Accor Australia & New Zealand Hospitality Pty Ltd v Liv Pty Ltd

Accor Australia & New Zealand Hospitality Pty Ltd v Liv Pty Ltd - [2013] FCA 379 - FCA 2013 case summary — Zoe

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Factual background 2 Accor Australia & New Zealand Hospitality Pty Ltd (the first applicant) holds the exclusive on-site rights to manage and let the accommodation facilities and related services available at a strata title resort facility located at 1 Marlin Parade, Cairns in north Queensland (the Resort). The building where the Resort is located is subdivided into three separate community title schemes as follows: (a) Harbour Lights Community Titles Scheme No 36769 - the residential scheme (b) Harbour Lights (Managed Apartments) Community Titles Scheme No 36770 - the managed apartments scheme (c) Harbour Lights (Retail) Community Titles Scheme No 36772 - the retail scheme. 3 Each of these Community Title Schemes was established under the Body Corporate and Community Management Act 1997 (Qld) (the BCCM Act). Within the building housing these three schemes, there is a large area of common property which includes a swimming pool and gymnasium. 4 Accor's on-site letting rights relate to the residential and managed apartments schemes. 5 Cairns Harbour Lights Pty Ltd (the second applicant) was the developer of the building and responsible for the establishment of the three community title schemes within it. It is also the registered owner of two trade marks: "Harbour Lights" and "Cairns Harbour Lights"; that were registered under the Trade Marks Act 1995 (Cth) (the Trade Marks Act) in early 2009. Prior to 2009, and from at least 26 February 2004 and mid-2005, respectively, the applicants claim to have continuously used the signs "Harbour Lights" and "Cairns Harbour Lights", or variations thereof, as trade marks in marketing and selling the services available at the Resort. Cairns Harbour Lights Pty Ltd has licensed Accor to use these two trade marks for that purpose. 6 Liv Pty Ltd (the first respondent) operates a business renting holiday accommodation and related services in the city of Cairns. Ms Ivana Patalano (the second respondent) is the sole shareholder and director of Liv. 7 Ms Elise Warring (the third respondent) was the registered holder of the internet domain names: cairnsharbourlights.com.au, harbourlightscairns.com.au and harbourlightscairns.com. As well, Ms Warring held various registered business names which used the words Cairns Harbour Lights, or variations thereof. As a part of their holiday accommodation business, the respondents (originally Ms Warring and subsequently Liv) used the abovementioned internet domain names and registered business names to market their holiday accommodation services on the internet. In late 2009 Ms Warring sold the holiday accommodation business that she had previously operated, including the rights to the internet domain names and the registered business names, to Liv. That sale was settled in early 2010.

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Rule 30.01 and the relevant principles 12 Rule 30.01 of the Rules provides: (1) A party may apply to the Court for an order that a question arising in the proceeding be heard separately from any other questions. (2) The application must be made before a date is fixed for trial of the proceeding. (Notes omitted) 13 This rule is substantially the same as the former rule: O 29 r 2(a). That being so, the principles relevant to the former rule as outlined by Branson J in Reading Australia Pty Ltd v Australian Mutual Provident Society (1999) 217 ALR 495 (Reading) (at [8]) can be applied to the present rule 30.01: see Graham's Factree Pty Ltd v Oakley Enterprises (No 1) Pty Ltd [2012] FCA 1033 at [8] per Dodds-Streeton J and Lifeplan Australia Friendly Society Ltd v Woff [2012] FCA 1415 (Lifeplan) at [8] per Mansfield J. Those principles are (Reading at [8]): (a) the term "question" in O 29 r 1 includes any question or issue of fact or law in a proceeding. The distinction in the rule between an "issue" and a "question" is the distinction between that which, when resolved, will result in an adjudication in favour of one party or the other, being an "issue", and less decisive matters of dispute being "questions" (Landsal Pty Ltd (in liq) v REI Building Society (1993) 41 FCR 421 at 425 ; 113 ALR 643 at 647); (b) a question can be the subject of an order for a separate decision under O 29 r 2 even though a decision on such a question will not determine any of the parties' rights (Landsal Pty Ltd (in liq) v REI Building Society at FCR 425; ALR 647); (c) however, the judicial determination of a question under O 29 r 2 must involve a conclusive or final decision based on concrete and established or agreed facts for the purpose of quelling a controversy between the parties (Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 ; 161 ALR 399 ; [1999] HCA 9 at [45]); (d) where the preliminary question is one of mixed fact and law, it is necessary that the question can be precisely formulated and that all of the facts that are on any fairly arguable view relevant to the determination of the question are ascertainable either as facts assumed to be correct for the purposes of the preliminary determination, or as agreed facts or as facts to be judicially determined (Jacobson v Ross [1995] 1 VR 337 at 341, referring to Nissan