208 78S CATCHWORDS Companies — Actions between companies and strangers ~ Security for costs of appeal to Federal Court of Australia - Appellant company a trustee. Federal Court of Australia Act 1976 ~ s.56 Federal Court Rules — Order 25 Rule 3(1)(b), Order 52 Rule 20 Riot Nominees Pty. Ltd. v. Suzuki Australia Pty. Ltd. (1981) 34 R.L.R. 653 con. RIV-OLAND MARBLE COMPANY (VIC.) PTY. LTD. v. SETTEF S.p.A. No. VGi of 1988 No. VG2 of 1988 Jenkinson J. 2 May, 1988 Melbourne IN THE FEDERAL COURT OF AUSTRALIA ) No. VG1 of 1988 VICTORIA DISTRICT REGISTRY ) No. VG2 of 1988 GENERAL DIVISION ) ; ON APPEAL FROM THE SUPREME COURT OF VICTORIA BETWEEN: RIV-OLAND MARBLE COMPANY Vic.) PTY. LTD. . Appellant AND: SETTEF S.p.A. Respondent CORAM: Jenkinson J. PLACE: Melbourne DATE: 2 May, 1988 REASONS FOR JUDGMENT Motion for security for the respondent's costs of an appeal from a judgment of the Supreme Court of Victoria. The respondent is an Italian corporation and the proprietor of an Australian trade mark in Part A of the Register. The mark is "RIV-OLAND", registered in respect of plastic wall panels, building materials, fittings and accessories and similar items. Its action against the appellant in the Supreme Court was concluded after trial by injunctive orders that the appellant be restrained from infringing the trade mark and that the appellant "change its name to a name which does not include the name 2. RIV-OLAND or any other name substantially identical with or deceptively similar to that name". An- order was made for the taking of an account of the profits made by the appellant by selling or applying to buildings or. other structures under that trade mark any wall finishes or other goods. Further consideration was adjourned. The appellant's counterclaim for rectification of the Register by expungement of the entry of the. respondent's trade mark was dismissed. These orders were pronounced on 15 December 1987. Most of the learned trial judge's conclusions of law and findings of ultimate facts are attacked in the notice of appeal. The annual returns lodged on behalf of the appellant with the National Companies and Securities Commission in respect of each of the years ended 30th June 1985 and 1986 indicate that the only activity of the appellant was the conduct of a business in execution of a trust of which it is the trustee. Its assets consisted of $12 cash and its right of indemnity as trustee in respect of liabilities, which were stated to aggregate $878,172 at 30 June 1986, incurred in execution of the trust. The return for the year ended 30 June 1985 included an assertion that the trust assets were sufficient to discharge all trust liabilities as at 30 June 1985. Both returns include a declaration of a director's belief that there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due. That director, Roger Ferraro, is mentioned in the learned trial judge's reasons for judgment as the founder of the business in the conduct of which his Honour concluded that infringement of the respondent's trade mark had occurred. But the returns show the only members of the appellant to be Carlo Bernardi and Giovanni Scomparin, both of 404 Queens Parade Clifton Hill. The name and address of the appellant's solicitors in the appeal are Messieurs Scomparin and Bernadi of 404 Queens Parade Clifton Hill. No other evidence was adduced touching the question whether the appellant would have the means. of satisfying an order that it pay the respondent's costs of the appeal. Mr. Tallarida of counsel for the appellant submitted that several considerations indicated that no order for security should be made. The appellant should be treated, he said, for the purposes of the motion for security as in substance a defendant forced to defend itself against the respondent's claim for orders which would have the effect of preventing the appellant from carrying on business under the name "RIV-OLAND", which had been the appellant's identifying name in trade for many years. Reliance was sought to be placed on the principle that security will not be ordered to be provided by a plaintiff who has been put in a position in which he had to sue in order to defend himself against attack. (See Willey v. Synan (1935) 54 C.L.R. 175; Re Travelodge Australia Ltd. (1978) 21 A.C.T.R. 17; Cf. Buckley v. Bennell (1974) 1A.C.L.R. 301.) It was further submitted that the appeal raised for decision doubtful and important questions in Australian trade mark law, notably the construction and application of s.28(a) of the Trade Marks Act 1955, and that that was a circumstance of considerable weight against ordering security for a respondent's costs of an appeal. Reliance was placed on Smail v. Burton [1975] V.R. 776 and Lucas v. Yorke (1983) 50 A.L.R. 228. I do not think that the principle expounded by Latham C.J. (54 C.L.R. at 179-180) and by Dixon J. (54 C.L.R. at 184-185) in Willey v. Synan will ordinarily have any application in relation to a motion for security for the costs of an appeal. In Dence v. Mason [1879] W.N. 31 an appellant urged as a consideration against ordering him to give security for the respondent's costs of the appeal the circumstance that he had been the defendant in the proceeding out of which the appeal had arisen. The Court of Appeal (Jessel M.R., Bramwell and Brett L.JJ.) said that "made no difference". The learned and extensive reasons of the trial judge for his conclusions lucidly disclose some questions of law as to each of which more than one view would be open on this appeal, although there is not lacking persuasive authority for the view taken by the trial judge on each question. I do not find any very strong consideration of public interest in the resolution by an appellate court of those questions. And that consideration does not displace other considerations (Kardynal v. Dodek [1978] V.R. 415; Lucas v. Yorke (1983) 50 A.L.R. 228 at 230); it is but one factor in the exercise of the discretion. If, as appears to be established, the impecuniosity of an appellant, not caused by conduct of the other party under consideration in the litigation, may