Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V.

Federal Court of Australia|2022-09-05|Before: Perram J

The parties confer with a view to agreeing to orders giving effect to these reasons within eight weeks.
The matter be listed for a further case management hearing on 10 November 2022. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

PERRAM J: 1 The present issue for determination is the form of the permanent stay. The Full Court accepted that a stay of the proceedings was appropriate but did not think that it should extend to the Cross-Claimants' - Federal Treasury Enterprise (FKP) Sojuzplodoimport ('FKPS') and Federal Public Unitary Enterprise External Economic Union Sojuzplodoimport (FGUP VO) ('FGUP') (together, referred to as 'FKP') - case so far as it relied upon the Dutch decisions as giving rise to an issue estoppel. It also thought that how Spirits International B.V.'s ('Spirits') discretionary defences interacted with that case might give rise to a possibility that Spirits would be able to argue that it could not conduct those defences fairly due to the failure of the Russian Federation, which stands behind FKP, to give proper discovery. However, it also felt that it was possible that FKP might be able to obtain summary judgment on those defences rendering any such question irrelevant. In any event, the question of how these various considerations should play out was left to me. 2 There have been two further developments. First, subsequent to the Full Court's decision I determined that the trial of the cross-claim, insofar as it relied on the Dutch decisions, and Spirits' application for a permanent stay would be heard together. Secondly, more recently, FKP have indicated that they propose to seek summary judgment against Spirits and that they will accept that if they are unsuccessful in that application, then the cross-claim should be dismissed. 3 Despite attempts, the parties have been unable to agree on the terms of the permanent stay. At a high level of abstraction it is easy to state what should be stayed. It is all parts of FKP's case which do not depend on the Dutch decisions to establish an issue estoppel. However, bringing that statement down to the level of the actual pleadings has proved a complicated matter. The principal reason for this is that FKP's pleading of issue estoppel arises in their reply to the defence and not in the cross-claim itself. 4 However, whatever the Court is to determine by way of a summary judgment application is, by definition, not an element of that part of the proceedings which is to be permanently stayed. In my view, it is more straightforward to determine and state what is to be tried than it is to determine and state what is to be the subject of the permanent stay. The two concepts are complimentary and what is in one is not in the other. 5 What are the issues which remain? As I have said, what remains is FKP's case based on issue estoppel and Spirits' discretionary defences. However, a more precise analysis of the issues is required for present purposes. The issues are defined by the pleadings. There are many allegations raised in these pleadings which are no longer material. These include those which are to be subject to the permanent stay and other issues which are no longer pursued (such as the status of certain Russian judgments and whether FKP have standing). I exclude these from the analysis.

The Cross-Claim 6 From ss11-15 of the Third Further Amended Cross-Claim, FKP plead that the events by which the marks came to be in the ownership of an entity called VAO-SPI were legally ineffective as a matter of Russian law and that the marks continued to be owned by 'Sojuzplodoimport'. It is alleged at s4 that FGUP, the Second Cross-Claimant, is the same entity. FKPS, the First Cross-Claimant, is an entity organised by the Russian Federation to recover ownership of the STOLICHNAYA and MOSKOVSKAYA trade marks: ss5-6. 7 A series of events are then pleaded whereby ownership of the marks was transferred from VAO-SPI to Spirits. The basic case is that FGUP is the true owner of the marks and that Spirits has derived its title from VAO-SPI which never was their true owner. At s52A and s53A, FKPS and FGUP claim to be a person aggrieved by the state of the register and at s54 they seek its rectification. A misrepresentation case is also pursued.

The Defence 8 Spirits denies that VAO-SPI did not get good title to the trade marks. It says that the events which occurred in 1992 did result in Sojuzplodoimport being transformed into VAO-SPI. It denies that FGUP is the legal successor to Sojuzplodoimport. 9 Spirits then asserts a number of other defences. These are: (a) a defence that the marks have been registered for more than seven years (s59); (b) a defence that the rectification of the register would be a confiscation of property by the Russian Federation in the exercise of government power (s60); (c) a defence that under Russian law the question of whether the succession is valid is now statute barred (s61); (d) various defences to the effect that Spirits' title cannot now be impeached (for example, because it is a purchaser for value without notice) (ss62-64); (e) an estoppel defence that the Russian Federation represented that VAO-SPI had good title on which Spirits and others relied in dealing with the marks (s65); (f) a defence of laches based on the allegation that the Russian Federation was delayed in asserting its claim (s66); and (g) a defence that rectification of the register should be refused on a discretionary basis in light of the above defences (s67).

The Reply 10 FKP then filed a reply in which they plead: (a) certain factual allegations about the transformation issue (ss1-7); (b) an issue estoppel arising from decisions of the Dutch courts to the effect that VAO-SPI is not the successor entity to Sojuzplodoimport (s7A); (c) a defence that it would be an abuse of process for Spirits to contend that VAO-SPI is the successor entity to Sojuzplodoimport in light of the Dutch decisions (s7B); and (d) a defence that the conclusions of the Dutch courts constitute judgments in rem (s7C).

