Beyond Properties Pty Ltd v Knight
[2009] FMCA 779
•14 August 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BEYOND PROPERTIES PTY LTD & ORS v KNIGHT | [2009] FMCA 779 |
| BANKRUPTCY – Review of Registrar's decision to adjourn creditors’ petition – “other sufficient cause” why a sequestration order should not be made – offsetting claim – abuse of process – public interest – sequestration order made. |
| Bankruptcy Act 1966, ss.52(1), 52(2)(a) & (b) Federal Magistrates Court Rules 2001 (Cth), r.20.03 |
| Cain v Whyte (1933) 48 CLR 639 Dowling v Colonial Mutual Life Assurance Society Ltd (1915) 20 CLR 509 Edward James Bride & Anor v KMG Hungerfords (A firm) [1998] FCA 412 Knight v Beyond Properties Pty Ltd [2007] FCA 70 Ling v Commonwealth (1996) 68 FCR 180 Re Coyne; Ex parte: Binningup (South) Pty Ltd [1993] FCA 81 Re Dominic Maddestra; Clyde William Badger and Christopher John Borella Ex parte: Penfolds Wines Pty Ltd [1993] FCA 15 Re LHF Wools [1970] Ch 27 Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 Rozenbes v Kronhill (1956) 95 CLR 407 Williams v Spautz (1992) 174 CLR 509 |
| Applicant: | BEYOND PROPERTIES PTY LTD |
| Second Applicant: | BEYOND INTERNATIONAL LTD |
| Third Applicant: | DISCOVERY COMMUNICATIONS INC |
| Fourth Applicant: | SPECIAL BROADCASTING SERVICE CORPORATION(SBS) |
| Fifth Applicant: | FOXTEL MANAGEMENT PTY LTD |
| Sixth Applicant: | BEYOND PRODUCTIONS PTY LTD |
| Respondent: | ANDREW KNIGHT |
| File Number: | ADG 203 of 2008 |
| Judgment of: | Simpson FM |
| Hearing date: | 1 July 2009 |
| Date of Last Submission: | 1 July 2009 |
| Delivered at: | Adelaide |
| Delivered on: | 14 August 2009 |
REPRESENTATION
| Counsel for the Applicant: | Ms S. Goddard S.C. with Mr R. Ross-Smith |
| Solicitors for the Applicant: | DLA Phillips Fox |
| The Respondent: | There being no appearance by or on behalf of the respondent |
ORDERS
The order of the Registrar of 13 May 2009 adjourning the hearing of the creditor’s petition to 17 August 2009 at 9.00 am be dismissed.
A sequestration order be made against the estate of Andrew Knight.
The applicant creditor’s costs be taxed and be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
The Court notes that the act of bankruptcy is 30 April 2008.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADG 203 of 2008
| BEYOND PROPERTIES PTY LTD |
Applicant
| BEYOND INTERNATIONAL LTD |
Second Applicant
| DISCOVERY COMMUNICATIONS INC |
Third Applicant
| SPECIAL BROADCASTING SERVICE CORPORATIONS (SBS) |
Fourth Applicant
| FOXTEL MANAGEMENT PTY LTD |
Fifth Applicant
| BEYOND PRODUCTIONS PTY LTD |
Sixth Applicant
And
| ANDREW KNIGHT |
Respondent
REASONS FOR JUDGMENT
Introduction
I have before me an Application for Review of a decision of Registrar Christie of 13 May 2009. At that time the Registrar adjourned the hearing of a petition for the sequestration of the estate of Andrew Knight (“the respondent”) to 17 August 2009 at 9.00am giving liberty to apply and reserving costs. The applicants say that the sequestration order should have been made and should now be made on the review.
The creditor’s petition was filed on 8 September 2008 and relies on the applicants’ judgment debt against the respondent for the sum of $541,973.92. The debt arose from a costs order made in Federal Court proceedings on 10 December 2007.
An application for review of a Registrar’s decision proceeds by way of a hearing de novo.[1] In reviewing the orders the Court is obliged to begin afresh and exercise for itself any discretion exercised by the Registrar. This includes being satisfied of the various matters referred to in s.52 of the Bankruptcy Act 1966 (Cth) (“the Act”).
[1] See r.20.03 of the Federal Magistrates Court Rules 2001 (Cth) (“FMCR”).
Respondent’s involvement in the hearing
The somewhat unusual circumstances of the hearing of this Application for Review of a Registrar’s decision demands an explanation. The unusual circumstances are brought about by the fact that, although the respondent was ordinarily resident in Australia when the act of bankruptcy was committed, for some time now he has resided in the United Kingdom. On a number of occasions orders have been required as a result of the respondent’s absence from Australian shores.
