BGD Corporation Pty Ltd v Kalaoun

Introduction 1 This proceeding was commenced on 2 March 2021 by originating application supported by a statement of claim. 2 As discussed further below, the respondent has failed to comply with orders of the Court on numerous occasions, despite the grant of extensions of time to do so. As at the date of this judgment, the respondent remains in default of court orders, including an order to give discovery of limited categories of documents to the applicants which order was first made on 9 April 2021. 3 By interlocutory application dated 4 August 2021, the applicants sought an order giving judgment against the respondent under r 5.23(2)(c) of the Federal Court Rules 2011 (Cth) (Federal Court Rules) on the basis that the respondent was in default of orders of the Court. The application was supported by an affidavit of Ms Georgina Wu, the applicants' solicitor, affirmed 9 August 2021. 4 At an interlocutory hearing on 18 August 2021, I made orders granting the respondent a further extension of time to file a defence and give discovery and I adjourned the hearing of the application for default judgment. 5 At a further interlocutory hearing on 17 September 2021, I made orders granting the respondent yet a further extension of time to file a defence and give discovery, failing which judgment would be entered for the applicants in terms to be directed by the Court. 6 The respondent failed to comply with the order to give discovery. By operation of the orders made on 17 September 2021, judgment will now be entered for the applicants. The terms of the judgment are explained below.

Overview of pleading 7 In the statement of claim, the applicants make the following allegations. 8 At all relevant times, the first applicant is and has been the registered proprietor, and the second applicant is and has been an authorised user, of the following registered trade marks: (a) Australian Registered Trade Mark 1484732, comprising a design and the words 'the Drain Man Clearing and Relining' in class 37 in respect of clearing of tree roots from pipes and drains (plumbing services) as shown below: (b) Australian Registered Trade Mark 1930214, comprising a design and the words 'The Drain Man Clearing and Relining' in class 37 in respect of clearing of tree roots from pipes and drains (plumbing services); maintenance of plumbing; plumbing as shown below: 9 The words "Drain Man" are dominant cognitive cues of the registered marks. 10 At all relevant times, the second applicant has carried on and promoted a business of providing plumbing services, including drainage cleaning and relining, maintaining plumbing, servicing sewer pipes, maintaining sewer pipes, renovating sewer pipes and clearing tree roots from pipes and drains by reference to the registered marks and the name "The Drain Man", and the second applicant has generated substantial goodwill and reputation in Australia in relation to the registered marks and the name "The Drain Man". Members of the public in Australia expect that plumbing services provided or promoted by reference to the name "The Drain Man" or the registered marks are provided by or have some trade connection with the second applicant. 11 The respondent, Mr Kalaoun: (a) since at least 8 September 2020, has carried on a business of maintaining plumbing, servicing sewer pipes, maintaining sewer pipes, renovating sewer pipes and clearing tree roots from pipes and drains; (b) on 8 September 2020, registered the business name "Mr Drain Man" with the Australian Securities and Investments Commission (ASIC); (c) on 18 November 2020, applied to IP Australia to register the word trade mark "Mr Drain Man" in Class 37 for services comprising maintenance of plumbing; sewer pipe servicing; sewer pipe maintenance; sewer pipe renovation (being Application No. 2136892); (d) on 22 December 2020, registered the business name "My Drain Man" with ASIC; (e) on 4 February 2021, registered the business names "Sydney's Mr Drain Man" and "Local Drain Man" with ASIC; (f) on a date not known to the applicants, registered the internet domain http://mrdrainman.com.au and operated websites at the domain names http://mrdrainman.com.au and http://mrdrain.com.au; (g) from a date not known to the applicants, has promoted his business: (i) under or by reference to the name "Mr Drain Man", appearing in some instances as: (ii) under or by reference to the names "My Drain Man", "Sydney's Mr Drain Man" and "Local Drain Man"; (iii) at the website http://mrdrain.com.au by reference to the name "Mr Drain Man"; (iv) using the email address mydrainman@outlook.com.au; and (v) using a Facebook page at "@MrDrainMan". 12 Each of: (a) the phrase "Mr Drain Man" as used by the respondent; (b) the logo used by the respondent of which the phrase "Mr Drain Man" forms part; (c) the phrase "Sydney's Mr Drain Man" as used by the respondent; (d) the phrase "Local Drain Man" as used by the respondent; and (e) the phrase "My Drain Man" as used by the respondent, is deceptively similar to the registered marks. 13 By promoting his business under or by reference to those phrases and logo, the respondent has falsely represented that: (a) the respondent's plumbing business is the business of the applicants, when it is not; (b) the respondent's plumbing business is approved by or affiliated with the business of the applicants, when it is not; (c) the respondent is the second applicant, when he is not; and (d) the respondent is approved by or affiliated with the second applicant, when he is not. 14 The respondent's promotion of his business under or by reference to those phrases and logo constitutes: (a) an infringement of the applicants' registered marks in contravention of s 120(1) of the Trade Marks Act 1995 (Cth) (Trade Marks Act); (b) a contravention of ss 18 and 29(1)(g) and/or (h) of the Australian Consumer Law, being Sch 2 to the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law); and (c) the tort of passing off.