v Attorney-General [1970] AC 179 at 242-3 ; [1969] 1 All ER 629 at 663-4 per Lord Pearson; Bass v Perpetual Trustee at [53]); (e) care must be taken in utilising the procedure provided for in O 29 r 1 to avoid the determination of issues not "ripe" for separate and preliminary determination. An issue may not be "ripe" for separate and preliminary determination in this sense where it is simply one of two or more alternative ways in which an applicant frames its case and determination of the issue would leave significant other issues unresolved (CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 per Kirby P at 606); (f) factors which tend to support the making of an order under O 29 r 2 include that the separate determination of the question may: (i) contribute to the saving of time and cost by substantially narrowing the issues for trial, or even lead to disposal of the action; or (ii) contribute to the settlement of the litigation (CBS Productions Pty Ltd v O'Neill per Kirby P at 607); (g) factors which tell against the making of an order under O 29 r 2 include that the separate determination of the question may: (i) give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of trial (GMB Research & Development Pty Ltd v Commonwealth [1997] FCA 934); (ii) result in significant overlap between the evidence adduced on the hearing of the separate question and at trial - possibly involving the calling of the same witnesses at both stages of the hearing of the proceeding: GMB Research & Development Pty Ltd v Commonwealth; Arnold v Attorney-General (Vic) (unreported, Fed C of A, Sundberg J, Nos VG629-37 of 1995, 8 September 1995, BC9502745). This factor will be of particular significance if the court may be required to form a view as to the credibility of witnesses who may give evidence at both stages of the hearing of the proceeding; or (iii) prolong rather than shorten the litigation (GMB Research & Development Pty Ltd v Commonwealth). 14 In elaborating the principle set out in [8(e)] of Reading above, Mansfield J observed in Lifeplan (at [10], quoting from CBS Productions Pty Ltd v O'Neill (1985) 1 NSWLR 601 per Kirby P at 606) that a matter was "ripe" for separation as a question to be considered at a preliminary hearing if it involved "… a central issue in contention between the parties the resolution of which will either obviate the necessity of litigation altogether or substantially narrow the field of controversy". 15 In Reading, (at [9]) Branson J went on to observe that the ultimate question was what was "just and convenient" in the particular circumstances. Her Honour then identified two classes of case where it is commonly recognised as "just and convenient" to order a separate trial. One is in intellectual property rights cases where the issues of liability and relief are commonly separated because an applicant cannot be compelled in such cases to make an election as between damages and an account of profits, at least until all of the evidence has been received. The other class of case is an application in the nature of a demurrer where the pleadings contain all the relevant facts and one party contends that the pleadings do not disclose a cause of action, or a defence, or a matter of reply, as the case may be. 16 Since Reading, it appears to have been accepted, at least in this Court, that these two classes of cases are the exceptions rather than the rule. This approach appears to stem, at least in part, from the caution given by two judges of the High Court in Tepko Pty Ltd v Water Board (2001) 206 CLR 1; [2001] HCA 19 (Tepko). In Tepko, Kirby and Callinan JJ cautioned against trials of separate issues rather than one trial of all the issues in a proceedings. Their Honours expressed this caution in the following terms (see Tepko at [168]-[170]): 168 … The attractions of trials of issues rather than of cases in their totality, are often more chimerical than real. Common experience demonstrates that savings in time and expense are often illusory, particularly when the parties have, as here, had the necessity of making full preparation and the factual matters relevant to one issue are relevant to others, and they all overlap. 169 The second and related comment is this. A party whose whole case is knocked out on a trial of a preliminary or single issue, may suspect, however unjustifiably, that an abbreviated course was adopted and a decision reached in the court's, rather than the parties', interests. 170 Thirdly, there is an additional potential for further appeals to which the course of the trial on separate issues may give rise. Indeed, that could occur here were this appeal to be allowed and a retrial had in which the remaining issues of causation and damages were decided. Single-issue trials should, in our opinion, only be embarked upon when their utility, economy, and fairness to the parties are beyond question. 17 Numerous judges of this Court have heeded this caution. Some recent examples include Media Ocean Ltd v Optus Mobile Pty Ltd (No 5) [2009] FCA 659 at [20] per Perram J; my own decision in Breezeway Australia (Holdings) Pty Ltd v Preference Manufacturing Pte Ltd [2011] FCA 764 at [12]-[13]; Blues Pty Ltd v Commissioner of Taxation [2012] FCA 320 at [5] per Logan J; CSL Australia Pty Ltd v Minister for Infrastructure and Transport [2013] FCA 152 at [29] per Katzmann J; and Lifeplan at [10] per Mansfield J.

