Care A2 Plus Pty Ltd (Receiver Appointed) v The a2 Milk Company Limited

ROFE J: 1 These reasons give context to the orders I have made today.

background 2 By an originating application filed on 1 November 2022, which was later amended on 22 December 2023, Care A2 Plus Pty Ltd seeks orders pursuant to ss 88 and 59 of the Trade Marks Act 1995 (Cth) to cancel, rectify or limit some 50 marks registered in the name of The a2 Milk Company Limited. 3 Relevant to this proceeding, a2 Milk also commenced its own proceedings against Care A2, Care IP Pty Ltd, Care A2 Australia Pty Ltd and The Care Club Store Pty Ltd alleging trade mark infringement; being Federal Court proceeding NSD 934 of 2022. Both these proceedings are travelling together in this Court. 4 It is unnecessary for me to delve into the pleaded matters for the purposes of these reasons. Although, I do note both proceedings are set down for trial commencing 21 October 2024, on an estimate of 10 days (upcoming trial). 5 On 14 March 2024, a2 Milk filed an interlocutory application seeking security for costs from Care A2 of its costs of, and incidental to, Care A2's non-defensive claims (as referred to in the affidavit of Mr Timothy Bernard Webb, solicitor at Clayton Utz, sworn 14 March 2024 (Webb 1)), in the amount of $795,821.41 (the Security Application). 6 On 18 April 2024, the conduct of these proceedings was transferred from the docket of Burley J to my docket. 7 On 19 April 2024, Care A2 filed an interlocutory application seeking to vary Notation A to the orders of Burley J made by consent on 30 June 2023 (the Vary Application). The proposed variance was the deletion of items (i), (iv), (vi), (ix), (x), (xi) and (xii). 8 On 29 April 2024, GI 305 Pty Ltd commenced winding up proceedings against Care A2 which are currently pending in the Supreme Court of New South Wales (the Winding Up Application). That application is founded on matters unrelated to the present proceeding. 9 On 28 May 2024, I heard the Security Application and Vary Application together. Subsequent to that hearing, I ordered, inter alia, Care A2 to provide security for a2 Milk's past costs of and incidental to the Care A2 Non-defensive Claims (as referred to in [48] of Webb 1), in the amount of $300,000 within 10 days of the date of the order (the Security Order). Additionally, the Vary Application was stayed until further order. 10 Care A2 failed to provide security in accordance with the Security Order. 11 Consequently, the parties agreed between themselves for this proceeding to be dismissed in respect of trade mark registrations nos. 827411, 1679006, 1672247, 1744867, 1751238, 1839265 and 1868382 (non-infringement separate determination marks). The proceeding remains on foot in respect of trade mark registrations nos. 1422098, 1454858, 1668754, 1676054 and 1708342. It was also agreed that Care A2 should pay a2 Milk's costs of this proceeding to date in respect of the non-infringement separate determination marks and the costs of the Security Application (a2 Milk's Dismissal Costs). 12 To that end, the parties submitted minutes of proposed orders, however, were unable to agree on the precise form. Those orders are set out below, with areas in dispute between the parties (which a2 Milk presses for and Care A2 does not consent to) in underline: THE COURT NOTES THAT: A. The applicant has not provided security for costs in accordance with orders 1 and 2 made by Rofe J on 28 May 2024. B. The respondent has not sought any security for costs in respect of trade mark registrations nos. 1422098, 1454858, 1668754, 1676054 and 1708342 (the infringement marks). THE COURT ORDERS THAT: 1. Pursuant to [r] 19.01(1)(c) of the Federal Court Rules 2011 (Cth), the proceeding be dismissed in respect of trade mark registrations nos. 827411, 1679006, 1672247, 1744867, 1751238, 1839265 and 1868382 (the non-infringement separate determination marks), without prejudice to the applicant's right to challenge the validity of any of those marks in the event that the respondent alleges infringement of that mark against the applicant. 2. The applicant pay the respondent's costs of this proceeding to date in respect of the non-infringement separate determination marks with those costs payable forthwith. 3. The applicant pay the respondent's costs of the respondent's interlocutory application dated 14 March 2024 with those costs payable forthwith. 4. Apart from the infringement marks, the proceeding be dismissed in respect of all other trade mark registrations set out in Annexures A and B to the Further Amended Statement of Claim [filed 17 January 2024], and the claims in relation thereto, without prejudice to the applicant's right to challenge the validity of any of those marks in the event that the respondent alleges infringement of that mark against the applicant. 5. Order 4 of the [o]rders of Burley J dated 30 June 2023 be vacated. 6. The applicant's interlocutory application dated 19 April 2024 […] is dismissed with costs in the cause. 7. By 10 July 2024, the applicant file and serve an affidavit given by an officer of the applicant addressing the following matters with respect to the application for the winding up of the applicant commenced by GI 305 Pty Ltd currently pending in the Supreme Court of New South Wales (Winding Up Application): a. annexing or exhibiting all [C]ourt documents filed and served in the Winding Up Application; b. annexing or exhibiting all orders made in the Winding Up Application; c. whether the Winding Up Application is opposed by the applicant and, if so, on what basis; d. the deponent's expectation as to when the Winding Up Application will be heard and determined. 