Anchorage Capital Partners Pty Limited v ACPA Pty Ltd & Anor

[2018] HCATrans 150

[2018] HCATrans 150

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S38 of 2018

B e t w e e n -

ANCHORAGE CAPITAL PARTNERS PTY LIMITED

Applicant

and

ACPA PTY LTD

First Respondent

ANCHORAGE CAPITAL GROUP LLC

Second Respondent

Application for special leave to appeal

KIEFEL CJ
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 17 AUGUST 2018, AT 10.15 AM

Copyright in the High Court of Australia

MR M.J. DARKE, SC:  May it please the Court, I appear with my learned friends, MR P.W. FLYNN and MR S.J. HALLAHAN, for the applicant.  (instructed by Corrs Chambers Westgarth)

MR A.J.L. BANNON, SC:  May it please the Court, I appear for the respondents with my learned friends, MR C. DIMITRIADIS, SC and MR R.W. CLARK.  (instructed by Herbert Smith Freehills)

KIEFEL CJ:   Yes, Mr Darke.

MR DARKE:   Your Honours, the appeal for which we seek special leave would raise, for the first time in this Court, a question of growing importance in relation to the law of trademarks, namely, what conduct of a foreign trader amounts to use of a trademark in the course of trade in Australia in relation to services such as to make the foreign trader the owner of that mark in relation to those services?

That question arises in this case in circumstances where the foreign trader, being the second respondent, was found to own the Anchorage marks in relation to certain financial services despite the fact that at the relevant time, in 2007, it had not provided those or, indeed, any financial services in Australia and was not lawfully able to carry on a business of providing financial services here.

Your Honours, may I start by mentioning four principles which are of relevance to the question we have identified and which appear, from the respondent’s written argument, not to be disputed and then proceed directly to the Full Court’s reasons in an attempt to demonstrate that the case merits the consideration of this Court.

As to the principles, the first is that the use of a trademark which is required to establish ownership of the mark under section 58 of the Act in relation to particular goods or services is use of the mark in relation to the goods or services so as to indicate a connection in the course of trade in Australia between the goods or services and the person said to be the trademark owner. 

Secondly, the requirement that the use of the mark be such as to indicate a connection in the course of trade does not mean that there must be an actual dealing that is an actual supply of the goods or services under the mark in Australia, but, critically, it does mean that the mark as used must be accompanied by at least an existing intention, objectively manifested, to offer or supply the goods or services under the mark in trade in this country.

KIEFEL CJ:   There is no dispute about that, as you say.

MR DARKE:   There is no dispute about that.  The third principle is that for a person to use a mark with an existing intention to offer or supply goods or services under the mark in trade that person must be ready, that is, able, and willing to respond to orders for the goods or services by an already open trading channel here.  That was held by Justice McGarvie in the Settef v Riv‑Oland Marble Case (1987) 10 IPR 402 at 416 and 417 and we set out in paragraph 23 of our application the relevant parts of his Honour’s reasons.

His Honour based what he said there on earlier decisions of this Court, including the “Yanx” Case (1951) 82 CLR 199, to which Justice Deane referred in Moorgate and of course on what Justice Deane had said in Moorgate itself.  But what underlies that third requirement or that third principle is the idea that in order for a trademark to be used so as to indicate a connection in the course of trade in Australia the goods or services in relation to which the mark is used must actually be on the Australian market.  In the language of Justice Williams in the “Yanx” Case, a case about cigarettes, there must actually be a vendible article in the Australian market or, in the case of services, vendible services.

KIEFEL CJ:   Is your argument then based upon the notion that there must be an existing business carried on?

MR DARKE:   I do not need to go that far, your Honour, no.  But what I submit is that the person who has used the mark must be ready and willing to provide their services here in Australia.

KIEFEL CJ:   Does that take it very much beyond the notion of intention?

MR DARKE:   Well, it does in this sense.  In a sense it does not.  But the concept of “ready and willing” is simply a reflection of the intention objectively manifested.

