Skyy Spirits LLC v Lodestar Anstalt

JUDGE: PERRAM J DATE: 12 June 2015 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On 26 May 2015 I ordered that the Wild Turkey interests' appeal be allowed but stood over any argument about costs and any other orders to Tuesday 2 June 2015: Sky Spirits LLC v Lodestar Anstalt [2015] FCA 509. At the hearing on 2 June 2015 there remained four issues between the parties: (a) whether the Wild Geese interests should be ordered to pay the Wild Turkey interests' costs on an indemnity basis from 11 am on 29 May 2014 (as the Wild Turkey interests contended); or, instead, whether they should pay 50% of the Wild Turkey interests' taxed costs (as the Irish Whiskey interests contended); (b) whether the Court should grant a certificate to the Wild Turkey interests certifying that the two marks in question had been used in good faith during the non-use period; (c) whether the Court should stay some or all of its orders pending the outcome of any appellate proceedings; and (d) certain minor costs debates.

(a) Costs 2 On 27 May 2014 the Wild Turkey interests made an offer of compromise under r 25.01 of the Federal Court Rules 2011 (Cth). The offer suggested that the proceedings might be settled on the following basis and was open for acceptance for 14 days: '(1) The appeal be allowed. (2) The decision of the Delegate of the Registrar of Trade Marks, Mr Heath Wilson, given on 25 October 2013 in relation to Australian Trade Mark Registration Nos. 1066646 and 1066650 ("Trade Marks") be set aside. (3) The Respondent's applications for removal of the Trade Marks under section 92(4) of the Trade Marks Act 1995 (Cth) be refused. (4) There be no order as to costs.' (emphasis in original) 3 The offer was not accepted. Rule 25.14(3) provides: '25.14 Costs where offer not accepted … (3) If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant's costs: (a) before 11.00 am on the second business day after the offer was served - on a party and party basis; and (b) after the time mentioned in paragraph (a) - on an indemnity basis. Note 1: Costs on an indemnity basis is defined in the Dictionary. Note 2: The Court may make an order inconsistent with these rules - see rule 1.35.' 4 It is not in dispute that the offer was an offer to which this rule applies, or that the Wild Turkey interests have obtained, by reason of their entitlement at least to a non-trivial costs order on a party-party basis, a 'judgment that is more favourable' within the meaning of the rule. 5 It is not necessary for the purposes of r 25.14(3) for the Wild Turkey interests to show that the Irish Whiskey interests were unreasonable in not accepting the offer. This was held by the Full Court to be so in the case of the predecessor rule, O 23 r 11(6), in IFTC Broking Services Ltd v Commissioner of Taxation (2010) 268 ALR 1 at 4 [9] and 5 [12] (FC). Rule 25.14(3) is not relevantly different. Single judges of this Court have reached the conclusion that the same principal applies to r 25.14(3): Merost Pty Ltd v CPT Custodian Pty Ltd (No 2) [2014] FCA 594 at [10] per North J; Murphy v Westpac Banking Corporation (No 2) [2015] FCA 266 at [18] per Griffiths J. 6 Nevertheless the Irish Whiskey interests submitted that the judgment of Logan J in Granitgard Pty Ltd v Termicide Pest Control Pty Ltd (No 6) [2010] FCA 381 was authority for the proposition that r 25.14 was enlivened only where an offer is unreasonably not accepted. I do not accept this submission. First, Logan J was dealing with a situation which was not regulated by the rules and, secondly, rejected, at [18], the proposition that the mere demonstration of a reasonable case and of the rejection of an offer being reasonable was sufficient reason to 'order otherwise' than O 23 r 11(6) contemplated. 7 Rule 25.14(3) is, therefore, enlivened in this case. It creates a rebuttable presumption that the Wild Turkey interests are entitled to an indemnity costs order. This arises from the Court's power to dispense with the operation of any rule, including r 25.14(3) (r 1.34) and its power to make orders contrary to the rules (r 1.35). Generally, it will not be appropriate to dispense with the operation of r 25.14(3) unless there is proper reason to do so and this will generally only be the case where exceptional circumstances are present: Robinson v Kenny (No 2) [2015] FCA 2 at [18] per Farrell J. 8 In this case, exceptional circumstances were said by the Irish Whiskey interests to be present because: (a) the Wild Turkey interests had lost on the facts; (b) the Wild Turkey interests had won on a narrow point of law which was the subject of conflicting Full Court authority; and (c) the offer did not reflect the basis upon which they were ultimately successful. 9 I do not think (a) is correct. The Wild Turkey interests established that they had used the marks during the non-use period. Although I accepted the broader interpretation of control advocated by the Wild Turkey interests, they were still nevertheless obliged to show that Wild Geese Wines Pty Ltd (and hence derivatively the Wild Turkey interests) had used the marks in the non-use period. This they succeeded in doing. Further, the Wild Turkey interests never really sought to suggest that they did exercise actual control over Mr O'Sullivan's use of the marks. It is not strictly accurate, therefore, to describe them as having lost on the actual control issue. As with the Maginot Line, they sought instead to go around it. And, as with the Germans, in this they succeeded. 10 Turning to (b), it is true that the Wild Turkey interests succeeded on a point of law upon which conflicting views have been expressed in the Full Court. However, one of these was an obiter dictum and the other the ratio decidendi of the decision. The outcome in that situation was dictated by the rules of precedent in a way which was clear. I do not accept that that situation involves exceptional or even special circumstances. 11 As to (c), I do not think that it matters that the Wild Turkey interests were not relying on Asia Television Ltd v Yau's Entertainment Pty Ltd (No 2) (2000) 49 IPR 264 at the time the offer was made. It might be relevant to the reasonableness of the refusal if that were relevant, but it is not, at least not under r 25.14(3). Nor is it such a striking fact as to constitute exceptional circumstances sufficient to dispense with the operation of r 25.14(3). 12 The appropriate order in those circumstances is an indemnity costs order in the from required by the rules.