8. By 14 August 2024, the [r]espondent file and serve its evidence in answer. 9. Order 6 of the [o]rders of Burley J dated 15 January 2024 be vacated. 10. By 13 September 2024, the [a]pplicant file and serve its evidence in reply. 11. The proceeding be listed for further case management, together with proceeding NSD 934 of 2022, at 9.30 am on [insert date convenient to the Court and the parties]. 13 a2 Milk presses for the Dismissal Costs to be payable forthwith and further presses for orders requiring Care A2 to file an affidavit regarding the Winding Up Application. 14 The parties were provided an opportunity to file brief submissions in respect of the disputed sections.

Costs payable forthwith 15 The Court's procedure regarding costs is set out at Pt 40 of the Federal Court Rules 2011 (Cth). 16 Specifically, r 40.13 provides: 40.13 Taxation of costs awarded on an interlocutory application If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished. Note: The Court may order that costs of an interlocutory application be taxed immediately. 17 Further, s 43 of the Federal Court of Australia Act 1976 (Cth) confers a broad discretion in awarding costs, and particularly sub-s (3)(a) permits the Court to make an award of costs at any stage in a proceeding, whether before, during or after any hearing or trial. 18 Lee J recently observed in Lehrmann v Network Ten Pty Ltd (Costs) [2024] FCA 486 at [27] that while the power of the Court to award costs at its discretion is often remarked as unfettered, s 37N(4) of the Act requires the Court to take account of any failure by a party to comply with the overarching purpose of the civil procedure provisions, which is to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible as mandated by s 37M(1). 19 In pressing for costs to be made payable forthwith, a2 Milk relies on the following remarks of Goodman J in Dove v Xmeta Pty Ltd (formerly known as Everforex Financial Pty Ltd) (No 3) [2023] FCA 1320 where his Honour held (at [122]) that: [t]he purpose of an order for the provision of security for costs, consistent with the requirement to seek justice between the parties, is to provide a measure of protection … against the risk of being placed into a position in which that costs order is pyrrhic, because the party is required to pay the costs is not in a position to do so. 20 a2 Milk asserts that its Dismissal Costs are neither hypothetical nor contingent. The Security Order provided that security was to be paid for a2 Milk's "past costs of and incidental to the Care A2 Non-Defensive Claims". Accordingly, a2 Milk seeks payment forthwith of costs it has already incurred, in respect of claims which are to be dismissed and in respect of which the outcome is final. Costs generally follow the event and a2 Milk submits that there is no reason why Care A2 should not pay such costs now. 21 In addition, a2 Milk submits that a genuine (and likely increasing) risk exists that it may not be able to otherwise recover these costs, including because a liquidator may be appointed to Care A2 in the Winding Up Application. 22 a2 Milk maintains that the concerns which underpinned the filing of its Security Application not only remain but are further heightened despite the fact that the Security Application is now finalised on account of Care A2's breach of the Security Order. 23 Olney J cautioned in Thunderdome Racetiming & Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 at 312 that the discretion in the then equivalent provision to r 40.13: … should [only] be exercised in favour of a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice envisaged by the rule namely, that an order for costs of an interlocutory proceeding shall not entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded. 24 This proceeding has not yet fully concluded and issues relating to claim for revocation of the infringement marks both in this proceeding as well as NSD 934 of 2022 remain on foot which are shortly to be determined at the trial in October. The determination following the upcoming trial may result in "costs orders going in the opposite direction". The Court should avoid exposing the parties to the perils of multiple taxation proceedings: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International BV (No 5) [2018] FCA 19 at [8] (per Perram J). To overly convolute the taxation process of the overall proceeding would be contrary to the principles of the efficient administration of justice as required by s 37M of the Act. 25 I accept the submissions of Care A2 for the Dismissal Costs not to be made payable forthwith. In line with Thunderdome, I am not convinced that there is sufficient reason to depart from the general position in r 40.13 of the Rules. There was nothing to suggest that the ability of a2 Milk to conduct the litigation was impacted by not receiving the money now: Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd [2016] FCA 37 at [12] (per Perram J). 26 Accordingly, I will not order that the Dismissal Costs to be made payable forthwith.