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The contentions 18 I will now turn to summarise the contentions of counsel in this application and to then consider those contentions guided by these principles. Mr Coe, for Ms Warring, supported the application, but was content to rely upon the submissions of Mr Musgrave, counsel for Liv and Ms Patalano. 19 Mr Musgrave submitted that the respondents' separate question essentially articulates the respondents' challenge under s 88 of the Trade Marks Act to the registration of the applicants' trade marks. In this respect, he began by emphasising a point made earlier in these reasons: that the BCCM Act prevented a body corporate from giving exclusive letting rights over the residential lots in a scheme to a person such as Accor. It followed, so Mr Musgrave submitted, that the owners of those lots could use off-site letting agents, such as the respondents. Mr Musgrave also referred to two other sections of the BCCM Act: ss 22 and 33. They provide: 22 The name of a community titles scheme is made up of - (a) an identifying name shown in the community management statement; and (b) the words 'community titles scheme'; and (c) the unique identifying number allocated under the Land Title Act, section 115E(2). … 33(1) The name of the body corporate for a community titles scheme is the words 'Body corporate for' plus the name of the scheme. (2) The body corporate for a community titles scheme may sue and be sued in its corporate name. (Notes omitted) 20 He then went to the affidavit evidence to show that the name of each of the body corporates concerned in this matter uses the words: "Body Corporate for the Harbour Lights Community Title Scheme". Mr Musgrave then turned to what was said by Kitto J in Clark Equipment Co v Registrar of Trade Marks (1964) 111 CLR 511 at 514: "… It is apparent from the history of trade marks in this country that both the Legislature and the Courts have always shown a natural disinclination to allow any person to obtain by registration under the Trade Marks Acts a monopoly in what others may legitimately desire to use." The interests of strangers and of the public are thus bound up with the whole question, as Hamilton L.J. pointed out in the case of R.J. Lea, Ltd. (1) ; but to say this is not to treat the question as depending upon some vague notion of public policy: it is to insist that the question whether a mark is adapted to distinguish be tested by reference to the likelihood that other persons, trading in goods of the relevant kind and being actuated only by proper motives - in the exercise, that is to say, of the common right of the public to make honest use of words forming part of the common heritage, for the sake of the signification which they ordinarily possess - will think of the word and want to use it in connexion with similar goods in any manner which would infringe a registered trade mark granted in respect of it. (Emphasis added and citations omitted) 21 It followed, so Mr Musgrave submitted, that the owners of lots in the Harbour Lights Community Titles Schemes were entitled "as a part of the common heritage" to use the name of the body corporate for those schemes in letting their residential apartments within the scheme. It followed further, so he submitted, that the applicants should not continue to have the monopoly they have gained by obtaining registered trade marks incorporating those words. 22 Mr Musgrave submitted that, if the respondents' challenge to the registration of the applicants' trade marks is successful, that will dispose of the infringement component of these proceedings altogether. However, he acknowledged that it would not resolve the applicants' Australian Consumer Law claims and he conceded that part of the proceedings would have to proceed to trial in any event. Referring to [8(g)(i)] of the Reading principles above (at [13]), he submitted that, while there may be some contested factual issues that have to be resolved in determining the respondents' separate question, those issues were not significant or extensive. Further, referring to [8(g)(ii)] of the Reading principles, he submitted that, while some of the witnesses would be required to give evidence twice - in the separate question hearing and at trial - the limited scope of the factual issues involved and the absence of any issues of credit will mean that there is not likely to be any potential for any conflicting findings of fact at the two hearing stages. 23 Mr Crowe SC, for Accor, submitted that there was a number of reasons why the respondents' separate question should not be determined as a separate question in these proceedings. First, he submitted that course would prolong the total hearing time in these proceedings by at least one to two days. This is so, he submitted, because after the one to two days that are estimated for the hearing of the separate question, approximately the same amount of hearing time will still be required for the trial of the proceedings, whether or not the separate question is resolved in the respondents' favour. While Mr Musgrave did not agree with Mr Crowe's estimate as to the time required for the trial, he did not dispute his claim that it would still be necessary to conduct a trial on the Australian Consumer Law claims which would be likely to take approximately the same amount of time. 24 In addition to the prolongation of the total hearing time, Mr Crowe submitted that splitting the case in this way will raise the potential for the losing side to seek to pursue an appeal after the determination of the separate question. In this respect, Mr Crowe submitted that the question of law raised by the respondents' separate question was a difficult one which the unsuccessful party was likely to wish to pursue on appeal. If that occurred, there would then be two appeal stages, thereby occasioning significant delays in the proceedings. Mr Crowe submitted that these delays should be seen against the background of these proceedings being fast track proceedings where the applicants are anxious to gain a speedy decision on a controversy that has been alive between the parties for some years. 