FEDERAL COURT OF AUSTRALIA Australian Finance Group Limited v Accent Financial Group Pty Ltd [2005] FCA 66 PROCEDURE – order or judgment on default – failure to serve responsive affidavit – evidence of destruction of documents – absence of candour in disclosures – whether applicant entitled to judgment TRADE MARKS – opposition to registration – evidence of prior use – whether evidentiary burden shifted to respondent – whether respondent's application should be struck out for non-response to orders of Court Trade Marks Act 1995 (Cth) ss 58, 60, 197 Federal Court Rules O 20 r 1, O 35A r 2, O 35A r 3 Lahore, Patents, Trade Marks and Related Rights (Butterworths, Australia, 2001) DJL v Central Authority (2000) 201 CLR 226 applied Landauer Ltd v Comins & Co (a firm) (unreported, England and Wales Court of Appeal, Civil Division, 14 May 1991) cited Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 considered Lomas v Winton Shire Council [2002] FCAFC 413 cited McCabe v British American Tobacco Australia Services Ltd [2002] VSC 73 cited AUSTRALIAN FINANCE GROUP LIMITED v ACCENT FINANCIAL GROUP PTY LTD WAD 61 of 2003 RD NICHOLSON J 10 FEBRUARY 2005 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 61 OF 2003 BETWEEN: AUSTRALIAN FINANCE GROUP LIMITED (ACN 006 385 822) APPLICANT AND: ACCENT FINANCIAL GROUP PTY LTD (ACN 067 725 768) RESPONDENT JUDGE: RD NICHOLSON J DATE OF ORDER: 10 FEBRUARY 2005 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The applicant's notice of motion filed 31 August be refused insofar as it relies upon the matters particularised in pars 4(a) and 4(c) of the affidavit of Darren John Jackson sworn 31 August 2004. 2. The applicant's said notice of motion otherwise remains on foot. 3. The applicant pay the respondent's costs of the motion as advanced as described in order 1. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD 61 OF 2003 BETWEEN: AUSTRALIAN FINANCE GROUP LIMITED (ACN 006 385 822) APPLICANT AND: ACCENT FINANCIAL GROUP PTY LTD (ACN 067 725 768) RESPONDENT JUDGE: RD NICHOLSON J DATE: 10 FEBRUARY 2005 PLACE: PERTH REASONS FOR JUDGMENT 1 The applicant has brought a motion for judgment on the basis that there is no real or genuine defence to its claim: Federal Court Rules ('FCR') O 20 r 1 and 'the inherent power'. By the same motion, the applicant has also applied for judgment under the FCR and/or the Court's 'inherent power' to control its proceedings, by reason of the respondent's consistent failure to comply with Court orders and its destruction of documents: FCR O 35A r 2(2)(d) and (f); and r 3(2)(d) and (e). 2 On 9 September 2004, the Registrar ordered that the application, by reason of the last two matters, be listed for hearing. These reasons address the submissions in relation to those two matters. The Registrar declined to order that the summary judgment application be heard at the same time. 3 Order 35A r 2(1) of the FCR provides that, for the purposes of the order, an applicant is in default if the applicant: '… (d) fails to serve a list of documents or an affidavit or other document, or does not produce a document as required by Order 15; or … (f) fails to prosecute the proceeding with due diligence.' Order 35A r 3(2) of the FCR provides that if a respondent is in default the Court may: '(d) give judgment or make any other order against the respondent; or (e) make an order specified in paragraph (b), (c) or (d) to take effect if the respondent does not take a step ordered by the Court in the proceeding in the time limited in the order.' These provisions reflect the provisions previously in FCR O 15 r 16(1)(b) and r 16(2) and also FCR O 10 r 7(1)(b) and r 7(2). nature of the proceeding 4 The applicant appeals against a decision of the hearing officer of the Trade Marks Office given on 26 February 2003. In that decision the Registrar dismissed the applicant's opposition to registration by the respondent of a mark in respect of the letters 'AFG'. In the hearing before the hearing officer, the applicant contended, inter alia, that the respondent was not the owner of the mark: Trade Marks Act 1995 (Cth) ('the Act'), s 58. It was also contended that the mark was substantially identical or similar to a trade mark in which the applicant had already acquired a reputation in Australia and that use of the mark by the respondent was like to deceive or cause confusion: s 60. The Registrar dismissed the applicant's opposition, relevantly, on the basis that the applicant had not adduced adequate evidence of prior use, or reputation, as at the relevant date, being 30 August 1999, the date upon which the respondent had applied for registration of the mark ('the priority date'). It is common ground that these proceedings are by way of rehearing, with power to admit further evidence: s 197. 