FEDERAL COURT OF AUSTRALIA Virgin Enterprises Ltd v Australian Paper & Disposables Pty Ltd [2006] FCA 1852 VIRGIN ENTERPRISES LIMITED v AUSTRALIAN PAPER & DISPOSABLES PTY LIMITED, AUSTRALIAN PAPER & COMMODITIES PTY LIMITED, VIRGIN PAPER & DISPOSABLES PTY LIMITED and SANJEEV KHANNA NSD 2151 OF 2006 EDMONDS J 20 DECEMBER 2006 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 2151 of 2006 BETWEEN: VIRGIN ENTERPRISES LIMITED Applicant AND: AUSTRALIAN PAPER & DISPOSABLES PTY LIMITED First Respondent AUSTRALIAN PAPER & COMMODITIES PTY LIMITED Second Respondent VIRGIN PAPER & DISPOSABLES PTY LIMITED Third Respondent SANJEEV KHANNA Fourth Respondent JUDGE: EDMONDS J DATE OF ORDER: 20 DECEMBER 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: In these orders the terms 'Offending Names', 'Virgin Group of Companies', 'Primary Trade Mark', 'Virgin Registered Trade Marks', 'Offending Business Names' and 'Offending Company Name' each have the meanings given to them in the Applicant's Statement of Claim filed in these proceedings on 2 November 2006. THE RESPONDENTS EACH BEING IN DEFAULT, THE COURT ORDERS PURSUANT TO O 35A r 3(2)(c) THAT: 1. The Applicant have leave pursuant to section 471B of the Corporations Act 2001 (Cth) to begin and to proceed with these proceedings against the Second Respondent on condition that the Applicant not take any step to enforce any judgment or order it may obtain against the Second Respondent in the proceedings without the leave of the Court. 2. The First and Second Respondents, whether by themselves, their servants or agents or otherwise, be restrained from using: 2.1 the Offending Names; or 2.2 any name which includes the name "VIRGIN" or any colourable imitation thereof, in connection with the manufacture, distribution or supply of paper products and/or the supply of related goods, without the licence of the Applicant. 3. The First and Second Respondents, whether by themselves, their servants or agents or otherwise, be restrained from conducting any business under or by reference to: 3.1 the Offending Names; or 3.2 any name which includes the name "VIRGIN" or any colourable imitation thereof, without the licence of the Applicant. 4. The First and Second Respondents, whether by themselves, their servants or agents or otherwise, be restrained from infringing the Primary Trade Mark and the Virgin Registered Trade Marks, or any of them. 5. The First and Second Respondents, whether by themselves, their servants or agents or otherwise, be restrained from representing by any means whatsoever in trade or commerce that: 5.1 they are, or either of them is, the Applicant or one of the companies in the Virgin Group of Companies; and/or 5.2 they are, or either of them is, connected with the Applicant or one of the companies in the Virgin Group of Companies; and/or 5.3 their business, or the business of either of them, is the Applicant's business or a business of one of the companies in the Virgin Group of Companies; and/or 5.4 their business, or the business of either of them, is one that is connected in trade with the Applicant or one of the companies in the Virgin Group of Companies; and/or 5.5 their business, or the business of either of them, is conducted with the permission or under the control or supervision of the Applicant; and/or 5.6 their goods, or the goods of either of them, are the Applicant's goods or goods of one of the companies in the Virgin Group of Companies; and/or 5.7 their goods, or the goods of either of them, are connected in trade with the Applicant or one of the companies in the Virgin Group of Companies; and/or 5.8 their goods, or the goods of either of them, are or will be supplied with the permission or under the control or supervision of the Applicant. 6. The First and Second Respondents, whether by themselves, their servants or agents or otherwise, be restrained from passing off by any means whatsoever: 6.1 themselves, or either of them, as being the Applicant or one of the companies in the Virgin Group of Companies; and/or 6.2 themselves, or either of them, as being connected with the Applicant or one of the companies in the Virgin Group of Companies; and/or 6.3 any business conducted by them, or either of them, as the Applicant's business or as a business of one of the companies in the Virgin Group of Companies; and/or 6.4 any business conducted by them, or either of them, as one that is connected in trade with the Applicant or one of the companies in the Virgin Group of Companies; and/or 6.5 any business conducted by them, or either of them, as one conducted with the permission or under the control or supervision of the Applicant; and/or 6.6 their goods, or the goods of either of them, as being the Applicant's goods or goods of one of the companies in the Virgin Group of Companies; and/or 6.7 their goods, or the goods of either of them, as being goods connected in trade with the Applicant or one of the Virgin Group of Companies; and/or 6.8 their goods, or the goods of either of them, as being goods supplied, or to be supplied, with the permission or under the control or supervision of the Applicant. 