King v Delta Metallics Pty Ltd

Federal Court of Australia (Full Court)|2013-08-19|Before: McKerracher JJ

Introduction 1 Before the Court is an application for leave to appeal, or alternatively, an appeal against orders made by the primary judge respectively on 9 October 2012 and 23 November 2012. By mistake the application for leave to appeal and the notice of appeal omitted reference to the orders made on 9 October 2012. No point was taken by counsel for the respondent in relation to this omission and it is proper to proceed on the basis that the application for leave to appeal and the notice of appeal relate to both orders. 2 By the former orders the primary judge dismissed an application by Joshua Nathan King, who will be referred to as the appellant, to set aside a judgment entered against him pursuant to an order made on 23 September 2011, with costs payable forthwith. 3 By the latter orders, the appellant was ordered to pay $12,253 on account of profits together with the costs of the hearing on 23 November 2012. 4 It is convenient to assume in the appellant's favour, that he does not require leave to appeal against the orders in question, or, if he does require leave to appeal, that such leave should be granted. By making this assumption it becomes unnecessary to venture into the murky waters of the ill defined differences between final and interlocutory orders.

default judgment appeal 5 In reaching his decision to refuse the application to set aside the default judgment of 9 October 2012, the primary judge considered, inter alia, the fact that the respondent had resolved its claims against the remaining respondents between the date of the entry of the default judgment and the hearing of the appellant's application to set aside the default judgment. The primary judge said at [27]: I may properly infer that the terms of settlement and of discontinuance were entered into with a backdrop, at least, of Delta knowing that it had a judgment against Mr King, a major party to the litigation. On that basis, it seems to me that there would be a serious prejudice to Delta if the default judgment was now to be set aside in circumstances where those settlements have proceeded on the basis of a known and important fact, namely, judgment being entered against Mr King. 6 The appellant's sole ground of appeal against the refusal to set aside the default judgment is that because there was no evidence adduced by the respondent of the terms of each settlement with the other respondents, there was no basis for the primary judge to infer that there was any prejudice to the respondent if the default judgment were to be set aside. 7 It is significant that the allegation of prejudice was raised by the respondent in its submissions in opposition to the application to set aside the default judgment. The respondent claimed that it 'may have taken a different position with regards the settlement of the case against the other Respondents'. In the exercise of his discretion, the primary judge was entitled to draw the inference of prejudice. 8 The majority in House v The King (1936) 55 CLR 499, in discussing the role of an appellate court in reviewing the exercise of discretion by a primary judge, said at 505: It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. 9 We are unable to discern any error in the refusal to set aside the default judgment of the kind referred to above. His Honour was mindful that his decision was discretionary, and he made his decision to refuse the application even taking into account an assumption that the appellant had an arguable defence. 10 Accordingly, the appeal against the orders made on 9 October 2012 should be dismissed.

Introduction 11 For the reasons which are now set out the appeal against the orders made on 23 November 2012 should also be dismissed. 12 Counsel for the appellant argued that the appellant was denied procedural fairness when the primary judge made the orders on 23 November 2012. He contended that the orders were made at a directions hearing when the primary judge had earlier indicated that the purpose of that hearing was only for programming the future steps to be taken for the preparation of an inquiry either into the assessment of damages or, at the election of the respondent, an account of profits.

