Noble Engineering Pty Limited v Tianjian Noble Boats International Pty Ltd

Federal Court of Australia|2010-05-31|Before: Reeves J

Solicitor for the Respondent: HWL Ebsworth Lawyers

BETWEEN: NOBLE ENGINEERING PTY LIMITED ACN 010 768 742

AND: TIANJIAN NOBLE BOATS INTERNATIONAL PTY LTD ACN 133 581 487

BETWEEN: NOBLE ENGINEERING PTY LIMITED ACN 010 768 742

AND: TIANJIAN NOBLE BOATS INTERNATIONAL PTY LTD ACN 133 581 487

introduction 1 This is an application for summary judgment by Tianjian Noble Boats International Pty Ltd, the respondent in these proceedings, against Noble Engineering Pty Limited, the applicant. 2 Tianjian has made its application under s 31A(2) of the Federal Court of Australia Act 1976 (Cth). That section allows the Court to give summary judgment for Tianjian if it is satisfied that Noble has "no reasonable prospects" of successfully prosecuting the proceeding. 3 Most of the facts surrounding this dispute are admitted on the pleadings - Noble's Fast Track Statement and Tianjian's Fast Track Response. What follows is a brief summary of those facts.

factual background 4 Noble holds two registered trade marks which relate to the design of boat hulls. The trade marks use the words "Noble Supervee Hull Design" and "Noble Supervee" and one of them includes a stylised image. 5 In 2008, Noble agreed to grant an exclusive licence to a company called Noble No 2 Pty Ltd, which in turn, granted a licence to Tianjian, to use and exploit Noble's trade marks. 6 After a dispute arose about the payment of the licence fee under this agreement, Noble terminated the exclusive licence effective from 12 August 2009. 7 Subsequent to 12 August 2009, Tianjian continued to use the trade marks on boats it offered for sale and in related promotional materials on its website; in brochures; in magazine articles; and in displays at the Sydney and Brisbane International Boat Shows.

Tianjian RAISES A defence under section 123(1) of the Trade Marks Act 8 Noble issued these proceedings, as Fast Track proceedings, in December 2009, claiming that these uses infringed its trade marks. 9 In its Fast Track Response, Tianjian admitted it made all the alleged uses of Noble's trade marks, but it claimed, by way of defence, that it was entitled to do so under s 123(1) of the Trade Marks Act 1995 (Cth). That section provides that:

In spite of section 120, a person who uses a registered trade mark in relation to goods that are similar to goods in respect of which the trade mark is registered does not infringe the trade mark if the trade mark has been applied to, or in relation to, the goods by, or with the consent of, the registered owner of the trade mark.

10 Section 9 of the Trade Marks Act is also relevant to this defence. It defines the expressions "applied to" and "applied in relation to" that are used in s 123(1). 11 In Transport Tyre Sales Pty Ltd v Montana Tyres Rims and Tubes Pty Ltd (1999) 93 FCR 421; [1999] FCA 329, the Full Court held, among other things, that s 123 of the Trade Marks Act not only applies to goods to which a trade mark had been applied with consent of the registered owner, but it also applies to the use of that trade mark in promotional material in relation to those goods: see at [94] to [96]. 12 Tianjian purported to raise this defence in paragraph 5 of its Fast Track Response as follows: (a) by virtue of the licence agreement between Noble No 2 and [Noble] dated 9 October 2008, [Noble] granted to Noble No 2 an exclusive right to use and exploit, inter alia, the Trade Marks; (b) by virtue of the agreement between Noble No 2 and [Tianjian], [Tianjian] licenced to [Tianjian], inter alia, the Trade Marks; [NB: the second reference to Tianjian appears to be an erroneous reference to Noble No 2.] (c) Benjamine Noble, as marketing director for [Tianjian's] business, provided the "NOBLE SUPERVEE HULL DESIGN" logo artwork and authorised and directed the placement of the logo artwork on [Tianjian's] goods and advertising material; (d) Robert Noble, director of [Noble], is Benjamine Noble's father; (e) [Noble] consented to the application of the Trade Marks to and in relation to the respondents' goods between October 2008 and 12 August 2009; (f) [Tianjian] did not become aware that [Noble] was the registered owner of the Trade Marks until 1 September 2009; (g) at all material times, the Trade Marks were applied to and in relation to the [Tianjian's] goods with the consent of [Noble] and therefore, [Tianjian's] use of the Trade Marks is excused by s 123 of the Trade Marks Act 1995 (Cth) and is not an infringement of s 120 of the Trade Marks Act 1995 (Cth).

