GAIN Capital UK Limited v Citigroup Inc

BACKGROUND 3 These proceedings concern Gain Capital's appeal of a decision by the Registrar of Trade Marks allowing Citigroup's opposition to the registration of two trademarks (the Gain Marks). The background to them can be relevantly summarised as follows: (1) on 9 November 2010, City Index Limited (CIL), which was acquired by Gain Capital in April 2015, sought registration of the Gain Marks under the Trade Marks Act 1995 (Cth) (Trade Marks Act) in respect of services described as "Financial Services; providing general financial services advice for derivative and foreign exchange contracts"; (2) pursuant to s 52 of the Trade Marks Act Citigroup opposed those applications relying on ss 44(2), 59 and 60 of that Act as grounds of opposition; (3) on 6 May 2014, a delegate of the Registrar of Trade Marks upheld Citigroup's opposition; (4) on 27 May 2014, CIL commenced an appeal to this Court; (5) on 5 September 2014, Citigroup filed its Statement of Grounds and on 19 September 2014 CIL filed its reply; (6) between November 2014 and September 2015 the parties filed and served their evidence; (7) following acquisition of CIL by Gain Capital, the appellant's name in these proceedings was changed to Gain Capital; (8) on 16 September 2015, at a case management conference before Yates J the matter was set down for hearing for 4 days commencing on 11 April 2016 and on 26 October 2015 by consent Yates J made orders relating to the undertaking of steps preparatory to hearing; (9) on about 7 January 2016, Gain Capital made an application, through its solicitors, to IP Australia for the services included in its applications for registration of the Gain Marks to be amended. That application was made without notice to Citigroup. On about 14 January 2016, the application in relation to one of the marks was accepted. However, on 2 February 2016 that decision was revoked and the request to amend the application in relation to the second mark was refused; (10) on 19 February 2016, Gain Capital notified Citigroup of its proposal to amend its notice of appeal and its reply and to rely on the Webster Affidavit.

LEGAL PRINCIPLES 4 The Court's discretion to permit a late amendment to pleadings and reliance on a late filed affidavit must be exercised in a way that both promotes the just resolution of a dispute according to law and as quickly, inexpensively and efficiently as possible: see s 37M of the Federal Court of Australia Act 1976 (Cth) (FCA Act). Section 37M(2) of the FCA Act provides that this overarching purpose includes, among other things, as objectives the just determination of all proceedings before the Court, the efficient use of the judicial and administrative resources of the Court, the efficient disposal of the Court's overall caseload and the disposal of all proceedings in a timely manner. 5 The principles enunciated in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 (Aon) apply to this Court: see Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261 at [43]. Those principles were summarised in Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Limited (in liq) [2015] FCA 1098 (Tamaya) by Gleeson J at [127]: … Relevant matters the court is to consider include: (1) The nature and importance of the amendment to the party applying for it: Aon at [102]; (2) The extent of the delay and the costs associated with the amendment: Aon at [102]; (3) The prejudice that might be assumed to follow from the amendment, and that which is shown: Aon at [5], [100] and [102]; (4) The explanation for any delay in applying for that leave: Aon at [108]; and (5) The parties' choices to date in the litigation and the consequences of those choices: Aon at [112] and Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 (Luck) at [44]; (6) The detriment to other litigants in the court: Aon at [93], [95] and [114] and Luck at [44]; and (7) Potential loss of public confidence in the legal system which can arise where a court is seen to accede to applications made without adequate explanation or justification: Aon at [5], [24] and [30]. 6 A Full Court of this Court found that the summary of relevant matters emanating from Aon included in Tamaya at [127] were correctly set out: see Tamaya Resources Ltd (in liq) v Deloitte Touche Tohmatsu (a firm) [2016] FCAFC 2 at [125].