The appellant's conduct and the history of the litigation 13 In order to understand the context in which the directions hearing was conducted on 23 November 2012, it is necessary to refer to some of the significant events in the conduct of the appellant and the history of the litigation. 14 On 6 July 1992, the respondent registered a trade mark, No. A581759, for "White Collar Boxing" in respect of group training in specialised and structured exercise and boxing self defence skills. The respondent used the mark in the conduct of these activities over a long period. 15 From around October 1992 the respondent provided group boxing lessons and boxing training, trained and accredited boxing coaches and organised and officiated boxing competitions and tournaments using the White Collar Boxing trade mark. 16 On 31 July 2010, a boxing tournament entitled White Collar Boxing was promoted by the appellant at the University of New South Wales. The participants received boxing lessons and boxing training prior to the tournament. The appellant received a net profit of $445 from this event. 17 On 3 September 2010, the solicitors for the respondent wrote to the appellant by email and post requesting a written undertaking that the appellant stop using the White Collar Boxing trade mark and provide an account of profits earned from the tournament held on 31 July 2010. There can be no doubt that shortly after this date, the appellant was fully aware of the trade mark and its infringement. 18 On 11 December 2010 the appellant conducted the second boxing tournament and training. He received a net profit of $3,180 from this event. 19 On 24 February 2011, the respondent commenced proceedings including against the appellant and others alleging that the appellant infringed the registered trade mark, contravened ss 42 and 44 of the Fair Trading Act 1987 (NSW), ss 52 and 53 of the Trade Practices Act 1974 (Cth), ss 18 and 29 of the Australian Consumer Law (NSW) and committed the tort of passing off by promoting, offering for sale and selling boxing lessons, boxing training and boxing tournament services using the words "White Collar Boxing" and like expressions. 20 The application was filed in the fast track list. One allegation made in the fast track statement was that the appellant had wrongfully made profits from the infringement of the trade mark which it would be unconscionable for him to retain ([4.16]). The fast track application claimed damages ([10]) or alternatively, at the option of the respondent, an account of profits and the payment of the sums found due ([11]). 21 On 16 April 2011, the appellant promoted the third tournament and training. He received a net profit of $4,814 from this event. 22 On 11 May 2011, the primary judge ordered substituted service of the proceedings on the appellant. 23 On 7 June 2011 the primary judge ordered that the appellant file and serve a fast track response by 28 June 2011. On 10 June 2011 solicitors filed a notice of appearance for the appellant, but on 6 July 2011 filed a notice of ceasing to act for him. Then on 11 July 2011, new solicitors filed a notice that they then acted for the appellant. 24 On 23 July 2011, the appellant conducted the fourth tournament and training session. He received a net profit of $3,814 from this event. 25 The fast track response, which was due on 28 June 2011, was finally filed on 3 August 2011 and served on 4 August 2011. In the fast track response the appellant admitted promoting three boxing tournaments on 31 July 2010, 11 December 2010 and 16 April 2011 by reference to the words including "White Collar Boxing". There was no response in relation to the 23 July 2011 tournament because it had not occurred when the amended fast track statement was filed on 14 June 2011. In relation to the claim for relief, the appellant denied that the respondent "is entitled to the relief claimed by it". 26 On 9 August 2011, the solicitors for the appellant wrote to the solicitors for the respondent indicating that the appellant did not have any funds or assets from which to pay any judgment or legal costs. The letter indicated that the solicitors would file a notice of ceasing to act. It also stated that the appellant would not be taking any further steps in the proceedings and in the event that a judgment was entered against him was willing to be adjudicated bankrupt. 27 As a result of the orders made on 7 June 2011, a mediation was scheduled for 17 August 2011. The appellant did not attend. 28 On 20 September 2011, as a result of the failure of the appellant to comply with the orders of the Court and his indication that he would no longer participate in the proceedings, the respondent applied for default judgment. 29 On 23 September 2011, the application for judgment under r 5.23(2)(c) of the Federal Court Rules 2011 was heard and judgment given against the appellant. The following orders were also made: 16. The First Respondent [the now appellant] pay the Applicant [the now respondent] damages to be assessed for infringement of Australian registered trade mark number A581759, together with interest or, at the Applicant's election, an account be taken of the First Respondent's profits, together with interest. 