the Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 have made it clear that the power to terminate proceedings summarily should not be exercised unless it is clear that there is no real question to be tried. In these circumstances, it is impossible to say that there are not, even at its lowest point, arguments which need to be explored further before it can be said that there is no real question of whether or not the alleged misleading conduct took place, and whether it can be said that there are occasions when the conduct of a liquidator may occur in trade or commerce.
6. Most recently, in Macks v Viscariello, Mr Viscariello wished to contend that an administrator had engaged in misleading and deceptive conduct in providing a section 439A report under the Corporations Act and advising creditors at the second creditors' meeting that there was no alternative to liquidation. Whilst the Full Court noted that the authorities in this field reflect each case's factual context, the trial judge's finding that the administrator's conduct was not in trade and commerce was correct when all the relevant circumstances were considered. At [233]-[234] (citations omitted): 233 … As the Primary Judge observed, the relationship between a voluntary administrator, the company, the contributors and the creditors is a statutory construct. Mr Macks was performing his statutory role as administrator in providing the s 439A report and in informing the creditors of the position of the Companies at the second creditors meeting. His conduct could be reviewed by a court pursuant to Pt 5.3A and s 1321 of the Corporations Act. The s 439A report and the statements made by him at the meetings of creditors were merely part of a process by which a decision was made to terminate the administrations and place the Companies in liquidation. 234 Accordingly, Mr Macks' conduct that was the subject of Mr Viscariello's claims under the Fair Trading Act was not in trade or commerce for the reasons that were given by the Primary Judge. We agree with his Honour's conclusion that: Of course the voluntary administrator may in the course of exercising his or her statutory duties dispose of the assets of the company in the course of trade or commerce. The prosecution, and compromise, of a chose in action of the company under administration may also involve conduct in trade or commerce. However, the conduct of an administrator in exercising his or her statutory functions, powers and duties relating to the creditors, contributories and directors of the company under Part 5.3A does not constitute conduct in trade or commerce.
7. Macks v Viscariello was noted without criticism by McDougall J in Probuild Constructions (Aust) Pty Limited v Shade Systems Limited [2018] NSWSC 540 at [18]-[19]. In Seaman v Silvia [2018] FCA 97, Derrington J followed Macks v Viscariello in holding that a proposed pleading of misleading or deceptive conduct said to arise from statements made in the section 439A report could not succeed: at [45].
8. As to whether the liquidators here were engaged 'in trade or commerce', at least to the level of cogency to support a grant of leave to permit that contention to be fully ventilated in these proceedings, the following emerges from the evidence on this interlocutory application. It appears that the liquidators were unfunded. Initially, the liquidators' efforts were directed towards ascertaining what the assets and liabilities of Herdgraph and Aardwolf were and whether any uncommercial transactions had occurred. The liquidators' initial searches discovered Trade Mark 945207 and the European Union Trade Mark. Mr Nguyen had informed the liquidators of suspected asset stripping including Mark Corbett setting up Aardwolf Australia with a similar name and trading in the same goods and services.
9. It was not until July or August 2013 that the liquidator became aware via Mr Nyugen that Aardwolf Australia was attempting to become the registered owner of the Name and Logo. It was only when the liquidators came into possession of the letter of consent that the liquidators formed the view that Herdgraph had other trade mark entitlements of which the liquidators were not previously aware. It was in this context that the liquidators, on behalf of Herdgraph and Aardwolf, sold whatever intellectual property rights those companies had to Mr Nguyen, who wanted to take action against Aardwolf Australia to oppose the Parent Applications. The value of the trade marks was discounted to reflect the costs the purchaser would incur to mount a legal challenge for the trade marks in dispute and Mr Nguyen was aware of these circumstances but wished to pursue the matter.
10. The liquidators' actions seem to me to fall classically within a Court appointed liquidator's function of identifying assets of the company and realising those assets as best can be done in the circumstances so that a distribution can be made to creditors or contributories. There is no suggestion that the purchase price resulted in any profit being earned by the liquidators. The modest price of $5,000, coupled with Abaco Machines' agreement to subordinate its priority for its costs of the application to wind up the companies, likely had the result that the liquidation became a 'nil sum game' for the liquidators. There is nothing apparent from the evidence that would indicate that the liquidators' conduct was anything other than performing their statutory powers under Part 5.3A. I consider that the prospects of establishing that the representations in the deed were made 'in trade or commerce' are poor.