The Rejoinder 11 Spirits then filed a rejoinder in which it pleads: (a) the Dutch decisions are not final (s12); (b) the Court should not recognise the Dutch decisions as they are concerned with the application of Russian law (s12); (c) the issues in the Dutch decisions do not deal with Spirits' defence based on misrepresentation by the Russian Federation, laches or discretionary refusal of rectification (s12); and (d) denies that abuse of process argument is available to FKP (s13). 12 In addition to these pleaded issues, Spirits now alleges that by its conduct of the proceedings, FKP have abandoned any reliance on abuse of process or judgment in rem. This is not currently reflected in the pleadings. Assuming that this problem is rectified, the issues for determination at trial therefore are: (1) Are the Dutch proceedings final? (2) If the Dutch proceedings are final, should this Court decline to give effect to the Dutch decisions because they are concerned with the operation of Russian law? (3) If the Dutch proceedings are to be given effect to, is Spirits precluded from alleging that VAO-SPI is the successor to Sojuzplodoimport on the basis of issue estoppel? (4) Is it open to FKP to rely on abuse of process and judgment in rem? (5) If it is open, are either made out? (6) If Spirits is prevented by the Dutch decisions from contending that VAO-SPI is the successor to Sojuzplodoimport, do they also preclude its seven defences pleaded at ss59-67 of the defence? (7) If Spirits is not precluded from alleging that VAO-SPI is the successor to Sojuzplodoimport, is this in fact so? (8) Is it entitled to succeed on its seven defences?

Next Steps 13 FKP have now indicated that they propose to seek summary judgment. Subject to appeals, FKP agrees that the outcome of the summary judgment application will determine the proceedings, i.e. if the application fails then the cross-claim will be dismissed. The summary judgment application will involve a determination of the following issues: (1) Are the Dutch proceedings final? (2) If the Dutch proceedings are final, should this Court decline to give effect to the Dutch decisions because they are concerned with the operation of Russian law? (3) If the Dutch proceedings are to be given effect to, is Spirits precluded from alleging that VAO-SPI is the successor to Sojuzplodoimport on the basis of issue estoppel? (4) Is it open to FKP to rely on abuse of process or judgment in rem to achieve a similar outcome? (5) If it is open for it to rely on these matters, are either made out? (6) If Spirits is prevented by the Dutch decisions from contending that VAO-SPI is the successor to Sojuzplodoimport, do they also preclude all of the seven defences pleaded at ss59-67 of the defence? 14 The consequence of the summary judgment process is that the question of whether the seven defences are in fact made good will not arise. If the conclusion is reached that any one of those seven defences is not precluded by the Dutch decisions, then summary judgment will be refused and, pursuant to FKP's announced position, the cross-claim will be dismissed. 15 A consequence of this is that the question of whether Spirits is entitled to a permanent stay in relation to its discretionary defences will never arise for there is no outcome in which the seven discretionary defences ever get tried on a final basis. Discovery is therefore irrelevant. Since discovery is irrelevant, it follows that Spirits' application for a permanent stay of the balance of the cross-claim (on the basis of deficient discovery by the Russian Federation) has no continuing purpose. 16 A tidy way forward would be for FKP to file an application for summary judgment on the cross-claim and for the Court to state separate questions for determination on that summary judgment application. The six questions above are the result of my own analysis of the pleadings. It may be that there are subtleties in the positions of the parties which they do not capture. For example, there is a suggestion in the proposed orders put forward by FKP about the form of the permanent stay that the preclusions in (6) may also arise from matters which are admitted by Spirits. I do not mean by the above to exclude such matters. It may be that some of the questions have fallen by the wayside. For example, it appears likely that there is no longer any dispute that the decision of the Dutch Supreme Court is final. 17 The orders providing for the summary judgment procedure will therefore need to address the following: (1) the filing by FKP of a summary judgment application on the cross-claim; (2) the stating of separate questions for determination in that application. The questions should refer to the paragraphs of the pleadings to which they relate; (3) a recording of the agreement that if the summary judgment application fails then, subject to appeals, the cross-claim is to be dismissed; and (4) that questions of costs will not be determined. 18 Once the orders have been made for the summary judgment procedure, the permanent stay will take the form of: (5) a vacation of the earlier temporary stay; and (6) the imposition of a permanent stay of the cross-claim except so as to permit the summary judgment procedure to advance. 19 There remains Spirits' interlocutory application of 7 December 2018 by which the permanent stay was sought. The result of the permanent stay contemplated in (6) is that this application will have been determined. It was successful in part and by reason of the summary judgment procedure, the remainder no longer has any utility. The orders above should include therefore an order dismissing the balance of the permanent stay application. All that remains on that application therefore is the question of costs. As I have previously indicated, all questions of costs will be dealt with at the conclusion of the proceedings. 20 The current timetabling orders of 11 May 2022 do not require agreement on these issues to be reached immediately. The next determination concerns security for costs. The submissions and evidence for this will be ready for determination on the papers on 16 September 2022. On 21 and 22 March 2023, the Court will resolve any pleading debates and the identification of the further material referred to by the Full Court. Since the hearing on 21 and 22 March 2023 is likely to impact the form of the pleadings, it may be that the precise formulation of the questions for the summary judgment application cannot occur until after that determination. If so, the crystallisation of the permanent stay will have to wait until after that time. 21 I decline to make either parties' proposed orders. Instead I will order that: (1) the parties confer with a view to agreeing to orders giving effect to these reasons within eight weeks; and (2) there be a further case management hearing on Thursday, 10 November 2022 to report back on the progress of these discussions. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Perram.

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