17. The First Respondent pay the Applicant damages to be assessed for contraventions of the Fair Trading Act 1987 (NSW), the Trade Practices Act 1974 (Cth) and the Australian Consumer Law (NSW). 18. Enquiries, including appropriate discovery, be held to quantify the damages or, subject to the Applicant's election, to take account of the profits, referred to in order 16. 19. Enquiries, including appropriate discovery, be held to quantify the damages payable pursuant to the Fair Trading Act 1987 (NSW), the Trade Practices Act 1974 (Cth) and the Australian Consumer Law (NSW) and passing off. 30 On 21 October 2011, in aid of the orders for enquiries, the primary judge made an order that the appellant provide a verified statement of the profits which he earned from the four tournaments. The order provided: 8. By 4.00pm on 28 November 2011, the First and Second Respondents: (a) Provide to the Applicant a summary statement (supported by any relevant documentation) verified on oath, pertaining to:- (i) income received in connection with:- • the boxing tournaments staged at the University of New South Wales Roundhouse in Kensington, Sydney on:- - 31 July 2010; - 11 December 2010; - 16 April 2011; and - 23 July 2011 (the Tournaments); • the provision of boxing lessons and boxing training to participants in the Tournaments (whether or not they boxed on the night) (the Training). (ii) costs and disbursements in connection with the Training and the Tournaments; (iii) the profits from the Training and the Tournaments; (iv) payments to the First and Second Respondents (or their nominees, servants, agents or associated entities) in connection with the Training and the Tournaments; (v) the number of spectators at each Tournament; (vi) the number of participants in the Training and the Tournaments (whether or not they boxed on the night); (vii) the number of referees and officials engaged for each Tournament. 31 On 3 April 2012, the respondent filed a statement of charge and a contempt application arising from the appellant's failure to comply with the orders of the primary judge made on 23 September 2011. 32 On 13 April 2012, the primary judge extended the time for compliance for the provision of the verified statement pursuant to the order made on 21 October 2011, and ordered substituted service on the appellant of the contempt application. 33 On 1 June 2012, solicitors filed a notice of acting for the appellant. The contempt application came on for hearing but was adjourned when counsel for the appellant foreshadowed an application to set aside the judgment obtained against the appellant. 34 On 15 June 2012, the respondent filed an amended application and an amended statement of charge which added a charge of contempt arising from the appellant's failure to provide the verified statement within the extended time. 35 On 8 August 2012, the appellant filed the application to set aside the judgment obtained against him. 36 On 31 August 2012, the contempt application was determined against the appellant and he was ordered to provide the verified statement. 37 On 3 September 2012, the appellant filed the verified statement. The verified statement disclosed that the appellant made a net profit of $445 from the first tournament, $3,180 from the second tournament, $4,814 from the third tournament, and $3,814 from the fourth tournament. 38 On 9 October 2012, the appellant's application to set aside the judgment was dismissed. On that occasion his father, who apparently is a barrister, appeared as his McKenzie friend and relied upon written submissions prepared by the barrister previously engaged by the appellant. 39 At the end of the hearing on 9 October 2012, the matter was adjourned to 23 November 2012. When adjourning the matter the primary judge said: All right. Well, we'll adjourn the further hearing of the proceedings for directions only - so I'll make it quite clear - to 9.30 am on 23 November, 2012. Mr King, what will happen is that the parties I anticipate will be in discussions then as to the further conduct of the hearing and the further conduct is if the applicant Delta still wants damages or counter [sic] profits, then we'll have to have a hearing in relation to that. But there will be affidavit material and submissions in relation to the matter. All right? (Emphasis added.) 40 On 15 November 2012, the solicitors for the respondent wrote to the solicitors for the appellant indicating that the respondent had elected to seek an account of profits of $12,253 based on the verified statement filed by the appellant. The solicitors for the respondent enclosed consent orders to that effect. 41 On 21 November 2012, the appellant sent an email to the solicitors for the respondent indicating that he was again representing himself in the proceedings and "will be making an offer tomorrow in response to your letter 15 November 2012". No offer was made and the application for an order against the appellant for an account of profits amounting to $12,253 was heard on 23 November 2012.

