Australian Karting Association v Karting (New South Wales) Incorporated
[2022] FedCFamC2G 614
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Australian Karting Association v Karting (New South Wales) Incorporated [2022] FedCFamC2G 614
File number(s): SYG 1649 of 2019 Judgment of: JUDGE BAIRD Date of judgment: 2 August 2022 Catchwords: INTELLECTUAL PROPERTY – PRACTICE AND PROCEDURE – application for leave – affidavit filed over 600 days out of time – evidence not relevant to pleaded issue – delay not adequately explained for whole period –leave refused – application dismissed, with costs Legislation: Evidence Act 1995 (Cth) s 131
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 190, 191
Trade Marks Act 1995 (Cth) ss 58, 59, 60, 88, 92, 101
Cases cited: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Division: Division 2 General Federal Law Number of paragraphs: 35 Date of last submission/s: 22 July 2022 Date of hearing: Determined on the papers Place: Sydney Counsel for the Applicant: Mr J S Cooke and Mr J M Elks Solicitor for the Applicant: Simpson & Philips Solicitors Counsel for the Respondent: Ms G Rubagotti and Mr G Tsang Solicitor for the Respondent: Barry Nilsson Lawyers ORDERS
SYG 1649 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: AUSTRALIAN KARTING ASSOCIATION LIMITED
Applicant
AND: KARTING (NEW SOUTH WALES) INCORPORATED
Respondent
ORDER MADE BY:
JUDGE BAIRD
DATE OF ORDER:
2 AUGUST 2022 2022
THE COURT:
1.DISMISSES the applicant’s application in a proceeding dated 20 June 2022.
2.ORDERS the applicant pay the respondent’s costs of and incidental to the application.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
Judge Baird
This proceeding concerns claims of copyright infringement in certain manuals and forms, and infringement of registered trade mark, and cancellation and removal of trade mark. The applicant, Australian Karting Association Limited (AKAL), sues the respondent, Karting (New South Wales) Incorporated (KNSW), for infringement of copyright, and infringement of Australian registered trade mark number 1604069 (069 Mark). The 069 Mark is a composite mark comprising a stylised image of driver with helmet in a motor kart, a background chequerboard pattern, and the stylised words KARTING, and ‘NEW SOUTH WALES’, registered in respect of specified services in class 41 of the Register of Trade Marks. KNSW cross‑claims for cancellation and removal of the 069 Mark, and seeks relief for unjustified threats for copyright and trade mark infringement.
The proceeding is presently set down for final hearing before me to commence on Tuesday 23 August 2022, with an estimate of 3 days. As presently constituted, that estimate is conservative. The dates for final hearing have been set down since 29 September 2021.
By application in a proceeding dated 20 June 2022, AKAL seeks leave to rely on the affidavit of AKAL’S Chief Executive Officer, Kelvin O’Reilly, affirmed 20 May 2022 (on its face dated 20 May 2020). The O’Reilly affidavit is made in response to KNSW’s cross‑claim for cancellation and removal of the 069 Mark. KNSW opposes leave. By consent the application is to be heard and determined on the papers.
In support of the application AKAL relies on the affidavit of its lawyer, Michelle Sandow, affirmed 20 June 2022. In answer on the application KNSW relies on the affidavit of its lawyer, Thomas Byrne, affirmed 28 June 2022. I have before me the O’Reilly affidavit. It comprises 24 paragraphs (9 pages), and including annexures, over 330 pages in total.
I have had the benefit of written submissions by AKAL in support (dated 6 July 2022), by KNSW opposing the grant of leave (dated 15 July 2022), and by AKAL in reply (dated 22 July 2022). I have considered the parties’ affidavits on the application, and the parties’ submissions.
The proceeding was commenced on 1 July 2019, and the first case management hearing took place before me on 24 July 2019. By consent, further to orders made 9 June 2022, the further amended originating application and further amended statement of claim were both filed on 10 June 2022, the defence to that claim was filed on 30 June 2022. An amended reply to an earlier amended defence was filed 10 June 2022 as well.