Procedural history 15 The proceeding was commenced on 2 March 2021. 16 At the first case management hearing on 9 April 2021, the applicants were represented by counsel, Mr Wodak, and the respondent was represented by his solicitor, Ms Karen Asal of CrimCorp Defence Lawyers. I made orders referring the proceeding to mediation before a Registrar of the Court to be conducted by 4 June 2021. I also made orders for the respondent to give discovery in limited categories by 14 May 2021 to facilitate the mediation. 17 The parties attended mediation, but the proceeding did not settle. The respondent failed to give discovery as ordered. On 18 May 2021, Ms Asal filed a notice of termination of a lawyer's retainer stating that the respondent had terminated the retainer of CrimCorp Defence Lawyers and had not appointed another lawyer. 18 At the second case management hearing on 25 June 2021, the applicants were represented by their solicitors and the respondent was self-represented. I made orders for the respondent to file and serve a defence by 16 July 2021 and I extended the time for the respondent to give discovery in limited categories to 16 July 2021. The respondent did not comply with those orders. 19 At the third case management hearing on 23 July 2021, the applicants were represented by counsel, Mr Wodak, and the respondent did not appear. The applicants informed the Court that, given the respondent's ongoing default under the Court's orders, they intended to bring an application for default judgment. I made orders timetabling that application and listed it for hearing on 18 August 2021. 20 The applicants filed and served their interlocutory application on 4 August 2021. In her supporting affidavit, Ms Wu deposed that on 6 August 2021 she had conducted the following searches: (a) a trade mark application search on the IP Australia website which showed that the trade mark application 2136892 filed by the respondent has not been withdrawn; (b) an ASIC Business Name Register search which showed that the respondent remained the registered owner of the following business names: Mr Drain Man, My Drain Man, Local Drain Man and Sydney's Mr Drain Man; and (c) a "Whois Domain Lookup" search which showed that the respondent was still the registrant of the domain "mrdrain.com.au". 21 Ms Wu also deposed that the ASIC Business Name Register search showed that the respondent had become the registrant of the business name "Sydney's Drain Men" on 4 June 2021. Ms Wu further deposed that the applicants' costs in bringing the proceedings, including estimated costs up to and including the hearing listed on 18 August 2021, were estimated to be approximately $30,000. 22 At the interlocutory hearing on 18 August 2021, the applicants were represented by counsel, Mr Wodak, and the respondent was represented by a new solicitor, Mr Steve Kassem. Mr Kassem informed the Court that he had been recently retained by the respondent and had prepared a defence for the respondent. A copy of the proposed defence, dated 18 August 2021 and signed by Mr Kassem, had been provided to my chambers by email that day but had not been filed. It contained a number of deficiencies and Mr Kassem acknowledged that he required further time to take instructions from the respondent. After hearing argument, I did not determine the application for default judgment but I made orders: (a) adjourning the hearing of the application for default judgment; (b) requiring the respondent to file and serve a notice of acting - appointment of lawyer by 18 August 2021, to give formal notice of the appointment of Mr Kassem as his legal representative; (c) extending the time for the filing of the respondent's defence to 27 August 2021; (d) further extending the time for the giving of discovery in limited categories to 10 September 2021; and (e) listing the matter for further case management on 15 September 2021. 23 At that interlocutory hearing I informed the parties that if the respondent's failure to comply with Court orders continued, the applicants would be permitted to re-agitate their application for default judgment. 24 The respondent failed to comply with the Court's orders for the filing of a defence and the giving of discovery. 25 At the next interlocutory hearing on 15 September 2021, the applicants were represented by counsel, Mr Wodak, and the respondent was represented by counsel, Mr R McCrudden. Mr McCrudden informed the Court that he had been recently retained by Mr Kassem to appear for the respondent; Mr Kassem was very unwell and had recently been in hospital; but Mr McCrudden had no further instructions in relation to the proceeding. After hearing from counsel, I adjourned the hearing for 48 hours to enable the parties to file any further material in respect of the application for default judgment. 