5 The result is that the applicant bears the onus of proving that the respondent was not, as at the priority date, the owner of the mark 'AFG' for the purposes of the application of s 58 of the Act and the matters including reputation required under s 60: Lahore, Patents, Trade Marks and Related Rights (Butterworths, Australia, 2001) at [55,574]. However, if there is evidence by the opponent of a prior user of the mark the evidentiary burden shifts to that party seeking registration (here, the respondent): Lahore at [55,578]. The present evidentiary position is that in response to the applicant's affidavits, which it maintains contain evidence of the applicant's use of the mark back to September 1994, the respondent has filed affidavits to the effect that it was the first user of the mark. These affidavits include an affidavit from Mr Pugliese sworn on 27 August 2003, which purports to deal with the history of the trading of the respondent and the use of the mark in its business from around 1994 and 1995 through to and beyond the priority date of 30 August 1999. Therefore the fundamental factual issue in the proceedings is whether the applicant can establish (bearing in mind the shift in evidentiary onus that may arise) that the respondent was not the first user of the mark in Australia. directions of the court 6 On 9 September 2003, Carr J ordered that 'on or before 7 October 2003 the respondent give discovery in relation to paragraphs 25, 26 and 28 of the affidavit of Elvio Pugliese sworn 27 August 2003 in these proceedings'. On 10 November 2003, his Honour ordered that 'on or before 25 November 2003 the respondent provide discovery as set out in the orders made on 9 September 2003 and inspection of the discovered documents'. On 12 February 2004, his Honour further ordered that: 'unless by 5 March 2004 the respondent either: (a) provides inspection of all the documents numbered 6 and 24 in the respondent's list of documents dated 1 December 2003; or (b) files an affidavit amending that list and provides inspection of any document listed in that affidavit which has not already been inspected by the applicant the respondent's notice of appearance be struck out and judgment be entered for the applicant with costs.' 7 On 8 April 2004 his Honour ordered that: 'pursuant to O 15 r 8 on or before 23 April 2004 the respondent file and serve an affidavit stating whether any documents in the classes of documents described in the schedule are or have been in the respondent's possession, custody or power and, if they have been but are not then in the respondent's possession, custody or power, when the respondent parted with them and what has become of them.' 8 The schedule to his Honour's order of that date described the following classes of documents: 'SCHEDULE 1. All financial accounts, management accounts, trial balances, cash books cash payments journals and ledgers relating to the business of the respondent between 1994 and 2002 (both years inclusive). 2. All invoices, cheques and account statements relating to the respondent's advertising expenditure and signage expenditure between 1994 and 2002 (both years inclusive). 3. All documents recording the number of vehicles passing advertising signs between 1997 and 2002 (both years inclusive).' The respondent's response 9 In his affidavit of 27 August 2003 Mr Pugliese, on behalf of the respondent, deposed, relevantly, that: (a) he was involved in the management of the business of the respondent, using the name 'AFG' in the period from on or before 9 January 1995, to the priority date, 30 August 1999 (and beyond then), and that the business had been carried on using the name 'AFG' (pars 1 – 30); (b) the respondent's trading involved significant sales in the financial years 1997/1998 and 1998/1999 and in the two months into the next financial year to 30 August 1999 (par 25); (c) the respondent had promoted its services, by way of annual advertising expenditure, in specified amounts, in the years 1994 to 1999 inclusive and annual signage expenditure from 1997 and had obtained significant exposure of its signage in 1997 and 1998 (par 26). (d) AFG (part of the business of the respondent) acted in promoting a number of capital raising issues before the priority date and in particular in 1997, 1998 and 1999. 10 The respondent contends that it has given particular discovery as follows: 1. Unsworn list sent to applicant's solicitors by email 7 November 2003. 2. Sworn list of documents provided to applicant's solicitors 12 December 2003. 