7. The Fourth Respondent, whether by himself, his servants or agents or otherwise, be restrained forthwith from: 7.1 aiding, abetting, counselling, procuring or directing the First and Second Respondents, or either of them: 7.1.1 to infringe the Primary Trade Mark and the Virgin Registered Trade Marks, or any of them; 7.1.2 to make any of the representations referred to in order 5; 7.1.3 to engage in the passing off referred to in order 6; 7.2 being in any way, directly or indirectly, knowingly concerned in, or party to, any such conduct by the First and Second Respondents, or either of them. 8. The First Respondent forthwith take all steps as may be necessary or desirable to cancel the registration in its name of the New South Wales business name "VIRGIN PAPER AUSTRALIA" (BN98187341). 9. The First, Second and Fourth Respondents forthwith deliver up to the Applicant, or its nominee, for destruction all documents, materials (including, without limitation, all labels, brochures, stationary, business cards, letterhead and signage) in their possession, power, custody or control of any of them or in the possession, power, custody or control of any of their servants or agents bearing: 9.1 any of the Offending Names; or 9.2 the Offending Business Name; or 9.3 the name "VIRGIN"; or 9.4 any name or mark which includes the name "VIRGIN" or any colourable imitation thereof; or 9.5 the Primary Trade Mark, with or without any other names or marks; 9.6 any of the Virgin Registered Trade Marks, with or without any other names or marks; 9.7 any other names or marks which are substantially identical with or deceptively similar to the Primary Trade Mark and/or the Virgin Registered Trade Marks. 10. The First and Second Respondents, at their own cost, place corrective advertising in publications to be nominated by the Court in a form approved by the Court, such advertising to include a reference to the orders made by the Court. 11. An account be taken of the profits made by the First and/or Second Respondents by reason of: 11.1 their infringement of the Primary Trade Mark; 11.2 their infringement of the Virgin Registered Trade Marks; 11.3 their passing off, and the First and/or Second Respondents pay to the Applicant such profits together with interest thereon pursuant to section 51A of the Federal Court of Australia Act 1976 (Cth). 12. The Third Respondent, whether by itself, its servants or agents or otherwise, be restrained from conducting any business under or by reference to: 12.1 the Offending Company Name; or 12.2 any name which includes the name "VIRGIN" or any colourable imitation thereof, without the licence of the Applicant. 13. The Third Respondent, whether by itself, its servants or agents or otherwise, be restrained from representing by any means whatsoever in trade or commerce that: 13.1 it is the Applicant or one of the companies in the Virgin Group of Companies; and/or 13.2 it is connected with the Applicant or one of the companies in the Virgin Group of Companies; and/or 13.3 its business is the Applicant's business or a business of one of the companies in the Virgin Group of Companies; and/or 13.4 its business is one that is connected in trade with the Applicant or one of the companies in the Virgin Group of Companies; and/or 13.5 its business is conducted with the permission or under the control or supervision of the Applicant; and/or 13.6 its goods or services are the Applicant's goods or services or goods or services of one of the companies in the Virgin Group of Companies; and/or 13.7 its goods or services are connected in trade with the Applicant or one of the companies in the Virgin Group of Companies; and/or 13.8 its goods or services are supplied or provided, or will be supplied or provided, with the permission or under the control or supervision of the Applicant. 14. The Third Respondent, whether by itself, its servants or agents or otherwise, be restrained from passing off by any means whatsoever: 14.1 itself as being the Applicant or one of the companies in the Virgin Group of Companies; and/or 14.2 itself as being connected with the Applicant or one of the companies in the Virgin Group of Companies; and/or 14.3 any business conducted by it as the Applicant's business or as a business of one of the companies in the Virgin Group of Companies; and/or 14.4 any business conducted by it as one that is connected in trade with the Applicant or one of the companies in the Virgin Group of Companies; and/or 14.5 any business conducted by it as one conducted with the permission or under the control or supervision of the Applicant; and/or 14.6 its goods or services as being the Applicant's goods or services or goods or services of one of the companies in the Virgin Group of Companies; and/or 14.7 its goods or services as being goods or services connected in trade with the Applicant or one of the Virgin Group of Companies; and/or 14.8 its goods or services as being goods or services supplied or provided, or to be supplied or provided, with the permission or under the control or supervision of the Applicant. 