FEDERAL COURT OF AUSTRALIA Geneva Laboratories Limited v Prestige Premium Deals Pty Ltd [2015] FCA 747 Citation: Geneva Laboratories Limited v Prestige Premium Deals Pty Ltd [2015] FCA 747 Parties: GENEVA LABORATORIES LIMITED and UNION-SWISS (PROPRIETARY) LIMITED v PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427), UNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709), UNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162) and CHIEF EXECUTIVE OFFICER OF AUSTRALIAN CUSTOMS AND BORDER PROTECTION SERVICE; PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427), UNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709), UNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162) v GENEVA LABORATORIES LIMITED File number(s): NSD 344 of 2014 Judge(s): YATES J Date of judgment: 24 July 2015 Catchwords: PRACTICE AND PROCEDURE – application for security for costs – application granted Legislation: Federal Court Rules 2011 r 19.01 Cases cited: F. Hoffmann-La Roche & Co. A.G. v Secretary of State for Trade and Industry [1975] AC 295 Date of hearing: 13 July 2015 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 31 Counsel for the First Applicant/Cross-Respondent: Mr AC Casselden Solicitor for the First Applicant/Cross-Respondent: Marque Lawyers Counsel for Second Applicant: The second applicant did not appear Counsel for the First to Fourth Respondents/Cross-Claimants: Mr DC Eardley Solicitor for the First to Fourth Respondents/Cross-Claimants: Russo & Partners Counsel for the Fifth Respondent: The fifth respondent did not appear IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 344 of 2014 BETWEEN: GENEVA LABORATORIES LIMITED First Applicant UNION-SWISS (PROPRIETARY) LIMITED Second Applicant AND: PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427) First Respondent UNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709) Second Respondent UNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162) Third Respondent ANDREW CHRISTOPHER Fourth Respondent CHIEF EXECUTIVE OFFICER OF AUSTRALIAN CUSTOMS AND BORDER PROTECTION SERVICE Fifth Respondent AND BETWEEN: PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427) First Cross-Claimant UNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709) Second Cross-Claimant UNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162) Third Cross-Claimant ANDREW CHRISTOPHER Fourth Cross-Claimant AND: GENEVA LABORATORIES LIMITED Cross-Respondent JUDGE: YATES J DATE OF ORDER: 24 JULY 2015 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The notice of cross-claim filed 21 May 2015 (the cross-claim) and the statement of cross-claim filed 21 May 2015 be amended by substituting "Prestige Premium Deals Pty Ltd" for "United Prestige Group Pty Limited" as the first cross-claimant. 2. The first, second and third cross-claimants provide security for the cross-respondent's costs of the cross-claim in the sum of $67,781.25. 3. The security referred to in Order 2 be provided by payment into Court of the said sum, such payment to be dealt with in accordance with Div 2.5 of Pt 5 of the Federal Court Rules 2011. 4. The first, second and third cross-claimants' claims under the cross-claim be stayed until such time as they have complied with Orders 2 and 3. 5. The first, second and third cross-claimants pay the cross-respondent's costs of its application for security for costs, as taxed or agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 344 of 2014 BETWEEN: GENEVA LABORATORIES LIMITED First Applicant UNION-SWISS (PROPRIETARY) LIMITED Second Applicant AND: PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427) First Respondent UNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709) Second Respondent UNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162) Third Respondent ANDREW CHRISTOPHER Fourth Respondent CHIEF EXECUTIVE OFFICER OF AUSTRALIAN CUSTOMS AND BORDER PROTECTION SERVICE Fifth Respondent AND BETWEEN: PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427) First Cross-Claimant UNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709) Second Cross-Claimant UNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162) Third Cross-Claimant ANDREW CHRISTOPHER Fourth Cross-Claimant AND: GENEVA LABORATORIES LIMITED Cross-Respondent JUDGE: YATES J DATE: 24 JULY 2015 PLACE: SYDNEY REASONS FOR JUDGMENT 1 By interlocutory application dated 19 June 2015, the applicants seek an order pursuant to r 19.01 of the Federal Court Rules 2011, that the first, second and third respondents (the corporate respondents) provide security for costs in respect of a cross-claim which they and the fourth respondent (collectively, the respondents) have brought in the principal proceeding. The fourth respondent, Andrew Christopher, is the sole director of, and shareholder in, each corporate respondent. 2 The cross-claim has only been brought against the first applicant, Geneva Laboratories Limited. Accordingly, I have treated the interlocutory application as one for relief that is sought by the first applicant alone as the cross-respondent. Background 3 On 3 April 2014, an order was made ex parte that the respondents be restrained from importing, selling, offering for sale, supplying, displaying and/or advertising certain goods, until further order (the product restraint or the restraint). The goods in question were any product to which certain trade marks, or substantially identical or deceptively similar trade marks, had been applied. Other orders were made. The usual undertaking as to damages was given by the first applicant who, at that stage, was the only applicant named in the proceeding. The proceeding was then adjourned to 9 April 2014. 4 When the matter came back on 9 April 2014, there appears to have been argument that one of the orders made on 3 April 2014 should be varied. The order was varied on 15 April 2014. However, no application was made to vary or discharge the product restraint. 5 In the period 9 April 2014 to 12 June 2014, the matter came back before the Court on a number of occasions. No application was made to vary or discharge the product restraint on those occasions. 