the operation of section 31a in this application 13 Tianjian bears the onus in this summary judgment application: see Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372; [2008] FCAFC 60 ("Jefferson Ford") at [127] per Gordon J and Windsor v Sydney Medical Service Co-operative Ltd (No 2) [2009] FCA 704 at [38] per Edmonds J. 14 Put in context, that means establishing that, because of this defence, Noble has no reasonable prospects of successfully prosecuting these proceedings. To make good this defence, Tianjian has to establish, as a fact, that all of its uses of Noble's trade marks after 12 August 2009 involved boats to which Noble's trade marks were applied before that date. Put another way, if the pleadings, affidavits and other evidence produced in relation to Tianjian's summary judgment application reveal that there is a real issue of fact that has to be resolved for Tianjian's defence to succeed, it cannot be said that Noble's claim has no reasonable prospects of success: see Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2007) 236 ALR 720; [2006] FCA 1352 ("Boston Commercial") at [44] per Rares J, Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 at [20] per French J, Commonwealth Bank of Australia v ACN 000 247 601 Pty Ltd (In liq) (formerly Stanley Thompson Valuers Pty Limited) [2006] FCA 1416 at [32] per Jacobsen J and Jefferson Ford at [130] per Gordon J.

Tianjian's evidence 15 In support of its application, Tianjian relied upon an affidavit of Mr Jason Lee, its General Manager and Secretary. In that affidavit, Mr Lee states, among other things, that Tianjian decided to rebrand all its products in about June or July 2009. As a consequence of that decision, Mr Lee states:

In conjunction with Alan [Liang - a Tianjian Company Assistant], I took immediate steps to arrange for new stickers bearing a new mark to be produced in China. I instructed the shipyard in China to remove the stickers bearing the trade marks and replace them with the new stickers bearing the new marks.

I also asked Alan to arrange to prepare new brochures, flags and marketing material, reflecting the new marks.

From July 2009 onwards, the Trade Marks were not applied to or in relation to any of the respondent's products.

16 Later in his affidavit, Mr Lee gives evidence about a magazine article that was referred to in Noble's Fast Track Statement as follows:

13 (c) The interview, testing and photographs taken by "Trailerboat Fisherman" magazine and included in its November/December 2009 edition took place in or around August 2009. Stickers bearing the Trade Marks had been applied to the products between January 2009 and June or July 2009 in the course of the manufacture of the products at the shipyard in China. After the Meeting, the Trade Marks were no longer applied to the products;

17 Mr Coveney, counsel for Tianjian, submitted that Mr Lee's affidavit provided the evidence necessary to establish the factual basis for Tianjian's defence under s 123(1) of the Trade Marks Act. Further, he submitted that Noble had produced no evidence to contradict this evidence and this provided further support for it. He also submitted the closest Noble came to doing so was in the affidavit of Mr Noble, where he implies it is "possible" that the trade marks were applied to the new shipment of boats made by Tianjian after 12 August 2009. Finally, Mr Coveney pointed to the fact that Noble has not filed a Reply to Tianjian's Fast Track Response, denying the allegations in paragraph 5 thereof.

