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

Introduction 1 The Cross-Claimants are Federal Treasury Enterprise (FKP) Sojuzplodoimport ('FKPS') and Federal Public Unitary Enterprise External Economic External Economic Union Sojuzplodoimport (FGUP VO) ('FGUP') (collectively, 'FKP'). FGUP is the modern name for an entity of the former Union of Soviet Socialist Republics which until at least 20 January 1992 was entitled to be registered as the owner of several well-known trade marks including the famous STOLICHNAYA trade mark. The registered owner of these marks in Australia is presently the Cross-Respondent ('Spirits'). 2 For many years a debate has persisted in the courts of a number of countries about who the true owner of the marks is and this debate has, from time to time, ensnared various distributors and licensees of the marks. The present matter is one such bout of litigation which began in this Court in 2004. FKPS and FGUP were drawn into this litigation and they cross-claimed against Spirits seeking rectification of the Register of Trade Marks to record FGUP as the true owner of the marks. The rest of the litigation settled some time ago but this cross-claim remains extant. It has had a chequered history which for many years was mired in issues concerning the failure of the Russian Federation, which stands behind FKP, adequately to comply with an invitation from this Court to give discovery. I eventually temporarily stayed the cross-claim to permit adequate discovery to be given and indicated that if this was not done within one year, I would consider permanently staying the proceeding: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 4) [2017] FCA 1345. When adequate discovery was not given I then permanently stayed the cross-claim: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (Permanent Stay) [2019] FCA 802 and Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (Form of Orders) [2019] FCA 1772. The permanent stay was reversed by the Full Court on the basis that FKP should have been given the opportunity to pursue claims it had which might not have been affected by the adequacy of the Russian Federation's discovery: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. [2021] FCAFC 77; 159 IPR 58 ('FKP v Spirits (FC)'). 3 It is convenient for the purposes of these reasons to describe FKP's claim as a claim that it is the true owner of the marks. 4 By its Third Further Amended Cross-Claim ('the Cross-Claim') FKP asserts this claim and that it is entitled to be recorded as the owner of the marks in the Register of Trade Marks. It alleges that the current registered owner of the trade marks, Spirits, is not their true owner. By its Defence to the Cross-Claim ('the Defence'), Spirits alleges that on 20 January 1992 VVO, the entity which then owned the trade marks, was lawfully transformed into another entity, VAO-SPI, as a result of which VAO-SPI became the owner of the trade marks. Spirits is a successor in title to VAO-SPI so this interpretation of history leads to Spirits being the true owner of the trade marks. On the other hand, FKP asserts that it is the modern form of VVO. Its perspective on history is that the transformation of VVO into VAO-SPI never happened, as a result of which VVO (and hence FKP) has at all times remained the true owner. The basic dispute between FKP and Spirits is therefore whether following the collapse of the Soviet Union, VVO was transformed into VAO-SPI or not. 5 To this basic claim Spirits puts forward three defences. First, it seeks to prevent FKP from even claiming to be the true owner of the trade marks through a plea of estoppel by representation. Spirits' two other defences are designed to deal with the eventuality that FKP establishes that it is the true owner of the trade marks. In that circumstance, Spirits argues that FKP should be denied relief by reason of a defence of laches based on FKP's delay in articulating its claims or, alternatively, because the Court should not, for similar and other reasons, exercise its power under s 88(1) of the Trade Marks Act 1995 (Cth) ('the Act') to amend the Register of Trade Marks to record FKP as their owner. 6 It will be noted that the estoppel argument precludes FKP from claiming to be the true owner of the trade marks whereas the two delay defences are not preclusive but proceed on the basis that FKP has otherwise proven it is their true owner. The estoppel defence and the delay defences can never therefore operate at the same time and are necessarily alternatives operating in different circumstances. 7 For its part FKP claims that it too has the benefit of an estoppel on the issue of the transformation of VVO into VAO-SPI. This estoppel is an issue estoppel said to arise from judgments given by the Dutch courts. In parallel litigation about the equivalent marks, the Dutch courts have held that the transformation of VVO into VAO-SPI did not occur. A substantial question between the parties is whether the three defences just mentioned can be pleaded as defences in the face of that issue estoppel if it arises. 8 The parties have agreed that this question is to be determined by a sudden death summary judgment application. FKP will, in due course, apply for summary judgment on the basis of the Dutch issue estoppel. If it is successful then there will be judgment for FKP on the Cross-Claim. However, FKP has also agreed that if it fails on the summary judgment application then the Cross-Claim will be concluded in favour of Spirits and the Cross-Claim dismissed. 9 It will be noted that when the summary judgment application is eventually heard it will, at least, pit one preclusive doctrine, issue estoppel, against another, estoppel by representation. FKP will say the issue of the transformation has been determined in its favour and cannot be litigated by Spirits and Spirits will say that FKP is prevented from contending that the transformation did not occur because of representations made by the Russian Federation. What happens when an issue estoppel meets an estoppel by representation is, at this stage, unclear and for present purposes irrelevant. At the time of the summary judgment application there will also be a question as to whether the two discretionary defences based on, inter alia, delay can stand in the face of the issue estoppel. The outcome of this question is likewise unclear at this stage. 