THE NATURE OF THE AMENDMENTS SOUGHT 7 The amendments which Gain Capital seeks to make to its notice of appeal and reply fall into five categories: (1) an amendment to the services for which it seeks registration of the Gain Marks to "Financial services, being trading services for retail, over the counter derivatives provided via a user online software program or provided electronically or through other communicative means" (the Designated Services); (2) amending the application date in the amended reply in response to Citigroup's amendment to the application date in its amended statement of grounds relied upon in appeal proceedings dated 9 December 2015 (the Amended Statement of Grounds); (3) amending the particulars in the reply by the addition of a further particular in relation to the response to the s 44 ground of opposition; (4) the introduction of reliance on s 44(3) of the Trade Marks Act in the reply; and (5) correcting a mistake in the notice of appeal as to what the delegate of the Registrar of Trade Marks found. 8 Based on the argument before me, I understand that no issue arises between the parties in relation to the amendments at (2) and (5) above.

EXPLANATION FOR THE DELAY 9 Gain Capital relies on an affidavit affirmed by its senior legal counsel, Huang Hauduc, and an affidavit sworn by its solicitor, Andros Chrysiliou, to explain the delay in seeking to amend its pleadings and to file the affidavit of Mr Webster. 10 In relation to the amendment to the services, Ms Hauduc explains that since it acquired the City Index Group of companies, Gain Capital has undertaken a review of the further direction and strategic goals for the City Index brand. In early 2016, the global commercial and strategy team decided that it was no longer necessary to seek registration of the Gain Marks for all the services for which the registration had been sought when the applications for registration had been lodged. Accordingly, Gain Capital only seeks registration of a subset of those services being the Designated Services. 11 In relation to the pleading amendments, introducing reliance on s 44(3) of the Act, Mr Chrysiliou says that when he first prepared the reply, Gain Capital denied paragraphs 9 and 25 of the Statement of Grounds which raised s 44 of the Trade Marks Act without pleading the basis for that denial or particularising reliance on s 44(3)(a) or (b) of the Trade Marks Act. However, in denying those paragraphs Mr Chrysiliou did not intend to limit Gain Capital's arguments and did not intend to indicate that Gain Capital was not relying on s 44(3), which reliance Mr Chrysiliou says arises from or is implicit in the denial in any event. Having reviewed Gain Capital's reply Mr Chrysiliou believes that it is desirable, for the sake of clarity, to include paragraphs in the reply which expressly raise reliance on s 44(3)(a) and (b). 12 In relation to Gain Capital's proposed reliance on the Webster Affidavit, Mr Chrysiliou says that, both in connection with the proceeding defending the opposition to the registration before the Registrar for Trade Marks and in relation to these proceedings, he was of the view that Gain Capital would be in the best position if it could adduce evidence from a witness who was directly involved at the time in the business activities which led to Gain Capital first using the Gain Marks in Australia, who could give evidence about their personal involvement in that process and who could give evidence about the use of those marks in Australia from 2007 to 9 November 2010, the priority date. 13 Mr Chrysiliou attempted to locate such a witness, in the case of the proceedings before the Registrar, by speaking with his instructing agent in the UK, Ms Rosemary Cardas of Kelties, who said she did not know anyone and believed she could not find anyone to give evidence about those matters and by undertaking internet searches about the City Index business in Australia, which did not bear any fruit. When it came to these proceedings, at Mr Chrysiliou's instigation, one of his employed solicitors undertook enquiries to locate such a witness by once again making enquiries of Ms Cardas in the UK and by making enquiries of the City Index business in Australia. Again no such person could be located. In both sets of proceedings Gain Capital adduced evidence from Nigel Rose and Michael Gillan who had some knowledge of the business activities in Australia but who were not able to give the evidence that Mr Chrysiliou had identified as optimal. 14 Mr Chrysiliou only became aware that Mr Webster was an employee of Gain Capital and was able to give evidence about the matters he had identified in mid-February 2016. Ms Hauduc seems to be the person who identified Mr Webster as a potential witness. Mr Webster is a senior vice president of strategy at Gain Capital and it was in the course of discussing the redefining of the services for the Gain Marks that she discovered that Mr Webster had worked at City Index UK Ltd from January 2004 to April 2009 and was able to give important evidence in these proceedings.