3. Respondent's amended list of documents sworn 5 March 2004. 4. Supporting and explanatory affidavit filed 6 April 2004. 5. Supplementary list of documents filed 6 April 2004. 6. Further supplementary list of documents filed 12 May 2004. 7. Further further supplementary documents filed 18 May 2004. 8. Further supporting and explanatory affidavit sworn 19 May 2004. 9. Further affidavit filed on behalf of the respondent sworn 31 August 2004. 10. Further supporting affidavit filed 30 September 2004. 11 In these circumstances the respondent contends it cannot seriously be argued that there is any real lack of candour or absence of any proper attempt to comply with the consent orders on its part. 12 In relation to an affidavit of the respondent's sworn 14 May 2004, the applicant submits that the affidavit was not in the terms as directed by the orders of 8 April 2004 and made no attempt to address the matters the subject of those orders. In any event, it is said to be inconsistent with previous sworn and unsworn lists of documents. 13 In relation to the respondent's affidavit of 19 May 2004, it is likewise said by the applicant to have made no attempt to address any of the matters required by the 8 April 2004 orders. In particular, it is said, it failed to state whether the respondent has now, or has ever had, for each of the years 1994 to 1999, any financial accounts, management accounts, trial balances, cash books, journals, ledgers or any invoices, cheques or account statements for advertising and signage. Additionally, it stated in par 2(c) without identifying documents by reference to the categories of documents in the schedule that there had been a destruction in July 2003 of 'all of the financial reports, bank statements and other books of account of the respondent which included the financial years to 1998'. Further still, it referred in par 2(b) to undisclosed categories of documents also having been destroyed when the respondent moved offices, again without stating whether those destroyed documents fell within the categories stipulated by the orders of 8 April 2004 and, if so, when the destruction occurred. Further, it is argued by the applicant, there is no evidence from this affidavit as to when these alleged office moves occurred and on whose authority company documents were so destroyed. In par 2(d) it is stated that 'source documents … such as invoices, cheques and account statements relating to … advertising expenditure from 1994 to 1998 … were destroyed on dates and/or upon the events of moving offices as referred to above', without disclosing which documents had once been in the respondent' possession in that regard and when they were destroyed. It was contended that the affidavit failed to address at all the topic of expenditure relating to signage and the number of vehicles passing advertising signs and was, in any event, inconsistent with the respondent's lists and affidavits of 7 November 2003, 12 December 2003, 6 April 2004 and 4 May 2004. 14 After the applicant's motion for judgment was filed, the respondent filed a further affidavit of Mr Pugliese sworn on 30 September 2004. Here again the applicant submits that it fails to comply with the orders of 8 April 2004. At par 18, Mr Pugliese states that the documents in item 1 of the schedule quoted above 'were not kept to the best of my knowledge between 1994 and 2002 at all'. The applicant says this shows non-compliance with the Corporations Law, s 289 (later s 286) whereby the respondent was required to keep 'accounting records' for seven years. Further, it is said, it is inconceivable that a company with operations of the size and kind portrayed by Mr Pugliese could have been practically managed without at least books of primary entry. The statement of Mr Pugliese is, in any event, one qualified by reference to his knowledge. Furthermore, the affidavit does not address the matters raised by his Honour's direction of 8 April 2004. 