26 At the interlocutory hearing on 17 September 2021, the applicants were represented by counsel, Mr Wodak, and the respondent was represented by counsel, Mr R McCrudden. The applicants read an affidavit of Ms Wu deposing that her firm had not been served with a defence on behalf of the respondents and had not been provided with discovery. By reason of the respondent's ongoing failure to comply with the Court's orders, the applicants renewed their application for default judgment. In response, the respondent relied on an unsworn affidavit of Mr Kassem which stated that: (a) Mr Kassem had been admitted to hospital on 2 July 2021, and was discharged on 5 July 2021. Mr Kassem remained off work until the middle of August (and appeared on behalf of the respondent at the interlocutory hearing on 18 August 2021). (b) On 20 August 2021, Mr Kassem met personally with a client in his office and on 25 August the client informed Mr Kassem that he had tested positive to COVID-19. Mr Kassem was then required to self-isolate. However, because he has a young family and other dependents, Mr Kassem returned to work on 30 August 2021. Mr Kassem subsequently felt unwell and did not do any substantial work until 6 September 2021. (c) On 7 September 2021, Mr Kassem again met personally with a client in his office and on 10 September the client informed Mr Kassem that he had tested positive to COVID-19. Mr Kassem took a COVID test on 13 September 2021 which came back negative. Mr Kassem subsequently visited his doctor who prescribed medicine for blood pressure and advised Mr Kassem to rest until 17 September 2021. 27 The respondent submitted that the respondent's defence had been completed and was ready to be filed and served, and otherwise sought a further timetable from the Court. 28 At the hearing, I declined to order default judgment. However, in light of the ongoing failure of the respondent to comply with the Court's orders, I determined that it was appropriate to make a self-executing order pursuant to r 5.23(2)(e) of the Federal Court Rules in the following terms: (a) the time for the filing of the respondent's defence was further extended to 4pm on 20 September 2021; (b) the time for the giving of discovery in limited categories was further extended to 4pm on 24 September 2021; (c) the respondent was ordered to file and serve a sworn copy of the unsworn affidavit of Mr Kassem (relied on at the hearing) by 4pm on 24 September 2021; (d) if the respondent failed to comply with any of the above orders, judgment would be entered for the applicants against the respondent pursuant to r 5.23(2)(e) of the Federal Court Rules in terms to be directed by the Court by further order; and (e) the matter was listed for further interlocutory hearing to be conducted by videoconference using Microsoft Teams at 9.00 am on 27 September 2021.

Rule 5.23(2) 29 Rule 5.23(2) of the Federal Court Rules provides that, if a respondent is in default, an applicant may apply to the Court for an order in the terms set out in paragraphs (a) to (e) of the rule. Rule 5.22 provides that a party is in default if the party fails to comply with an order of the Court. 30 Relevantly, paragraph (c) of r 5.23(2) stipulates that, if the proceeding was started by an originating application supported by a statement of claim, the applicant may apply to the Court for an order giving judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled. Paragraph (e) stipulates that the applicant may apply to the Court for an order that the order mentioned in paragraph (c) is to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time specified in the order. 31 The principles guiding the exercise of the Court's power under r 5.23(2)(c) were summarised by Flick J in Speedo Holdings B.V. v Evans (No 2) [2011] FCA 1227 (Speedo) at [20]-[26]. The following statement of principles is drawn from the summary and the authorities there referred to: (a) The power to enter judgment in default should be exercised cautiously. (b) The power is conditioned on one circumstance only: the failure of the respondent to comply with an order of the Court. There is no requirement of intentional default or contumelious conduct, nor that the applicant has suffered prejudice by the default, although such matters may be relevant to the exercise of the discretionary power. (c) Two situations are obvious candidates for the exercise of the power: first, cases in which the history of non-compliance by the respondent is such as to indicate an inability or unwillingness to cooperate with the Court and the applicant in having the matter ready for trial within an acceptable period; and second, cases - whatever the respondent's state of mind or resources - in which the non-compliance is continuing and occasioning unnecessary delay, expense or other prejudice to the applicant. (d) The Court is empowered to give judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled. It is not necessary for the applicant to prove its claim by evidence. The requirement is only that the Court is satisfied on the face of the statement of claim that the applicant is entitled to the relief claimed. The facts as alleged in the statement of claim are deemed to have been admitted by the respondent. (e) The Court may permit the applicant to adduce limited further evidence relating to the grant of relief, but not such as to alter the case as pleaded. 