Supaproducts Pty Ltd v Alesevic & Anor

5 Between 1991 and 2001 in excess of 113,000 square-shaped props have been sold within Australia by Supaproducts or its predecessors. This year (2003) approximately 12,000 to 15,000 square-shaped props have been sold. There are at the moment approximately 14,000 props available for hire throughout Australia. Supaproducts continues to advertise and promote its props in various construction related industry arenas such as journals advertising hire and rental.

Application under O 29 r 2 6 The motion presently before the Court, which was filed on 1 September 2003 and amended on 13 October, seeks orders that certain questions be determined pursuant to O 29 r 2 of the Federal Court Rules. That rule provides: "The Court may make orders for (a) the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceeding; and (b) …" 7 The motion identifies as the relevant questions: 1. Is the consequence of [the assignment already referred to] and/or [a certain undertaking given by the respondents to Supaproducts on 6 June 2003] and/or alternatively [further undertakings given to Supaproducts on 3 October 2003] such that [Supaproducts] no longer: (a) is a person aggrieved within the meaning of that term in s 39 of the Designs Act 1906; (b) has standing to continue this proceeding? 2. Irrespective of the answer to each of sub-paragraphs (a) and (b) of question 1, should the proceeding now be stayed permanently or dismissed pursuant to O 20 r 2 of the Federal Court Rules or some other and, if so, what Order? 3. If the answer to question 2 is YES, what further or consequential Orders should then be made for: (a) disposition of the Proceeding; (b) costs? 8 Order 20 r 2 provides for a stay or dismissal of a proceeding where no reasonable cause of action is disclosed, the proceeding is frivolous or vexatious or is an abuse of the process of the Court. The respondents rely on the last-mentioned ground. 9 Before turning to the undertaking mentioned, I should note that both O 29 r 2 itself and the terms of the motion contemplate that the Court will first consider whether an order should be made for the separate trial of a question. If such an order is made then the trial of the question will usually take place at some future date. In recent times courts have displayed a marked lack of enthusiasm for the separate trial of issues under O 29 r 2 or its equivalent in other jurisdictions; see for example Tepko Pty Ltd v Water Board (2001) 206 CLR 1 at [168] - [170]. However, on the return of the motion in the present case the parties plunged immediately into argument on the merits of the issues raised by the proposed questions, as if an order for a separate trial had already been made. As it happens, I am satisfied that this is an appropriate case for the making of an order under O 29 r 2 and that the questions raised can be satisfactorily dealt with. Nevertheless, treating an order under O 29 r 2 as a fait accompli is not to be encouraged.

The undertaking 10 The respondents concede that prior to the commencement of this proceeding RJB Industries threatened proceedings against Supaproducts for infringement of the Design. The solicitors for Supaproducts had on 15 October 2002 written to Mr Alesevic and other directors of RJB Industries threatening proceedings for infringement of Supaproducts' shape trade mark, breach of the Trade Practices Act 1974 (Cth), passing off, and "breach of contract and duty of good faith". The letter also required RJB Industries to have the Design expunged from the register for lack of originality. It was said if the Design was not removed instructions would be sought to commence action against Mr Alesevic. 11 The solicitors for RJB Industries replied on 25 October 2002 denying the allegations and stating, amongst other things, that if Supaproducts pursued the matter further then RJB Industries would instigate proceedings for design infringement. 12 As already mentioned, Supaproducts commenced the present proceeding on 19 December 2002. Various interlocutory procedures took place. Then on 6 June 2003 the solicitors for the respondents wrote to the solicitors for Supaproducts a letter, expressly stated to be open, which said, amongst other things: "Our clients have now considered their position in the light of the current state of these proceedings. Our clients maintain that registered design no. 133798 was, and remains, validly registered. However, as our clients have no intention of bringing infringement proceedings against your client, they have no objection to your client supplying square-shaped props unfettered by any possible threat of infringement arising out of the registered design. Accordingly, our clients hereby give the following unconditional and irrevocable undertakings to your client: 1. RJB Industries Pty Ltd (and any successor in title to RJB Industries Pty Ltd as the owner of Australian registered design no. 133798) and Bostjan Alesevic hereby undertake not to threaten to commence, or commence any legal proceedings against Supaproducts Pty Ltd or to make any other claim whatsoever against Supaproducts Pty Ltd in relation to: (a) the application by Supaproducts Pty Ltd of registered design no. 133798 or any fraudulent or obvious imitation of that registered design to square-shaped props ('the square-shaped props'); and (b) the sale, hire, offering or keeping for sale or hire, of the square-shaped props, either before or at any time after the date of this undertaking. 2. To the extent that it may be necessary to do so, the undertaking in paragraph 1 above extends to the customers of Supaproducts. If the subject proceedings proceeded to trial and judgement, and that judgement was in your client's favour, your client could be in no better position that it now is in view of the above undertakings. Accordingly, we propose that the subject proceedings be dismissed forthwith with no order as to costs." 13 On 3 October 2003 the respondents' solicitors wrote to the solicitors for Supaproducts proffering amendments to the undertakings. First, the undertakings were to extend to any successor in title to Supaproducts' business. Secondly, the respondents would procure from any successor in title to RJB Industries as the owner of the Design undertakings in favour of Supaproducts in like terms and a deed to that effect. Thirdly, the respondents would provide to Supaproducts a copy of any transfer of ownership of the Design and of the deed of undertaking. Fourthly, the undertakings would extend to prospective customers and to purchasers of Supaproducts' goods in any secondary markets.