15 The applicant therefore submits the respondent has failed to comply properly or at all with the various orders made since 9 September 2003. This has occurred in circumstances where the respondent is seen to have caused or allowed the destruction of financial documents covering the period 1994 – 1998, including since the commencement of this litigation. There is, therefore, it is submitted, a lack of candour and precision in the respondent's evidence. In particular, Mr Pugliese's affidavit did not disclose, but it has since emerged, that he was an undischarged bankrupt between 15 September 1993 and 21 April 1998 and that his declarations to the Trustee in Bankruptcy revealed no mention of any involvement with the respondent or the alleged use of the mark in the relevant period. Respondent's contentions misconception of 'proceeding' 16 The respondent submits that it would be wrong to approach the issue of discovery on the rehearing as if it were an expungement proceeding: Lomas v Winton Shire Council [2002] FCAFC 413 at [19]. The purpose of an expungement proceeding is to enable 'the validity of a trade mark … [to] be fully explored': Lomas at [18]. whether the issues misconceived 17 The respondent identifies the issues as relating to the question of which of the parties first used the mark in trade. The applicant filed evidence of its use of the mark back to September 1994. The respondent submits that it is important to have in mind that evidence of a single use will suffice. It is said this not a case involving any question of abandonment or non-use. Therefore the issue of discovery must been seen in the context of the requirements of s 58 and s 60 of the Act. In that context the respondent says it is not apparent that the applicant was prejudiced by the nature of the respondent's evidence. The submission is that the applicant has failed to show how it will be prejudiced. It is said that it must be borne in mind that the nature of financial documents from 1995 onwards is not of any consequence to the issues of evidence of first use. applicant's complaints not made out on the facts 18 The respondent then submits that the applicant has conceded that the orders sought and obtained from his Honour were wider than necessary. 19 The respondent further submits that the issues arising under s 58 and s 60 are not the issues which arise from a focus on the evidence of the respondent. Rather, they are issues that relate to remedies. The submission is that the applicant has failed to show how the documents would impact on the conduct of the trial. discretion of court 20 The respondent also submits that the Court needs to take into account the extent of the impact if it did find that there were any inadequacies in the respondent's responses to the orders. It is submitted that the complaints of the applicant are not made out in the circumstances on that basis. Rather, the applicant's submissions are conclusionary and lacking logic. 21 The respondent additionally addresses certain aspects of the facts in the light of this general submission. The first is that of the destruction of documents. Here, the respondent submits, it is not shown why documents of 1997 would assist the trial. Furthermore, the evidence raises the prima facie position that the destruction was innocent, that the respondent considered it had five years to retain the documents and had confused the requirements under the Taxation Administration Act with those under the Corporations Law. There is evidence that no record was kept of what was destroyed and this explains the lack of precision in the respondent's response. 22 On the issue of the non-disclosure of the Mr Pugliese's bankruptcy, it is said that this is not an issue which touches this matter. The evidence, it is submitted, does not show any intention nor flavour of non-compliance which is of such a character as should deprive the respondent of the opportunity to put its case to the defence. 23 In response, the applicant states that the respondent's own submissions show that the respondent's evidence does affect the issues arising under the relevant sections of the Act. Reference is made to the respondent's submission that 'the onus can only shift to the respondent in a practical or evidentiary sense under s 60 if the respondent wished to assert the relevant reputation was not the applicant's reputation but the respondent's reputation'. 24 On the issue of destruction of documents, reference is made by the applicant to the decision in Landauer Ltd v Comins & Co (a firm) (unreported, England and Wales Court of Appeal, Civil Division, 14 May 1991) at 382, which it is said is authority for the proposition that even if destruction is inadvertent it is a justification for striking out an action. 