On 13 October 2008 Registrar Christie made the following orders:
1.Personal service on the respondent of Creditors Petition No ADG 203 of 2008, copies of the affidavits verifying the petition and a copy of any consent to act as trustee be dispensed with.
2.In lieu of personal service, an official copy of the Creditor’s Petition, copies of the affidavits verifying the petition, a copy of any consent to act as trustee and a sealed copy of this order be served on the respondent by:
a)Prepaid ordinary post addressed to the respondent at PO Box 131 Woodside in the State of South Australia; and
b)Prepaid airmail addressed to the respondent at 190 Shaftesbury Avenue, London WC2H 8JL in the United Kingdom; and
c)Emailing a scanned copy of the documents to [email protected];
3In each instance referred to in paragraph 2 hereof, the documents be accompanied by a letter stating the date of posting or emailing, as the case may be.
4.Service in accordance with this order shall be deemed good and sufficient service of the said documents upon the respondent.
5. If service is effected in accordance with this order, the said documents shall be deemed to be served on the respondent on the tenth day after the date on which all the methods of service referred to in paragraph 2 hereof have been effected.
6.The hearing date of this petition be amended to 10 November 2008 at 2.15pm.
7. Costs of and incidental to this application are reserved.
When the respondent filed his notice of opposition to the creditors’ petition on 7 November 2008 he gave his address for service as
PO Box 131 Woodside, SA 5244. As well as giving this South Australian post office box address, the respondent’s supporting affidavit filed the same day also showed that his email address was [email protected].
On 17 March 2009, with the respondent appearing by telephone in the UK, Registrar Christie made the following orders in relation to the hearing of the creditor’s petition:
1.The matter be listed for hearing at 9.00 am on Friday 17 April 2009.
2.The respondent to file and serve written submissions by 4.30 pm on 8 April 2009 service to be by email to the applicant using the address: [email protected]
3. Costs be reserved.
On 14 April 2009 the respondent filed an outline of argument and on 16 April 2009 an affidavit of himself sworn 14 April 2009 in London.
The creditors’ petition was heard on 17 April 2009 and the Registrar’s decision made on 13 May 2009. The Registrar ordered that the creditors’ petition be adjourned to 17 August 2009. This is the decision now under review.
The Application for Review first came on before me for directions on 4 June 2009. The parties had previously been advised that the application was listed for hearing at 10.00 am on 18 June 2009.
On 4 June 2009 the applicants were represented by Counsel but there was no appearance by or on behalf of the respondent. The following orders were made:
1.The applicants file and serve material to be relied upon by 10 June 2009 at 10am.
2.The respondent file and serve material to be relied upon by 15 June 2009 at 12 noon.
3.The applicants file and serve an outline of submissions by 15 June 2009 at 5pm.
4.The respondent file and serve an outline of submissions by 17 June 2009 at 5pm.
5.The respondent be permitted to appear by telephone at the hearing on 18 June 2009 at 10am providing that he communicates with the Associate to Federal Magistrate Simpson on (08) 8219 1000 or by email to [email protected] or [email protected] to confirm that he wishes to do so.
6.The respondent have liberty to apply to have the matter called back on prior to the hearing to seek such variation to these orders as he considers necessary and appropriate.
7.Solicitors for the applicants to advise the respondent of these orders.
When the matter came on before me on 18 June 2009 the applicants appeared by their Counsel and the respondent appeared by telephone. The respondents requested that the hearing be adjourned as he needed more time to prepare, file and serve material for the hearing. I acceded to this request. The following orders were made:
1.This matter be listed for hearing before FM Simpson on 1 July 2009 at 10.00 am (SA time) (Noting half a day allowed).
2.The time for the respondent to comply with paragraph 2 of the Order made on 4 June 2009, being the filing and serving of all material upon which he intends to rely at the hearing, is extended to not later than 12pm (SA time) on 25 June 2009.
3.The time for the applicants to comply with paragraph 3 of the Order made on 4 June 2009, being the filing and serving of an Outline of Submissions, is extended to not later than 12pm (SA time) on 29 June 2009.
4.The applicants be at liberty to file and serve any responding affidavit material by not later than 12pm (SA time) on 29 June 2009.
5.The time for the respondent to comply with paragraph 4 of the Order made on 4 June 2009, being the filing and serving of his Outline of Submissions, is extended to not later than 3pm (SA time) on 30 June 2009.
6.The respondent be permitted to appear by telephone at the hearing on 1 July 2009 at 10am PROVIDED THAT he telephones the Registry on (08) 8219 1000 just prior to the commencement time.