15. The Third Respondent forthwith take all steps as may be necessary or desirable to effect a change from "VIRGIN PAPER & DISPOSABLES PTY LIMITED" to a name not including the word "VIRGIN" or any colourable imitation thereof, and to have the said change of name recorded according to law. 16. The Third Respondent forthwith deliver up to the Applicant, or its nominee, for destruction all documents, materials (including, without limitation, all labels, brochures, stationary, business cards, letterhead and signage) in its possession, power, custody or control or in the possession, power, custody or control of its servants or agents bearing: 16.1 the Offending Company Name; or 16.2 the name "VIRGIN"; or 16.3 any name or mark which includes the name "VIRGIN" or any colourable imitation thereof. 17. The Respondents pay the Applicant's costs. 18. The Applicant have liberty to apply on seven days notice. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 2151 of 2006 BETWEEN: VIRGIN ENTERPRISES LIMITED Applicant AND: AUSTRALIAN PAPER & DISPOSABLES PTY LIMITED First Respondent AUSTRALIAN PAPER & COMMODITIES PTY LIMITED Second Respondent VIRGIN PAPER & DISPOSABLES PTY LIMITED Third Respondent SANJEEV KHANNA Fourth Respondent JUDGE: EDMONDS J DATE: 20 DECEMBER 2006 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is an application by Virgin Enterprises Limited ('Virgin') for relief commonly referred to as judgment in default and for which provision is made by O 35A r 3(2) of the Federal Court Rules. 2 Virgin is incorporated in the United Kingdom and is the trademark and licensing company of the Virgin Group of Companies. The first, second and third respondents are Australian companies and the fourth respondent, Mr Sanjeev Khanna, is said to be the sole director of the first and second respondents and involved in their day to day activities. 3 These matters are taken from Virgin's statement of claim which also discloses that, at the most general level, Virgin alleges that the corporate respondents have impermissibly utilised the word Virgin as part of the names under which they carry on business and in other ways. Mr Khanna is said to have been involved in their conduct. 4 In order to enliven the discretion in O 35A r 3(2), Virgin must establish that the relevant respondent has failed to satisfy its claim and that it has failed to do one of the things mentioned in O 35A r 2(2). Before turning to that matter it is convenient to set out a brief history of the proceedings. 5 On 2 November 2006 Virgin commenced the proceedings by application and statement of claim. The application bears the usual note mandated by O 4 r 5 and the time of the first directions hearing is endorsed as 9.30 a.m. on 6 December 2006. 6 On 27 November 2006 Virgin filed affidavits of service which record that the first, second, third and fourth respondents were each served on 9 November 2006. 7 On 6 December 2006 the proceedings came before Gyles J and there was no appearance on behalf of any of the respondents nor had any of them filed a notice of appearance as required by O 9 r 2. His Honour indicated that his chambers had received a communication from one of the respondents, presumably Mr Khanna, that he was ill and would not be present. Counsel for Virgin indicated it wished to apply for relief under O 35A r 3(2) and the application was stood over to 14 December 2006. His Honour asked Virgin to write to the respondents confirming that the matter would be heard on 14 December 2006 at 2.15 p.m. 8 Counsel for Virgin indicated to his Honour that a liquidator had been appointed in respect of the second respondent, Australian Paper & Commodities Pty Limited, on 29 May 2006 and there was therefore a preliminary issue of whether Virgin should have leave to continue the proceedings against that company pursuant to s 471B of the Corporations Act 2001 (Cth). 9 On 14 December 2006 the matter came before me. There was again no appearance by the first, second and third respondents, but on this occasion Mr Khanna was present and appeared on his own behalf. The first, second and third respondents had not filed a notice of their respective appearances and, despite his presence at Court, neither had Mr Khanna. Virgin had written to the respondents in accordance with Gyles J's request and had received a response from the liquidators of the second respondent. In this regard, the initial correspondence, annexed to the affidavit of Karen Anne Hayne sworn 13 December 2006, and the reply dated 13 December 2006 from Messrs Paul Sweeney and Terry van der Velde of S.V. Partners, as the joint and several official liquidators of the second respondent, was handed up by counsel for Virgin. 