The cross‑claim was filed on 9 October 2019, and the defence to cross‑claim was filed on 14 November 2019. It has not been amended. Relevantly to the application before me, the cross‑claim alleges grounds for cancellation, or alternatively, removal of the 069 Mark pursuant to ss 88 and 101 of the Trade Marks Act 1995 (Cth) (TM Act), inter alia, on grounds under ss 58, 59, and 60 of the TM Act, and for non‑use under s 92. The grounds for cancellation of the 069 Mark under s 88 of the TM Act relevantly arise from the pleaded fact (which is not in dispute) that the application for registration of the 069 Mark was filed on 4 February 2014 in the name of Performance Management and Marketing Pty Ltd (PM&M), in circumstances where the day before, AKAL had applied for registration of a trade mark KNSW alleges to be substantially identical to the 069 Mark, for the same services or same kind of services. PM&M subsequently filed a request of a full assignment or transmission of trade mark form with IP Australia, including a letter of assignment signed by Mr O’Reilly, as managing director of PM&M, which the Registrar by her delegate accepted. The 069 Mark subsequently proceeded to registration in the name of AKAL.
KNSW alleges that AKAL is not the owner of the 069 Mark (s 58 ground), that the amendment of the application for registration to AKAL was obtained as a result of false suggestion or misrepresentation (cancellation under s 88(2)(b) of the TM Act), and that PM&M had no intention to use, or authorise the use of the 069 Mark at the date of filing (s 59 ground).
In its defence to the cross‑claim, inter alia, AKAL denies the s 58, false suggestion, and s 59 allegations, and to each allegation says that PM&M filed for registration of the 069 Mark as agent for AKAL. Separately, in answer to the ground of removal for non-use in respect of designated services (s 92), AKAL denies the allegations of non‑use, and further says that to the extent the 069 Mark has not been used in respect of some of the designated services, the Court should in its discretion not remove the Mark as it applies to those services due to its use in respect of similar or closely related services. AKAL says that KNSW is not entitled to the relief sought.
In a final paragraph of its defence to cross‑claim, paragraph [56], AKAL says that to the extent that the cross‑claim seeks orders under s 88 of the TM Act, the Court should exercise its discretion under s 88(1) to refuse to cancel the 069 Mark on the basis that KNSW consented or acquiesced to the registration of the 069 Mark at the time of its registration. It provides no particulars. AKAL’s defence makes no reference to any case of mistake, inadvertence, or administrative error.
It is not in dispute that the O’Reilly affidavit is substantially out of time. Counsel for KNSW submits that the evidence for the most part was due some 610 days earlier, on 17 September 2020, and also that AKAL’s delay is 680 days. Given the timetabling orders in place which I set out below, to say that the affidavit is very late is an understatement.
Timetabling orders for evidence on the cross‑claim were made by me on 17 November 2019. They were varied on 12 May 2020 by consent to provide that the parties exchange evidence concurrently on the cross‑claim on 29 May 2020. KNSW filed and served its evidence on the cross‑claim in May and June 2020. AKAL did not. It has been in default of the timetable since then. The parties were engaged in without prejudice settlement negotiations regarding the trade mark issues in the proceeding for at least some of the time since then. Without prejudice settlement negotiations on the trade mark aspect of the proceeding commenced in June 2020.
Ms Sandow and Mr Byrne were involved in those settlement negotiations. Ms Sandow sets out a chronology, and makes some observations about the events described in the chronology. Mr Byrne supplements that chronology, and annexes various without prejudice correspondence, privilege in which is not waived by reason of s 131(2)(g) of the Evidence Act 1995 (Cth).
Ms Sandow says that the settlement negotiations commenced in June 2020, and continued until May 2022. She says “in early May 2022, it became clear to [her] that KNSW was no longer engaging in the settlement dates. In the light of the upcoming trial dates the O’Reilly affidavit was prepared and served as efficiently as possible”. It is apparent from that chronology, supplemented by Mr Byrne, and by the correspondence annexed, that those negotiations were intermittent, at best, for much of the period.
Mr Byrne says that by reason of his involvement in the negotiations and correspondence, he has understood since 9 November 2020 that the parties had reached, or were very likely to reach, an impasse on the negotiations to settle the trade mark claims.
As I have said, I have reviewed the correspondence, and the parties’ chronologies. I do not accept either party’s characterisation of the progress of the settlement negotiations, or the period they were on foot. It suffices to observe that the Court was informed at various times that settlement negotiations were ongoing, and, at one time, that it appeared a resolution had been reached concerning the trade mark aspect of the proceeding. It is unnecessary to set out the detail of the parties’ correspondence. Having regard to the parties’ evidence, I am satisfied that at least following early November 2020, negotiations were intermittent, and that there was a significant period before early May 2022, where communications had broken down. For the purposes of the present application it is unnecessary to decide more precisely when or whether the settlement negotiations reached an impasse, or broke down, or to attribute failure of the negotiations to any party.