On 1 July 2009 at about 10.00 am the respondent contacted the Court by telephone. The Court was unable to immediately embark on the hearing as it had other court commitments. The respondent was informed that the Court would commence the hearing as soon as it was able to and that he should ring back at 10.45 am South Australian time. It became clear during that telephone conversation that the respondent had not complied with the orders made on 18 June 2009 concerning the filing of any further affidavit material and submissions and that he wished to do so. Arrangements were made with Court staff for the respondent to forward his material for consideration by the Court prior to the matter being brought on later that day. The material was eventually sent through to the Court. The respondent failed to ring back at 10.45 am as requested. Attempts were made by the Court staff to contact the respondent by telephone in the United Kingdom but the recorded message received was that the respondent’s phone could not receive the call. The matter was adjourned to 2.15 pm in the hope that before then the respondent would ring back in which event he would be told of the adjourned time.
The respondent did contact the Registry at some time after the matter had been adjourned to the afternoon at 2.15 pm South Australian time. He was told that he should ring the Court at 2.10 pm as the matter had been listed for argument at 2.15 pm. The respondent was further advised that if he failed to do so the matter would be heard without him being present by telephone. The respondent failed to contact the Court at 2.10 pm. The Court waited a further 15 minutes and then commenced hearing submissions on behalf of the applicants at
2.25 pm. No further contact was made with the Court by the respondent on the day that submissions were heard.
It is unfortunate that the respondent was not present by telephone to hear the submissions put on behalf of the applicants but a full opportunity was given for him to do so. It was necessary for the Court to proceed with the submissions on 1 July 2009 as the applicants had twice been ready to proceed. They were entitled to have their application proceed notwithstanding the respondent’s non-attendance by telephone.
Material before the Court
The evidence and other material put before the Court on the Application for Review is as follows:
Document Description Date Filed
a) Creditor’s Petition 8/9/2008
b) Affidavit of Peter Tehan 8/9/2008
c) Affidavit of Lynette Ireland 8/9/2008
d) Affidavit of Jonanthon Torpy 8/9/2008
e) Affidavit of Kristen Welch 8/9/2008
f) Notice stating Grounds of Opposition to
Creditor’s Petition 7/11/2008
g) Affidavit of Andrew Knight 7/11/2008
h) Affidavit of Peter George Charatsis 10/11/2008
i) Affidavit of Shannon Elizabeth Platt 14/12/2008
j) Outline of Petitioning Creditors 10/2/2009
k) Outline of Argument of Respondent 14/4/2009
l) Affidavit of Andrew Knight 16/4/2009
m) Outline of Applicant’s Submissions in
Response 16/4/2009
n) Application for Review 29/5/2009
o) Affidavit of Shannon Elizabeth Platt 10/6/2009
p) Affidavit of Peter Tehan 29/6/2009
q) Applicant’s Submissions 29/6/2009
r) Affidavit of Debt of Peter Tehan 1/7/2009
s) Affidavit of Debt of Jonathan Torpy 1/7/2009
t) Affidavit of Debt of Simon Ward 1/7/2009
u) Affidavit of Debt of Susan Story 1/7/2009
v) Affidavit of Andrew Knight (unsworn) Not filed
w) Affidavit of Andrew Knight sworn 24.6.09 1/7/2009
x) Reasons of Registrar Christie 13/05/2009
There was no application by the applicants or respondent to call oral evidence or to cross-examine the deponent to any affidavit. In relation to item 14(v) above I have treated that document as submissions rather than evidence as it is an unsworn affidavit.
Background
The background to this creditor’s petition proceeding is helpfully detailed in the reasons of Registrar Christie of 13 May 2009 as follows:
“Mr Knight deposes that he coined the name ‘Mythbusters’ in 1988 and subsequently authored three books under the name ‘Mythbusters’. In addition, he claims he promoted a television series about the investigation of myths, in which the presenters were known as ‘Mythbusters’, to television executives in Australia between 1994 and 2004. He further deposes that in 2000 he registered ‘Mythbusters’ as a business name in Australia and purchased the rights to the domain name or about 2002, one or more of the applicants commenced using the name ‘Mythbusters’ for a television series and subsequently released ‘spin off’ books in Australia.
On 12 May 2004 Mr Knight applied, by application number 1001523, to register an application for an Australian trade mark ‘Mythbusters’ in classes 16 and 41 (including printed matter and including entertainment). The application was accepted, apparently on 27 August 2004, and its acceptance advertised on 6 September 2004. A Notice of Opposition was lodged by one of the applicants, Beyond Properties Pty Ltd (Beyond Properties), on 7 December 2004 (the resultant proceedings are referred to hereunder as the ‘trade mark proceedings’). It appears a competing application was subsequently also lodged by one or more of the applicants.