Tianjian fails to discharge its onus 18 It is clear from its terms, particularly subs (3), that s 31A sets a lower standard for applications of this kind than that set by High Court decisions such as General Steel Industries Inc v Commissioner for Railways (N.S.W.) (1964) 112 CLR 125 at 129 to 130 per Barwick CJ: see Duncan v Lipscombe Child Care Services Inc (2006) 150 IR 471; [2006] FCA 458 at [6] per Heerey J, Lawrenson Light Metal Die Casting Pty Ltd (In Liq) v Cosmick Pty Ltd [2006] FCA 753 at [15] per Heerey J, Jewiss v Deputy Commissioner of Taxation (2006) 65 ATR 222; [2006] FCA 1688 at [26] per Mansfield J, Boston Commercial at [27] per Rares J; Genovese v BGC Construction Pty Ltd [2007] FCA 923 at [4] and [5] per Gilmour J, Jefferson Ford at [124] per Gordon J and Vranic v Secretary, Department of Education, Employment and Workplace Relations [2009] FCA 672 at [21] per Greenwood J. 19 Nonetheless, I respectfully agree with the views expressed by a number of judges of this Court to the effect that I should proceed with caution when dealing with an application of this kind so as to ensure that Noble is not unjustly shut out from litigating an issue that is fairly arguable: see Boston Commercial at [45] to [46] per Rares J; Unit 11 Pty Ltd v Sharpe Partners Pty Ltd (2006) 150 FCR 405 at [64] per Tamberlin J; Granitgard Pty Ltd v Termicide Pest Control Pty Ltd [2008] FCA 55 at [9] per Logan J and Keynes v Rural Directions Pty Ltd (No 2) (2009) 72 ACSR 264; [2009] FCA 567 at [47] per Besanko J. 20 Furthermore, I also respectfully agree with the observations of Rares J in Shumack v Commonwealth of Australia [2009] FCA 775 at [14] that the power expressed in s 31A is concerned with substance and not form, eg pleading points. 21 As I have noted above, there is one pivotal fact raised by Tianjian's defence. It is: whether the boats that Tianjian admits it displayed and promoted for sale after 12 August 2009, bearing Noble's trade marks, had those trade marks applied to them before 12 August 2009. If Tianjian establishes this pivotal fact, it will be entitled to succeed on its defence under s 123(1) of the Trade Marks Act and, because there is no other issue in dispute, it must follow that Noble will have no reasonable prospects of successfully prosecuting its claim in these proceedings. 22 However, there is a number of reasons why I consider Tianjian must fail in this application. To begin with, Mr Lee does not state in his affidavit that the boats Tianjian offered for sale after 12 August 2009 had Noble's trade marks applied to them before that date. All Mr Lee says in paragraph 12 of his affidavit is that none of Noble's trade marks was applied to any boats after July 2009. This is obviously not evidence that any of Noble's trade marks were applied to any boats before that date. 23 While Mr Lee does say in paragraph 13(c) of his affidavit that stickers bearing the Trade Marks were applied to the products between January 2009 and June/July 2009, he also says earlier (at paragraph 10) that, in July 2009, the stickers bearing Noble's trade marks were removed and replaced with stickers bearing new trade marks. If that is so, it is difficult to see how any of the boats produced in China, whether before or after that date, could have borne Noble's trade marks. 24 Of course, I suppose it is possible that there were boats that were already in Tianjian's supply chain in transit to, or in Australia, that bore Noble's trade marks. However, neither Mr Lee nor anyone else, has given any evidence of this fact. Since this is information that is exclusively within Tianjian's possession and it has apparently elected not to address it directly in its evidence-in-chief, I do not consider, in those circumstances, that any inference as to this fact can be drawn in its favour: see Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418 per Handley JA. Moreover, I do not consider it would be appropriate to draw such an inference in circumstances where I am determining a summary judgment application upon which Tianjian bears the onus. 25 As to paragraph 5 of Tianjian's Fast Track Response, nowhere in that paragraph does Tianjian allege the pivotal fact I have stated above: at [21]. Unless that pivotal fact is clearly alleged by Tianjian in its pleading, I cannot see how its pleadings assists it. Further, if that fact is not pleaded, there was no need for Noble to expressly admit or deny it. 26 While the pivotal fact is not pleaded, the defence under s 123(1) of the Trade Marks Act is pleaded in general terms in paragraph 5. In that event, I do not consider it was necessary for Noble to file a Reply to Tianjian's Fast Track Response if the only purpose was to join issue with Tianjian on that defence because, in such circumstances, O 11 r 14 of the Federal Court Rules implies a joinder on that issue. 27 It necessarily follows from all this, that Tianjian's defence under s 123(1) of the Trade Marks Act and the pivotal fact involve issues of fact that are in dispute and will have to be resolved before Tianjian's defence could succeed. It could not, therefore, be said that Noble had no reasonable prospects of success in prosecuting its claims.