Reliance

1. The more pressing issue, however, is that of reliance. The plaintiffs do not suggest that they relied on the liquidators' representations. Rather, the plaintiffs seek leave to sue on Mr Nguyen's reliance on the representations in the Trademark Deed of Assignment. As the plaintiffs correctly submitted, section 236 of the Australian Consumer Law does not require that the plaintiff who alleges damage must have relied upon that misrepresentation. The defendants' conduct can be directed at a third party whose reliance causes loss to the plaintiff: Elias v Alloha Formwork & Construction Pty Ltd [2017] NSWSC 1546 at [84]; Perpetual Trustee Company Ltd v Ishak [2012] NSWSC 697 at [171]-[173]; Hoath v Connect Internet Services Pty Ltd (2006) 229 ALR 566; [2006] NSWSC 158 at [109]; Hampic Pty Ltd v Adams (2000) ATPR 41-737; [1999] NSWCA 455 at [37]; Pritchard v Racecage Pty Ltd (1997) 142 ALR 527 at 542; (1997) 72 FCR 203; Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd (1995) 17 ACSR 495; (1995) 122 FLR 294 at 311. All that is necessary is a sufficient and direct link or a requisite element of proximity in order for section 236 to be satisfied: McCarthy v McIntyre [1999] FCA 784 at [48]; Finishing Services Pty Ltd v Lactos Fresh Pty Ltd (2007) ANZ ConvR 93; [2006] FCAFC 177 at [31]; Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 109 ALR 638; (1992) 37 FCR 526 at 532; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; [1998] HCA 69 at [99]-[103].
2. I have serious doubts as to whether the plaintiffs have any prospect of establishing reliance by Mr Nguyen. As Kiefel J observed in Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; (1999) 43 IPR 545; (1999) ATPR 41-687 at [45]: The question of causation can sometimes be resolved not by direct evidence as to what part a misrepresentation played in the process of entry into contract, but by a Court determining what effect must be taken to have resulted. Indeed this course may sometimes be preferable to one which rested solely on evidence later given on the point. In Gould v Vaggelas (1985) 157 CLR 215 at 236 Wilson J held that if a material representation is calculated (which is to say, objectively likely: Ricochet Pty Ltd v Equity Trustees Executor & Agency Co Ltd (1993) 41 FCR 229; Henderson v Amadio Pty Ltd (No 1) (1995) 62 FCR 1, 166) to induce the representee to enter into a contract and the person in fact enters into a contract, a fair inference arises that the representation operated as an inducement, adding that it need not be the only cause.
3. And at [50]: … that Courts ought to be, and no doubt are, cautious in accepting mere assertions of reliance as essentially self-serving: see Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471, 483 and will usually attempt to assess that prospect by reference to objective criteria. …
4. Whatever clause 6.10.2.10 of the Trademark Deed of Assignment provided, the factual context in which the deed was executed indicates that the person who know what there was to be known about the intellectual property rights of Herdgraph and Aardwolf was Mr Nguyen. He was the source of the liquidators' information on the subject. It was Mr Nguyen who brought the Parent Applications to the attention of the liquidators. It was Mr Nguyen who wished to take the matter further as part of a very long running dispute with Mr Corbett Snr in respect of the intellectual property rights of the "Abaco" and "Aardwolf" trade marks. It is difficult to think of a person less likely to rely on the liquidators' understanding of the position set out imperfectly in the recitals to the deed.
5. Thus, I consider that the plaintiffs' proposed claim for misleading and deceptive conduct lacks sufficient merit to warrant a grant of leave.