25 Mr Crowe strongly disputed the respondents' submissions as to the limited nature of the factual issues that would be involved in considering the separate question. In this respect, he pointed to the decision of Sundberg J in Chocolaterie Guylian NV v Registrar of Trade Marks (2009) 180 FCR 60; [2009] FCA 891 (Chocolaterie Guylian) at [9] where his Honour set out what Mr Crowe referred to as the "cascading" issues of fact that fall to be determined under s 41 of the Trade Marks Act. 26 Turning to the separate question proffered by the respondents, Mr Crowe submitted the "proper motive" mentioned in subcl (gg) will also involve a disputed question of fact, as will the identification of the "common heritage" mentioned in subcl (cc) (see both at [11] above). Given the extent of these factual disputes, Mr Crowe submitted there will be an extensive overlap between the evidence called at the two hearing stages, viz the separate question hearing and the trial hearing. He submitted this will cause delay, increased costs and also increase the potential for conflicting findings in the two stages.

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Consideration 27 If the respondents' question involved a "crisp and clear" demurrer point (to adopt the epithet used by Edmonds J in SPI Spirits (Cyprus) Ltd v Diageo Australia Ltd [2006] FCA 14 at [33]), there would be some merit in considering it as a separate question in these proceedings. Indeed, an application in the nature of demurrer was the second of the two classes of proceedings identified by Branson J in Reading as cases that are commonly dealt with by way of separate determinations (see at [15] above). The first of those two classes of proceedings does not arise in this application. 28 As to the second class of proceedings identified by Branson J in Reading, while Mr Musgrave submitted that the areas of factual dispute involved with the respondents' separate question were not significant or extensive, he was forced to concede that this was not a matter where the facts can either be assumed to be correct, or have been agreed between the parties. Nor do I consider they are capable of being easily and quickly determined by the Court: see Reading at [8(d)] and [9] (at [13] and [15] above respectively). That being so, it obviously does not constitute the kind of demurrer point mentioned above. To the contrary, I agree with Mr Crowe's submissions that the factual disputes that are likely to arise in the respondents' challenge to the applicants' trade marks under s 88 of the Trade Marks Act, relying as it does on s 41 of that Act, are likely to be significant and extensive. As Sundberg J illuminated in Chocolaterie Guylian, s 41 requires the consideration of a succession of matters depending upon whether the sign in question is alone, to some extent, or not at all, inherently capable of distinguishing the relevant services. These extend from: (a) whether the sign is inherently adapted to distinguish the relevant services alone under s 41(3); to (b) if the sign is to some extent inherently adapted to distinguish the relevant services, a consideration of the three matters set out in s 41(5); and to (c) if the sign is not inherently adapted to distinguish the relevant services at all, a consideration of whether the relevant use by the applicant meant that the sign did in fact distinguish the relevant services in accordance with s 41(6). 29 On this aspect, it is worth digressing to record that the respondents' proposed question does not reflect this succession of matters. It asks whether the applicants' registered marks are "capable of distinguishing; or … to any extent inherently adapted to distinguish". Thus, neither the precise terminology (inherently capable of distinguishing) nor the varying extent of the distinction (alone, to some extent, or not at all) is reflected in this question. In my view, this imprecision and inaptness in the respondents' separate question and the consequential confusion and delay that is therefore likely to arise in determining it, are reasons enough to reject it as an appropriate matter for separate determination in these proceedings. But there is a number of other reasons for this conclusion, as follows. 