Proceedings giving rise to creditors petition
On 25 January 2005 Mr Knight commenced an action in the New South Wales District Registry of the Federal Court of Australia (the Federal Court) alleging that the applicants had breached s 52 of the Trade Practices Act 1974 (Cth) and committed the tort of passing-off by producing and distributing a television series entitled ‘Mythbusters’ and ‘spin-off’ books. Mr Knight claimed the right to the name ‘Mythbusters’ as a result of his use of that term in books that he had written and in approaches he had made to television production companies. A cross claim instituted by Beyond Properties and Beyond International Ltd alleging that letters written by Mr Knight to their customers or potential customers containing allegations regarding the name ‘Mythbusters’ were themselves misleading and deceptive was not pressed on the last day of trial. On 8 February 2007 the primary application was dismissed with costs by Buchanan J. Relevantly his Honour found that:
“Mr Knight had established that he had a reputation in Australia as the author of children’s books bearing the name ‘Mythbusters’;
He had also established that he had a reputation with members of the group whom he had tried to interest in the idea of a series based upon his concept of ‘Mythbusters’ but did not establish a reputation with the Australian television viewing public;
The production, distribution and broadcasting of the ‘Mythbusters’ television program caused damage to Mr Knight’s plans for a program of the same name;
Mr Knight did not establish deception or misrepresentation of or to the Australian television viewing public or production executives or establish a case of passing off;
In the absence of any formal protection of the name ‘Mythbusters’ by its registration under the Trade Marks Act 1995 (Cth) Mr Knight was obliged to demonstrate a distinctive secondary meaning associated with him so as to establish a proprietary interest but failed to do so;
Mr Knight did not establish the tort of passing-off and misleading and deceptive conduct in relation to the ‘spin off’ books.”
His Honour also formally dismissed the cross claim and awarded costs of the cross claim to Mr Knight. On 22 August 2007 the costs in relation to the primary application were estimated at $528,000.00 by a taxing officer and, in the absence of any objection, a Certificate of Taxation subsequently issued on 19 September 2007. By order of 10 December 2007 Mr Knight was ordered to pay this amount to the applicants. The costs of the cross claim do not appear to have been set off from the debt claimed and indeed there is no evidence that they have yet been quantified. It appears that at least one other interlocutory costs order in Mr Knight’s favour may also not have been set off from the debt claimed or indeed been quantified.
Mr Knight appealed to the Full Court of the Federal Court but that appeal was dismissed with costs on 19 November 2007. These costs have not yet been taxed.
On 14 December 2007 Mr Knight filed an application for special leave to appeal from that decision to the High Court of Australia (High Court). On 13 March 2009, the application for special leave was refused with costs.
Trade mark proceedings
Despite the passage of some five years, the trade mark proceedings remain unresolved. Mr Knight claims the reason for this delay primarily relates to repeated requests for extensions of time and suspension by the applicants. His affidavit of 6 November 2008, sets out at para 31.1 to 31.16 the extension and suspension applications that have been made. The timeline contained in it is broadly consistent with the material contained in the affidavit of Shannon Elizabeth Platt sworn on 3 December 2008 and filed on behalf of the applicants. Mr Knight deposes that:
“31.1 On 2 March 2005, despite being on notice of my trade mark application since September 2004, Beyond applied for an extension of time within which to serve its evidence-in-support to 7 June 2005. The application was granted.
31.2 On 7 June 2005 Beyond applied for another extension of time within which to serve its evidence-in-support to 7 September 2005. The application was granted. Beyond did not serve any new evidence within the extra time period granted.
31.3 On 29 November 2005 I served my evidence-in-answer without any application for further time.
31.4 Following service of my evidence-in-answer Beyond requested a five-day extension for filing its evidence-in-reply purporting that a one-page statutory declaration was not served with the main body of my evidence-in-answer on 29 November 2005. Despite the fact that the Trade Mark Office held that the one-page statutory declaration had been served on Beyond in time, the five-day extension was granted.
31.5 On 6 March 2006 Beyond applied for an extension of time within which to serve its evidence-in-reply to 6 June 2006. The application was granted, however, the Senior Trade Mark Examiner, Mr Sinclair, put Beyond on notice that it would be highly unlikely that any further request for an extension would be granted unless there were compelling reasons.
31.6 On 5 June 2006 Beyond applied for a further extension of time within which to serve its evidence-in-reply to 6 August 2006. The application was granted even thought the Hearing Officer stated that the reasons given by Beyond for the delay in service were not considered “compelling”.
31.7 Just prior to the matter proceeding to be set down for hearing, Beyond applied for a suspension of the opposition decision until after the determination of the proceedings.
31.8 The Hearing Officer advised that she did not intend to allow the suspension, following which Beyond requested a hearing for the suspension.