(b) The certificate 13 The Wild Turkey interests seek an order in these terms: 'The Court certifies that Australian Registered Trade Marks 1066646 WILD GEESE WINES and 1066650 WILD GEESE were used in good faith in Australia by the Applicant between 27 August 2007 and 27 August 2010 in respect of wine.' 14 This order was not sought in the originating application. Section 105 of the Trade Marks Act 1995 (Cth) provides: '105 Certificate - use of trade mark (1) If in any proceedings relating to an opposed application the Registrar or the court has found that: (a) a trade mark has been used in good faith during a particular period; or (b) a trade mark has not been used during a particular period solely because of circumstances that were an obstacle to its use; the Registrar or the court must, if so requested by the registered owner of the trade mark, give to the registered owner a certificate of those findings. (2) In any subsequent proceedings in which non-use of the trade mark is alleged: (a) the certificate is, on being produced, evidence of the facts stated in it; and (b) if the proceedings are determined in favour of the opponent and, on or before filing the notice of opposition, the opponent notified the applicant of the contents of the certificate - the opponent is entitled, unless the Registrar or the court otherwise directs, to have the opponent's full costs paid by the applicant.' 15 The Wild Turkey interests submitted that such a certificate had been considered by Yates J in Optical 88 Ltd v Optical 88 Pty Ltd (No 2) (2010) 275 ALR 526. Although a certificate was granted in that case there was no discussion of the principles governing its issue which might assist in this case. The only other relevant reference I have found to s 105 is to the decision of Lander J in Kowa Company Ltd v NV Organon (2005) 223 ALR 27 at 39 [67] and 41 [83]. In that case, the Court was not satisfied that facts had been demonstrated sufficiently to warrant the issue of a certificate. It throws no light on this case. 16 The Wild Turkey interests submitted that the provision would be enlivened if the Court had found that it had used the marks in good faith and that it had requested the issue of the certificate. At that point, the words in s 105 'the Court must…give' made the issue of a certificate mandatory. 17 The Irish Whiskey interests disputed that the Court had found that the Wild Turkey interests had used the marks in good faith. Further, they submitted that the mandatory nature of the provision could not outflank the procedural consequences of the Wild Turkey interests not seeking such a certificate until after judgment. It was, on this view, too late to seek a certificate. 18 In reply, the Wild Turkey interests submitted that my findings at [18] in the first judgment constituted a finding that the marks had been used in good faith. 19 The Wild Turkey interests are entitled to the certificate they seek. I do not accept that the Irish Whiskey interests are prejudiced by the fact that the certificate has only been sought after judgment even assuming, in their favour, that a certificate needs to be sought in a proceeding and is not just a ministerial act by a registrar. The issue at trial was whether the marks had been used in the non-use period. This debate was resolved at [18] in these terms: '18 In my view these modest sales were, nevertheless, commercial sales of the 2004 Merlot and the use of the trade marks on the bottles constituted use of the trade mark in relation to goods within the meaning of s 7(4). As the High Court observed in E & J Gallo Winery v Lion Nathan Australia Pty Ltd (2010) 241 CLR 144 at 168-169 [64], 'Whilst a single act of sale may not be sufficient to prevent removal, in the case of genuine use, a relatively small amount of use may be sufficient to constitute "ordinary and genuine" use judged by commercial standards' (references omitted). In those circumstances, I am satisfied that Mr O'Sullivan's company used the trade marks to sell the 2004 Merlot during the non-use period.' 20 The paragraph followed from the finding which had been made that Mr O'Sullivan's company had sold its wine to various restaurants and other people in the non-use period using the marks. I do not accept the contention of the Irish Whiskey interests that if they had known good faith was in issue that they would have conducted themselves otherwise. The case plainly proceeded on the assumption that Mr O'Sullivan's use was in good faith. 21 The prerequisite for the issue of a certificate is therefore demonstrated and no procedural impediments now prevent its issue. A certificate will be granted.