10 In their letter the official liquidators write relevantly: '[They] will neither consent to nor oppose the application to seek leave of the court and the orders sought in the Federal Court Proceedings No. NSD2151 of 2006.' 11 Counsel for Virgin renewed the application for relief pursuant to O 35A r 3(2) and, in particular, urged the Court to make orders under para (c) of that sub-rule. Comprehensive submissions were made as to how Virgin was entitled to relief sought in the application on the basis of what is pleaded in its statement of claim and why the Court should be satisfied that it had power to grant that relief. 12 I asked Mr Khanna to indicate to me his intention as the fourth respondent in the proceedings. I granted him leave to indicate what he knew, if anything, of the intentions of any of the first, second, or third respondent companies. I also asked him to address the lack of response to the proceedings so far. 13 Mr Khanna confirmed that he is a director of the first respondent and that he understood that the second respondent is in liquidation. As for the third respondent, Mr Khanna said that it 'has no concern with me or any of my other companies'. 14 Given those circumstances, he agreed that he could not speak for the second or third respondents. Mr Khanna explained that he was, from 9 November 2006 to 8 December 2006, unwell and suffering from mental depression, diabetes, and some heart disease. On 6 December 2006, when he was travelling to Court, he started to feel dizzy and called the Court to explain that it was very difficult for him to attend. He said that his office was closed from 1 December 2006 to 8 January 2007 and he also said that it had been very difficult to find a solicitor or barrister because of the impending holidays. 15 Mr Khanna said that he wished to defend the proceedings and that the first respondent's intention was also to defend them. 16 In the circumstances, I declined to consider Virgin's application and instead gave the first respondent and Mr Khanna an opportunity to file a notice of appearance and a defence to Virgin's statement of claim. However, I made it quite clear to Mr Khanna that if there was a failure to do these things I would make the orders sought by Virgin. I gave the first respondent and Mr Khanna until 4.00 p.m. on Tuesday, 19 December 2006 to take those steps. I directed that the matter come back before me today. 17 In the event, no document has been filed by any of the respondents and accordingly I propose to make the orders sought by Virgin. I do so for the following reasons. 18 As a preliminary matter Virgin asked for an order to deal with the fact that the second respondent is in liquidation. Rather than requiring an order to continue the proceedings against the second respondent, what is needed is retrospective leave to commence, the liquidation of the second respondent having begun well before the proceedings were commenced on 2 November 2006. It is, however, permissible to grant leave nunc pro tunc. 19 The policy behind the prohibition upon commencing or continuing with proceedings against a company in the position of the second respondent was explained by McPherson J in Ogilvie-Grant v East (1983) 1 ACLC 742. At 744, his Honour said that the prohibition exists because – 'without relevant restriction, a company in liquidation would be subject to a multiplicity of actions which would be both expensive and time-consuming as well as unnecessary.' 20 In contrast, the proof of debt procedure now dealt with in Div 6 of Pt 5.6 of the Corporations Act 2001 (Cth) may be seen as more expeditious and less expensive. 21 His Honour concluded that the question of whether an applicant should be permitted to proceed by action, or should be required to submit his proof of debt and, if dissatisfied, appeal to a Judge, is largely one of choosing between alternative forms of procedure. The effect of the section imposing the prohibition is, in his Honour's words – 'to require the claimant to adopt the course of lodging proof of debt unless he can demonstrate that there is some good reason why departure from that procedure is justified in the case of the particular claim in dispute.' 22 In the present case, counsel for Virgin identified the fact that the relief Virgin seeks is not relief which it can obtain from the liquidators of the second respondent. It can obtain the injunction and an account of profits only through action in this Court, a matter which would support a grant of leave. I agree. 