CONCLUSION 28 For these reasons, Tianjian's application for summary judgment must be dismissed.

security for costs 29 Tianjian has also sought an order for security for costs against Noble. It has variously relied upon s 56 of the Federal Court of Australia Act 1976 (Cth), O 28 r 3 of the Federal Court Rules and s 1335 of the Corporations Act 2001 (Cth) in making that application. 30 Mr Simon Tolhurst, the solicitor acting for Tianjian, has sworn an affidavit in which he has deposed, among other things, to an estimate of Tianjian's costs of pursuing this matter to trial. The total estimated costs are $74,438.50. Noble has not disputed this assessment. 31 In its materials, Noble has admitted that it is impecunious and would not be able to meet an order for costs in Tianjian's favour if it were unsuccessful in these proceedings. However, Noble opposes an order for security for costs on two grounds: 1. because of its impecuniosity, it could not meet an order in the amount sought and that would stifle its proceedings against Tianjian; and 2. its impecuniosity was brought about by the conduct of Tianjian. 32 In the alternative, Noble says that, if security for costs is to be ordered, the most it is able to provide at the present time is $15,000 and any order for security should therefore be limited to this amount. Mr Jones, who appeared for Noble, also submitted that any order should be staged over a period of time leading up to the trial of the proceedings. 33 In support of the latter ground, Mr Noble has filed an affidavit in which he has deposed to the background to the dispute between Noble and Tianjian. It is apparent from Mr Noble's affidavit that these proceedings form a part of a much wider dispute involving not only Tianjian, but also a co-venturer in a boat building business and the receivers that have been appointed to a related company called Noble No 2 Pty Ltd. 34 Given the breadth and complexity of that dispute and the fact it involves a number of other parties, I do not consider I can determine whether or not Tianjian is responsible for Noble's impecuniosity and, if so, to what extent. I will therefore proceed to determine Tianjian's application on the basis of Noble's first ground of opposition. 35 In view of Noble's admitted impecuniosity, I consider Tianjian should be secured for the payment of any costs order it may obtain against Noble, should Noble be unsuccessful in these proceedings. However, so far as possible, I consider that order for security should be implemented in a way that does not stifle Noble's proceedings against Tianjian. In my view, that can best be achieved by ordering that security for costs be provided in a number of stages. 36 The schedule of estimated legal costs prepared by Mr Tolhurst shows that the vast majority of the total estimate of approximately $74,000 is related to the costs of the actual trial, ie approximately $50,000. The balance of approximately $24,000 relates to interlocutory steps and preparation for trial. Since Noble has stated it is able to provide a maximum amount of $15,000 at this time, I consider the staged payments should be as follows:

First stage $15,000 within a short period from this order

Second stage $ 9,000 at a time to be fixed sometime before the trial of these proceedings is due to commence

Third stage At a time to be fixed just prior to the commencement of the trial of these proceedings.

37 I therefore propose to make orders that Noble provide security for Tianjian's costs, in a form to be agreed, in the amounts and in accordance with the stages set out above. I will hear the parties as to the form of the security, the dates upon which it is to be provided and any consequential orders. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.

Trade Marks Act 1995(Cth)ss 9, 123(1)

Federal Court of Australia Act 1976(Cth)ss 31A(2), 31A(3), 56

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