S.P.I. Spirits (Cyprus) Ltd v Diageo Australia Ltd

reasoning 18 After careful consideration, I have come to the conclusion, not without some hesitation, that the Russian Federation is the 'real,' applicant/plaintiff in the cross-claim because the claims made therein are brought and made on behalf of the Russian Federation by FKP and FGUP, and not in their own right: see Willis & Co v Baddeley [1892] 2 QB 324; Abu Dhabi National Tanker Co v Product Star Shipping Ltd [1992] 2 All E.R. 20, [1991] 2 Lloyd's Rep. 508, cf James Nelson & Sons Ltd v Nelson Line (Liverpool) Ltd [1906] 2 KB 217. 19 In coming to this conclusion, I have been persuaded by the following matters: (i) The Russian Federation, represented by the Ministry of Agriculture of the Russian Federation, is recorded, and has since 26 October 2001 been recorded, as the owner of the Stolichnaya and Moskovskaya trade mark registrations in the Russian Federation ('the Russian Trade Marks'). (ii) By Decree No 494 of the Government of the Russian Federation dated 4 July 2002 the right to use and dispose (without the right to assign) the Russian Trade Marks in the name and on behalf of the Russian Federation was granted to FKP. (iii) Pursuant to Order No. 6 of the Government of the Russian Federation dated 6 January 2005, FKP was appointed by the Government of the Russian Federation: '… to represent the interests of the Russian Federation in the courts on matters of recovery and protection of the rights of the Russian Federation to the trademarks for alcoholic products abroad; to realize registration of the rights of the Russian Federation to the mentioned trademarks abroad … .' (Emphasis added) (iv) Order No 6 was originally expressed to apply until 1 January 2006, but was extended for a further twelve months pursuant to Resolution No. 860 of the Government of the Russian Federation dated 30 December 2005. FKP's authority to represent the Russian Federation in these proceedings is presently due to expire on 1 January 2007. (v) The representations and pleadings in respect of FKP referred to in [10] supra. (vi) The pleadings in respect of FGUP referred to in [4] of the further amended cross-claim, in particular that it is the legal successor to Sojuzplodoimport, an instrumentality forming part of the former Union of Soviet Socialist Republics (USSR). (vii) FKP only came into existence in 2001 and only became a legal entity separate from the Russian Federation on 9 April 2002. (viii) FGUP only became a legal entity separate from the Russian Federation on 18 April 2002 and if it did exist back in 1990 - 1992 in the form of Sojuzplodoimport, it did so as part of the USSR and subsequently as part of the Russian Federation, at least until 18 April 2002. 20 Moreover, I have also reached this conclusion by reason that I do not accept the submissions made on behalf of FKP and FGUP at [14] supra namely, that they are analogous to State-owned corporations of the kind regularly established by governments in Australia. Such State-owned corporations do not hold their assets for the benefit of the State, rather they hold them in their own right albeit that such corporations may be majority, or even wholly, owned and controlled by the State. It is only upon the dissolution of such wholly owned corporations that ownership of their assets would revert to the State. In the case of FKP and FGUP, they held no assets other than assets they hold on behalf of, or for the benefit of, the Russian Federation. 21 Furthermore, I reject the submission on behalf of the FKP and FGUP that: 'it cannot be said that [they] have no real interest in the outcome of the present proceedings, because: (i) FKP … stands to derive a benefit for itself from the action, by means of being in a position to hold, use and licence the trade marks and to extract licence fees and royalties as a result; and (ii) FGUP has an interest, on its case, as the true owner of the trade marks in question.' I reject this submission because, on my finding, the Russian Federation, as the owner of the trade marks, would be entitled to have FKP account to it in respect of such fees and royalties and FGUP, even if it had an earlier manifestation, was not an entity discrete and separate from the political state which created it, namely the USSR nor, at least until 18 April 2002, the relevant successor to that political state namely, the Russian Federation. 22 As I have indicated at [2(a)], Spirits seeks an order for discovery 'pursuant to O 15A r 8 or otherwise'. I do not regard this alternative basis as, in substance and effect, a request for third party discovery pursuant to O 15A r 8 of the Federal Court Rules. It is a totally discrete basis founded on s 23 of the Federal Court Act; wide enough to cover orders requiring the discovery, production and inspection of documents: Commonwealth v Northern Land Council (1991) 30 FCR 1 per Black CJ, Gummow and French JJ; see also Gambro Pty Ltd v Fresenius Medical Care Australia Pty Ltd [2002] FCA 581; at the same time, accepting that the Court has a general power under s 23 to prevent the abuse or frustration of its processes in relation to matters coming within its jurisdiction (Hunter v Leahy (1999) 91 FCR 214) or where it is otherwise necessary to protect the integrity of the processes of the Court: CSR Ltd v CIGNA Insurance Australia Ltd (1997) 189 CLR 345 at 391 - 392; Cardile v LED Builders Pty Ltd (1999) 198 CLR 380. 23 On the view I take, it is unnecessary to address the order sought in par 4 of the Notice of Motion on the basis of O 15A r 8 of the Federal Court Rules, but in deference to the submissions that were made, I think I should. That rule enables the Court to 'order that a person who is not a party and in respect of whom it appears that the person has or is likely to have or has had or is likely to have had in the person's possession any document which relates to any question in the proceeding shall make discovery to the applicant of any such document'. 24 The reference to 'a person who is not a party' is undoubtedly a reference to a person who is not a party of record and that could include not only a person who/which is the 'real' applicant/plaintiff, but any person who is not a party of record. Of course, the Court would need to be satisfied that the other requirements of the rule are met before acting upon it. 25 FKP and FGUP submitted that an order for third party discovery ought not to be granted against a foreign entity which is not a party to the proceeding and is not otherwise subject to the jurisdiction of the Court. They point out that there is ample authority in the context of applications for leave to serve subpoenas outside the jurisdiction for the proposition that such leave should not be granted in respect of a non-party foreign entity 'except in the most exceptional circumstances': Stemcor (Australasia) Pty Ltd v Oceanwave Line SA [2004] FCA 391 at [12] per Allsop J. See also Arhill Pty Ltd v General Percival Company (1991) 23 NSWLR 454; Aetna Pacific Securities v Hong Kong Bank of Australia Ltd (20 April 1993, Supreme Court of New South Wales, Giles J, unreported). The cases suggest, they submit, that this will particularly be the case where (as here) the foreign jurisdiction in question is a civil law jurisdiction: Arhill. 