PREJUDICE 15 Citigroup relies on an affidavit sworn by its solicitor, Christopher Francis Jordan, who provides detailed evidence of the history of the proceedings, the steps taken by the parties in the proceeding to date, of the steps still to be taken in preparation for trial and of the prejudice that would flow to Citigroup if the filing of the amended pleadings and reliance on the Webster Affidavit is permitted. In relation to the issue of prejudice Mr Jordan says that: (1) it is not clear, on the face of the specification now proposed, exactly what the Designated Services comprise; (2) Citigroup's evidence was based on the original specification of the services and would have been cast differently had the amendment to rely upon the Designated Services been made prior to or during evidence preparation. If Gain Capital is now permitted to rely on the Designated Services a number of additional steps will need to be taken including considering the Statement of Grounds in light of such an amendment and identifying if an amendment is required to it, reviewing Citigroup's evidence to ascertain whether any of the evidence filed to date is no longer relevant and if any further evidence is required, speaking to existing witnesses, many of whom have limited availability, and seeking further instructions. The same issues arise in relation to any amendment to introduce reliance on s 44(3); (3) in Mr Jordan's opinion, Citigroup will be unable to take the steps required to meet such amendments in advance of the commencement date of the trial and, even if it could, the need to divert attention to addressing those matters would significantly prejudice Citigroup's preparation for trial. Mr Jordan also says that if additional witnesses are required, that will impact on the ability to complete the trial within the allocated four days; (4) if Gain Capital is permitted to rely on Mr Webster's affidavit, Citigroup will need to review its existing evidence, advice will have to be provided to Citigroup and instructions sought in relation to any further evidence that may be required in response to Mr Webster's evidence and, if required, that evidence will need to be prepared. Once again, Mr Jordan identifies the difficulty of dealing with the competing interests of addressing the additional evidence and preparing for trial between now and the trial date; and (5) Mr Jordan says that if the amendments and the Webster Affidavit are allowed Citigroup's trial costs will significantly increase, its resources allocated for trial preparation will be diverted and the schedules of Citigroup's witnesses, who have already made arrangements to attend the trial, will be disrupted. He considers that the prejudice that Citigroup will suffer cannot be adequately remedied by a costs order.

Pleading amendments 16 The first amendment that arises for consideration is the proposed change to the description of the services to the Designated Services. 17 Citigroup submits that no proper explanation has been provided for the delay in seeking to amend the services for which it seeks registration and that the scope of services is relevant to all of Citigroup's grounds of opposition. There is no explanation why someone else, for example, Mr Rose, the chief financial officer, could not have turned their mind to the question of whether the services in the applications were appropriately framed at an earlier point in time. There is no evidence that the services offered have changed or that there is an intention to change them in the future. 18 Citigroup also submits that this is not a case where there is a proposal to move from a definition comprising a list of items where an applicant now says it no longer presses some of those items. Rather, the Designated Services encompass concepts that did not appear before and which do not clearly arise on the existing evidence. While Gain Capital says that the description is clear and the concepts are described in the Webster Affidavit, Citigroup submits that Mr Webster will not be a "footnote to the Register of Trade Marks" and there is no clear explanation of what is meant by the Designated Services. The Designated Services may be a narrowing of the services as previously described and, ordinarily, a narrower case ought to be allowed to proceed. However, because of the opacity of the description of the Designated Services, Citigroup contends that there is a lack of clarity which would enable the issues to be confined. 19 Citigroup's position is that the Court does not have power to entertain an application that was not in substance considered by the Registrar, because the Court stands in the shoes of the Registrar and the question of the proper scope of services is to be considered at the time of the application. However, it also accepts that the contrary position is arguable. Accordingly it does not contend the question of power alone is a sufficient ground to refuse the amendment. 