31.9 In letter dated 27 July 2006 the Hearing Officer made the procedural direction that both the hearing for the suspension and the main opposition hearing would be held at the same time. Beyond opposed having the hearing for the suspension and the hearing for the substantive matter heard together.
31.10 The Trade Mark Office reasserted that both matters would be heard at the same time and the likely hearing date would be 29 August 2006. Following this, Mr Pollock of Spruson & Ferguson, trade mark attorney for Beyond, advised that the hearing would not take place on the day proposed by the Trade Mark Office as he would be on holiday around 17 August 2006 to around 4 September 2006.
31.11 After being requested by the Trade Mark office to confirm available dates Beyond’s attorney indicated in his letter of 15 August 2006 that Beyond’s counsel was available to attend a hearing on 15 September 2006. This was also confirmed by Beyond’s trade mark attorney Mr Pollock on the telephone to my solicitor, Ms Ciccocioppo on 15 August 2006. However, Beyond’s attorney asserted that the hearing for the matter would take more than one day and since the 15 September 2006 is a Friday the hearing could not take place on 15 September 2006 as the hearing could not ‘spill-over’ into a Saturday.
31.12 After the Hearing Officer advised in an email dated 17 August 2006 “I have considered Mr Pollock’s comments but I fail to see why both matters cannot be heard on the one day… It appears that a one day hearing starting at 9am on 15 September [2006] in Canberra will be sufficient and is a date that would suit both sides”. Following this, Beyond’s attorney advised under cover of letter dated 17 August 2006 that Beyond’s counsel was now not available on the 15th of September 2006 or “any other date in September”.
31.13 Further, on or about 23 August 2006 Beyond filed and served an application in the Federal Court against the Registrar of Trade Marks (first respondent) and I (second respondent). Beyond’s application was an application to review the decision of the delegate of the Trade Mark Registrar made on 27 July 2006 to have both the hearing for the suspension and the main opposition hearing at the same time (referred to above). Prior to the hearing of Beyond’s application the Trade Marks Office reversed its decision to hear the substantive matter and the suspension at the same time and allowed the suspension of the trade mark opposition proceedings.
13.14 Beyond applied for a further suspension of the opposition proceedings pending the outcome of my appeal to the Full Court of the Federal Court and this led to the continuing suspension of the trade mark proceedings.
13.15 Following the decision of the Full Court, the Trade Mark Office proposed the hearing of the opposition be set down for April 2008. However Beyond advised that its counsel was unavailable at that time.
13.16 Recently, the trade mark office has granted a further suspension following Beyond’s request that the trade mark matter is suspended until after the hearing High Court Application and any subsequent appeal.”
The proceedings were last suspended pending the determination of the High Court application for special leave to appeal, however, that matter has now been resolved and there is no evidence before me to suggest that, at least at this time, any further reason for delay has been put forward. It appears from the material before me that the matter will be listed on the next available convenient Sydney hearing date.
Mr Knight claims that if he is successful in his trade mark application he will have a prima facie right to bring a claim for damages or account of profits against the applicants for infringement of the trade mark and for damage caused to him by their actions. He has deposed that the amount sought would be at least $1.2 million but has not provided details of how that amount was arrived at. He says he is not able to quantify any amount that would be claimed on account of profits in the absence of the financial records of the applicants.
United Kingdom proceedings
In 2006 Mr Knight commenced proceedings in the High Court of England and Wales, against Beyond Properties, Beyond Productions Pty Limited (Beyond Productions), Beyond International Services Limited (Beyond International Services) and Discovery Communications Incorporated (Discovery) seeking damages and injunctive relief in relation to the ‘Mythbusters’ name in what appears to be an action similar in nature to the Federal Court proceedings (although the relevant factual issues differ somewhat). The application was dismissed on 24 May 2007 and permission to appeal the decision was refused on 21 June 2007. Costs were ordered to be assessed but an order was also made that on an interim basis payment be made in an amount of ₤300,000. Those costs have not been paid by Mr Knight. Mr Knight filed an application in the Court of Appeal seeking an extension of time in which to file a Notice of Appeal from that decision, permission to appeal that decision and a stay of execution of the order for costs. On 3 March 2008 that application was also dismissed.
Mr Knight has also deposed to his having commenced new proceedings in the High Court of England and Wales against Beyond Properties, Beyond Productions, Beyond International Services, Beyond International Limited, Discovery, Simon and Schuster Inc and John Luscombe. Mr Knight claims that Beyond Properties and the other defendants are (and have been) selling and promoting books under the ‘Mythbusters’ mark in the United Kingdom even though they denied they were doing so in the earlier proceedings. It is not clear on the evidence before me what stage these proceedings have reached.