6 On 11 June 2014, the respondents' solicitors wrote to the applicants' solicitors alleging that the product restraint was contrary to law and contrary to public policy with respect to competition in Australia. The letter alleged that the first applicant had not established any proper basis on which the product restraint could be maintained. The letter also alleged that the respondents had suffered significant loss and damage by reason of the product restraint and stated that the respondents would be engaging a suitably qualified accountant to provide expert evidence on the question of the damage said to have been suffered. The letter said that the respondents would be claiming damages and invited the first applicant to "withdraw … the injunction order". 7 When the matter was next before the Court on 25 June 2014, an order was made "without admission" that the product restraint be discharged and that the first applicant be released from its undertaking as to damages with effect on and from 18 June 2014. 8 On 21 May 2015, the respondents filed a notice of cross-claim and statement of cross-claim against the first applicant, seeking damages of $7.6 million. The cross-claim is not raised defensively to the causes of action pleaded by the applicants in the principal proceeding. 9 In their statement of cross-claim, the respondents allege that, during the period of the product restraint (the restraint period), they were legally entitled to import goods covered by the restraint but had been prevented from doing so by that order. The respondents allege that, prior to the restraint period, they had offered such goods singularly and as part of a bundled offering. They allege that, as a consequence of the product restraint, they have suffered significant and permanent loss and damage. 10 In the present application, the first applicant has adduced evidence which indicates that, on 21 April 2014 and 5 May 2014, the first respondent imported substantial quantities of goods covered by the restraint, notwithstanding the order that had been made. It has also adduced evidence which indicates that, when the product restraint was in effect, the first respondent advertised and promoted the sale of goods covered by the restraint. 11 Further, the first applicant has adduced evidence which indicates that, when the product restraint was in effect, a company called United Prestige Pty Ltd sold substantial quantities of goods covered by the restraint. The address of this entity, assuming it to exist, appears to be the same as the registered office and principal place of business of each corporate respondent. 12 The evidence adduced in this application also establishes the following matters. The first respondent has issued 100 shares and that its paid-up capital is $100. The second respondent has issued 1,000 shares and that its paid-up capital is $1,000. The third respondent has issued 100 shares and that its paid-up capital is $100. 13 On 2 June 2015, the applicants' solicitors wrote to the respondents' solicitors requesting security for costs or, in the absence of security being provided, the production of certain financial and business records relating to the corporate respondents. The respondents' solicitors responded to this request by inviting the applicants to file an application seeking security for costs. No financial or business records, as sought, have been provided to the first applicant. Further, the corporate respondents have not placed evidence before the Court of their respective financial positions. 14 The applicants' solicitor, Nathan Thomas Mattock, has deposed that, on the basis of the matters referred to in [12] and [13], he believes that the corporate respondents will be unable to meet an adverse order for costs, should such an order be made. 15 The first applicant has also adduced evidence that none of the corporate respondents owns real property in New South Wales. 16 On this state of the evidence, I am satisfied that there is reason to believe that each corporate respondent will not be able to pay the first applicant's costs in respect of the cross-claim, should an order for costs be made in favour of the first applicant. Mr Christopher has not provided evidence of his financial circumstances or signified that he is prepared to provide security for any costs that might be ordered against any of the corporate respondents. 17 In their written submissions, the respondents canvassed a number of uncontroversial principles as to when a Court will grant security for costs. In the circumstances of the present case, it is not necessary for me to discuss those principles. I will, however, refer to some specific submissions advanced by the respondents. 18 First, the respondents submitted that their lack of funds has been caused, or contributed to, by the first applicant's conduct in obtaining the product restraint. This submission appears to accept that the corporate respondents do, indeed, lack funds with which to meet any adverse costs order. There is, however, no evidence that their respective financial positions in that regard have been caused or contributed to by the first applicant obtaining the product restraint. The evidence on this application suggests that, notwithstanding the product restraint, goods continued to be imported by the first respondent and supplied by one or more of the corporate respondents or an entity associated with them in some way. 19 Secondly, the respondents submitted that the making of an order for security for costs would "unduly stultify" their ability to pursue the cross-claim. There is no evidence before me of that fact. If anything, this submission appears to accept, once again, that the corporate respondents' financial circumstances are such that they would not be able to meet an adverse costs order. 20 Thirdly and relatedly, the respondents submitted that I should take into account the extent to which it is reasonable to expect creditors or shareholders, or other persons financially involved in the conduct of the proceeding, to make funds available to satisfy any order for security which might be made. Once again, there is no evidence before me on that matter. The only person apparently standing behind the corporate respondents is Mr Christopher, who has elected not to give evidence as to the financial position of the corporate respondents or, indeed, his own financial position. 