10 The applications now before the Court are a prelude to this forthcoming summary judgment application. The fewer of these three defences FKP has to face on the summary judgment application the better from its perspective. FKP therefore seeks in advance of the summary judgment application to have the three defences - estoppel, laches and the exercise of the discretion under s 88(1) - struck out on the basis that they fail to disclose a reasonable defence or are otherwise an abuse of process: Federal Court Rules 2011 (Cth) ('FCR') rr 16.21(1)(e)-(f). For its part Spirits seeks to adjust its pleading to meet some of the objections raised by FKP. 11 The evidence received on such a strike out application may include the documents referred to in the relevant particulars and evidence tending to show that a defence is an abuse of process. It may also include other evidence ancillary to these purposes. The application is not, however, a summary judgment application and the question is not the question posed under FCR r 26.01(1)(e) of whether Spirits 'has no reasonable prospects of successfully defending the proceeding or part of the proceeding'. It follows that evidence tending to show that the Defence has no reasonable prospects of success is not relevant to a strike out application under FCR rr 16.21(1)(e)-(f). FKP may reventilate these matters at the summary judgment application where they belong. 12 Spirits' application for leave to amend the Defence on the other hand is governed by FCR r 16.53 which does not specify the standard to be applied. In Caason Investments Pty Ltd v Cao [2015] FCAFC 94; 236 FCR 322 at [21] a majority of the Full Court described the circumstances in which leave should be refused in this way: Leave to amend should be granted unless the proposed amendment is futile, such that the issue sought to be added is unlikely to succeed, the amendment is likely to be struck out or would cause substantial prejudice or injustice to the opposing party in a way that cannot be compensated by costs: Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 at [21] to [22]; Medich v Bentley-Smythe Pty Ltd [2010] FCA 494 at [8]. 13 In KTC v David [2022] FCAFC 60 at [111] Wigney J (with whom Anastassiou and Jackson JJ agreed on the relevant principles at [329] and [418]) paraphrased 'is unlikely to succeed' as 'has no reasonable prospects of success'. That latter formulation reflects the language of the summary judgment test in s 31A of the Federal Court of Australia Act 1976 (Cth) ('the FCA Act'). Whether the standard on a summary judgment application ought to be the standard applied on amendment applications is an interesting question. Plainly, leave should not be granted to raise a claim that would only be struck out. I can perhaps see some force in the idea that leave to amend should not be granted if it is shown that summary judgment would be given on that claim. However, the difficulty with that view is that it turns every amendment application potentially into a summary judgment application on which evidence may be adduced by both parties. It is far from clear that this would be in accordance with the requirements of s 37M(1) of the FCA Act that the Court's powers be exercised to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. 14 There is utility in maintaining the distinction between pleading debates and summary judgment debates even accepting that they may overlap in the case of amendment applications. In this case, it was very clear to the parties that the present application was to be concerned with pleading points. To the extent that FKP has an argument that summary judgment should be given on a defence it should advance this argument at the time at which summary judgment is to be considered. For present purposes, I do not propose to consider those of FKP's submissions which are grounded in summary judgment principles. It is not shut out from advancing these arguments at the proper time. To the extent that summary judgment principles are theoretically applicable on the present applications, given that I am to hear an actual summary judgment application, I would exercise the Court's power in FCR r 1.32 to postpone any consideration of a summary judgment issue to that hearing. 15 Objection was taken to FKP's evidence on the present application on the basis that it did not observe this distinction. I admitted the evidence subject to its relevance. As will be seen, my conclusion is that the evidence is not relevant on a strike out application or an amendment application concerned, as the procedure the parties have adopted is, only with pleading adequacy. 16 It is necessary to note another feature of the procedure the parties have created. In the context of strike out applications, it is often said that one asks whether the pleading raises a triable issue. Relatedly, it is also sometimes said that at trial a more complete complexion may appear on the facts pleaded or that the result at trial may be driven by the full context. Of course, in this case there will be no such trial due to the summary judgment procedure the parties have agreed. 17 Insofar as amendment applications are concerned, there are analogous principles which concern the circumstance where the granting of leave to amend will by reason of delay cause prejudice to the respondent in being forced to meet the amended case at trial. A particular example is afforded by an amendment application brought many years after the events in question. In this case the period of time is around 30 years. 18 The question which arises here is whether in assessing contentions of this kind one is to bring to account the known fact that there will be no trial. Because there will be no trial, the facts will not become clearer in their full context and the respondents will not be prejudiced in their ability to meet any late amendment. Both parties contended for an asymmetrical outcome on this issue by which the fact that there would be no trial was used to each's own advantage whilst at the same time denying the other the same latitude. I am clear that whichever approach is taken must be the same for both parties. 19 I do not think that the procedure which the parties have adopted brings about any change to the principles to be applied. In particular, I do not see how the fact that there is to be no trial would permit me to alter the operation of either FCR rr 16.21 or 16.51 as it has been interpreted. Even if I were permitted to refashion the law concerning amendment and strike out applications to accommodate the fact that the trial on which both are premised will not occur, neither party offered me a coherent set of new principles to replace it. 20 In that circumstance, the fact that there is to be no trial is an interesting one, no doubt, but the procedural questions are still the same and remain grounded upon the assumption that there will be a trial. Thus, I consider it open to both parties to invoke what hypothetically may happen at a trial which will not occur. 21 It is useful to deal with each of the defences separately.