20 Gain Capital submits that there are examples where, in hearing appeals from the Trade Marks Office, the Court has exercised its power to narrow proposed specifications: see Kowa Company v NV Organon (2005) 223 ALR 27. In that case, of course, the Court narrowed the specification itself, rather than on application by the appellant. Gain Capital also points to other cases where the Court and the Registrar of Trade Marks have rewritten specifications in the context of non-use and cancellation proceedings under the Trade Marks Act. Gain Capital submits that it would not be a proper exercise of the Court's power for the Court to refuse a trademark applicant's request for it to consider, on appeal, a narrower subset of the services in respect of which registration was initially sought. That is, it would not be a proper exercise of the Court's power for the Court to insist upon a trade mark applicant running a broader appeal than it wishes to or pressing grounds of appeal that it does not wish to press. Gain Capital thus submits that the allowing of such an amendment is not a matter of an exercise of discretion. 21 However, if that is not the case and it does require the exercise of a discretion, Gain Capital submits that the discretion would be exercised in its favour such that the amendment is allowed because: (1) there is a proper reason for Gain Capital's decision to narrow the services to the Designated Services and a proper explanation of the timing for that decision; (2) there is no, or at best minimum, prejudice to Citigroup from such an amendment. Citigroup no longer faces the risk that the Court will allow the Gain Marks to be registered across the range of services previously specified and, in any event, Citigroup's evidence ought to already have addressed the Designated Services. In that regard Gain Capital relies on [39] of the affidavit of Nigel Rose affirmed 27 November 2014 and [3.2] of the affidavit of Nigel Rose affirmed 29 July 2015 in which Gain Capital says there is reference to trading in derivatives and contracts for difference trading; and (3) the narrowing of the issues in dispute between the parties is consistent with s 37M of the FCA Act. 22 Having considered the submissions of the parties I am of the view that the amendment to the services should be allowed. Regard must be had to the nature of the amendment which will narrow the matters in issue. Gain Capital should not be required to pursue its appeal on a wider basis in these circumstances. I note that Citigroup has raised the issue of power and whether the Court has power to entertain an application that was not in substance considered by the Registrar. Gain Capital is on notice of Citigroup's position and if that issue does arise, it is an issue for another day. 23 In the event that the allowing of this amendment requires the exercise of a discretion, I would exercise my discretion in favour of allowing it. While this decision came late, there is, in my view, sufficient evidence to explain the delay. That is, Gain Capital only acquired the City Index business in 2015. It is thus understandable that decisions about review of future direction of the business may have only been made in the recent past. I accept that there is no evidence before me as to whether the services that Gain Capital actually offers have or will change. However, in light of Ms Hauduc's evidence, I am prepared to accept there is an explanation for the delay in making the amendment which is sufficient. Further, I have had regard to the prejudice that will inevitably be suffered by Citigroup by reason of this amendment and the forceful submissions that have been put in that regard. I accept that it will need to make enquiries, review the Statement of Grounds and its evidence, including the content of its court book, and consider whether further evidence needs to be prepared. However, in my view that prejudice is outweighed by the nature of the amendment which is of importance to Gain Capital and which, in effect, ought narrow the issues in dispute. 24 The next amendment is the proposed reliance on s 44(3) of the Trade Marks Act. Citigroup submits that a party must expressly plead a matter of fact or point of law that, if not expressly pleaded, might take another party by surprise if later pleaded: see r 16.08(b) of the Federal Court Rules 2011. I accept that submission. Gain Capital submits that in denying paragraphs 9 and 25 of the Statement of Grounds, there was always an intention to rely on s 44(3) of the Trade Marks Act. It contends that was implicit in the denial and arises out of the wording of s 44(2) of the Trade Marks Act. In my view that is not at all clear based on Gain Capital's reply as currently pleaded. Understandably, Citigroup did not think, prior to the application to amend the reply, that Gain Capital was relying on s 44(3) of the Trade Marks Act. 25 Gain Capital also submits that Citigroup ought to have been on notice of its reliance on s 44(3) because of the evidence of Mr Rose set out at [20] to [38] of his affidavit affirmed on 27 November 2014. That evidence provides examples of CIL's advertising and sponsorship in Australia, its presence on social media platforms and its turnover in advertising expenditure. While that evidence might be relevant to reliance on s 44(3) of the Trade Marks Act it is also relevant to other matters raised by Citigroup in its Statement of Grounds, for example, its reliance on s 59, such that, in my view, the adducing of that evidence did not make it clear that there was to be reliance on s 44(3) of the Trade Marks Act. 26 Gain Capital contends that it is incumbent on a decision maker considering a matter under s 44(2) to consider s 44(3) given the opening words of s 44(2). That is, for the Registrar and indeed a Court to be satisfied that s 44(2) of the Trade Marks Act is made out it must be satisfied that ss 44(3) and 44(4) do not apply and thus necessarily there must be a consideration of those subsections in making a determination under s 44(2). It seems to be suggested that consideration must be made whether or not there is an indication of positive reliance on ss 44(3) or 44(4). That would seem to me to be an unusual outcome. 27 Notwithstanding the above, this amendment is said to be made in the interests of clarity and it is said that Gain Capital always intended to rely on s 44(3). I accept the explanation given by Mr Chrysiliou. It is not an amendment which can be said to arise because of choices made in the litigation, for example, a change in course. It is better that any clarification be made now than on the first day of the trial. While I accept that prejudice will flow to Citigroup of the nature identified by Mr Jordan and as submitted by counsel for Citigroup, in my view that prejudice is outweighed by the importance of the amendment to Gain Capital and the need for the case to be decided on its merits. The interests of justice are best served if all matters in issue between the parties are properly ventilated at trial. I will allow the amendment. 28 In relation to the amendments sought by way of the addition of particulars to paragraphs 6 and 22 of the reply, Citigroup accepts that those particulars have work to do independent of s 44(3) but submits that, given the stage the matter has reached, if the additional particulars are allowed, then Gain Capital ought to identify what the "surrounding circumstances" are that are referred to in proposed particular (c) and (b) to paragraphs 6 and 22 respectively of the amended reply. I will allow the amendment on that basis.

The Webster affidavit 29 Gain Capital has provided an explanation for the late identification of Mr Webster as a potential witness. It also submits that Mr Webster's evidence is not only limited to its reliance on s 44(3) of the Trade Marks Act but goes to other issues including evidence of the characteristics of the relevant market for the purposes of ss 44 and 60, evidence of intention to use for the purposes of s 59 and evidence of there being an absence of actual confusion for the purposes of ss 44 and 60. 30 In TSG Franchise Management Pty Ltd v Cigarette and Gift Warehouse (Franchising) Pty Ltd (No 1) [2015] FCA 739 Davies J allowed the late calling of a witness on day 4 of a trial. She accepted that the late calling of the witness had the potential to cause prejudice to the applicant in the conduct of its case and noted the need to take into account the requirements of ss 37M and 37N of the FCA Act and the principles of case management expressed by the High Court in Aon. Notwithstanding that, she found that the interests of justice required that the application be allowed given that the relevant witness may be a key and critical witness. His evidence was "likely to be material to the determination of" the case. 31 Gain Capital's intention to rely on Mr Webster was first identified approximately seven weeks prior to trial. That is, still some weeks before trial. It is the case that much of Mr Webster's evidence is based on the business records of Gain Capital which, one might expect, could be reviewed by another person within the business. However, there is evidence before me that Mr Webster's evidence is important to the case in that it is his personal knowledge which is of import. There is also evidence that until very recently, despite attempts, no one had been identified who could give evidence of the nature to be given by Mr Webster. While the evidence about the actual enquiries made to identify a relevant witness lacks detail of the nature of the inquiries made, I accept that inquiries were made. Citigroup submits that if leave is given for Gain Capital to rely on the Webster Affidavit significant prejudice will flow to it. I do not discount the importance of the issues raised in that regard. However, Mr Webster is clearly a highly relevant witness. In my view the interests of justice are best served if Gain Capital is permitted to file and rely on the Webster Affidavit at the hearing.

