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Aardwolf Industries LLC v Riad Tayeh

Aardwolf Industries LLC v Riad Tayeh

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Case Copied 26 March 2020 82 min read

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Supreme Court

New South Wales

Medium Neutral Citation: AARDWOLF INDUSTRIES LLC v RIAD TAYEH [2020] NSWSC 299
Hearing dates: 27 August 2019
Date of orders: 26 March 2020
Decision date: 26 March 2020
Jurisdiction: Equity - Corporations List
Before: Rees J
Decision:
Refuse leave to sue liquidators

Catchwords:
CORPORATIONS — leave to sue Court appointed liquidator — principles at [81]-[89] – unfunded liquidators – directors initially uncooperative – directors said companies had no assets and dormant – directors through other corporate entities apply to register trade marks of companies in liquidation – director signs letter on behalf of company in liquidation consenting to new corporate entity acquiring trade mark rights – director accused of ‘phoenixing’ – director does not inform liquidator that companies in liquidation abandoned trade mark rights and other corporate entities acquired those rights through usage and oral assignment – liquidator assigns trade mark rights to petitioning creditor and plaintiffs’ competitor – international trade mark war – plaintiffs application for trade mark initially unsuccessful – liquidation ends – plaintiffs later establish abandonment in other proceedings - complaint made years after completion of liquidation and deregistration of companies – leave refused

INTELLECTUAL PROPERTY – trade marks – abandonment – principles at [45]-[47]

NEGLIGENCE – liquidator’s duty to third parties – principles at [97]-[103] – vulnerability – no vulnerability here
AUSTRALIAN CONSUMER LAW – whether liquidator engaged ‘in trade or commerce’ – principles at [113]-[118] – reliance by third party – poor prospects
Legislation Cited: Australian Consumer Law, ss 2, 18, 236
Civil Liability Act 2002 (NSW), s 5D(3)(b)
Corporations Act 2001 (Cth), ss 472, 475, 477(2)(c), 530A, 530A(3), 530A(6A)
Trade Marks Act 1995 (Cth), ss 17, 20, 21, 27(1), 44(1), 44(3), 44(4), 45, 52(1), 58, 72(3), 76, 78, 79, 92(4)(b), 95(2), 106, 107, 113, 215
Trade Marks Regulations 1995 (Cth), regs 9.6, 21.15(4)
Cases Cited: Aardwolf LLC v Aardwolf Industries Sole Member LLC, et al. (case no. CV 14-9556-GW(JEMx))
Abaco Machines (Australasia) Pty Limited v Aardwolf Australia Pty Limited [2015] ATMO 55; (2015) 114 IPR 204
Amcor Ltd v Peter J Ramsay and Associates Pty Ltd [2018] VSC 75
Anglo Coal (Dawson Management) Pty Limited v Greig [2011] FCA 941
Aobao International Pty Ltd v Action North American, Inc (2018) 143 IPR 358; [2018] ATMO 133
Armitage v Gainsborough Properties Pty Ltd [2011] VSC 419
Ausmart Services Pty Ltd (In Liq) v Zheng [2019] FCA 2162
Baxter v Hamilton (2005) 15 Tas R 59; [2005] TASSC 64
Bing! Software Pty Ltd v Bing Technologies Pty Ltd (No 1) (2008) 79 IPR 454; [2008] FCA 1760
Cmr of Taxation v Iannuzzi (No 2) [2019] FCA 1818
Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 92 ALR 193; (1990) 169 CLR 594
du Boulay v Worrell [2009] QCA 63
Eighty Second Agenda Pty Ltd v Handberg [2014] VSC 665; (2014) 32 ACLC 14-081
Elias v Alloha Formwork & Construction Pty Ltd [2017] NSWSC 1546
EOS Australia Pty Limited v Expo Tomei Pty…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2020] NSWSC 299
Decision Date: 26 March 2020

CaseChat Overview and Summary

Aardwolf Industries LLC sought leave to sue Riad Tayeh, the liquidator of two companies, alleging negligence and breach of Australian Consumer Law. The dispute arose from the liquidation of the two companies, where the plaintiffs claimed that the liquidator had mismanaged the trade mark rights of the companies, resulting in substantial loss. The Federal Court was asked to determine whether the plaintiffs had standing to bring the action against the liquidator, and if the liquidator had breached any duties owed to third parties, including potential negligence and violations of Australian Consumer Law.

The court had to decide several key legal issues. Firstly, it needed to determine the principles governing the abandonment of trade marks and whether the trade marks in question had indeed been abandoned. Secondly, it had to examine the duties of a liquidator to third parties, specifically whether the liquidator owed any duties of care to the plaintiffs. Lastly, the court had to assess whether the liquidator engaged in trade or commerce under Australian Consumer Law and if the plaintiffs' reliance on the liquidator was justified.

In its reasoning, the court held that the plaintiffs' application for leave to sue was unsuccessful. The court found that the trade marks had not been abandoned, and the liquidator had acted appropriately in assigning the rights to a petitioning creditor. The plaintiffs' claims of negligence were also dismissed as there was no evidence of vulnerability or breach of duty by the liquidator. Additionally, the court ruled that the liquidator did not engage in trade or commerce under Australian Consumer Law, and thus the plaintiffs' reliance did not establish a breach. Given these findings, the plaintiffs' claims were deemed to have poor prospects of success.

The court ultimately refused the plaintiffs' application for leave to sue, dismissing their claims against the liquidator. The decision underscored the importance of proper management of trade mark rights during liquidation and the limited scope of a liquidator's duties to third parties.

Orders