32 In Professional Administration Service Centres Pty Ltd v Commission of Taxation [2012] FCAFC 180; 295 ALR 52, the Full Court stated (at [43]-[44]) that an overriding consideration in the exercise of the power under r 5.23 is whether any injustice would flow from such an order and, under the umbrella of that overriding consideration, a number of matters fall to be considered including: (a) the nature of the default involved; (b) the duration of the default and whether it is continuing; (c) the circumstances in which the orders, in respect of which default has occurred, were made including whether the orders made accorded with the practice of the Court in making orders of that kind; (d) the circumstances which occurred between the time of making the orders and the order for the dismissal of the proceeding, including whether any attempt was made by the defaulting party to amend or set aside the orders to accommodate or deal with these intervening circumstances; (e) whether the continuing default is occasioning unnecessary delay, expense or other prejudice or unacceptable burden on the party not in default; (f) the attitude of the defaulting party to the default and the Court's judgment as to whether or not the defaulting party genuinely wishes the matter to go to trial within a reasonable period; (g) the stage that the proceeding has reached, including whether it has been commenced for some time but not advanced due, in whole or in part, to the default or whether the proceeding is in an advanced state ready or nearly ready for hearing; (h) the likely disruption to hearing dates or, if not fixed, to setting the matter down for hearing at an early date; and (i) the consequences to the defaulting party of dismissing the proceeding. 33 The above principles must also guide the exercise of the Court's power under r 5.23(2)(e) to make a self-executing order in the form of r 5.23(2)(c).

Consideration 34 The proceeding was commenced on 2 March 2021. It is now 27 September 2021. There have been six case management or interlocutory hearings before today in which standard orders have been made to prepare the proceeding for trial. The orders have required the respondent to give discovery in limited categories and to file a defence. While the respondent has recently filed his defence (after being in default for a very lengthy period), he remains in default of the Court's order to give discovery, an order that was first made on 9 April 2021 and which required discovery in limited categories only. 35 The respondent has been granted numerous extensions of time to give discovery. The respondent has not given the Court a proper explanation for the failure to comply with the Court's orders. At the previous interlocutory hearing, the respondent relied on an unsworn affidavit of his solicitor which indicated that his solicitor had been unwell. On the basis of that unsworn evidence, the Court gave the respondent a further short extension of time to give discovery, but also required the respondent to file a sworn copy of his solicitor's affidavit. The respondent did not give discovery and did not file a sworn copy of his solicitor's affidavit. 36 The present circumstances exemplify both of the categories of cases, referred to by Flick J in Speedo, in which it would be appropriate to give default judgment: the history of non-compliance by the respondent is such as to indicate an inability or unwillingness to cooperate with the Court and the applicants in having the matter ready for trial within an acceptable period; and the non-compliance is continuing and occasioning unnecessary delay, expense or other prejudice to the applicants. 37 I am satisfied that this is an appropriate case in which the Court should grant the applicants judgment in default, and that the self-executing order made on 17 September 2021 should take effect in accordance with its terms. 38 The relief sought by the applicants is more limited than the relief claimed in their originating process. In particular, the applicants do not seek any order for damages or any order for corrective advertising. The relief is confined to declarations of contravention, injunctive relief and costs. Subject to one (important) matter, I am satisfied that the applicants are entitled to the relief they seek on the basis of the pleaded allegations. 39 The qualification concerns the scope of the injunctive relief sought by the applicants. In my view, the injunctive relief sought by the applicants exceeded the applicants' legal entitlements arising from the pleaded allegations. The applicants sought orders requiring the respondent: (a) to do all things necessary to transfer the internet domain "http://mrdrainman.com.au" to the second applicant; (b) to cease use of any email address which includes in its address the phrase "Drain Man" or each of the words "Drain" and "Man"; (c) to cause to be deleted the Facebook page at "@MrDrainMan"; (d) to cancel the business name registrations for all business names he has caused to be registered which include the phrase "Drain Man" or each of the words "Drain" and "Man"; (e) to deliver up to the applicants all hard-copy promotional materials in his possession which include the phrase "Drain Man" or each of the words "Drain" and "Man"; (f) not to apply for or seek to register any trade mark in class 37 including the phrase "Drain Man" or each of the words "Drain" and "Man"; (g) not to apply for or seek to register any business name including the phrase "Drain Man" or each of the words "Drain" and "Man"; (h) not to seek to register any company which includes in its name the phrase "Drain Man" or each of the words "Drain" and "Man"; (i) not to seek to change the name of any company to a name which includes the phrase "Drain Man" or each of the words "Drain" and "Man"; (j) not to register or use any social media account which includes the phrase "Drain Man" or each of the words "Drain" and "Man". 