A "person aggrieved" 14 There appears to have been no previous consideration of this expression as it appears in the Act. However, the parties accepted, as do I, that the interpretation of the term by McLelland J in a trade mark context in The Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 12 IPR 417 at 454 should be followed. Adopting his Honour's language to the present context, it can be said that the expression would embrace any person having a real interest in having the entry expunged and thus would include any person who would be, or in respect of whom there is a reasonable possibility of his or her being, appreciably disadvantaged in a legal or practical sense by the entry not being expunged. McLelland J's approach was followed by Full Courts of the Federal Court, also in a trade mark context, in Kraft Foods Inc v Gaines Pet Foods Corporation (1996) 65 FCR 104 at 112-113 and Campomar Sociedad Limitada v Nike International Ltd (1998) 85 FCR 331 at 363, 381.

At what time must an applicant for expungement of a design be a "person aggrieved"? 15 The two matters relied on to show that Supaproducts is not a person aggrieved - the assignment and the undertakings - both occurred after the commencement of the proceeding. Therefore if the relevant date for satisfying the requirement of s 39 is the commencement of the proceeding the respondents must fail. Their counsel accepted, implicitly at least, that in the light of Mr Messina's evidence and the threat made last year Supaproducts was plainly a person aggrieved when it commenced this proceeding. 16 In my opinion the commencement of the proceeding is the relevant date. The general rule is that rights and obligations, including jurisdictional rights, are determined by courts on the basis of the law existing at the time a proceeding is commenced. In Esber v The Commonwealth (1992) 174 CLR 430 at 448 Brennan J noted that a hearing by the Administrative Appeals Tribunal is a rehearing de novo and when the question for decision is whether an applicant should be granted a right, the law to be applied is that which exists at the time of the hearing. His Honour continued: "By contrast, in a judicial proceeding brought to enforce an alleged right accrued at the time when the proceedings were instituted, the question for decision is determined according to the law existing when the proceedings were instituted unless statute otherwise provides." 17 Consistently with this principle, the jurisdiction of a court usually has to be established as at the time proceedings are commenced. Thus at common law a court has jurisdiction over a defendant who is served within the geographical jurisdiction of the court, notwithstanding that he or she is no longer present at any subsequent time: Laurie v Carroll (1958) 98 CLR 310 at 322-324. In the present case, the requirement that an applicant be a "person aggrieved" is a pre-condition of the jurisdiction conferred on the Federal Court by s 39. 18 The language of s 39 necessarily assumes that the "application" and the "order" will not be made at the same time. There will of necessity need to be a gap in time to enable interlocutory procedures to be carried out, including the giving of notice to the Registrar as required by s 39(2). The natural meaning of the words is that when the application is made by the filing in the Court of an initiating document, the applicant then has to be a person aggrieved. If the respondents' argument were correct one would expect quite different language, something along the lines "where the court is satisfied that an applicant is a person aggrieved and that the entry on the register has been wrongly made, it may order that the entry be expunged."