Other factors relevant to leave

1. The defendants submitted that the plaintiffs were on notice of the Trademark Deed of Assignment sometime between 30 January 2014 and 27 May 2015 during the course of the winding up of Herdgraph and Aardwolf but made no complaint until 1 September 2016 and did not approach the Court until these proceedings were commenced on 3 July 2019. The plaintiffs made no complaint to the defendants about the deed until 1 September 2016, almost a year after the deregistration of Herdgraph and Aardwolf. A further three years passed since that initial correspondence and the commencement of these proceedings. The same conclusion should be reached as Santow J in Mamone v Pantzer at [9] and for essentially the same reasons.
2. The plaintiffs submitted that it wasn't until June 2017 that the Delegate made a decision consistent with the plaintiffs' claims. Any proceedings commenced against the liquidators before then would have been dashed by an adverse decision by IP Australia and thus there was good sense in awaiting the outcome of that process. I note that this does not explain the additional two years which then passed before these proceedings commenced.
3. Having regard to the principles set out at [81]-[89], I consider the follow matters are relevant to whether leave should be granted, in addition to the views I have reached on the merits of the proposed causes of action. 1. The liquidators of Herdgraph and Aardwolf were presented with significant difficulties by reason of the failure of the directors of those companies - also the directors of the plaintiffs - to comply with their statutory obligations to cooperate with the liquidators, hand over the books and records and promptly submit a RATA. 2. The directors eventually provided information which was less than fulsome and did not specifically alert the liquidators to the suggestion later made that the intellectual property rights of Herdgraph and Aardwolf had been abandoned, acquired by Aardwolf Industries and assigned to Aardwolf Australia. Mr Corbett Snr was challenged by the liquidators as to whether he was engaging in "phoenixing" activity and did not take the opportunity to set the liquidators straight. The timing of the incorporation of Aardwolf Australia after Herdgraph and Aardwolf discontinued the Federal Court proceedings and were the subject of adverse costs orders was itself an indication of possible 'phoenixing'. 3. Instead, on being informed that Herdgraph's trade mark had expired and during the six month 'grace period', another corporate entity with the same directors as Herdgraph and Aardwolf, being Aardwolf Australia, made a prompt application to become the registered owner of the Name and Logo. In support of that application, the Corbetts submitted a letter of consent to IP Australia, purportedly on behalf of Herdgraph, to the effect that Herdgraph owned the Name and Logo and consented to those trade marks being registered by Aardwolf Australia. This was in circumstances where the trade mark examiner had supplied a significant amount of information to Mark Corbett as to ways in which Aardwolf Australia could support its application to register the Name and Logo. 4. By March 2014, Mark Corbett was aware of the Trademark Deed of Assignment and addressed its contents in detail in his declaration of 24 March 2014. But Mark Corbett did not take his complaints up with the liquidators at the time. The liquidation of Herdgraph and Aardwolf continued for another 15 months, until the Delegate refused the Parent Applications on the basis that Aardwolf Australia had executed a falsehood upon the Registrar of Trade Marks by reason of the letter of consent. 5. True it is that the plaintiffs have since compiled a substantial amount of affidavit and documentary material to support a claim of abandonment, which has found acceptance in the US and with IP Australia. But no complaint was made to the liquidators until 2016 and it was another three years until these proceedings were commenced, moments before the expiry of the limitation period.
4. I am not prepared to allow a Court appointed liquidator to be subject to such an action in respect of matters which happened so long ago and in respect of which the plaintiffs have not agitated their complaints in a timely manner. Having apparently failed to cooperate with the liquidators at the time, I consider it is necessary to protect the integrity of the winding up process by refusing leave to permit Mr Corbett Snr and Mark Corbett through their corporate vehicles - the plaintiffs - to now sue the liquidators for how they did their job in the absence of such cooperation.

orders

1. For these reasons I make the following orders: 1. Dismiss the Notice of Motion filed on 3 July 2019. 2. Dismiss these proceedings. 3. Order the plaintiffs to pay the defendants' costs of the proceedings, including the Notice of Motion filed on 3 July 2019.

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