(c) A stay? 22 The delegate of the registrar had accepted the Irish Whiskey interests' application to remove the marks from the register and it ordered that the marks should be so removed. This Court has allowed an appeal from that determination. The delegate's orders should, therefore, be set aside and in lieu thereof it should be ordered that the applications for removal should themselves be dismissed. There should also be an order for costs in favour of the Wild Turkey interests for the proceedings before the delegate. Such an order was urged by the applicant in its written submissions and no submission to the contrary was made by the respondent. 23 The effect of those orders will be that the Wild Turkey interests' marks will remain on the register. Although the Irish Whiskey interests sought a stay of this Court's orders I do not see that the preservation of the status quo requires this. If the Irish Whiskey interests succeed on the appeal then the marks will be removed from the register. Absent some evidence concerning a threat to enforce the marks pending any appeal, I do not see what the point of a stay would be. 24 There is a related issue about security for costs. The Wild Turkey interests are not resident in the jurisdiction. Before trial they were ordered to and did provide security for the costs of the Irish Whiskey interests. It is agreed that in light of the conclusions to which I have come that that security should be released. The Irish Whiskey interests submit, however, that if they are successful in any appeal then they will have lost the security to which they are entitled by reason of any such order. They therefore seek a stay of the release order. 25 I do not think the prospects of any appeal are poor. Moreover, there is a potential irremediable unfairness if the security is returned now and the appeal succeeds. Subject to appellate remedies being diligently pursued, it is appropriate to stay the release of the security.

(d) Other matters 26 The Irish Whiskey interests also argued that the costs should be adjusted to take account of what was alleged to have been some lack of co-operation in relation to the preparation of a statement of agreed facts. Such a process is not the same as a notice to admit facts. I do not think that it warrants some special costs order. 27 The orders of the Court will be:

1. Set aside the decision of the delegate of the Registrar made on 25 October 2013 in proceeding [2013] ATMO 85 and in lieu thereof order:
   1. The applicant's applications to remove Trade Marks Nos. 1066646 and 1066650 be refused.
   2. The applicant pay the respondent's costs of the proceeding before the Registrar to be assessed (if not agreed) in accordance with Schedule 8 to the Trade Mark Regulations 1995 (Cth).
2. The respondent pay the applicant's costs of the proceeding assessed on the following basis: (a) Before 11.00 am on 29 May 2014 - on a party and party basis; and (b) From 11.00 am on 29 May 2014 - on an indemnity basis.
3. All amounts paid by the applicant in respect of security for the respondent's costs together with any interest thereon be released to the applicant.
4. Certify that Australian Registered Trade Marks 1066646 WILD GEESE WINES and 1066650 WILD GEESE were used in good faith in Australia by the applicant between 27 August 2007 and 27 August 2010 in respect of wine.
5. Provided that any application for leave to appeal or appeal is diligently pursued, stay order 3 until twenty eight (28) days after the entry of final orders disposing substantively of any appellate proceedings in this Court. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.