Red Bull Australia Pty Limited v Sydneywide Distributors Pty Limited t/as Sydneywide Bottlers Australia

REASONS FOR JUDGMENT 1 On 3 September 2001 Conti J delivered his decision in these proceedings. A summary which accompanied the decision described it as follows: "The decision of the Court was that notwithstanding the obvious differences in the trademarks of the two products Red Bull and LiveWire, the packaging and get up of LiveWire was so deceptively similar as to have enabled Sydneywide to appropriate part of the goodwill and custom of Red Bull into the marketplace for energy drinks. In reaching this conclusion, the Court drew the inference that Sydneywide, under Mr Klimis' direction and decision-making, intentionally designed a packaging label which 'sailed too close to the wind' in its endeavours to gain, at virtually no cost to Sydneywide, the benefit of Red Bull's massive advertising and marketing campaign conducted over the preceding two or three years." Conti J granted injunctive relief against Sydneywide. The form of that relief was refined on 18 October 2001 when his Honour made an order restraining Sydneywide from selling, offering or exposing for sale, distributing or marketing any can displaying the packaging get up of the can depicted in the annexure to the orders, or any get up substantially identical with or deceptively similar thereto. 2 Although Conti J granted a final injunction, his decision was technically interlocutory and on 18 October 2001 Conti J granted leave to appeal against that decision. 3 On 24 September 2001 Sydneywide applied pursuant to Order 51 rule 7 for a stay of the injunctions granted by Conti J. That application was ultimately listed for hearing before Conti J on 18 October 2001. His Honour declined to determine the application for reasons that I need not go into and the matter came before me as duty judge on 5 December 2001. A period of some three months has elapsed since the original decision, although it is fair to say that much of the delay is not attributable to any fault on the part of Sydneywide. Nonetheless, Sydneywide has not prosecuted the application for a stay with the diligence that one would have expected from a party whose interests were seriously affected by the orders now sought to be stayed. 4 The stay orders are sought under Order 52 rule 17. Rule 17(1) provides relevantly as follows: "An appeal to the Court shall not: (a) operate as a stay of execution or of proceedings under the judgment appealed from ... except so far as the Court or a Judge or the Court below may direct." 5 The Court has a broad discretion under the sub-rule. It is "sufficient that the applicant for the stay demonstrates a reason or an appropriate case to warrant the exercise of a discretion in his favour". It is not necessary to show "special circumstances". In considering whether or not to grant a stay it is relevant that appropriate undertakings are given: Powerflex Services Pty Ltd v Data Access Corporation (1996) 35 IPR 193. 6 Prima facie, a successful party is entitled to the benefit of the judgment which that party has obtained and is entitled to commence with the presumption that the judgment is correct. The judgment after a hearing on the merits is not to be regarded as provisional in character pending the determination of an appeal. The existence of an arguable case on appeal does not of itself justify the granting of a stay: Starborne Holdings Pty Ltd v Radferry Pty Ltd (Cooper J, 21 May 1998, unreported). It would be unlikely that a stay would be granted without demonstration of an arguable case. 7 I have considered the submissions put by Mr Franklin, counsel for Sydneywide, as to his client's prospects of success on appeal. It is not appropriate that I should say more than that I am persuaded by those submissions that his client has an arguable case on appeal which might succeed, but which might also fail. Issues of credibility of witnesses and matters of impression are involved (see Windsor Smith Pty Ltd v Dr Martens Australia Pty Ltd (2000) 49 IPR 286 par 16), with the difficulties which are thereby occasioned to an appellant. Sydneywide's case on appeal is not disproportionate to that of Red Bull such that its prospects of success could be described as preponderant. 8 As the price of the stay, Sydneywide proffers the following undertakings to the Court: (a) to maintain proper records of all sales of LiveWire cans; (b) not to destroy any records in relation to the business of Sydneywide; (c) to take all available steps to expedite the hearing of the appeal, including an application to have the appeal set down at the first available Sydney sitting. In fact, the hearing of the appeal has been fixed for 11 February 2002. 9 On 24 October 2001 Sydneywide offered to consent to the dismissal of its stay application if Red Bull would give an undertaking as to damages covering the period up to the determination of the appeal. Despite a reminder, Red Bull did not respond to that request until 7 November, when Red Bull declined to provide the undertaking as to damages which Sydneywide had sought. There is no obligation on Red Bull to provide such an undertaking. The undertaking is required in the case of an interlocutory injunction, as interlocutory relief is granted on the basis that there is a triable issue, before any determination of the merits: American Cyanamid Co v Ethicon Ltd [1975] AC 396, 406, 409. 