KIEFEL CJ:   Intention and ability?

MR DARKE:   Yes.  So one must be able to provide the services lawfully in this country, we respectfully submit.

KIEFEL CJ:   But if you did not have the ability to you would not have the relevant intention, so you are driven back to it being intention and that is all.

MR DARKE:   Well, we say that the concept of intention is informed by the requirement that one be ready and willing to provide the services.

KEANE J:   So it has to be a real intention.

MR DARKE:   It has to be a real intention.

KEANE J:   If it has to be a real intention you have four judges finding that a real intention existed.

MR DARKE:   But without – critically without – focusing on the readiness of the second respondent to provide its services in the Australian market.

KIEFEL CJ:   Well, that is to deny any form of conditional offer or offer to treat or – it is to circumscribe the intention, is it not, to immediate supply?

MR DARKE:   Yes.  It is to require that the person who has used the mark is presently able to supply the goods or services in the Australian market.  It does not mean that there must be an offer which is capable of acceptance in a contractual sense. But a requirement, in order for there to be an existing intention, in our submission, is that the person who claims to have used the mark be at that point in time actually ready and able to supply the services in this market.

KEANE J:   So does it come down to a question of onus as to who has to show the putative user is able to do what they are proposing to do?

MR DARKE:   There is a question of onus.  We say that the question of onus must rest on the party claiming to have used the mark.  In this case that was the second respondent that was asserting that my client was not the owner of the mark because it had made prior use of the mark.

KEANE J:   Was there a case raised that the putative user could not do what was required to be done in order to meet any orders that might be generated?

MR DARKE:   Yes, that was what we submitted, your Honour.  We submitted that was the case because the second respondent did not have an AFSL nor did it have the benefit of any class order exemption that would permit it to actually provide services in this jurisdiction at the relevant time.

KEANE J:   That it could not obtain, in the ordinary course of its affairs, that which was required?

MR DARKE:   No, it was not our submission that it could not obtain but that it had not obtained and it did not in fact obtain until 2009, well after 2007, which was when the courts below found that the second respondent made use of the trademarks.

The fourth principle that I wanted to mention and I will just mention it briefly is this, that where, as here, the question is one of trademark use in relation to services, for the use to indicate a connection in the course of trade in Australia between the services and the person said to be the owner of the mark crucial integers in the course of trade involved in the provision of the services must take place in Australia.  That is what Justice Gummow said when his Honour was a member of the Federal Court in Carnival Cruise Lines Inc v Sitmar Cruises.

Your Honours, that brings me to the Full Court’s reasons.  The section of those reasons dealing with ownership of the Anchorage marks begins at page 89 of the application book.  Their Honours start by summarising a number of the relevant authorities, in particular, at paragraph 51 on page 90 their Honours quote the relevant parts of Justice Deane’s reasons in Moorgate (No 2) and in paragraphs 44 and 45 their Honours refer to a number of authorities on trademark use.

We do not point to any explicit misstatement of principle in those parts of their Honours’ reasons, but we do note that their Honours do not elaborate on Justice Deane’s concept in Moorgate of an existing intention to offer or supply goods bearing a mark in trade.  They certainly do not explain that concept as requiring the foreign trader to be ready and willing to offer or supply under the mark by an already open trading channel, which is what was held in Settef SpA v Riv‑Oland and nor do they identify the need in cases involving service marks for crucial integers in the course of trade under the mark to take place in Australia, as Justice Gummow did in Carnival v Sitmar.

The significance of those matters is apparent when one comes to the critical parts of their Honours’ reasons, which begin at paragraph 87 on page 101, under the heading “Did the second respondent intend to offer to supply its services in Australia?”  Their Honours deal there with the question of whether the second respondent had an intention to offer to supply its services in Australia in 2007 when it sent the slide presentation to a couple of Australian email addresses – that being the conduct which their Honours found amounted to trademark use. 