be regarded as "special circumstances", under rules of court which make the power to order an appellant to give security for the costs of an appeal subject to a condition that such circumstances exist, impecuniosity not so 5. caused may in my opinion be regarded as sufficient to enliven the power to which reference is made in the .negational provisions of Order 52 Rule 20 of this Court's Rules: "Unless the Court or a Judge otherwise directs no security for costs of an appeal to the Court shall be required." But I would not regard the appellant's impecuniosity - in the sense of inability to satisfy an order for the respondent's costs of the appeal - as casting a fetter on the exercise of the discretionary power by way of any rule of the kind adopted by the Court of Appeal in Hall v. Snowdon Hubbard & Co. [1899] 1 Q.B. 593, to which Brennan J. referred in Lucas v. Yorke. supra. In Bell Wholesale Co. Pty. Ltd. v. Gates Export Corporation (1984) 2 F.C.R. 1 a Full Court of this Court made it clear that an impecunious company resisting an application for security in a proceeding brought in respect of trading activities carried on in execution of a trust will put itself at a disadvantage if it fails to disclose what is the financial capacity of those for whose benefit the company is acting. In Chester & Fein Property Developments Pty. Ltd. v. Candam Investments Pty. Ltd. (1985) 9 F.C.R. 419 the same approach is taken, but with specific reference to disclosure of the property, and of the value of the property, constituting the trust assets over which a corporate trustee might exercise its lien to secure its right of indemnity, as well as disclosure of the identity and the financial position of each beneficiary under the trust, against whom that right of indemnity might be exercised. Counsel for the appellant offered no evidence or explanation concerning those matters. He relied on a decision in this Court, Riot Nominees Pty. Ltd. v. Suzuki Australia Pty. Ltd. (1981) 34 A.L.R. 653, that Order 28 Rule 3({1)(b) of this Court's Rules does not comprehend a trustee suing for the benefit of the beneficiaries of a trust in the execution of which the trustee carries on a business. That paragraph reads: "Where, in any proceeding, it appears to the Court on the application of a respondent - eoevee (b) that an applicant is suing, not for his own benefit, but for the benefit of some other person and there is reason to believe that the applicant will be unable to pay the costs of the respondent if ordered to do so; oe eeee eecevee the Court may order that applicant to give such security as the Court thinks fit for the costs of the respondent of and incidental to the proceeding." In that case Keely J. regarded English authorities on a similar provision and antecedent English practice as affording guidance in determining the reach of Order 28, Rule 3(1)(b). His Honour cited passages from White v. Butt [1909] 1 K.B. 50, which was concerned with the question whether the trustees of a deed between separating spouses making provision for the wife's maintenance should be treated as "nominal plaintiffs" within a rule of 7. practice concerning security for costs. Buckley L.d. observed ({1909] 1 K.B. at 56): "As I have said, I am startled that any one should put forward the proposition that trustees, like the plaintiffs, come within the rule as to 'nominal plaintiffs,' because they have no beneficial interest in the subject-matter of the litigation. If this proposition were true, it would apply equally to any trustees, whether of a marriage settlement or a will, or for debenture-holders, and it would follow that trustees could be ordered, if impecunious, to give security for costs in any action brought by them as trustees, on the ground that they, personally, had no beneficial interest in the subject-matter of the action. Such a proposition appears to me altogether untenable." It may be a question whether the Lord Justice had in the forefront of his mind a trustee of a trading trust when he made those observations. Keely J. pointed out that the application for security "was expressly made, not under s.363 of the Companies Act, but under 0.28 r.3(1)(b)". Upon an application not so circumscribed which is directed against the trustee of a trust of which the assets are ventured in trading activities the decision in Riot Nominees Pty. Ltd. v. Suzuki Australia Pty. Ltd., supra should be regarded, in my opinion, as having effect only in relation to that provision of the Rules. "But those rules cannot operate so as to limit the wide power conferred by s.56 (of the Federal Court of Australia Act 1976) .... The discretion to make orders under s.56 must be exercised judicially, but that is the only relevant 8. limitation". (Bell Wholesale Co. Ltd. v. Gates Export Corporation (1984) 2 F.C.R. at 3.) The exiguous evidence justifies an inference that the appellant may be unable to satisfy an order that it pay the respondent's costs of the appeal. The appellant's failure to provide the Court with any evidence on that question, ar any evidence to suggest that an incapacity to satisfy such an order would be caused by any conduct of the respondent, lends substantial weight to the case for ordering security, in my opinion. In all the circumstances I think that I should make such an order. The uncontradicted evidence of a member of the firm of: solicitors acting for the respondent is that the respondent's costs of the appeal are estimated to total $30,000. I think it appropriate to order security, not in an amount sufficient to cover the whole of those costs, but in a reasonable amount. (See Aberdare and Plymouth Co. v. Hankey (1888) 32 Sol. J. 644.) The amount will be $20,000. I certify that this and the 7 preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Mr. Justice Jenkinson. {/ Associate Dated: 2 May, 1988 Counsel for the Appellant Counsel for the Respondent ry Solicitors for the Appellant : Solicitors for the Respondent: Date of Hearing Mr. V.A. Tallarida Mr. R.R. Boaden Scomparin and Bernardi — Madden Butler Elder & Graham 25 March, 1988