26 Underlying this principle is the view that service of an order upon a foreign entity demanding that it do something in Australia on pain of punishment in proceedings to which it has not submitted is an invasion of the foreign territory's sovereignty: Stemcor. In addition, such a subpoena, even if it is served, is not capable of enforcement: Stemcor. The position, they submit, is no different in principle in the case of an order for third party discovery pursuant to O 15A r 8; the order compels production of documents, disobedience of it would give rise to contempt, and leave is required in order to serve it outside the jurisdiction: See O 8 r 3. Compare Arhill. None of the cases included in Spirits' list of authorities, they observe, involved the making of an order for third party discovery against a foreign entity. 27 Finally, it was submitted that these considerations, and particularly the concerns about the invasion of sovereignty, are heightened given the particular nature of the order sought in the present case: discovery by the Russian Federation, a foreign State. 28 While these submissions may well have considerable force where the non-party person sought to be subject to an order under O 15A r 8 of the Federal Court Rules is a foreign entity, particularly a foreign State, that force is undermined in the face of a finding that the foreign entity is the 'real' applicant/plaintiff and the party or parties of record are but 'nominal' applicants/plaintiffs. None of the cases to which I was referred by FKP and FGUP had this particular feature. 29 As I am satisfied that the other requirements of O 15A r 8 are met in the present case, it is supportive of the order sought in the present case. However, this should not be read as indicating the form of the order I think should be made. There are other matters which need to be considered before formulating the final terms of the order and I refer to these at [36] below. 30 On the conclusion I have reached, it is not necessary that I deal with the motion insofar as it seeks an order in terms of par 5 of the amended notice - a Sabre order - requiring FKP and FGUP to take steps to obtain the documents, within the listed categories or as otherwise ordered by the Court, in the possession, custody or control of the Russian Federation, and an order in terms of par 6 thereof for the provision of such documents to Spirits together with verifying affidavits. Nevertheless, again in deference to the submissions that were made, I should indicate why, had it been necessary to consider this aspect of the motion, I would have been minded to dismiss it. 31 First, there must be a real likelihood that the party, in this case FKP and FGUP, who is to take steps to obtain access to and discover the documents which are in the possession, power or control of a third party, would be given access to the documents upon request: See Sabre at432 - 433. This likelihood must be established by evidence: Gambro at [8], [17] - [19]. In the present case, Spirits has made no attempt to establish this. There is nothing in the evidence from which the inference could be drawn that any documents within the very broad categories requested by Spirits would be provided by the Russian Federation or its ministries, agencies and instrumentalities. 32 Second, there must be a likelihood that the documents sought are in fact in existence in the possession of the third party. It may be accepted for the purpose of argument that at least some documents sought by Spirits are held somewhere within the many ministries, agencies and instrumentalities of the Russian Federation; and that some such documents may be so held. But the form of order does not identify the relevant ministries, agencies and instrumentalities which are thought to be likely to hold such documents. It ought to do so, by reference to the particular kinds of documents in each instance. 33 Third, the form of order in par 5 is otherwise inappropriate. In particular, the word 'reasonable' in the phrase 'take all reasonable steps' has been omitted from the usual form of order. Further, I agree with the submissions of FKP and FGUP that it would be preferable for any such order to set out explicitly the steps which, if taken, would satisfy the order. This is particularly so given the potentially broad range of documents the subject of the order and the broad range of ministries, agencies and instrumentalities that may be subject to it. 34 Finally, such an order should be considered, if at all, only after inter partes discovery has taken place, based on appropriate evidence as to the likelihood of existence and provision of documents, and by reference to far more targeted and specific requests for documents, consistent with the authorities on such orders. 35 For these reasons, if it had become necessary, I would have dismissed this part of the motion. 36 At this stage, I am not convinced that the discovery that might be given by the Russian Federation needs to be as comprehensive as '… all documents falling within the categories set out in the schedule to the Notice of Motion'. It may be that I can be persuaded, in the interests of doing justice between the parties, that discovery by the Russian Federation needs to be that comprehensive but I would first want to hear the parties on the matter. It may be that the parties can agree more confined categories, but if not, I will hear the parties prior to formulating the precise terms of the order. 37 I propose to stand the motion over to a date to be fixed to hear the parties on the categories of discovery that might be given by the Russian Federation and how the orders to give effect to these reasons might be formulated. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds.

Associate: Dated: 25 July 2006 Counsel for the First Cross Respondent: Mr R Cobden SC

Solicitor for the First Cross Respondent: Mallesons

Solicitor for the Second Cross Respondent: Freehills

Counsel for the Cross-Claimants Mr C Dimitriadis

Solicitor for the Cross-Claimants Allens Arthur Robinson

Date of Hearing: 3 March 2006

Date of Judgment: 25 July 2006