Now, this part of their Honours’ reasoning has a number of components.  Can I just step through them?  Paragraphs 87 to 92 give a general introduction to that part.  At the end of paragraph 92, in the last sentence, their Honours summarise our submission as being, in essence, that the second respondent did not have any intention of providing financial services in Australia in early 2007 because to do so would have contravened section 911A of the Corporations Act.

That summary of our submission accurately reflects its focus, which was on what the position would have been had the second respondent actually provided its financial services in Australia in 2007.

KIEFEL CJ:   That is that it could not legally respond to any orders?

MR DARKE:   Precisely – at the time it sent the slide presentation in 2007, which is the relevant time at which its readiness or ability to respond to orders is to be assessed.

KIEFEL CJ:   Which is to deny the possibility of it contracting forward.

MR DARKE:   Well, no.  In my submission, it is not to deny that possibility.  If it were the case that the second respondent could lawfully contract forward, then that might be sufficient to amount to a use of the trademark.  But it could not lawfully contract forward because it had no lawful ability to offer and supply financial services in this jurisdiction at the time.  The next component of their Honours’ reasoning is at paragraphs 93 through to 102 ‑ ‑ ‑

KIEFEL CJ:   What did the Full Court say about that?

MR DARKE:   Your Honours, the Full Court’s reasoning on the critical issue really does not emerge until paragraphs 114 and 115.

KIEFEL CJ:   Yes, 115 – it was “open to the second respondent to obtain a financial services licence”.

MR DARKE:   Indeed.  That is their Honours’ reasoning.  In our submission that reasoning effectively does away with the requirement that a foreign trader be ready or able to provide its services in Australia in order for it to have used the mark in the course of trade here.  In doing away with that requirement, the Full Court’s reasoning does away with the requirement that for a trademark to be used so as to indicate a connection in the course of trade in Australia between the relevant goods or services and their foreign trader, the goods or services must actually be on the Australian market, that they must be the service equivalent of an actual vendible article here in the Australian market.

The second respondent’s financial services were not, in 2007, a vendible service on the Australian market in circumstances where the second respondent was not yet lawfully able to provide those services here.  That was a position, as I said, that did not change until 2009.  Now, if, as we respectfully submit, their Honours were wrong in doing away with that requirement, then it is a significant error in an important area of law which requires, in our submission, the intervention of this Court.

KIEFEL CJ:   The respondents put against you that there was not actually a need to have an AFSL, that the second respondent was covered by the class order.  I think it is 03/824.

MR DARKE:   They do put that and, with respect, they are wrong about that.  The class order operated and it is set out, your Honours, at paragraph 91 of the Full Court’s reasons.  A person only had the benefit of the class order in circumstances where – and this emerges from subparagraph (b) of paragraph (1) of the class order – that person would not be carrying on a financial services business in Australia “but for section 911D”.

Section 911D, which is summarised in paragraph 90, effectively deems a person to be carrying on a financial services business in this jurisdiction if the person engages in conduct that is intended to induce people in the jurisdiction to use that person’s financial services. 

So section 911D does not cover the provision of financial services; it only covers conduct or applies to conduct intended to induce people to use financial services.  As a result, if the second respondent was actually providing financial services it would have been, in our submission, carrying on a financial services business in this jurisdiction other than by reason of the deeming provision in section 911D.  So it would not have had the benefit of the class order to which it refers.  So that is no answer to the submission that we make.

Now, if, as we respectfully submit, their Honours were wrong in what their Honours found or held in paragraph 115, that is a significant error and it does away with ‑ ‑ ‑

KEANE J:   But is it not – when one looks at paragraphs 114 and 115, at 114 they say:

Put shortly, the appellant submitted that a person could not acquire ownership of a trade mark on the basis of an intention to provide services in Australia that the person could not lawfully provide.

Their Honours do not accept that submission.  They say:

It is sufficient to say that the submission wrongly assumes that the second respondent could not carry on the business of providing financial services in Australia.