30 The first has already been adverted to above: the extent of the factual disputes that are likely to arise in determining the respondents' separate question. Each of the stages of the succession of matters identified in Chocolaterie Guylian involves a wide range of factual issues. For example, at the second stage, s 41(5) requires a consideration of the three matters set out in subs (5)(a). The third of those matters is extraordinarily broad: "any other circumstances". And even at the first stage (under s 41(1)), where the scope of the factual dispute is more limited - whether the sign is alone inherently capable of distinguishing the relevant services - there is still the potential for an extensive dispute on the facts. That is so because, among other things, that stage engages some of the factual issues that are specifically mentioned in the respondents' separate question. They include: (a) under cl (cc): whether the applicants' registered marks comprise words that are part of the "common heritage"; (b) under cl (ff): whether the applicants' registered marks denote a geographical location. Here, the obvious difference between the applicants' two registered marks ("Harbour Lights" and "Cairns Harbour Lights") is likely to become an issue. (c) under cl (gg): whether the respondents and other traders might "without improper motives" wish to use the signs in the ordinary course of trade. On its face, the propriety of a person's motives is an issue that is steeped in questions of credit. 31 Each of these factual issues above is, in my view, significant and is likely to give rise to an extensive contest. It follows that this is a reason telling against an order under r 30.01: see [8(g)(i)] of the Reading principles above at [13]. Before leaving this s 41 aspect, I note that this section of the Trade Marks Act was recently amended, ie with effect from 15 April 2013. Since the effect of these amendments was not addressed by counsel in submissions, I will assume they are not relevant to this application. 32 Secondly, once it is accepted that the potential exists for these factual disputes in determining the respondents' separate question, that necessarily carries with it the potential for an overlap between the evidence that will be adduced at the two hearing stages of these proceedings. That, in turn, introduces the very real potential for conflicting findings being made at those two stages. Since this could well involve issues of credit (see [30(c)] above), this provides a further reason to reject the respondents' question as an appropriate matter for separate determination in these proceedings: see [8(g)(ii)] of the Reading principles above at [13]. 33 Thirdly, and perhaps most importantly, I do not consider the respondents' separate question is "ripe" for determination as a separate question. That is, I do not consider that it involves "… a central issue in contention between the parties, the resolution of which will either obviate the necessity of litigation altogether or substantially narrow the field of controversy": see Lifeplan at [10] (at [14] above). Even assuming the respondents are successful on their separate question at the first stage of the hearing, while they are correct in submitting that that will resolve the infringement aspect of the dispute between the parties, it will still leave for determination the Australian Consumer Law component of the dispute. So the determination of the separate question will not obviate the necessity for litigation altogether. Nor, in my view, will it substantially narrow the field of controversy in these proceedings. That is so because, on the present estimates of counsel, the Australian Consumer Law component of the dispute is still likely to involve a 4-5 day trial. 34 This leads me to the fourth reason why it is inappropriate to grant the respondents' application for the determination of this separate question: the prolongation of the hearing in these proceedings. Even assuming success for the respondents at the first stage of the hearing, the hearing to determine the disputes in this proceeding will still involve two stages over a combined 5-7 days: 1-2 days for the separate question stage plus 4-5 days for the trial. This is to be compared to one trial over 4-5 days, if the respondents' question is not determined separately. To compound this prolongation, splitting the hearing of this proceeding into two stages in this way will also introduce the opportunity for appeals to be pursued after each of the two stages. It follows that, whatever happens at the first stage, determining the respondents' separate question will involve a prolongation of the hearing, and the opportunity for an appeal after the first stage with all the additional delays and costs that are likely to follow. This is not to mention the inconvenience that will be caused to those witnesses who will have to give evidence at each of the two stages. 35 Finally, I should mention the question of settlement: see Reading at [8(f)(ii)] (at [13] above). As I mentioned at the outset of these reasons, the parties have been in mediation in these proceedings for some months now. Since they have had a more than adequate opportunity to resolve their dispute by now, I am by no means persuaded that determining this separate question will advance the prospects of the proceedings being settled earlier than they otherwise would be. To the contrary, if this matter is instead set down for a trial of all the issues forthwith, the certainty and finality of that imminent trial is more likely, in my view, to provide a greater incentive for settlement of the whole proceeding, than the less certain and more prolonged course proposed by the respondents.

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