25 In relation to the form of orders, the applicant submits that these are consistent with those in the notice of appeal and the declarations sought. On the issue of whether such declarations should be granted until examination of the applicant's evidence, it is submitted that they should not be granted until such examination has occurred. The submission is that the applicant is relying on its affidavits in chief in those circumstances. reasoning Inherent Jurisdiction 26 In the first place it is clear that the Federal Court of Australia, as a statutory court, does not have inherent jurisdiction: DJL v Central Authority (2000) 201 CLR 226. I therefore propose to decide the issues in accordance with rules relied upon by the applicant. Findings on extent of non-compliance 27 If the powers relied upon by the applicant are to be exercised it is necessary for there to be a finding of the nature of the alleged default: cf Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388. To do this the Court is assisted by reference to Sch A to the applicant's outline of submissions as addressed in oral submissions and the supporting affidavit of Mr D Jackson sworn 31 August 2004. 28 The orders of 9 September and 10 November 2003 were not complied with by their respective due dates. The respondent in each case nevertheless provided verified lists. Inspection of most documents was provided late. 29 In relation to the springing order of 12 February 2004 compliance occurred by 5 March 2004, albeit without explanation for amendment. 30 By his affidavit of 6 April 2004 the respondent's director, Mr Pugliese, deposed to regular destruction of documents older than 5 years. 31 The orders made on 8 April 2004 for production of what may broadly be described as accounting records failed to elicit a response from the respondent by the due date of 23 April 2004. An unverified supplementary list was provided by 4 May 2004 but did not address the categories of document the subject of the order of 8 April 2004. A further supplementary list dated 14 May 2004 also did not comprehensively address matters required by the orders of 8 April 2004. The further affidavit of Mr Pugliese sworn 19 May 2004 was filed by the respondent, deposing as to destruction of certain financial records in about July 2003 and earlier. The applicant maintains this still does not address all the matters in the orders of 8 April 2004. Reasoning 32 In Lenijamar Pty Ltd at 396 the majority (Wilcox and Gummow JJ) distinguished cases in which (1) the history of non-compliance by an applicant is such as to indicate an inability or unwillingness to co-operate with the Court and other parties within an acceptable period and (2) where the non-compliance is continuing and occasioning unnecessary delay, expense or other prejudice to the respondent. Their Honours considered that the history of the matter is more likely to be decisive in the first of these two situations. Although the reasoning was directed to FCR O 10 r 7 as it then stood, it applies with the same relevance to the present rules. The facts in the present circumstances support a characterisation in the first category. Nevertheless, the cumulative effect of the respondent's defaults must be understood in the context of the discovery in fact provided by the respondent, albeit imperfectly, in response to the orders. That imperfection is also to be understood in the context of the evidence of document destruction. That evidence prima facie raises the issues whether the respondent has in fact answered the orders for discovery to the best of its ability even if in an untimely manner. 33 While I accept it may be the case that even inadvertent destruction of documents may be a proper foundation for striking out an action, I do not consider that the discretion to so strike out should presently be exercised here: cf Landauer; also McCabe v British American Tobacco Australia Services Ltd [2002] VSC 73. The evidence of the respondent is of destruction as a matter of routine based on a mistaken understanding of the necessary period of retention. I cannot see why that evidence should not be open to examination at trial and have such effect as its resulting weight (or lack of it) and credibility allows. 34 Whatever the imperfections in the respondent's response to the early mentioned orders, this is not a case where the respondent has been totally unresponsive or has left its position substantially unexplained. Again, the limit of the respondent's evidence has been disclosed by its responses (and its opportunities to identify such evidence having now passed), I cannot see why the issues should not be tried on that evidentiary base. conclusion 35 For these reasons I would, as a matter of discretion under the above-mentioned rules, refuse the applicant's notice of motion filed 31 August 2004 in respect of the two grounds here addressed. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson. Associate: Dated: 10 February 2005 Counsel for the Applicant: GH Murphy SC with D Jackson Solicitor for the Applicant: Minter Ellison Counsel for the Respondent: PE Hack SC with AM Musgrave Solicitor for the Respondent: Hynes Lawyers Date of Hearing: 24 November 2004 Date of Judgment: 10 February 2005