So they have concluded, as a matter of fact – an impression, if you like – that your contention that they could not carry on business providing financial services was wrong.  So the case turns on that conclusion.

MR DARKE:   But it is their reasons for that conclusion that make the error clear and the first of the two reasons they give is the one that I have just addressed, that is, that it was always open to the second respondent to go and obtain a financial services licence or to bring itself within another class or exemption relating to US SEC regulated financial service providers.

That reasoning does away with the requirement which is an important part of trademark law in this country that, in order for a foreign trader, who has not actually provided goods or services in this jurisdiction under a trademark to be found to have used that trademark here, the foreign trader must be found to have been ready at that point in time or able – that is another way of saying it – to provide its goods or services here under the mark.

KIEFEL CJ:   Your case on this point is that if you have a legal impediment at that point in time ‑ ‑ ‑

MR DARKE:   Yes, you are not ready.

KIEFEL CJ:   You cannot say that you are not ready. 

MR DARKE:   You are not ready; you are not able at that point in time.

KEANE J:   Even though as a matter of fact the impediment can be overcome and it is obvious that there is a willingness and ability to overcome the impediment?

MR DARKE:   Well, on the facts of this case, the second respondent ultimately overcame the impediment some two years later in 2009.  I do not recall there being evidence as to how easy it would have been for the second respondent to overcome that impediment.  The onus would be on the second respondent in that respect and so this may raise an issue of onus of the kind that your Honour mentioned earlier.  I do not accept that it would have been an entirely easy and straightforward matter for the second respondent to get an AFSL or to bring itself within an exemption.

KEANE J:   What if it is?  On the proposition that you are putting forward, why is not your proposition that even if it is possible and, indeed, easy to overcome any impediment you cannot establish an intention to trade in such circumstances?

MR DARKE:   I do go that far, and that is an important issue for this Court to determine.  It is an issue where the Full Court has found against me.  But I may succeed, even if the Full Court of this Court does not accept a submission that goes as far as that because I may succeed on the basis that the second respondent has not proved that it would have been easy for it to obtain an AFSL that requires an exemption.  But I do go so far as a matter of principle as to put the submission that your Honour just mentioned to me.

KIEFEL CJ:   Does your application for special leave then come down to the legal impediment point because if it is otherwise you would be trying to disturb the findings of fact in relation to intention?

MR DARKE:   It does come down to the legal impediment point.  That is the way we have put it in our written submissions and that is the way I am seeking to put it to your Honours now.  That is not to say that we accept the findings that the Full Court has made in relation to the other aspects of intention to use, but what ‑ ‑ ‑

KIEFEL CJ:   But you would not need to go there if you are right about the impediment.

MR DARKE:   If I am right on this legal impediment point, I do not need to go there, and what makes this case worthy of the High Court’s consideration is, in our respectful submission, the legal impediment point.  Your Honours, I should just finish off on paragraph 115.  Their Honours do advance a second reason in the last sentence of that paragraph for their rejection of our contention and that is where their Honours say that:

ownership of a trade mark can be acquired as a result of slight use that need not occur in the course of carrying on a business in Australia.

That general statement does not really address the issue, in our submission.  The issue here is not whether there was – the issue here is whether there was trademark use at all and that turns on whether the second respondent was ready to provide its financial services in Australia such that those services were on the market here, and it is difficult to see how that could have been the case in circumstances where the second respondent did not hold an AFSL or the benefit of an exemption from the requirement to hold one.

That is particularly so when one has regard to the fact that for there to be in relation to services trademark use, crucial integers in the course of trade involved in the provision of those services have to take place in Australia.  So, their Honours’ second reason does not, in our respectful

submission, grapple with the issue.  Your Honours, those are our submissions.

KIEFEL CJ:   Yes, Mr Bannon.

MR BANNON:   Your Honours, we submit it is a quintessential question of fact twice determined adversely and the question does boil down to intention.  Our learned friends put these arguments about inability as informing intention, not as a separate limitation as to inability.  One has of course the starting point in paragraph 106 of the judgment.