The hearing on 23 November 2012 42 At the hearing on 23 November 2012 the appellant represented himself. There was an initial exchange in the following terms: HIS HONOUR: I've had a look at an affidavit in support of an application for an order that the first respondent - that's you, Mr King - pay a sum of money to the applicant. That's what's before me at the moment. MR KING: Yes, your Honour. I'm not exactly sure as to the proceedings from this point on. I understand that today is a directional - for directions, although I've just spoken to Ms Ryan, and perhaps if your Honour would like to hear some points from myself, if --- HIS HONOUR: Well, you're right; today was intended to be a directions day. What - so what I was proposing to happen was the applicant would be having directions about material that they rely upon. The applicant is now wanting an account of profits. They say that you have told them - I think you stated that the total net profit derived was $12,253. MR KING: That's correct, yes. HIS HONOUR: So the stage of the proceeding now, having found liability, is just to work out, now that that election has been made as to what the account should be. So what I would normally do is to give directions for material to be put in in relation to whether that's the account of profits that should be made payable by you to the applicant. MR KING: Right. HIS HONOUR: But, quite frankly, it depends on what you want to do. And if you're proposing to stand moot and do nothing, then, on the material before me, I would probably proceed immediately to enter judgment for that amount of money. MR KING: For that amount of money. HIS HONOUR: But if you want an opportunity to put material in to dispute that amount of money, then I will give you that opportunity. (Emphasis added.) 43 Then, counsel for the respondent referred the Court to the order for a verified statement and told the primary judge that the appellant had ultimately provided such a statement. Next, the following exchange occurred between the primary judge and the appellant: HIS HONOUR: … Mr King, what do you want time to address the court about? MR KING: Well, my understanding is - will I be able to prepare affidavits in support of the account of profits not being 100 per cent the entitlement of the applicant - did not have 100 per cent entitlement to such profits? HIS HONOUR: On what basis? MR KING: On the basis of, most considerably, the reputation in Sydney and New South Wales, the lack of knowledge, the unintentional registration of the business in New South Wales - - - HIS HONOUR: No, that fight has already been lost by you, I'm afraid. MR KING: So as for the account of profits - - - HIS HONOUR: It's a mechanical how much profit you made, which - as I said, you seem to have stated your total net profit is $12,253. MR KING: That's in the affidavit. That's right, your Honour. HIS HONOUR: Yes. MR KING: Yes. HIS HONOUR: Well - - - MR KING: So that - so by way of your decision-making, does that mean that 100 per cent of the net profit is - - - HIS HONOUR: Yes. MR KING: Right. And there's no - - - HIS HONOUR: The net profit. So - all right. All - when I was talking to you before, I thought you may want to put material on to say, "Well, it's not $12,000 of net profit because of some other reason", just on - and I'm only talking about the arithmetic is all I would be - - - MR KING: Right. … HIS HONOUR: If you're not going to be taking (sic) about the arithmetic, then there's nothing further that we need to debate, is there? MR KING: Right. The only other thing that I saw through going through those spreadsheets the other day is that some of the profits were minimised by charitable donations, of which can be - evidence can be put forward to show that. So if I could ask your Honour, as a - - - HIS HONOUR: Well - were charitable donations to you, or - - - MR KING: It's to charities through those profits - from those profits received. So I - if I had more time, your Honour, to perhaps prepare some more affidavits to show evidence of those donations, perhaps your Honour might not directly go to 100 per cent entitlement of those net profits to the applicant, Delta Metallics. HIS HONOUR: But that's the - the relevant inquiry for me is what profit you, trading in the organisation, were made, and I have to look at the net profit. What you do with the money - you may give it away, but as far as the applicant is concerned, they're entitled to the profit. So let's say you gave it away to the best cause in the world. That doesn't make any difference to the applicant being denied the profit that you made before you disbursed it. MR KING: Right. So had I put in the spreadsheet perhaps a deduction of a charity donation - - - HIS HONOUR: That wouldn't be relevant. MR KING: Even - as to the bottom figure at the bottom of those - - - HIS HONOUR: Wouldn't make any difference. MR KING: Right. HIS HONOUR: What the net profits - you take away your overheads, maybe, you take away whatever other matters you take away to get from gross to net, which you're familiar with, and that's the only inquiry I have to really worry about. MR KING: Right. HIS HONOUR: So - and that has been done, effectively, by your affidavit of 3 September, where you say the net - total net profit was $12,253. MR KING: Right. HIS HONOUR: So everything you've now raised with me would not be relevant on any further delay. MR KING: Right. HIS HONOUR: So all that would be would be to extend the cost … Unfortunately you're going to have to pay it in any event. MR KING: Yes, your Honour, I'm aware of that. Well, if there's - you know, there's not much more I can say, I suppose, than that. HIS HONOUR: But I - - - MR KING: I think I'm in a bit of a - - - HIS HONOUR: But what you have said has been useful just to elucidate that probably we should bring - if there's nothing that's relevant that you want to bring before the court, we should close this litigation now, should we not? MR KING: Right. And is that $12,253 - just two questions on that. Is there an appeal process for damages or - - - (Emphasis added.) 44 In his reasons for judgment the primary judge explained at [4]: In the course of discussion before me today, the first respondent raised nothing that would impact upon the applicant being now entitled to an account of profits, nor impacting upon the amount which has been stated by the first respondent to be the total net profit derived, namely, the sum of $12,253.