The trial date 32 That then leaves the question of the trial date. While I propose to permit Gain Capital to file its amended notice of appeal and its amended reply and to rely on the Webster Affidavit, that result ought not visit on Citigroup undue prejudice in needing to address the issues raised by the filing of that material while still preparing for a trial scheduled to commence on 11 April 2016. Accordingly, I propose to accede to Citigroup's submission that, should the filing of the documents be allowed, the trial date should be vacated. 33 Citigroup has helpfully provided to the Court a convenient available period for the hearing of 15 to 24 June 2016. That date is also convenient to Gain Capital, although not its counsel currently retained. I was also informed that one of Gain Capital's witnesses, Mr Rose, is not available from 20 June 2016. I propose to set the matter down for hearing commencing on 16 June 2016 for four days. The parties should consider whether more than four days is required for the hearing and should let my associate know at the earliest possible opportunity, and no later than the date appointed for the case management hearing, if a further day is required. 34 I will also list the matter for a case management hearing at a time to be arranged through my associate to which the parties should come armed with a proposed timetable for regularising the remaining steps and any steps necessitated by the filing of the amended notice of appeal, the amended reply and the Webster affidavit to be undertaken in preparation for the hearing.

COSTS 35 Gain Capital has agreed that if I allow it to file its amended pleadings and to rely on the Webster Affidavit then it should pay Citigroup's costs thrown away by reason of the filing of those documents. 36 Citigroup seeks its costs thrown away on an indemnity basis. In Citigroup's submission it will now be put to a new exercise of engaging with the case as amended and should be compensated for doing so, that should be the price of the indulgence granted by the Court. It submits that orders should be made on an indemnity basis because of the chronology of events and the unsatisfactory nature of the explanation as to why these things could not have been done in a more timely fashion. 37 I accept that a costs order never fully compensates a party for the inconvenience and diversion of resources caused by the allowance of a late amendment and the ability to rely on a further affidavit. However, the purpose of a costs order is to compensate and not to punish the unsuccessful party: see King v Yurisich (No 2) [2007] FCAFC 51 at [19]. An indemnity costs order can be made in favour of a party where it was unreasonable for it to incur any costs. There will usually be a special circumstance or unusual feature which will support the making of such an order such as the bringing of a hopeless case. 38 I do not think this case falls in the category of those where a court would order indemnity costs. While notice of the application to file these documents came late and the orders which I propose to make will cause a vacation of the trial date, that notice did not come on the eve of the trial and the application was made as soon as Gain Capital became aware of the need to make its amendments and of the availability of Mr Webster as a witness. Gain Capital has provided evidence of the reason for its delay. I do not propose to accede to the request that the costs order in favour of Citigroup for its costs thrown away by reason of the amendments and the filing of the Webster Affidavit be made on an indemnity basis. Nor do I propose to make an order in the form sought by Citigroup in its submissions. What is covered by the costs order will ultimately depend on Citigroup's consideration of the amended pleadings and the Webster Affidavit. It is not a matter to be dealt with now by the fashioning of an order. 39 Gain Capital wishes to be heard on the issue of costs of the interlocutory application after it has had an opportunity to consider the outcome. Counsel for Citigroup has made submissions on its position on the costs of the interlocutory application. I will defer the question of costs on the interlocutory application. In order to avoid the need for further written submissions, the parties are to make any further submissions they wish to make on this issue at the next case management hearing.

CONCLUSION 40 I will make orders that: (1) the appellant has leave to file and serve the amended notice of appeal dated 11 February 2016, the amended reply to statement of grounds relied on in appeal proceedings dated 19 February 2016 and the affidavit of Alexis Webster affirmed 18 February 2016. Those documents are to be filed and served by 4 pm on 14 March 2016; (2) the appellant is to provide the respondent with particulars of the "surrounding circumstances" referred to in paragraphs 6(c) and 22(b) of the amended reply to statement of grounds relied on in appeal proceedings dated 19 February 2016 by 4 pm on 18 March 2016; (3) the hearing of this matter scheduled to commence on 11 April 2016 be vacated; (4) the matter be listed for hearing for 4 days commencing on 16 June 2016; (5) the appellant to pay the respondent's costs thrown away by reason of the filing of the the amended notice of appeal dated 11 February 2016, the amended reply to statement of grounds relied upon in appeal proceedings dated 19 February 2016 and the affidavit of Alexis Webster affirmed 18 February 2016; (6) the matter to be listed for a further case management hearing on a date to be arranged through my associate; (7) any submissions or further submissions on the issue of costs of the interlocutory application filed 26 February 2016 are to be made at the next case management hearing after which the costs of that application will be determined. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.