Ms Sandow summaries Mr O’Reilly’s evidence. First, in paragraphs [5]-[22] of the O’Reilly affidavit, Mr O’Reilly says that on 4 February 2014 he filed for the 069 Mark in the name of his personal consultancy company, PM&M, by mistake. He says he filed the 069 Mark in the name of PM&M as “Applicant” instead of “Agent” for AKAL. He describes the actions he took subsequently. Ms Sandow then explains that at [23]-[25] of his affidavit Mr O’Reilly explains AKAL’s use of the 069 Mark, at [26]-[33], Mr O’Reilly explains authorised use of the 069 Mark by KNSW under licence until it was terminated prior to the commencement of the proceeding (on AKAL’s case), and at [36]-[45] Mr O’Reilly conducts WayBack Machine searches of the parties’ websites showing use of the 069 Mark at the relevant times.
AKAL submits that the application for leave should be granted because there has been an adequate explanation for the delay (settlement negotiations), and there is little or no prejudice to KNSW if the O’Reilly affidavit is relied on at the final hearing. It submits the evidence at [5]-[20] of the O’Reilly affidavit is relevant to the grounds for cancellation under s 58, and s 88(2)(b) of the TM Act, or the Court’s exercise of discretion under s 88(1) not to cancel the Mark. It submits the balance of the O’Reilly affidavit is relevant to the grounds under s 59 and s 88 of lack of intention to use, and under s 92 for non‑use, and finally to the Court’s discretion whether or not to cancel the Mark if it decides that there was not sufficient use of the Mark in relation to the relevant services in the relevant period.
AKAL submits that it would be prejudiced if it could not rely on the O’Reilly affidavit, pointing to the above. It submits that there is little or no prejudice to KNSW because the affidavit has been served 3 months out from the hearing, many of the examples of use are already in evidence but this is a convenient repository for all the evidence of “use” of the 069 Mark for ease of the Court, and the remaining annexures that are “new evidence” largely consist of KNSW’s own documents. The quotation marks I have used here are AKAL’s.
For KNSW, Mr Byrne states that he did not previously understand AKAL intended to advance an argument relating to Mr O’Reilly’s administrative error in filing for the 069 Mark. He says he would have sought production of certain categories of documents from PM&M, which categories he sets out. In AKAL’s submissions in chief, AKAL states that PM&M and AKAL would agree to an order to review and produce any non‑privileged documents responsive to those categories within 7 days. It is not clear whether they would produce documents absent any such order, or whether they have volunteered the requested documents.
KNSW submits that Ms Sandow’s characterisation of the O’Reilly affidavit is incorrect. It says what Mr O’Reilly does in [5]-[20] of the affidavit is depose to his subjective intention that AKAL be nominated as applicant, and PM&M as agent. This is not the case that has been pleaded. KNSW submits that no part of the affidavit goes to establishing any facts, matters or circumstances upon which a relationship of agency between AKAL and PM&M could be found.
I accept KNSW’s submission. A review of the cross‑claim pleadings reveals that in its defence AKAL does not plead any discretionary defence in response to the s 88 grounds of cancellation. It does not particularise any “mistake” (as AKAL characterises it). In its defence to cross‑claim AKAL has maintained that PM&M filed the application for the 069 Mark as agent. It follows that AKAL, by the O’Reilly affidavit – at least in the above paragraphs, seeks to introduce new material into the proceeding that is not referable to any issue in dispute. It is irrelevant.
In submissions in reply, AKAL appears to concede that it did not “make explicit reference” to Mr O’Reilly’s “inadvertent” error. It says that whilst it did not explicitly refer to the CEO’s “mistake” the defence did plead a “global discretionary defence pursuant to s 88(1) [of the Act]”. As is apparent from my reference to [56] of the defence to cross‑claim summarised above, the discretion of the Court is said to be enlivened because KNSW acquiesced, not because Mr O’Reilly made an error. I do not accept that the defence pleaded encompasses the explanation now posited.