Consideration 45 The way in which the procedural fairness argument was finally articulated at the hearing of the appeal involved three contentions. 46 The first contention was that it was procedurally unfair to determine the amount of the account of profits when the matter had been listed on 23 November 2012 for directions only. Stated in these terms the contention is too wide to be accepted. Circumstances may arise that justify a change in the way a directions hearing is dealt with. If, as the primary judge said, there was nothing relevant to the assessment of the account of profits on which the appellant intended to rely, there would be no unfairness in proceeding to determine the issue at a hearing even though it was previously indicated that the hearing would be for directions only. 47 This then raises the second contention, namely, that there was at least one relevant matter which the appellant wished to raise which he was prevented from doing because the matter was determined at the directions hearing. The appellant's written submission describes the issue thus: 14. Additionally, it is submitted that a Court may well decline to order an account of profits in circumstances where the infringement has been "innocent", that is, the infringer has no knowledge that he has transgressed the trade mark owner's rights … The issue was, so it was argued, foreshadowed by the appellant when he said to the primary judge that he wished to raise "the lack of knowledge". 48 The primary judge said in response that "that fight has already been lost by you". 49 The primary judge was correct in that response. Judgment had been entered for an account of profits made by the appellant from the four tournaments. The time had passed to contest that judgment. The only remaining exercise was to calculate the amount of the profits involved. That was, as the primary judge said, an arithmetical exercise. 50 At the oral arguments on the hearing of the appeal, it was suggested for the first time on a hypothetical basis that what the unrepresented appellant at the directions hearing may have been raising with his Honour was a desire to put on affidavit evidence about reputation, as well as innocence. This hypothetical argument was put on the basis that the appellant may be able to adduce admissible evidence from those who paid money for his services to say that they had never heard of the trade mark and they were purely attracted to engage him because of his own outstanding reputation. At least in theory, it was argued, that may be relevant to the account of profits because if the infringer can demonstrate that the profits were derived not by reason of the infringement but for other reasons, then that may be taken into account in the discretion to be exercised in relation to the account of profits. This argument should not be accepted. 51 The argument was not advanced in the fast track response at the time when the appellant was legally represented. "Reputation" was referred to only in the context of liability. There was no reference to an account of profits even though an account of profits had been claimed in the application. In relation to relief, the only issue articulated was the quantum of "damages". There is a significant difference between the computation of damages and the computation of an account of profits and from whose perspective each form of relief is to be assessed. 52 The argument was not advanced with any clarity before his Honour at the hearing. Due allowance should be made for the fact that that appellant was a litigant in person at a directions hearing. However, even doing so, considering the history of the litigation, regard must also be had to the interests of the successful and innocent party and, to the importance of s 37M of the Federal Court of Australia Act 1976 (Cth). In this context, caution should be exercised in "second guessing" the evaluation of weight to be accorded to those considerations by the docket judge directly associated with the entirety of the litigation. 53 Even at the hearing of the appeal, the appellant did not say that such evidence would be available. The proposition briefly alluded to was purely hypothetical. 