KIEFEL CJ:   Well, actually I was not sure about that.  I thought in the end Mr Darke was saying that legal impediment itself is conclusive; we do not need to overturn intention.

MR BANNON:   That was not the way it was put below.  The way it was put below was that the reason why one should find that they did not intend is because there would be a legal reason why they could not supply at the time.

KIEFEL CJ:   So it would not be real intention?

MR BANNON:   It would not be real intention.  What you have here is findings from the court that the slide presentation was sent on two occasions in January 2007, and that is the findings of the primary judge.  The Full Court supplemented that in paragraph 122 - application book 109 at the top of the page – with findings that the same slide presentation was sent again in September and October 2007. 

At 108 in paragraph 118 their Honours refer to the slide presentation as a “marketing and promotional document”.  There cannot be any issue about that, which includes the references to the trademarks.  Back at 106 there is a reference to some cross‑examination of the second respondent’s witness, Mr Fitzpatrick, and it was actually put to him that the document was being delivered into the hands of potential investors and, as their Honours say:

The inference that the documents were sent to potential investors for the purpose of attracting investments in the Anchorage Funds is compelling.

So that once one has a finding of intention and an ability to deal with any issue which there may exist – and this of course would not just apply to this case – any foreign exporter of goods may, for example, need a specific export licence to send some goods.  There may be all sorts of regulatory requirements which have to be attended to.  But the point of the trademark issue is, is there a use - and advertising without any supply is use – that is the Oil Drop Case.  It is confirmed in Moorgate. 

So that merely advertising the sale - for example, a property developer advertises the sale of units to be built.  That is going to require a solicitor.  That is going to require all sorts of regulatory steps.  They cannot be actually supplied there and then.  That does not mean it is not in the course of trade.

But on the very specific point as to whether or not there was an impediment, there are two aspects of the Corporations Act order which have to be looked at.  The first is, if I could take your Honours to the actual section, 911A, and the court did address this and I will take your Honours to it.  At page 170 of the application book is 911A, which is the need for a licence.  You only need a licence under subsection (1) if you are carrying on a business in Australia.

KIEFEL CJ:   The Full Court held that it was not.

MR BANNON:   It was not carrying on a business in Australia.  So the only way in which one would not be able to supply services once or on isolated occasions would be if the supply of one service or an isolated occasion would constitute the carrying on of a business.  Their Honours referred to Luckins Case which says isolated transactions do not constitute the carrying of a business.  There was no place of business here in the country.  So there was no actual impediment, and that last sentence of 115 is what their Honours are referring to, and they deal with that earlier in the judgment, as I will take your Honours to.  The point about the 911D, if one goes to page 175, that says:

a financial services business is taken to be carried on in this jurisdiction by a person if, in the course of the person carrying on the business -

that is, business anywhere, and there is no dispute we were carrying on the business of supplying these services overseas at the very time, so we had product, we had funds to supply:

the person engages in conduct that is:

(a)intended to induce people in this jurisdiction to use the financial services the person provides; or

(b)     is likely to have that effect -

So that the supply of the slides is apt to induce people to acquire a service and that fact of itself would deem us to be carrying on a business under 911D and prima facie we would need a licence.  But that is where the exemption order comes into play.  Just going back to what my learned friend took your Honours to on application book 102, what that provides is an exemption from a person to require a licence where all of the following – sorry, looking at the chapeau:

exempts a person from the requirement to hold an Australian financial services licence for the provision of a financial service –

that is, the actual provision:

where all of the following apply:

(a)       the service is provided to wholesale clients only –

The evidence was these documents were being provided to wholesale clients, major companies, not individual investors.  So, for this to apply, the service is actually provided.  So this exemption provides for the very circumstance where the service is actually provided, which is completely consistent with Luckins, namely, that you can provide a service on an isolated occasion without carrying on a business here.  So this is absolutely confirmatory of its applicability to our particular situation.  Then:

(b)but for section 911D . . . would not be carrying on a financial services business -

In other words, if the only reason you are carrying on a business is 911D, then you can get the benefit of this exemption, and:

(c)the person does not hold an Australian financial services licence –

which we did not hold.  So, putting all those threads together, if the only reason we were carrying on a business here was 911D and we were not otherwise carrying on a business, then this can apply; we satisfy both of those conditions.  Did we – or on this occasion would we have provided a service to a wholesale client?  Yes.  This very exemption says you can provide a service to a wholesale client, consistently with Luckins, without needing a licence.  The only reason you cannot do that is if it is carrying on a business.  Their Honours addressed all this.  They addressed that in paragraph – having referred to 91, their Honours at paragraph 99 at the top of page 104 referred to Luckins and at paragraph 101 their Honours said:

It may be that as a result of sending the slide presentation to Australia, the second respondent could be taken to have been carrying on a financial services business in Australia by reason of the operation of s 911A –

We all agree that is a typo and should be 911D:

Whether or not that is so is a matter on which it is unnecessary . . . However, even if the second respondent was to be taken as carrying on a financial services business –

i.e., via 911D:

the Class Order would most likely have applied to it, relieving it of the need to hold an Australian financial services licence.

Accordingly, we do not accept that s 911A of the Corporations Act is of any assistance in determining –

whether there was an intention to offer.  So, that is a finding that 911A would not apply in that circumstance.  Then one comes to 115 – so we have complementary points in 115.  One is the point which is to say well, you can always get a licence, just like you can always get an export licence; you can get any other regulatory approval.  Then the last sentence:

It also ignores the fact that ownership of a trade mark can be acquired as a result of slight use that need not occur in the course of carrying on a business –

That is referring back, admittedly slightly obliquely, but we all understand what it is referring back to, the points that there are two clear legal reasons why there was no impediment.  We also say that there was no cross‑examination of Mr Fitzpatrick to say, “You didn’t intend to supply these services because you didn’t think you could”.  In other words, once you establish intention of a major corporation which has capacity to do all sorts of things – get licences, deal with things – it is a very difficult step for the applicant in this case to say, “We didn’t have an intention to actually do those things and overcome whatever impediments there were”.

At the end of the day, this case is not a case which raises any issue in relation to the Trade Marks Act.  It is a case which raises at best an issue as to what constitutes carrying on a business and the interpretation and interaction of 911A and 911D and the class order, not a matter which warrants the consideration of this Court.

KIEFEL CJ:   Anything in reply, Mr Darke?

MR DARKE:   Just briefly, your Honours.  As to how the matter was put below, we certainly did put below that the legal impediment the second respondent faced by reason of not having an AFSL was a reason why the court would not find an existing intention.  But we also put that as a result of that legal impediment the second respondent was not ready to provide its services in Australia.  That was the reason why it had not engaged in trademark use.

Secondly, insofar as my friend places reliance on paragraphs 93 to 102 of the Full Court’s reasons, what their Honours are dealing with there is whether the second respondent was in fact at the relevant time, that is, in January 2007, carrying on a financial services business in Australia.  That is apparent from paragraph 93 below line 40 on page 102 of the application book.  Their Honours are not dealing with the question of whether, had the second respondent actually provided its services in this jurisdiction, it would have been carrying on a financial services business.

Their Honours in 93 to 102 are really not dealing with the main argument that we put which is that, had the second respondent provided its services here, it would have been carrying on a financial services business and therefore needed an AFSL.  So, really one comes back to paragraph 115 which is the only place where the Full Court dealt with what we say is the critical issue in the case and the Full Court’s approach was erroneous for the reasons that I submitted in‑chief.  Those are our submissions.

KIEFEL CJ:   This application involves the application of settled principles to the facts.  We see no reason to doubt the conclusions reached by the courts below.  Special leave is refused with costs.

The Court will adjourn to reconstitute.

AT 10.47 AM THE MATTER WAS CONCLUDED