Affidavit in relation to the Winding Up Application 27 a2 Milk presses for an officer of Care A2 to file an affidavit giving evidence on various matter pertaining to the Winding Up Application (proposed order 7). 28 a2 Milk asserts that proposed order 7 is appropriate as a matter of case management given any potential impact the Winding Up Application will have on the upcoming trial. In making this submission, a2 Milk postulates that a potential scenario may arise where a liquidator is appointed to Care A2,and Care A2's fails to disclose developments relating to its receivership and the Winding Up Application. a2 Milk submits that Care A2 has failed on previous occasions to disclose such relevant developments. 29 a2 Milk further draws attention to Care A2 retaining separate legal representation on the Winding Up Application to solicitors on record for them in this matter, i.e., Ashurst Australia. Annexure TBW-23 to the third affidavit of Mr Webb sworn on 21 May 2024 exhibits an email he received from Ms Anita Cade and Mr Ray Cheng of Ashurst on 14 May 2024. This email states, inter alia, that "[w]e are instructed that as at 2 May 2024, our client had received a statutory demand from GI 305 Pty Ltd demanding payment of a specified amount of moneys and was disputing the debt claimed." a2 Milk submits that it is unclear why Care A2 did not apply for the statutory demand to be set aside, rather than be presumed insolvent under s 459C(2)(a) of the Corporations Act 2001 (Cth). Based on this email, a2 Milk says an inference can be drawn that Ashurst has limited information concerning the Winding Up Application. 30 In circumstances where the upcoming trial could potentially be impacted, including in NSD 934 of 2022, as a result of the Winding Up Application, a2 Milk submits that the provision of such information will be consistent with the overarching purpose set out in s 37M of the Act. 31 Equally, Care A2 contends that in the absence of any ongoing claim for security for costs, it should not have to bear the costs of putting on evidence in respect of the Winding Up Application when that information, including information about its financial position, is irrelevant and entirely unnecessary. 32 Further, in opposing proposed order 7, Care A2 has provided the Court with the following undertaking at [8] of its submissions: In any event, Care A2+ can confirm to the Court that it is challenging the Winding Up Application and undertakes to keep the Court informed of the status of the Winding Up Application. Finally, as noted previously to the Court, it is Care A2+'s understanding that the Winding Up Application is in a preliminary stage and set down for directions on 22 July 2024. Given the deadline contained in order 7 of the Marked Up Proposed Orders precedes that date, an affidavit providing information in respect of the Winding Up Application would have little, if no, utility. 33 In light of this undertaking, I am inclined to accept Care A2's submissions. The preparation of the evidence sought under proposed order 7 may be extensive and will incur costs. 34 Where this costly and onerous task can be circumvented by Care A2's undertaking, I consider this alternative to be more aligned with the cost efficiency principles set out in s 37M of the Act. 35 Whilst the Winding Up Application has the potential to affect the upcoming trial, I do not consider that the information sought under proposed order 7 to be necessary. As and when Care A2 is apprised of information arising from the Winding Up Application, it can notify the Court and a2 Milk of these developments in accordance with its undertaking. The Winding Up Application has not reached any substantive stage such that it could have any detrimental (or other) impact on these proceedings. 36 Further, I am not swayed by the fact that Care A2 has engaged representatives other than Ashurst for the Winding Up Application regarding Ashurst's awareness of relevant information for the purposes of apprising the Court. I am content that both Ashurst and Care A2 understand the nature and gravity of the undertaking that has been provided to ensure that this Court is made aware of all relevant matters, especially those that will impact the future conduct of these proceedings. I expect that information to be conveyed to the Court in a timely manner without delay. 37 Accordingly, I decline to make proposed order 7. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Rofe.