23 In Vagrand v Fielding (1993) 41 FCR 550 the Full Court of this Court said at 553: 'We do not suggest that, in a case where the desired relief is otherwise unavailable, an applicant is automatically entitled to leave under s 371(2) of the Companies Code, or its equivalents. The question of leave is always a matter of discretion. But the circumstance that relief is not otherwise available to an applicant must always be a significant factor in favour of leave.' 24 On the basis of what the liquidators have stated in their letter, there would appear to be no prejudice to the creditors of the second respondent or to the orderly winding up of the second respondent if leave is granted. 25 I would, however, impose a condition that Virgin not enforce any judgment or order it may obtain against the second respondent without the leave of the Court, so as to preserve the Court's control of the proceedings against the second respondent. 26 I now turn to the question of whether Virgin has established that the respondents are in default for the purposes of O 35A. There is evidence before me in the form of affidavits of service which satisfies me that each of the respondents has been properly served. 27 The second and third respondents may be dealt with in short order. They are plainly in default on the following bases, given that they have not satisfied Virgin's claim: 1. Their failure to enter appearances before the first directions date or at all. 2. Their failure to attend the directions hearing before Gyles J on 6 December 2006 and before me on 14 December 2006 and today. 3. Their failure to file a defence within seven days of the first directions hearing on 6 December 2006 as required by O 11 r 20. 28 The positions of the first respondent and that of Mr Khanna are similar. On 14 December 2006 I gave both of them an opportunity to enter an appearance and file a defence by 4.00 p.m. yesterday. They have failed to do so and are in default on at least the following bases given that they have also not satisfied Virgin's claim: 1. Their failure to enter an appearance within the extended time or at all. 2. Their failure to file a defence within the extended time or at all, and, apart from Mr Khanna, their failure to attend the directions hearing today. 29 Therefore, in relation to each of the respondents, the discretion in O 35A r 3(2) is enlivened. Counsel for Virgin addressed the relief it seeks under that rule on the last occasion, which mirrors that sought in the application, and in very broad terms is as follows: 1. Injunctions against the first and second respondents – paras 1 – 5; 2. An injunction against Mr Khanna – para 6. 3. An order that the first respondent cancel the registration of its New South Wales business name – para 7. 4. An order that the first and second respondents and Mr Khanna deliver up certain documents and materials to Virgin for destruction – para 8. 5. An order that the first and second respondents undertake corrective advertising – para 9. 6. An order that an account of profits be taken in relation to the first and second respondents and that they pay such profits and interest to Virgin – para 10. 7. Injunctions against the third respondent – paras 11 – 13. 8. An order that the third respondent change its name – para 14. 9. An order that the third respondent deliver up certain documents and materials to Virgin for destruction – para 15. 10. Costs – para 16. 30 Fulfilment of the condition in O 35A r 3(2)(c)(i), that the applicant appears to be entitled to the relief it seeks on the basis of what appears in the statement of claim, does not require the applicant to prove its claim. Rather, as Heerey J said in Arthur v Vaupotic Investments Pty Limited [2005] FCA 433 at [3], the rule requires – 'that on the face of the statement of claim there is a claim for the relief sought and, of course, that the court has jurisdiction to grant that relief.' 31 Virgin's application is based on the provisions of the Trade Marks Act 1995 (Cth), the Trade Practices Act 1974 (Cth), and the tort of passing off. It appears to be a fairly straightforward intellectual property case. 32 Having regard to the comprehensive review of the statement of claim, which was undertaken by counsel for Virgin on the last occasion, I am satisfied, on the basis of what is pleaded in the statement of claim, that the applicant is entitled to the relief sought and I am satisfied that the Court has power to grant it. 33 I therefore give judgment against the respondents in terms of the relief sought in the application. Counsel for Virgin said on the last occasion that further directions may be needed in relation to the account of profits and the corrective advertising and I will therefore grant Virgin liberty to apply on seven days' notice. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. Associate: Dated: 13 March 2007 Counsel for the Applicant: Mr D Sibtain Solicitor for the Applicant: Addisons Respondents: Mr S Khanna appeared in person and on behalf of the First Respondent Date of Hearing: 20 December 2006 Date of Judgment: 20 December 2006