19 In Ritz Hotel McLelland J reached the same conclusion. His Honour said (at 455):

"The material time is the date of the application. Ascertainment of the date of an application is significant under the [Trade Marks] Act [1955] not only as the date as at which it must be determined whether the applicant is a "person aggrieved", but also as establishing critical dates for the purposes of para (a) ("1 month before the application") and para (b) ("1 month before the date of the application") of s 23(1), and for determining whether in legal proceedings relating to a trade mark registered in Pt A of the register (including applications under s 22), s 61 operates in relation to the validity of the original registration." His Honour however noted that at the time of the final hearing the question of an applicant's standing might be relevant to the discretion to grant relief. His Honour said (at 456): "If an applicant were, relevantly, a 'person aggrieved' at the commencement of the proceedings but had ceased to be so at the time of the hearing, the court would in my opinion have power to grant the application, assuming a case for relief to have been otherwise made out, although it might decline to do so on discretionary grounds: cf Motor Terms Co Pty Ltd v Liberty Insurance (1967) 116 CLR 177 at 194-5 in respect of somewhat analogous circumstances in a winding-up application". 20 Motor Terms concerned the winding-up of a company. The petitioning creditor's debt was not statute-barred at the date of the presentation of the petition although it was by the time the winding-up order was made. The High Court held that the relevant date was the date of presentation of the petition: see per Barwick CJ at 179 and Taylor J at 187-192. 21 McLelland J's reliance on particular provisions of the Trade Marks Act which may not have an equivalent in the Designs Act does not in my opinion detract from his Honour's general reasoning. 22 Counsel for the respondents relied on Kaiser Aluminum & Chemical Corporation v The Reynolds Metal Company (1969) 120 CLR 136. The appellant had unsuccessfully opposed the application of the respondent for a patent for an invention relating to refractory linings for electrolytic cells used in the production of aluminum. A Deputy Commissioner of Patents dismissed the objection on the ground that the opponent showed no locus standi. The appellant appealed to the High Court and tendered an affidavit sworn after the Deputy Commissioner's decision showing that the appellant held interests of respectively 50 per cent, 52 per cent and 100 per cent in companies in Australia which did engage in the manufacture of refractories. Kitto J held that although the Deputy Commissioner was correct on the evidence before him, in the light of the new evidence the appeal should be upheld. In the course of his judgment his Honour said (at 138): "[The Deputy Commissioner] quoted the well-known statement of Lord Buckmaster as Solicitor-General, in New Things Ltd'sApplication (1913) 31 RPC 45 at 46 that an interest to oppose a patent application 'must be a real, definite and substantial interest, and must not arise from something that the opponent proposes to do'. The second half of this passage is only one particular way of stating the converse of the rule expressed in the first half: Clavel's Application (1928) 45 RPC 222 at 224. As the Comptroller-General in England had laid down earlier, there must be reasonable grounds for apprehending that the grant of patent rights to the applicant would be 'immediately or directly prejudicial to the interests of the opponent' at the time when the opposition is heard: Notes of Rulings, 1912 (B) and (C) (1912) 29 RPC App No. 22 pages v to viii. See Lufft v Weiss (1946) 73 CLR 119. On the material before the Deputy Commissioner in the present case it could not properly have been held that the opponent had any interest in this sense." 23 However counsel for the respondents in the present case conceded that the question of the time at which an interest had to be shown was not in issue in Kaiser Aluminum. There was no doubt that at all material times the appellant held the shareholdings mentioned. The issue before Kitto J was whether the evidence tendered after the Deputy Commissioner's decision was admissible on the appeal and, in any event, whether an opponent without an interest could rely on the interest of a subsidiary; see the report of counsel's argument at 137. 24 The possibility of relief being declined on discretionary grounds, as adverted to by McLelland J in Ritz Hotel (see [19] above), could only arise at the final hearing. 25 I therefore conclude that question 1 in the motion must be answered: No.

Abuse of process; O 20 r 2 26 The material shows that Supaproducts has a prima facie case that the Design should be expunged from the register on the ground of lack of novelty. Supaproducts appears to be legitimately adopting a procedure provided by the Act to expunge the monopoly presently enjoyed by a trade rival. 27 The respondents' offer may ultimately have some bearing on questions of costs should Supaproducts succeed, but the bare fact that an applicant rejects an offer does not make the continuation of a proceeding an abuse of process. This is so whether or not the offer might have been, objectively considered, a reasonable one. 28 In any event, Supaproduct's rejection of the undertaking, in both original and amended form, is understandable on at least three grounds: · The proffered undertaking was bound up with a proposal that Supaproducts pay its own costs to date. · The undertaking could not be enforced against an assignee of the Design who took without notice. Presumably the undertaking could not be noted on the register; see s 34 which prohibits notice of any trust, expressed implied or constructive being received by the Registrar or entered on the register. Breach of the undertaking to procure like undertakings from an assignee could only give rise to a claim in damages against the respondents, which might prove to be worthless. · The existence on the register of the Design would be likely to affect adversely the market value of Supaproduct's business. This is not, as the respondents argued, a matter of speculation merely because there is no evidence of a proposed sale presently in contemplation. The development of a business as a saleable capital asset is, along with the derivation of income, one of the basic motivations for engaging in economic activity. 29 Accordingly the second question will be answered: No. The third question is not necessary to answer. The orders on the motion will be. 1. Order that the questions in the respondents' further amended motion dated 13 October 2003 be determined pursuant to O 29 r 2 of the Federal Court Rules separately and prior to any trial of this proceeding. 2. Answer the questions as follows: (1) No. (2) No. (3) Unnecessary to answer. 3. Order that the respondents pay the applicant's costs of the motion. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey .

Associate: Dated: 22 October 2003 Counsel for the Applicant: C Golvan SC and B Fitzpatrick

Solicitors for the Applicant: Macpherson & Kelley