10 However, the fact that an undertaking is not offered by Red Bull means that if Sydneywide succeeds in its appeal, any loss which it suffers by reason of the subsistence of the injunction in the meantime will be irrecoverable. That is a factor which is clearly relevant to the exercise of the discretion to grant a stay. 11 This is not a case in which the subject matter of the appeal will be extinguished unless there is a stay. Sydneywide puts its case upon the basis that unless a stay is granted it will suffer hardship in the form of irrecoverable financial loss. Sydneywide has approximately 5,070 cases of LiveWire in stock which are currently in storage. These cans were filled with energy drink product in late February 2001. The optimum taste for the product is best within one year of the production date. Thereafter loss of quality and flavour may occur. 12 The cost of these cans is set forth in confidential Exhibit EK1. I will continue to maintain that confidence by not disclosing the figure. Mr Franklin accepted that Sydneywide's likely loss is of that order. It is a sum which approximates the shareholders' funds of Sydneywide as shown in its 30 June 2000 balance sheet. 13 However, LiveWire is but one of the product lines sold by Sydneywide. The cans referred to in Exhibit EK1 consist of less than ten per cent of the turnover of Sydneywide as shown in the 30 June 2000 balance sheet (which does not reflect trading in LiveWire cans as this commenced in February 2001). 14 Sydneywide's evidence does not quantify its probable loss in terms of its overall current business. Mr Franklin did not put it as high as submitting that it would have a devastating effect on the company, but its effect is likely to be significant. I am prepared to accept on the limited materials put forward that if the injunction remains in place but the appeal succeeds Sydneywide is likely to suffer a loss which from the perspective of Sydneywide is material. That loss cannot be dismissed as insignificant. 15 Apart from the 5,070 cases of filled cans, there are approximately $58,000 worth of empty LiveWire cans awaiting production in New Zealand with the existing LiveWire graphics printed on those cans. I am not satisfied that the value of that investment will be lost to Sydneywide if the injunction is maintained but Sydneywide is successful in its appeal. If the injunction were stayed, those cans could be filled and sold. 16 If the injunction is stayed, and if sales of LiveWire resume but the appeal is unsuccessful, Red Bull is likely to suffer damage to its goodwill by reason of sales of LiveWire in the meantime. It is notoriously difficult to quantify the damage sustained in cases such as the present, and forecasting of the likely damage is made all the more difficult because one does not know under what trade conditions, including volume and price, the LiveWire products will be sold if resumption of trading is permitted. Hence the precise impact on Red Bull of resumed trading in LiveWire cannot be assessed with any precision at this stage. 17 LiveWire has not proffered anything to secure or protect Red Bull against intermediate damage should the appeal fail. Mr Catterns QC points by way of contrast to the guarantee offered (and increased by the Court) in Westaflex (Aust) Pty Ltd v Wood (1990) 18 IPR 168. 18 Although Red Bull may be assumed to have brought these proceedings to vindicate its own commercial interests, a case such as the present has a public interest dimension. Issues of consumer protection are involved as well as the commercial interests of Red Bull. This is a factor which militates against the grant of stay, but as there is no suggestion that LiveWire is in any sense an inferior product to Red Bull, in the circumstances of the present case public interest considerations do not have much bearing on whether a stay should be granted or refused. 19 If the injunction is maintained and the appeal succeeds, Sydneywide is likely to suffer irrecoverable loss in an amount which is material to it. If the injunction is lifted and the appeal fails, Red Bull is likely to suffer unquantifiable loss. Even if the loss were quantifiable, Sydneywide has not established that its current financial position is such that it would be good for that loss if it was significant in amount. 20 The hardship to Sydneywide if a stay is not granted is matched by the hardship to Red Bull if it is. The delay in prosecuting this application (albeit partly explained) suggests that the hardship to Sydneywide is not of an overwhelming nature. In those circumstances, the presumption that Red Bull is entitled to the benefit of its judgment has not been displaced and the application for a stay should be dismissed with costs. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.