21 Fourthly, the respondents submitted that I should take into account the likelihood of a costs order being made at the conclusion of the proceeding, and the public interest nature of the litigation. There is no evidence before me to suggest that the respondents' cross-claim raises a matter of public interest. I accept, however, that I should take into account the likelihood of a costs order being made at the conclusion of the proceeding. 22 In this connection, the first applicant has advanced the same consideration. It submitted that the cross-claim is "extremely weak". It submitted that there is evidence to suggest that the respondents simply ignored the product restraint. It submitted that, although the matter had been before the Court on numerous occasions since 3 April 2014, the respondents took no steps to vary or discharge the product restraint and only raised the "withdrawal" of the injunction in correspondence on 11 June 2014. The first applicant also contended that the product restraint had not been improperly obtained. It submitted that all necessary material disclosures had been made at the time the product restraint was sought, including an acknowledgement by it, at that time, that the respondents were entitled to import and supply genuine goods. However, the first applicant's case at that time was that the respondents were not importing or supplying genuine goods. 23 The first applicant also submitted that the respondents' right to obtain an award of damages pursuant to an undertaking as to damages is an equitable right, which may be lost by application of the ordinary principles of laches and of acquiescence, or by reference to the various discretionary matters that are taken into account when equitable relief is sought: F. Hoffmann-La Roche & Co. A.G. v Secretary of State for Trade and Industry [1975] AC 295 at 361. Here, the first applicant pointed again to the evidence of importation and supply during the restraint period, notwithstanding the order that had been made. It also pointed to the evidence showing that, during the restraint period, the first respondent continued to advertise the goods in question. The first applicant submitted that all these activities constituted misconduct on the part of the respondents which would disentitle them to the relief they claim. 24 Now is not the time for me to make any findings of a final nature in relation to such matters. However, a preliminary assessment of the cross-claim indicates that, based on the first applicant's submissions, there are a number of matters that might be legitimately raised in defence, such as to demonstrate that there is a real possibility that the cross-claim might not succeed. 25 I should record that the respondents also pointed to the fact that they have made their own application for security for costs in the principal proceeding. They submitted that the determination of the present application should await the determination of their own application. I reject that submission. The respondents have not brought on their own application for hearing at the present time because they say they are awaiting further information to enable them to do so. There is no reason why there should be any delay in determining the present application. 26 Mr Mattock has deposed to his assessment of the likely costs to be incurred by the first applicant in defending the cross-claim. He has estimated that the first applicant's future costs will be $81,375. On the basis that the first applicant is entitled to recover 100% of its disbursements and 75% of its solicitors' fees, the first applicant submitted that security in the amount of $67,781.25 should be given. 27 The respondents have submitted that the Court should not approach its task by providing a complete indemnity in respect of the amount of the security to be provided. They submitted that "sufficient security" should be provided. They also submitted that the Court is not bound to accept the first applicant's estimate of the costs likely to be incurred. 28 I accept the general tenor of these submissions. I note, however, that Mr Mattock's assessment of the amount of the first applicant's likely costs has not been challenged in any way whatsoever. I have also brought to bear my own assessment of the likely work to be involved in meeting the cross-claim as pleaded. I accept that there are likely to be difficult evidentiary questions concerning the causation of the alleged loss and the quantification of the alleged damage. In my view, the amount sought as security by the first applicant is within the range of costs that might ultimately be awarded to it, assuming it is successful in its defence. 29 The respondents submitted that the present case might be an appropriate one on which the parties could agree on a timetable for providing security. No details of such a timetable were provided to me. I hold reservations that any agreement is likely to be forthcoming having regard to the respondents' attitude to providing security when the matter was first raised by the applicants' solicitors. In the circumstances, it seems to me that the better course is simply to make an order that security for costs be given in the sum sought. 30 The first applicant has succeeded in its application over the respondents' opposition. The first applicant should have its costs of the interlocutory application. 31 Finally, I note that, in the notice of cross-claim and statement of cross-claim, the first cross-claimant has been misnamed. The evident intention was to name Prestige Premium Deals Pty Ltd as the first cross-claimant, not United Prestige Group Pty Ltd, which is also named as the third cross-claimant. I shall order that the notice of cross-claim and statement of cross-claim be amended accordingly. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate: Dated: 24 July 2015