AKAL says, in any event, that KNSW is not taken by surprise because Ms Sandow asserted in correspondence in June 2020 that “the evidence will show that it was fully disclosed to IP Australia that in the process of registering the mark, Mr O’Reilly marked the wrong box, identifying PM&M as applicant rather than agent”. That evidence has now been filed.
AKAL, in reply submits that “to the extent that KNSW requires an amended defence to be filed to understand the case it is to meet at trial on these issues, [AKAL] seeks leave to rely on” a proposed amended defence attached to its reply submissions.
The additional matters set out in the amended defence now proposed make clear the changes to the defence sought to be propounded are substantial, albeit that they seek to enliven the Court’s exercise of discretion. These matters were not previously raised. I do not consider that Ms Sandow’s reference to evidence in June 2020 provides clear or sufficient evidence of the defence now proposed to be mounted as articulated in the draft amended pleading attached to the reply submissions, or Mr O’Reilly’s evidence.
It is apparent from Mr O’Reilly’s affidavit, assuming for present purposes that I accept the evidence on its face, that AKAL has known since before filing the defence to cross‑claim in November 2019, of the explanation now propounded, and sought to be pleaded. There is no explanation at all why that explanation was not notified in the defence to cross‑claim in November 2019, nor why there has not been any attempt to amend the defence at any time prior to reply submissions. It was not pleaded, it was not particularised. I do not accept that it is merely a matter of not making explicit Mr O’Reilly’s explanation. The explanation cannot be discerned in the current pleading.
If the defence is not pleaded, it cannot be raised. Generally, parties are bound by their pleaded cases. That is what is before the Court for decision. There is no formal application before me to amend the defence to cross‑claim. I do not propose to allow an amended defence, absent notification and formal application for leave. KNSW has not been given an opportunity to be heard on the matter.
Further, and in any event, I do not accept that now amending the defence to cross claim is merely a matter of what KNSW needs to be appraised of in order to meet the case at trial, as AKAL puts the question of leave to rely on the proposed amended defence. It is further a matter of compliance with the overarching purpose evident now in ss 190 and 191 of the Federal Circuit and Family Court of Australia Act 2021 (Cth), and of satisfying the Court that leave is appropriate in the circumstances.
I do not consider the present explanation for the delay (settlement negotiations) – even were I to accept it on its face – suffices to explain the lack of pleaded case since November 2019, and especially before June 2020, or in the periods where the negotiations had stalled.
As to the remaining paragraphs of the O’Reilly affidavit, whilst I accept that it may assist the Court to have material organised and collected in one place, I am not persuaded that introducing some 230 or so pages of annexures is consistent with the overarching purpose. Without a more coherent explanation, merely annexing hundreds of pages is not efficient, nor does it assist the Court.
KNSW has focussed its opposition to the O’Reilly affidavit on 3 bases, irrelevance by reference to the pleaded case, inadequacy of the explanation for delay, and unfair prejudice. I have accepted its arguments concerning the pleaded case, and I consider the arguments as to delay have some merit. For these reasons, I do not grant leave to AKAL rely on [5]‑[20] of the O’Reilly affidavit. I accept KNSW’s arguments on the tendentious nature of paragraphs [21]-[22], and that paragraphs [34]-[35] relate to the principal claim, which – it appears - was not the subject of the settlement negotiations. I do not grant leave to rely on those paragraphs.
This leaves paragraphs [23]-[33] of Mr O’Reilly’s affidavit. KNSW’s overarching submission has been that the delay is extremely long, and the explanation is inadequate. I accept that there have been some settlement negotiations, however it is apparent from both Ms Sandow’s and Mr Byrne’s affidavits, that the communications between the parties have been sporadic, and that the negotiations had stalled at various times, and particularly during 2021. That negotiations revived in May this year does not provide an adequate explanation for the lack of action in the preceding period. Further, and most relevantly, the orders were that the parties exchange evidence by mid 2020 – that is, that it be concurrent. There is no explanation why AKAL did not comply with the then extant orders for exchange of concurrent evidence in the period before June 2020.
For these reasons, having regard to the principles set out by the High Court of Australia in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175, I am not persuaded that it is appropriate to allow AKAL’s application for leave to rely on the O’Reilly affidavit at the final hearing listed to commence this month.
The application is dismissed, with costs.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Baird. Associate:
Dated: 2 August 2022
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