54 The way in which the primary judge interpreted the appellant's indication in the transcript as to the affidavit evidence he might be able to collate was consistent with the manner in which we interpreted the remarks and expressly consistent with the content of the written submissions prepared for the appeal. It was only in the oral submissions that the hypothetical argument was creatively advanced from the passing reference to reputation in the transcript. Reliance on such a mere possibility without more at such late stage in the proceedings by the appellant was too little, too late. 55 The third contention concerning procedural fairness focused on the fact that the appellant was self-represented on 23 November 2012 before the primary judge. Counsel for the appellant on the appeal relied on the following passage from the judgment of Allsop P (as his Honour then was) in Jeray v Blue Mountains City Council (No. 2) (2010) 180 LGERA 1 at [6]: At the root of procedural fairness is the provision of a fair hearing to a litigant and the basal notion that the litigant has understood the proceedings before him or her and has had an adequate opportunity given to him or her, considering his or her attributes, qualities and deficiencies which render the litigant more or less able to vindicate his her rights in court. 56 The only matter ultimately relied on in the appeal by counsel for the appellant by way of written submissions as an issue which the appellant was precluded from advancing by reason of the determination at the directions hearing was the argument that the appellant was an innocent infringer. The appellant himself raised that issue. It was properly rejected as irrelevant by the primary judge in circumstances where judgment for the taking of an account of profits had already been given. 57 Even if the issue of innocent infringement was still theoretically open at the stage of the assessment of the amount of the account of profits, there was no denial of procedural fairness by the primary judge in determining the amount of the judgment on 23 November 2012 in the circumstances of this case. The fast track procedure requires the parties to isolate the issues required for determination at an early stage of the proceeding. The appellant did not raise the issue of innocent infringement in his fast track response. At that stage he was represented by lawyers. What is a fair procedure to the appellant must pay some regard to the interests of the respondent. The conduct of the proceeding by the appellant was marked by attempts to evade service, and serial non compliance with orders of the Court leading, in one instance, to the unusual course of the respondent bringing contempt proceedings to compel performance of interlocutory orders. The conduct of the appellant provided no basis for taking a benign approach to his failure to state that innocent infringement was an issue in the proceeding. 58 Finally, even if there was a denial of procedural fairness, it does not follow that the appellant is entitled to relief. 59 In order to attract relief the denial of procedural fairness must work a practical injustice on the appellant: Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam (2003) 214 CLR 1 at [38] per Gleeson CJ. If the denial of procedural fairness would have made no difference to the outcome of the proceeding, relief will not be granted: Stead v State Government Insurance Commission (1986) 161 CLR 141. The Court is concerned with matters of substance, not of mere form: R v Chief Constable of the Thames Valley Police; Ex parte Cotton [1990] IRLR 344 at 351 per Bingham LJ. 60 In the present case any denial of procedural fairness did not work a practical injustice. As a matter of substance, the denial of procedural fairness made no difference to the outcome. 61 The appellant promoted three of the four tournaments after a letter of demand dated 3 September 2010 from the respondent's solicitors had alerted him to the allegation of trade mark infringement. He promoted the 16 April 2011 and 23 July 2011 tournaments after the proceedings were filed on 24 February 2011. In these circumstances the appellant could not establish the defence of innocent infringement on the facts. 62 In relation to these three tournaments, if there was a denial of procedural fairness, relief should be withheld because the denial would have made no difference to the result. At the highest, the argument of innocent infringement may have relieved the appellant of the obligation to account for the profit of $445 earned from the first tournament which occurred before he was alerted to the claim of infringement. In the circumstances of this case, and in particular, in the way in which the appellant has conducted the litigation, the exposure to that small liability is not a ground for allowing the appeal and should be regarded as de minimis. 63 For these reasons, if leave to appeal against the orders made on 9 October 2012 and 23 November 2012 is required, leave is granted. Further, the appeal against the orders made on 9 October 2012 and 23 November 2012 is dismissed with costs. I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices North, Cowdroy and McKerracher.

Trade Practices Act 1974(Cth)

(NSW), the Trade Practices Act 1974(Cth)

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