Hong Kong proceedings
Mr Knight has also deposed that he owns the ‘Mythbusters’ trade mark in Hong Kong in classes 16 and 41. He states that he has put the applicants on notice of a claim with respect to infringement of the ‘Mythbusters’ trade mark in the Hong Kong jurisdiction. There is no further evidence before this Court as to the particulars of Mr Knight’s claim or indeed, whether those proceedings have been commenced at all.
Singapore proceedings
On or about 27 October 2005 Mr Knight commenced action in the High Court of the Republic of Singapore seeking damages and injunctive relief in respect of the ‘Mythbusters’ trade mark from Beyond International and Beyond Properties in an action that again appears to have been substantially similar in nature to the Federal Court proceedings. As a result of him not complying with an order for payment of security for costs in an amount of S$35,000.00 the application was dismissed on 2 February 2007 with costs. A Certificate of Taxation issued against Mr Knight for an amount of S$97,353.66 of which S$87,353.66 remains owing.
Other Proceedings
Other proceedings between the parties also appear to have commenced in the USA (currently stayed by consent until the finalisation of the trade mark proceedings and the UK proceedings) and more recently in Malaysia.”
The review proceedings
On the basis of the evidentiary material tendered before me I am satisfied of the matters referred to in sub-s.52(1) of the Act namely, the matters stated in the petition, that service of the petition was effected, and that the debt on which the applicants rely is still owing. Having made these findings I am able to make a sequestration order against the estate of the respondent unless the respondent satisfies me that, either, he is able to pay his debts, or, there is “other sufficient cause” why a sequestration order should not be made.[2] The respondent does not argue that he is able to pay his debts but says that for “other sufficient cause” the order should not be made. The respondent seeks dismissal of the petition or, alternatively, adjournment of the hearing of the petition pending determination of the trade mark proceedings.
[2] Ss.52(2)(a) and (b) of the Act.
The respondent’s argument that there is “other sufficient cause” for making the orders that he seeks has three limbs. He says, firstly, that he has a claim against the applicant petitioning creditors that exceeds the amount of the judgment debt. Second, he says that “(these) bankruptcy proceedings are being used to seek an advantage outside of the bankruptcy process itself”. He submits that this would amount to an abuse of process and the creditors petition would have to be dismissed. Finally, the respondent says that it is not in the public interest for the sequestration order to be made. Again, he submits that, if made out, the petition should be dismissed.
I will address in turn each of these three arguments put forward by the respondent.
Offsetting claim
If the respondent can show that he has a claim against the petitioning creditor equal to or exceeding the amount of the judgment debt the Court should dismiss the petition. The respondent must show that the claim is a genuine and serious one which he has not reasonably been able to litigate[3]. It must be a ‘real claim’ likely to succeed, having sufficient validity to justify a dismissal or adjournment[4]. An arguable claim by itself does not necessarily constitute “other sufficient cause” within the meaning of sub-s.52(2)(b) of the Act to justify dismissal or adjournment of the creditor’s petition. There is a public interest consideration in dealing with insolvent debtors which the Court must consider in addition to the interests of the individual parties. There is also a public interest consideration in dealing with creditors’ petitions promptly and before they expire. In Re Dominic Maddestra; Clyde William Badger and Christopher John Borella Ex parte: Penfolds Wines Pty Ltd[5] (Maddestra’s case”) Lee J said in somewhat similar circumstances to these:
“Nine months have passed since the hearing of the petition was adjourned without the Supreme Court litigation being any closer to resolution and, indeed, if it were to go to trial it could not expect to be heard within fifteen months. Furthermore, I am satisfied, as counsel for the petitioner submits, that the litigation does not have on its face a real appearance that it is capable of satisfying the demands of the petitioner … in the short term, a matter to be borne in mind when assessing … the public interest in these petitions. If collateral litigation is well advanced and likely to bring a beneficial result to a debtor, there may be a good cause for the Court not to make a sequestration order and it may be satisfied that such an order ought not to be made…. The point has come where a determination must be made whether the petition should be dismissed or sequestration order made.” (emphasis added).
[3] Re LHF Wools [1970] Ch 27.
[4] Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 at 116.
[5] [1993] FCA 15, Unreported, Federal Court of Australia, Lee J 3 February 1993, paras.21-23.
The applicants submissions in relation to the offsetting claim can be summarised as follows:
a)The resolution of the trade mark proceedings will not occur in the foreseeable future and, in any event, will not give rise to a current entitlement to damages; and
b)The respondent has not produced evidence to prove that his contingent entitlement on his trade mark claim even remotely approaches the amount of his current debt to the applicants.
I accept the respondent’s evidence[6] that the Australian Trade Mark Office has confirmed that the opposition proceedings before it have been set for the September sessions in Sydney to take place between
[6] See affidavit referred to in para.14(w) of these reasons.
7 and 11 September 2009. I also accept the evidence of Ms Platt[7] that:
[7] See affidavit referred to in para.14(o) of these reasons.
·a decision of the Registrar of Trade Marks would take 3 to 6 months to be handed down;
·an appeal by to a single judge of the Federal Court by the unsuccessful party in the opposition proceedings would take 1 to 2 years to be finalised;
·
an appeal to the Full Federal Court would take a further 6 to
18 months to be finalised; and
·an application for special leave to appeal to the High Court of Australia (“High Court”) would take about 1 year to be determined and a further year to hear and issue judgment in relation to the appeal.
If the respondent is successful at any stage of the opposition proceedings I consider it more likely than not that the applicants will appeal if an appeal is available. If however the respondent is ultimately successful in the opposition proceedings he will then, and only then, be in a position to commence his proceedings for damages for trade mark infringement to enforce his trade mark registration against the applicants or any of them (“the infringement proceedings”). The infringement proceedings are the proceedings that the respondent says will provide the offsetting claim against the applicants that amounts to “other sufficient cause” to dismiss or adjourn the creditors’ petition.
The respondent’s options in relation to the infringement proceedings will depend on the goods and services covered by the MYTHBUSTERS trade mark that the respondent is permitted to register. If the respondent obtains a trade mark registration in relation to books only, the respondent is unlikely to succeed in an infringement proceeding against any of the applicants. In the respondent’s failed Federal Court proceedings before Buchanan J against the applicants[8] His Honour said:
[8] Knight v Beyond Properties Pty Ltd [2007] FCA 70, unreported, Federal Court, Buchanan J, 8 February 2007.
“208. During the course of the proceedings I permitted Mr Knight to amend his Statement of Claim to plead causes of action against the first, second, third and sixth respondents in relation to the three spin-off books. The amendment was permitted in circumstances where, although it was opposed by the respondents, counsel for the respondents very fairly and properly conceded that he could not argue any question of prejudice arising from the amendment.
209. …
210.The Mythbusters books and the spin-off books are markedly different in every respect – size, appearance, concept and content. In any view there is no possibility of confusion between them. …
211. … In my view Mr Knight’s causes of action with respect to the spin-off books must be rejected.
212. In light of this finding it is only necessary to deal briefly with another contention on Mr Knight’s behalf.
213. It cannot be, and is not, alleged that any of the respondents is the publisher of the first or second Mythbusters book although it is admitted on the pleading that the third Mythbusters book is published by the first, second or sixth respondent. To overcome the lack of direct connection to publication of the first and second spin-off books Mr Knight sought to rely on the doctrine of ‘instruments of deception’ and, by that route, to attribute ultimate responsibility to one or more of the respondents with respect to the first and second spin-off books.
and later
217.… In the present case Mr Knight sought to apply the doctrine to books imported into Australia where not only had licensing for publication itself, occurred outside the jurisdiction but neither the importers nor publishers were parties to the proceedings.
218. Simon and Schuster and Wiley were licensed to publish the first and second books in the United States and Canada and did so. That conduct is not actionable in the present proceedings. They are not parties to the proceedings. The books were presumably imported into Australia in accordance with the liberty preserved by s.22A of the Copyright Act 1968 (Cth). It has not been shown that any of the respondents are responsible for or have any connection with their importation or sale in Australia. In my view the doctrine of ‘instruments of deception’ has no application to these circumstances.
219. It follows from these various conclusions that so much of the Further Amended Statement of Claim as attempts to raise causes of action in passing-off or under s.52 of the TP Act with respect to any or all of the spin-off books must also be dismissed.
If the respondent obtains a trade mark registration in relation to television services, the applicants (as respondents to the respondent’s infringement proceedings) could cross-claim for revocation of the respondent’s MYTHBUSTERS trade mark. I accept the evidence of Ms Platt that such trade mark infringement proceedings are likely to take about 2 years from issuing the application to delivery of judgment. If the applicants (in these proceedings) were unsuccessful in the infringement proceedings at first instance or on any appeal I consider it likely that they would appeal with further lengthy delay before the High Court either refused special leave or handed down its decision on the appeal.
It will be seen that the applicant has a formidable task ahead of him as a hopelessly insolvent and unrepresented litigant if he intends to continue with these various proceedings to their ultimate conclusion. The applicants already have very substantial costs orders against the respondent not only in Australian jurisdictions but also in other countries.
If able to pursue the trade mark proceedings as a result of this Court dismissing this creditors’ petition the respondent may well have to address applications for security for costs as well as further applications seeking a sequestration order. If there are no such application that are successful it is never the less clearly going to be many years before the offsetting claim is ultimately decided.
In my view the respondent’s proposed litigation can not be said to “have on its face a real appearance that it is capable of satisfying the demands of the petitioner… in the short term”[9]. This is particularly so since the respondent has not put forward any evidence as to the likely quantum of his offsetting claim. Instead, he says that the damage caused by the applicants’ infringement “… has been extensive and such damage exceeds the cumulative costs order awarded in the applicants’ favour”[10]. I can not and do not accept this statement at face value.
[9] The Maddestra case at paras.21-23.
[10] Affidavit of respondent sworn on 24 June 2009 and filed on 1 July 2009.
It is for the respondent to establish the existence of sufficient cause.[11] He has failed to provide any evidence of an important element of the offsetting claim aspect of his “sufficient cause” submission notwithstanding the detailed written submissions of the applicants[12] on the topic and their evidence in support of those submissions.
[11] Cain v Whyte (1933) 48 CLR 639 at 645-646; Ling v Commonwealth (1996) 68 FCR 180.
[12] Paragraphs 103 to 124 of the applicants’ submission filed on 29 June 2009.
I am not satisfied that the respondent’s offsetting claim, if it can be said he has one, is equal to or exceeding the amount of the judgment debt. I find that the respondent has failed to establish an offsetting claim as ‘other sufficient cause’ for declining to make a sequestration order.
Abuse of Process
I turn therefore to ‘abuse of process’ as “other sufficient cause”.
Again, the onus of proving abuse of process is on the respondent. It is a heavy onus[13]. The respondent must show that the applicants’ real intention in bringing the creditors petition was for some purpose that is not legitimate[14]. If there is no evidence of the creditors’ states of mind regarding improper motive the Court will not infer such[15]. Even if a creditor has an interest in the debtor being made bankrupt to stifle litigation, that in itself is not enough for refusing to make a sequestration order if, apart from that motive, the petitioning creditor is entitled to the order sought[16].
[13] Williams v Spautz (1992) 174 CLR 509.
[14] Rozenbes v Kronhill (1956) 95 CLR 407.
[15] Edward James Bride & Anor v KMG Hungerfords (A firm) [1998] FCA 412 (“Bride’s case”).
[16] Re Coyne; Ex parte: Binningup (South) Pty Ltd [1993] FCA 81.
In Dowling v Colonial Mutual Life Assurance Society Ltd[17] the petitioning creditor sought a sequestration order so that it could then have the debtor examined so as to ascertain the identity of persons who had instigated the debtor to be able to publish defamatory matters concerning the creditor. It was submitted on behalf of the debtor that the creditor’s petition was thereby an abuse of process. A majority of the Court found that in these circumstances there was only the ‘use’ of the creditor’s petition, and not the ‘abuse’ of the process. The Court said it would have been different if for instance there had been a finding that the creditor had threatened the debtor that if he did not give the names of the individuals, they would proceed to obtain the sequestration order. Such a course would have been an abuse of the process[18].
[17] (1915) 20 CLR 509.
[18] At pp.524-5.
I agree with Registrar Christie that this is clearly a case of “use” as opposed to “abuse” even if there was established (which I do not find there is) a desire to stifle the other litigation referred to in those reasons. There is no basis made out to dismiss the petition on this ground. In making this decision I have taken into account the detailed written submissions of the respondent contained in his various submissions and, in particular, those contained in the respondent’s document ‘Outline of Argument’ filed on 14 April 2009 (“Outline of Argument”) paragraphs 5 to 19 inclusive together with the evidence on which the submissions are based.
The Public Interest
The substantial submissions from the respondent on this topic are to be found in paragraphs 20 to 24 of the Outline of Argument. The respondent submitted that:
“This conduct (delaying the Trade Mark opposition proceedings to try to wear down the respondent) in comparison to the speed and urgency that if (sic) has pushed through these bankruptcy proceedings is indicative of a party attempting to manipulate the processes of the various court forums to its own advantage and abusing the over-arching objectives of these forums”[19].
[19] Outline of Submissions para.20.
It will be seen that this submission is very similar to the abuse of process argument. For the reasons stated earlier, I do not consider that there has been an abuse of process. I find that there is no credible evidence before the Court to justify a finding that the applicants have delayed the Trade Mark opposition proceedings and proceeded expeditiously with the bankruptcy proceedings to try to wear down the respondent, or that the applicants have improperly attempted to manipulate the processes of other courts to their own advantage without due regard to the proper conduct of those proceedings.
Conclusion
For the above reasons I see no proper basis for dismissing or further adjourning the creditors’ petition. I would make the orders sought by the applicant.
I certify that the preceding thirty-seven (37) paragraphs are a true copy of the reasons for judgment of Simpson FM
Associate: J. Semler
Date: 14 August 2009
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