40 In my view, those orders are too broad for three reasons. First, the applicants' legal entitlements, as stated in the statement of claim, concern the use of the phrase "The Drain Man", and deceptively similar names, as a trade mark, business name or trading name in connection with the promotion or supply of plumbing services (including drainage cleaning and relining, maintaining plumbing, servicing sewer pipes, maintaining sewer pipes, renovating sewer pipes and clearing tree roots from pipes and drains). It follows that the applicants are entitled to an order restraining the respondent from using that phrase, and deceptively similar phrases, in connection with the promotion or supply of plumbing services. The applicants are not entitled to prevent the respondent from using that phrase for other unrelated purposes, whether they be non-trading purposes or trading purposes that are not connected with plumbing services. 41 Second, the applicants allege that the dominant cognitive cue of their registered trade marks is the words "Drain Man", the second applicant has carried on and promoted its business of providing plumbing services by reference to the name "The Drain Man" and the second applicant has generated substantial goodwill and reputation in Australia in relation to the name "The Drain Man". The applicants further allege that the respondent has used four names in connection with his plumbing business: "Mr Drain Man"; "My Drain Man"; "Sydney's Mr Drain Man"; and "Local Drain Man". The common element in those names is the phrase "Drain Man" which is the dominant feature of the applicants' registered trade marks and trading name. The applicants allege, and I take as admitted for the purposes of this default judgment, that the names used by the respondent are deceptively similar to the applicants' trade marks and trading name. It follows that the applicants are entitled to enjoin the respondent's use of those four names. I also consider that the applicants are entitled to enjoin the respondent's use of any name that includes the phrase "Drain Man", as that is the dominant feature of the applicants' registered trade marks and trading name. However, the applicants are not entitled to enjoin the use of any name that includes the words "Drain" and "Man". Not every name that includes each of those words will infringe the applicants' legal rights (whether arising under the Trade Marks Act, the Australian Consumer Law or at common law). 42 Third, while the applicants are entitled to enjoin the respondent's use of the internet domain name "http://mrdrainman.com.au" in so far as it is used in relation to plumbing services, the applicants have no legal entitlement to require the respondent to transfer that domain to them. 43 Finally, the applicants should receive their costs of the proceeding. On 16 November 2020, prior to the commencement of the proceeding, the applicants' solicitors wrote to the respondent putting him on notice that his conduct and use of the words "Mr Drain Man" and "My Drain Man" infringed the applicants' trade marks and demanding that he cease the infringing conduct. On 20 November 2020, the applicants' solicitors received an email from a solicitor, Mr Farooq of Milestone Legal, acting for the respondent seeking an extension of time in which to respond until 30 November 2020. No further response was received. The applicants commenced the proceeding on 2 March 2021. At each case management and interlocutory hearing at which the respondent appeared in person or through a legal representative, the Court has sought to impress upon the respondent the importance of considering and responding to the applicants' claims and either making a meaningful attempt to settle the proceeding or, if the proceeding is to be defended, taking the necessary steps to comply with the Court's orders. It is unfortunate that the respondent has neither taken the required steps to comply with the Court's orders, nor made admissions or given undertakings so as to resolve the proceeding. In the circumstances, the applicants are entitled to their costs of the proceeding. I will order that such costs be awarded in a lump sum pursuant to r 40.02(b) of the Federal Court Rules and that the quantification of the costs be referred to a Registrar of the Court for determination.

Conclusion 44 In conclusion, I give judgment for the applicants pursuant to r 5.23(2)(c) of the Federal Court Rules by reason of the respondent's default in failing to comply with orders of the Court. I will grant declaratory and injunctive relief in favour of the applicants and award costs. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan.