Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (Pleadings Issues)
[2024] FCA 223
•12 March 2024
FEDERAL COURT OF AUSTRALIA
Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (Pleadings Issues) [2024] FCA 223
File number: NSD 1816 of 2004 Judgment of: PERRAM J Date of judgment: 12 March 2024 Catchwords: PRACTICE AND PROCEDURE – cross-claim – application to strike out certain paragraphs of Cross-Respondent’s defence – whether relevant parts of defence fail to disclose a reasonable defence or are otherwise an abuse of process in accordance with rr 16.21(1)(e)-(f) of the Federal Court Rules 2011 (Cth)
PRACTICE AND PROCEDURE – application to amend defence to cross-claim pursuant to FCR r 16.53 – standard to be applied – whether proposed amendments legally viable – where proposed amendments raised more than 30 years after events in question – whether delay prejudicial to Cross-Claimants
ESTOPPEL – estoppel by representation – whether pleading defective because no allegation of pre-existing legal relationship – whether principles in Waltons Stores (Interstate) v Maher (1988) 164 CLR 387 applicable – whether equity can enforce representation – whether representation can be communicated generally – promissory estoppel
EQUITY – whether laches available as a defence to a claim for declaratory relief pursuant to s 21 of the Federal Court Act 1976 (Cth) – nature of the property right in unregistered trade mark – whether knowledge of facts giving rise to claim is essential element of plea of laches – whether laches available as a defence to a claim for rectification of the Register of Trade Marks under s 88(1) of the Trade Marks Act 1995 (Cth)
TRADE MARKS – where Cross-Claimant seeks rectification of Register of Trade Marks – considerations relevant to exercising discretion under s 88(1) of the Trade Marks Act 1996 (Cth)
Legislation: Federal Court of Australia Act 1976 (Cth) ss 21, 31A, 37M(1)
Trade Marks Act 1995 (Cth) ss 21(1), 22(1), 27(1)(a), 58, 88(1), 89, 126
Federal Court Rules 2011 (Cth) rr 1.32, 16.21(1)(e), 16.21(1)(f), 16.53, 26.01(1)(e)
Trade Marks Registration Act 1875 (UK)
Cases cited: ACN 074 971 109 Pty Ltd (as Trustee for the Argot Unit Trust v The National Mutual Life Association of Australasia Ltd [2008] VSCA 247; 21 VR 351
Allen v Hay (1922) 69 DLR 193
Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd [2018] FCAFC 6; 259 FCR 514
Ashton v Pratt [2015] NSWCA 12; 88 NSWLR 281
Autocaps (Aust) Pty Ltd v Pro-Kit Pty Ltd [1999] FCA 1315; 46 IPR 339
Black v S Freedman & Co (1910) 12 CLR 105
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Caason Investments Pty Ltd v Cao [2015] FCAFC 94; 236 FCR 322
Carbone as Trustee for the S & N Carbone Family Trust v Mills [2019] NSWCA 15
Chapman v Michaelson [1909] 1 Ch 238
Commissioner of Taxation v Murry [1998] HCA 42; 193 CLR 605
Commonwealth v Verwayen (1990) 170 CLR 394
ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) FCR 302
Crawley v Short [2009] NSWCA 410; 262 ALR 654
CSR Ltd v Amaca Pty Ltd [2016] VSCA 320; 62 VR 359
Edelsten v Edelsten (1863) 1 De G J & S 185; 46 ER 72
Estoppel by Conduct and Election (3rd ed, Sweet & Maxwell, 2016), Patrick Keane KC
Falkingham v Peninsula Kingswood Country Golf Club Ltd [2015] VSCA 16; 318 ALR 140
Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 4) [2017] FCA 1345
Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (Permanent Stay) [2019] FCA 802
Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (Form of Orders) [2019] FCA 1772
Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. [2021] FCAFC 77; 159 IPR 58
First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd (2012) 15 HKCFAR 569
Furness Withy (Australia) Pty Ltd v Metal Distributors (UK) Ltd (The ‘Amazonia’) [1990] 1 Lloyd’s Rep 236
Fysh v Page (1956) 96 CLR 233
Giumelli v Giumelli [1999] HCA 10; 196 CLR 101
Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1
H Stanke & Sons Pty Ltd v O’Meara [2007] SASC 246; (2007) 98 SASR 450
Health World Ltd v Shin-Sun Australia Pty Ltd (2010) 240 CLR 590
Jorden v Money (1854) 5 HLC 185
JT International SA v Commonwealth [2012] HCA 43; 250 CLR 1
Kraft Foods Group Brands LLC v Bega Cheese Limited [2020] FCAFC 65; 377 ALR 387
KTC v David [2022] FCAFC 60
Lindsay Petroleum Company v Hurd (1874) LR 5 PC 221
Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39-40
Mualim v Dzelme [2021] NSWCA 199; 157 ACSR 367
Orr v Ford (1989) 167 CLR 316
Paragon Finance plc v DB Thakerar & Co (a firm) [1999] 1 All ER 400
Re Jermyn Street Turkish BathsLtd [1970] 1 WLR 1194
Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158
Rogers v Resi-Statewide Corporation Limited (No 2) (1991) 32 FCR 344
Savage v Lunn [1998] NSWCA 203
Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; 97 ALJR 388
Sidhu v Van Dyke [2014] HCA 19; 251 CLR 505
Simm v Anglo-American Telegraph Co (1875) 5 QBD 188
Smith v Coastivity Pty Ltd [2008] NSWSC 313
Spalding v Gamage (1915) 32 RPC 273
Thompson v Palmer (1933) 49 CLR 507
Grundt v Great Boulder Proprietary Gold Mines Limited (1937) 59 CLR 641
Waltons Stores (Interstate) v Maher (1988) 164 CLR 387
Weingarten Bros v G & R Wills & Co [1906] SALR 34
Whitechurch v Cavanagh [1902] AC 117
Yorkshire Insurance Co v Craine (1922) 2 AC 541
Davison M and Horak I, Shanahan’s Australian Law of Trade Marks and Passing Off (7th ed, Thomson Reuters, 2022)
Handley KR, Estoppel by Conduct and Election (2nd ed, Sweet & Maxwell, 2006)
Heydon JD, Leeming MJ and Turner PG, Meagher, Gummow & Lehane’s Equity: Doctrines & Remedies (5th ed, LexisNexis Butterworths, 2015)
Keane P, Estoppel by Conduct and Election (3rd ed, Sweet & Maxwell, 2016)
McLelland MH, 'New Horizons in Passing-Off' (1961) 3 Sydney Law Review 525
Wadlow C, Wadlow on the Law of Passing-Off (6th ed, Sweet & Maxwell, 2021)
Division: General Division Registry: New South Wales National Practice Area: Intellectual Property Sub-area: Trade Marks Number of paragraphs: 190 Date of hearing: 21-22 March, 28 April 2023 Counsel for the Cross-Claimants: Mr D Shavin KC and Ms C L Cochrane SC Solicitor for the Cross-Claimants: Quinn Emanuel Urquhart & Sullivan Counsel for the Cross-Respondent: Mr M J Darke SC and Mr D Larish Solicitor for the Cross-Respondent: King & Wood Mallesons ORDERS
NSD 1816 of 2004 BETWEEN: FEDERAL TREASURY ENTERPRISE (FKP) SOJUZPLODOIMPORT
First Cross-Claimant
FEDERAL PUBLIC UNITARY ENTERPRISE EXTERNAL ECONOMIC UNION SOJUZPLODOIMPORT (FGUP VO)
Second Cross-ClaimantAND: SPIRITS INTERNATIONAL B.V.
Cross-Respondent
ORDER MADE BY:
PERRAM J
DATE OF ORDER:
12 MARCH 2024
THE COURT ORDERS THAT:
1.The parties provide a minute of order giving effect to these reasons within 7 days.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRAM J:
Introduction
The Cross-Claimants are Federal Treasury Enterprise (FKP) Sojuzplodoimport (‘FKPS’) and Federal Public Unitary Enterprise External Economic External Economic Union Sojuzplodoimport (FGUP VO) (‘FGUP’) (collectively, ‘FKP’). FGUP is the modern name for an entity of the former Union of Soviet Socialist Republics which until at least 20 January 1992 was entitled to be registered as the owner of several well-known trade marks including the famous STOLICHNAYA trade mark. The registered owner of these marks in Australia is presently the Cross-Respondent (‘Spirits’).
For many years a debate has persisted in the courts of a number of countries about who the true owner of the marks is and this debate has, from time to time, ensnared various distributors and licensees of the marks. The present matter is one such bout of litigation which began in this Court in 2004. FKPS and FGUP were drawn into this litigation and they cross-claimed against Spirits seeking rectification of the Register of Trade Marks to record FGUP as the true owner of the marks. The rest of the litigation settled some time ago but this cross-claim remains extant. It has had a chequered history which for many years was mired in issues concerning the failure of the Russian Federation, which stands behind FKP, adequately to comply with an invitation from this Court to give discovery. I eventually temporarily stayed the cross-claim to permit adequate discovery to be given and indicated that if this was not done within one year, I would consider permanently staying the proceeding: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 4) [2017] FCA 1345. When adequate discovery was not given I then permanently stayed the cross-claim: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (Permanent Stay) [2019] FCA 802 and Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (Form of Orders) [2019] FCA 1772. The permanent stay was reversed by the Full Court on the basis that FKP should have been given the opportunity to pursue claims it had which might not have been affected by the adequacy of the Russian Federation’s discovery: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. [2021] FCAFC 77; 159 IPR 58 (‘FKP v Spirits (FC)’).
It is convenient for the purposes of these reasons to describe FKP’s claim as a claim that it is the true owner of the marks.
By its Third Further Amended Cross-Claim (‘the Cross-Claim’) FKP asserts this claim and that it is entitled to be recorded as the owner of the marks in the Register of Trade Marks. It alleges that the current registered owner of the trade marks, Spirits, is not their true owner. By its Defence to the Cross-Claim (‘the Defence’), Spirits alleges that on 20 January 1992 VVO, the entity which then owned the trade marks, was lawfully transformed into another entity, VAO-SPI, as a result of which VAO-SPI became the owner of the trade marks. Spirits is a successor in title to VAO-SPI so this interpretation of history leads to Spirits being the true owner of the trade marks. On the other hand, FKP asserts that it is the modern form of VVO. Its perspective on history is that the transformation of VVO into VAO-SPI never happened, as a result of which VVO (and hence FKP) has at all times remained the true owner. The basic dispute between FKP and Spirits is therefore whether following the collapse of the Soviet Union, VVO was transformed into VAO-SPI or not.
To this basic claim Spirits puts forward three defences. First, it seeks to prevent FKP from even claiming to be the true owner of the trade marks through a plea of estoppel by representation. Spirits’ two other defences are designed to deal with the eventuality that FKP establishes that it is the true owner of the trade marks. In that circumstance, Spirits argues that FKP should be denied relief by reason of a defence of laches based on FKP’s delay in articulating its claims or, alternatively, because the Court should not, for similar and other reasons, exercise its power under s 88(1) of the Trade Marks Act 1995 (Cth) (‘the Act’) to amend the Register of Trade Marks to record FKP as their owner.
It will be noted that the estoppel argument precludes FKP from claiming to be the true owner of the trade marks whereas the two delay defences are not preclusive but proceed on the basis that FKP has otherwise proven it is their true owner. The estoppel defence and the delay defences can never therefore operate at the same time and are necessarily alternatives operating in different circumstances.
For its part FKP claims that it too has the benefit of an estoppel on the issue of the transformation of VVO into VAO-SPI. This estoppel is an issue estoppel said to arise from judgments given by the Dutch courts. In parallel litigation about the equivalent marks, the Dutch courts have held that the transformation of VVO into VAO-SPI did not occur. A substantial question between the parties is whether the three defences just mentioned can be pleaded as defences in the face of that issue estoppel if it arises.
The parties have agreed that this question is to be determined by a sudden death summary judgment application. FKP will, in due course, apply for summary judgment on the basis of the Dutch issue estoppel. If it is successful then there will be judgment for FKP on the Cross-Claim. However, FKP has also agreed that if it fails on the summary judgment application then the Cross-Claim will be concluded in favour of Spirits and the Cross-Claim dismissed.
It will be noted that when the summary judgment application is eventually heard it will, at least, pit one preclusive doctrine, issue estoppel, against another, estoppel by representation. FKP will say the issue of the transformation has been determined in its favour and cannot be litigated by Spirits and Spirits will say that FKP is prevented from contending that the transformation did not occur because of representations made by the Russian Federation. What happens when an issue estoppel meets an estoppel by representation is, at this stage, unclear and for present purposes irrelevant. At the time of the summary judgment application there will also be a question as to whether the two discretionary defences based on, inter alia, delay can stand in the face of the issue estoppel. The outcome of this question is likewise unclear at this stage.
The applications now before the Court are a prelude to this forthcoming summary judgment application. The fewer of these three defences FKP has to face on the summary judgment application the better from its perspective. FKP therefore seeks in advance of the summary judgment application to have the three defences – estoppel, laches and the exercise of the discretion under s 88(1) – struck out on the basis that they fail to disclose a reasonable defence or are otherwise an abuse of process: Federal Court Rules 2011 (Cth) (‘FCR’) rr 16.21(1)(e)-(f). For its part Spirits seeks to adjust its pleading to meet some of the objections raised by FKP.
The evidence received on such a strike out application may include the documents referred to in the relevant particulars and evidence tending to show that a defence is an abuse of process. It may also include other evidence ancillary to these purposes. The application is not, however, a summary judgment application and the question is not the question posed under FCR r 26.01(1)(e) of whether Spirits ‘has no reasonable prospects of successfully defending the proceeding or part of the proceeding’. It follows that evidence tending to show that the Defence has no reasonable prospects of success is not relevant to a strike out application under FCR rr 16.21(1)(e)-(f). FKP may reventilate these matters at the summary judgment application where they belong.
Spirits’ application for leave to amend the Defence on the other hand is governed by FCR r 16.53 which does not specify the standard to be applied. In Caason Investments Pty Ltd v Cao [2015] FCAFC 94; 236 FCR 322 at [21] a majority of the Full Court described the circumstances in which leave should be refused in this way:
Leave to amend should be granted unless the proposed amendment is futile, such that the issue sought to be added is unlikely to succeed, the amendment is likely to be struck out or would cause substantial prejudice or injustice to the opposing party in a way that cannot be compensated by costs: Research in Motion Ltd v Samsung Electronics Australia Pty Ltd (2009) 176 FCR 66 at [21] to [22]; Medich v Bentley-Smythe Pty Ltd [2010] FCA 494 at [8].
In KTC v David [2022] FCAFC 60 at [111] Wigney J (with whom Anastassiou and Jackson JJ agreed on the relevant principles at [329] and [418]) paraphrased ‘is unlikely to succeed’ as ‘has no reasonable prospects of success’. That latter formulation reflects the language of the summary judgment test in s 31A of the Federal Court of Australia Act 1976 (Cth) (‘the FCA Act’). Whether the standard on a summary judgment application ought to be the standard applied on amendment applications is an interesting question. Plainly, leave should not be granted to raise a claim that would only be struck out. I can perhaps see some force in the idea that leave to amend should not be granted if it is shown that summary judgment would be given on that claim. However, the difficulty with that view is that it turns every amendment application potentially into a summary judgment application on which evidence may be adduced by both parties. It is far from clear that this would be in accordance with the requirements of s 37M(1) of the FCA Act that the Court’s powers be exercised to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible.
There is utility in maintaining the distinction between pleading debates and summary judgment debates even accepting that they may overlap in the case of amendment applications. In this case, it was very clear to the parties that the present application was to be concerned with pleading points. To the extent that FKP has an argument that summary judgment should be given on a defence it should advance this argument at the time at which summary judgment is to be considered. For present purposes, I do not propose to consider those of FKP’s submissions which are grounded in summary judgment principles. It is not shut out from advancing these arguments at the proper time. To the extent that summary judgment principles are theoretically applicable on the present applications, given that I am to hear an actual summary judgment application, I would exercise the Court’s power in FCR r 1.32 to postpone any consideration of a summary judgment issue to that hearing.
Objection was taken to FKP’s evidence on the present application on the basis that it did not observe this distinction. I admitted the evidence subject to its relevance. As will be seen, my conclusion is that the evidence is not relevant on a strike out application or an amendment application concerned, as the procedure the parties have adopted is, only with pleading adequacy.
It is necessary to note another feature of the procedure the parties have created. In the context of strike out applications, it is often said that one asks whether the pleading raises a triable issue. Relatedly, it is also sometimes said that at trial a more complete complexion may appear on the facts pleaded or that the result at trial may be driven by the full context. Of course, in this case there will be no such trial due to the summary judgment procedure the parties have agreed.
Insofar as amendment applications are concerned, there are analogous principles which concern the circumstance where the granting of leave to amend will by reason of delay cause prejudice to the respondent in being forced to meet the amended case at trial. A particular example is afforded by an amendment application brought many years after the events in question. In this case the period of time is around 30 years.
The question which arises here is whether in assessing contentions of this kind one is to bring to account the known fact that there will be no trial. Because there will be no trial, the facts will not become clearer in their full context and the respondents will not be prejudiced in their ability to meet any late amendment. Both parties contended for an asymmetrical outcome on this issue by which the fact that there would be no trial was used to each’s own advantage whilst at the same time denying the other the same latitude. I am clear that whichever approach is taken must be the same for both parties.
I do not think that the procedure which the parties have adopted brings about any change to the principles to be applied. In particular, I do not see how the fact that there is to be no trial would permit me to alter the operation of either FCR rr 16.21 or 16.51 as it has been interpreted. Even if I were permitted to refashion the law concerning amendment and strike out applications to accommodate the fact that the trial on which both are premised will not occur, neither party offered me a coherent set of new principles to replace it.
In that circumstance, the fact that there is to be no trial is an interesting one, no doubt, but the procedural questions are still the same and remain grounded upon the assumption that there will be a trial. Thus, I consider it open to both parties to invoke what hypothetically may happen at a trial which will not occur.
It is useful to deal with each of the defences separately.
The estoppel defence: strike out application
The estoppel defence is at §65 of the Defence as follows:
65In further answer to the whole of the Third Further Amended Cross-Claim, the Cross-Respondent says that:
(a)during the period January 1992 to 2000, the Government of the Russian Federation represented that:
(i)[VVO] was transformed into VAO-SPI in accordance with applicable law;
(ii)VAO-SPI was the legal successor to [VVO]; and
(iii)all assets and liabilities of [VVO] had vested in VAO-SPI by operation of law with effect from 20 January 1992.
Particulars
Articles of Association of the Closed Foreign Economic Joint-Stock Company “Sojuzplodoimport”, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 20 January 1992
Order 229 of the Ministry of Agriculture of the Russian Federation dated May 1992
Certificate issued by Chamber of Commerce and Industry of the Russian Federation dated 7 August 1992
Declaration of the First Deputy of the Ministry of Agriculture of the Russian Federation, dated 22 October 1992
Declaration of the Chairman of the Rospatent, dated 23 October 1992
Declaration of the First Deputy of the Ministry of Foreign Economic Relations of the Russian Federation, dated 28 October 1992
Declaration of the First Deputy to the Ministry of Agriculture of the Russian Federation, dated 29 December 1992
Declaration of the First Deputy to the Ministry of Agriculture of the Russian Federation, dated 19 October 1993
Decision of the Rospatent, dated 6 May 1994
Letter dated May 1994 from Minstry of Foreign Economic Relations to Chairman of the Government of the Russian Federation
Letter dated 29 July 1994 from Rospatent to Head of the State Commission on ensuring the state monopoly on alcoholic products at the Government of the Russian Federation
Letter dated 5 August 1994 from State Committee of the Russian Federation on Antimonopoly Policy and Support of New Economic Structures to State Commission on ensuring the state monopoly on alcoholic products at the Government of the Russian Federation.
Notice dated 6 February 1995 from Ministry of Agriculture and Food Products
Articles of Association of the Closed Foreign Economic Joint-Stock Company "Sojuzplodoimport" Version 2, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 10 March 1995
Articles of Association of the Closed Foreign Economic Joint-Stock Company "Sojuzplodoimport" Version 3, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 26 June 1996
Articles of Association of the Closed Foreign Economic Joint-Stock Company "Sojuzplodoimport" Version 4, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 21 May 1997
Articles of Association of the Closed Foreign Economic Joint-Stock Company "Sojuzplodoimport" Version 5, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 28 July 1997
Judgment of Conviction in the name of the Russian Federation, Court of Kirov district, dated I April 1998
Articles of Association of the Closed Foreign Economic Joint-Stock Company "Sojuzplodoimport" Version 6, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 14 April 1998
Letter dated 11 September 1998 from Ministry of Internal Affairs of the Russian Federation to ZAO
Letter dated 1 3 May 1999 from Ministry of Internal Affairs of the Russian Federation to ZAO
Letter dated 14 May '1999 from ZAO to Ministry of Internal Affairs of the Russian Federation
Judgment of Conviction in the name of the Russian Federation, Court of the town of Dzerzhinsk, Nizhny Novgorod region, dated 6 August 1999
Expert Opinion on the questions put to the expert of the Internal Affairs Department of the town of Lermontov, dated 20 August 1999
Articles of Association of the Open Joint-Stock Company "Plodovaya" Kompaniya, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 8 February 2000
Further particulars may be provided after discovery.
(b)acting in reliance on the representations pleaded in sub-paragraph (a) above and induced by those representations, VAO-SPI, ZAO and the Cross-Respondent assumed that VAO-SPI acquired ownership of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark with effect from 20 January 1992;
(c)acting in reliance on the representations pleaded in sub-paragraph (a) above and induced by those representations, the Cross-Respondent assumed that it acquired ownership of the Stolichnaya Label Mark, the Moskovskaya Label Mark, the Stoli Word Mark, the Stolichnaya Word Mark, the Ohranj Label Mark and the Ohranj Word Mark from ZAO in or around April 1999;
(d)on the basis of the assumptions referred to in sub-paragraphs (b) and (c) above, VAO-SPI, ZAO and Cross-Respondent have used and registered the trade marks referred to in sub-paragraphs (a) and (b) above in Australia and throughout the world, or alternatively have authorised the use and registration of those trade marks in Australia and throughout the world;
Particulars
Deed of Assignment dated 14 September 1992 between VAO-SPI and Caldbeck Pty Ltd
Deed of Assignment dated 5 September 1994 between VAO-SPI and Inchcape Liquor Marketing Pty Ltd
Agreement dated 4 September 1996 between VAO-SPI and Diageo
Deed of Assignment dated 3 October 1996 between Inchcape Liquor Marketing Pty Ltd (formerly known as Caldbeck Pty Ltd) and VAO-SPI
Deed of Assignment dated 4 October 1996 between VAO-SPI and Diageo
Deed of Assignment dated 8 November 1996 between VAO-SPI and Diageo
Licensing Agreement dated 21 March 1997 between VAO-SPI and Diageo
Trademark Assignment Contract dated 26 December 1997 between VAO-SPI and ZAO
Supplement to Trademark Assignment Contract dated 12 January 1998 between VAO-SPI and ZAO
Agreement dated 31 March 1998 between VAO-SPI, ZAO and Diageo
Deed of Assignment dated 2 June 1998 between VAO-SPI and ZAO
Deed of Assignment dated 12 August 1997 between VAO-SPI and Diageo
Contract of Assignment of Rights to the Trade Marks dated 12 April 1999 between ZAO and the Cross-Respondent
Deed of Assignment dated 25 November 1999 between ZAO and the Cross-Respondent
Assignment and Amendment Agreement dated 14 August 2001 betweeen SPI Limited, S.P.I. Spirits (Cyprus) Limited, the Cross-Respondent, ZAO and Diageo
Further particulars may be provided after discovery.
(e)the allegations made by the Cross-Claimants in paragraphs 4(f), 4(h), 14, 24, 25, and 54-48 of the Third Further Amended Cross-Claim are contrary to the representations pleaded in sub-paragraph (a) above;
(f)the claims made by the Cross-Claimants in this proceeding are made on behalf of the Government of the Russian Federation;
Particulars
The Cross-Respondent refers to paragraphs 5, 5A, 6, 7 and 52A of the Third Further Amended Cross-Claim.
(g)by reason of the matters pleaded in sub-paragraphs (a) to (f) above, it is unconscionable for the Government of the Russian Federation, through the Cross-Claimants, to now assert, and the Cross-Claimants are estopped from asserting, that the Cross-Claimants, or either of them, have any right or interest in any of the trade marks referred to in the Cross-Claimant’s prayer for relief; and
(h)in the premises, the Cross-Claimants are not entitled to any of the relief sought in their prayer for relief.
FKP submits that there are five problems with §65. These are:
(a)it does not contain an allegation of a legal relationship which it should because it is a pleading of equitable estoppel;
(b)it does not allege that the representations were made to Spirits;
(c)the estoppel is pleaded to defeat the operation of Russian law which is not possible (T17.39);
(d)the matters set forth in the particulars cannot support the material facts which are alleged because they do not particularise clear and unambiguous representations (T22.33); and
(e)the pleading of equitable estoppel is defective because it seeks to hold FKP to the Russian Federation’s representations whereas it should plead the reversal of detriment: T17.5.
At the hearing, FKP raised two further points which have no place in the present dispute. First, FKP sought to develop a submission that the various Russian Federation entities nominated by Spirits as having made the representations did not have authority to make them. This line was pursued on the basis of expert opinion evidence from Mr Alexander Muranov on aspects of Russian law. This is a summary judgment point, not a pleading point, and is not relevant to the present strike out application. It may be raised at the summary judgment hearing.
Secondly, Mr Shavin KC for FKP sought to take me to evidence that tends to show that Spirits knew that the representations were not true. Although he accepted that this was not relevant to a pleading debate he advanced it as ‘an extra overlay’: T13.19. Since it does not bear on any of the pleading issues, it is not necessary to deal with this point either.
Points (a) and (e): absence of an allegation of legal relationship and failure to plead the reversal of detriment
FKP submits that an essential requirement of a pleading of equitable estoppel is that it alleges that there is a legal relationship between the party in whom an assumption has been induced and the party who did the inducing. In the case of §65 of the Defence the party induced is Spirits and the party inducing is the Russian Federation (who may conveniently be treated for present purposes as a privy of FKP). FKP submits that §65 does not contain any allegation of a pre-existing legal relationship between the Russian Federation and Spirits and for that reason should be struck out.
Respectfully, I do not agree. At §65(a) Spirits pleads three representations as to present or past matters; namely, that VAO-SPI was the owner of the trade marks, that it was the legal successor to VVO and that all the assets and liabilities of the Soviet-era entity had vested in VAO-SPI by operation of law from 20 January 1992. On the basis that, by the conduct of the Russian Federation, Spirits (and others) were induced to assume that VAO-SPI was the owner of the trade marks, Spirits then pleads that it altered its position on the basis of that assumption by using the trade marks around the world and licensing others to do so.
This is a pleading of estoppel by representation. The learned author of Estoppel by Conduct and Election (3rd ed, Sweet & Maxwell, 2016), Patrick Keane KC, at [1-006] suggests that the elements of an estoppel by representation in the sense presently being discussed are:
(a)a statement or other conduct that constitutes a representation of fact;
(b)its communication to the representee;
(c)the representee’s justifiable belief in its truth and his alteration of position in that belief;
(d)an attempt by the representor to contradict his representation; and
(e)prejudice to the representee as a result of his alteration of position if contradiction of the representation were permitted.
The identical statement in the second edition of that text by KR Handley KC was cited as accurate by the New South Wales Court of Appeal in Carbone as Trustee for the S & N Carbone Family Trust v Mills [2019] NSWCA 15 at [70] per Sackville AJA (with whom Beazley P and Barrett AJA agreed).
The first of the elements refers to a representation as to facts. However, a statement of mixed fact and law is a statement of fact. Thus as Brennan J explained in Waltons Stores (Interstate) v Maher (1988) 164 CLR 387 (‘Waltons Stores v Maher’) at 415-416, estoppel by conduct (or ‘in pais’) has been applied to bind a party to treat a conveyance as valid (Sarat Chunder Dey v Gopal Chunder Laha (1892) LR 19 Ind App 203) and to bind an insurer to treat as valid a claim lodged out of time (Yorkshire Insurance Co v Craine (1922) 2 AC 541). The application of that principle to estoppel by representation (as a subset of estoppel in pais) is accepted by Mr Keane in Estoppel by Conduct and Election at [2-014]. I do not read what the Full Court said in FKP v Spirits (FC) at [367] as being contrary to this conclusion.
On their face, therefore, the representations pleaded in §65(a) satisfy the first requirement of an estoppel by representation. FKP alleges, however, that the pleading is defective because it does not contain an allegation of a pre-existing legal relationship between the parties. It says that such a requirement emerges from the six elements set out by Brennan J in Waltons Stores v Maher for the establishment of an ‘equitable estoppel’. The passage is at 428-429:
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiffs action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.
This is about promissory estoppel and is not directed at an equitable estoppel by representation where the representation is as to a factual matter or mixed factual and legal matter. This is evident from the balance of the reasons of Brennan J where his Honour discussed estoppel in pais. Even assuming in FKP’s favour that the estoppel pleaded at §65 is an equitable estoppel by representation rather than a common law estoppel by representation, I do not therefore accept that the pleading at §65 is deficient for this reason.
In any event, even if the principle identified by Brennan J in Waltons Stores v Maher at 428 did have any application to estoppel by representation, it does not support Mr Shavin’s submission that Spirits must plead an existing legal relationship. What it says, and what the actual facts in Waltons Stores v Maher show, is that what is necessary is either an assumption about the existence of a legal relationship or an expectation that a legal relationship would come into existence. As the reasons of Brennan J also show at 420, the range of expectations which the principle encompasses includes an expectation that the holder of a legal right will not exercise that right against the person in whom that expectation has been induced (‘In cases of promissory estoppel, the equity binds the holder of a legal right who induces another to expect that that right will not be exercised against him’). Thus, even if §65(a) did include a representation in relation to the future to the effect that the Russian Federation would treat VAO-SPI and Spirits as the owner of the trade marks, this would fall squarely within that principle. This should be borne in mind when it becomes necessary to deal with Spirits’ application to amend §65(a) to include what is, in fact, a plea of promissory estoppel.
I also reject the submission that §65 is defective because in cases of equitable estoppel equity reverses the detriment suffered rather enforces the representation. This is for three reasons.
First, in the case of estoppel by representation in equity it has been clear since at least Jorden v Money (1854) 5 HLC 185 that equity will enforce the representation. As was said in that case at 210:
And then it is said that upon a principle well known in the law, founded upon good faith and equity, a principle equally of law and of equity, if a person makes any false representation to another, and that other acts upon that false representation, the person who has made it shall not afterwards be allowed to set up that what he said was false, and to assert the real truth in place of the falsehood which has so misled the other. That is a principle of universal application, and has been particularly applied to cases where representations have been made as to the state of the property of persons about to contract marriage, and where, upon the faith of such representations, marriage has been contracted. There the person who has made the false representations has in a great many cases been held bound to make his representations good.
Secondly, it is now seemingly clear even in the context of proprietary estoppel and promissory estoppel that relief is not limited to reversal of the detriment and does not need to be moulded to reflect the minimum equity required to do justice. Rather, the usual remedy that should be granted in these cases is enforcement of the assumption induced, unless to do so in the circumstances of a particular case would be wholly inequitable and unjust: Sidhu v Van Dyke [2014] HCA 19; 251 CLR 505 at [85] per French CJ, Kiefel, Bell and Keane JJ (with whom Gageler J agreed at [89]); Giumelli v Giumelli [1999] HCA 10; 196 CLR 101 (‘Giumelli’) at [33] and [48] per Gleeson CJ, McHugh, Gummow and Callinan JJ (with whom Kirby J agreed at [63]); Ashton v Pratt [2015] NSWCA 12; 88 NSWLR 281 at [113] per Bathurst CJ (with whom McColl and Meagher JJA agreed at [222] and [223]). Thus, even on this view of the estoppel being pleaded by Spirits, the proposition advanced by FKP cannot be a pleading requirement.
Thirdly, it is likely that the plea at §65 also encompasses a plea of common law estoppel by representation to which no such limitation on any view applies. As I explain later in these reasons when dealing with the laches defence, the claims made by FKP include claims at law (under s 88(1) of the Act) and claims in equity (for constructive trust and rectification) so that a sensible reading of §65 is that it comprises a plea of estoppel by representation at law in answer to the legal claims (of the kind discussed by Dixon J in Grundt v Great Boulder Proprietary Gold Mines Limited (1937) 59 CLR 641) and a plea of estoppel by representation in equity in response to the equitable claims (of the kind discussed by Dixon J in Thompson v Palmer (1933) 49 CLR 507).
I thus reject propositions (a) and (e) above.
Point (c): no pleading of estoppel possible contrary to Russian law
FKP submitted at T31.18 and at §§18-24 of its written submissions that neither Russian nor Australian law permitted an estoppel to be pleaded against a statute. As to the former, it referred to evidence from Mr Muranov that Russian law had no concept of estoppel until at least 2011. As to the latter, it referred to the principle in Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic (1990) 21 FCR 193 (‘Kurtovic’) that officials cannot bind themselves as to the manner in which statutory powers will be exercised since these powers are to be exercised in the public interest. Although not articulated, I apprehended that both submissions were directed at a conflict of laws problem; namely, the determination of which legal system was to govern the allegations of estoppel. If there was no sufficient evidence as to the Russian position then the default rule that Australian law would apply implied that the principle in Kurtovic was to be applied to the estoppel pleading.
This is not a pleading point although it may be a summary judgment point. When the time comes for it to be advanced in the proper forum I am not sure that FKP’s present understanding of the conflict of laws issue is sound. It seems to me that a better framework might involve looking at how estoppel by representation has been handled in a conflict of laws context. This may involve considering these questions or questions like them:
(a)Whether the doctrine of estoppel by representation forms part of the procedural law of the forum because it is a rule of evidence or whether for conflict of laws purposes at least it is treated as substantive law.
(b)Whether an estoppel by representation is governed by the proper law of the contract in cases where there is a contract. Here it would be useful to examine the decisions of the Canadian Supreme Court in Allen v Hay (1922) 69 DLR 193 and the Hong Kong Court of Final Appeal in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd (2012) 15 HKCFAR 569 at 611.
(c)Whether that principle extends to cases which do not concern contracts. Here it would be useful to consider the decision of the English Court of Appeal in Furness Withy (Australia) Pty Ltd v Metal Distributors (UK) Ltd (The ‘Amazonia’) [1990] 1 Lloyd’s Rep 236 at 247 where Staughton LJ observed that ‘[i]n a case of estoppel by convention where a foreign element is involved, one has … to look for something which can conveniently be called the proper law of the estoppel’.
(d)If it is appropriate to identify a ‘proper law of the estoppel’, what is the proper law of the estoppel pleaded at §65?
Points (b) and (d): communication of the representation to Spirits and whether, if communicated, representation conveyed
None of the particularised representations in §65(a) is alleged to have been made to Spirits. I do not, however, accept FKP’s submission that the pleading is thereby necessarily defective. It is possible that a communication made generally is made to any person who receives it. As Mr Keane observes in Estoppel by Conduct and Election at [3.001], ‘[t]he terms of the representation and the surrounding circumstances may show that it was made to persons generally so that anyone who knows of it is a representee’. An example of a representation made to persons generally is afforded by ACN 074 971 109 Pty Ltd (as Trustee for the Argot Unit Trust v The National Mutual Life Association of Australasia Ltd [2008] VSCA 247; 21 VR 351 at [191], [200], [203]-[204] (per Buchanan, Nettle and Dodds-Streeton JJA). I reject FKP’s submission that this case was not concerned with estoppel.
Turning then to the particularised documents, beyond a bland and, with respect, unhelpful submission that the particulars to §65 did not support the representations, FKP eschewed any analysis of this issue in its written submissions in chief which Spirits pointed out in its submissions. In particular, FKP did not develop the argument by reference to what any of the particulars were or why, when examined, the particularised matter did not support the allegation. I do not consider that my is role to conduct such an exercise merely because FKP suggested, without any explanation, that the particulars did not support the representations. Spirits, on the other hand, did submit that one of the particularised documents, a declaration of the First Deputy to the Minister of Agriculture of the Russian Federation dated 29 December 1992 said this:
By meeting dated 5-09-1991 and according to the [Russian Federation] Law “About Enterprises and Undertakings” as well as according to the Regulation of the Council of Ministers under [Russian Soviet Federative Socialist Republic] under Ref. No. 601 of 25th December 1990, [VVO] was reorganized, and now its name is: -foreign economic joint stock company [VAO-SPI]. Due to the above reorganization, [VAO-SPI] has become the sole and legitimate successor to [VVO] and, therefore, it undertook all its rights on the trade marks.
In reply, FKP submitted that its original submission that the particulars provided did not support the representations had gone unanswered. Since FKP did not in fact advance any explanation for why the particulars did not support the representations this is hardly surprising. In relation to the declaration of 29 December 1992 FKP submitted that the making of any such representation was beyond the remit of the Ministry of Agriculture. Again, as I have explained, this is not a strike out point.
In his oral submissions, Mr Shavin said at T38.45 ‘[t]here is nothing in paragraph 65 or the particulars to it or the matters particularised which establishes the sort of representation that they would need to found an estoppel’. However, as with FKP’s written submissions, I do not regard this as amounting to a submission of substance.
Thus, at the end of the day, FKP has not attempted to explain why the particularised documents do not support the representations alleged. In the case of the single document which has been the subject of debate, it is clear that it contains the statement alleged. Whether that declaration was made generally or to whom it was addressed is unclear to me. In particular, it is unclear to me that a declaration by a government official might not be generally addressed in the sense discussed above. In the case of that document, I conclude therefore that it contains the statement and that its terms leave arguable, in a strike out sense, that it was generally addressed.
In the case of all of the other particularised documents, FKP has said nothing. Thus there is no submission for me to consider. It is not my role to wade through the voluminous particulars to form a view of the matter myself. This is for two reasons. First, the parties did not assemble the documents in the particulars in any convenient way. Secondly, were I to reach the view that a particular document could not support the representations alleged or constitute a communication made generally in the sense I have discussed, this view would not have been advanced by FKP and hence acceptance by me of my own reasoning would be procedurally unfair to Spirits who will have been afforded no opportunity to respond to it. This in turn would carry with it the risk, ever present for judicial officers, of self-persuasion.
Into the same class of the unexplained may be put Mr Shavin’s submission that the representations pleaded were not clear and unambiguous. If this was directed at the terms of the actual pleaded representations appearing in §65(a) then I reject it because they are clear. If, instead, it was another nonchalant wave of the hand at the particulars then I reject it for the reasons I have just given.
I therefore reject points (b) and (d). Each of points (a)-(e) having failed, no basis is shown for striking out §65.
The estoppel defence: amendment application
In tandem with FKP’s efforts to strike out §65 Spirits also sought to adjust its terms. This it did by an amendment application. By the time of the hearing the amendment application had itself been amended. Its final form was an amended interlocutory application filed on 15 March 2023 to which was attached a proposed amended defence. This is not the version in the Court Book. The proposed amended form of §65 bears two forms of mark-up. The first in blue represents the changes proposed in the first form of the proposed amended defence. The second, which is in yellow highlighting, represents the fresh amendments proposed when the amendment application was itself amended shortly before the hearing. The history of these two rounds of amendment is not relevant to any issue I must deal with save one to which I will turn in due course. In the interests of clarity, I will indicate the proposed amendments to §65 only by underlining and will not seek to distinguish between these two rounds of amendment. With that observation, the proposed amended version of §65 is as follows:
65In further answer to the whole of the Third Further Amended Cross-Claim, the Cross-Respondent says that:
(a)during the period January 1992 to 2000, the Government of the Russian Federation represented that:
(i)[VVO] was transformed into VAO-SPI in accordance with applicable law;
(ii)VAO-SPI was the legal successor to [VVO];
and(iii)all assets and liabilities of [VVO] had vested in VAO-SPI by operation of law with effect from 20 January 1992;
(iv)further or in the alternative, it would not assert any right or interest it (or [VVO], if the transformation pleaded in paragraph 4(h) of this Defence did not take place) may have had in the trade marks referred to in sub-paragraphs (b) and (c) below.
Particulars
The representations were explicitly or otherwise impliedly made in the particularised documents.
Articles of Association of the Closed Foreign Economic Joint-Stock Company “Sojuzplodoimport”, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 20 January 1992
Order 229 of the Ministry of Agriculture of the Russian Federation dated May 1992
Certificate issued by Chamber of Commerce and Industry of the Russian Federation dated 7 August 1992
Declaration of the First Deputy of the Ministry of Agriculture of the Russian Federation, dated 22 October 1992
Declaration of the Chairman of the Rospatent, dated 23 October 1992
Declaration of the First Deputy of the Ministry of Foreign Economic Relations of the Russian Federation, dated 28 October 1992
Declaration of the First Deputy to the Ministry of Agriculture of the Russian Federation, dated 29 December 1992
Declaration of the First Deputy to the Ministry of Agriculture of the Russian Federation, dated 19 October 1993
Decision of the Rospatent, dated 6 May 1994
Letter dated May 1994 from Minstry of Foreign Economic Relations to Chairman of the Government of the Russian Federation
Letter dated 29 July 1994 from Rospatent to Head of the State Commission on ensuring the state monopoly on alcoholic products at the Government of the Russian Federation
Letter dated 5 August 1994 from State Committee of the Russian Federation on Antimonopoly Policy and Support of New Economic Structures to State Commission on ensuring the state monopoly on alcoholic products at the Government of the Russian Federation.
Notice dated 6 February 1995 from Ministry of Agriculture and Food Products
Articles of Association of the Closed Foreign Economic Joint-Stock Company "Sojuzplodoimport" Version 2, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 10 March 1995
Articles of Association of the Closed Foreign Economic Joint-Stock Company "Sojuzplodoimport" Version 3, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 26 June 1996
Articles of Association of the Closed Foreign Economic Joint-Stock Company "Sojuzplodoimport" Version 4, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 21 May 1997
Articles of Association of the Closed Foreign Economic Joint-Stock Company "Sojuzplodoimport" Version 5, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 28 July 1997
Judgment of Conviction in the name of the Russian Federation, Court of Kirov district, dated I April 1998
Articles of Association of the Closed Foreign Economic Joint-Stock Company "Sojuzplodoimport" Version 6, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 14 April 1998
Letter dated 11 September 1998 from Ministry of Internal Affairs of the Russian Federation to ZAO
Letter dated 1 3 May 1999 from Ministry of Internal Affairs of the Russian Federation to ZAO
Letter dated 14 May '1999 from ZAO to Ministry of Internal Affairs of the Russian Federation
Judgment of Conviction in the name of the Russian Federation, Court of the town of Dzerzhinsk, Nizhny Novgorod region, dated 6 August 1999
Expert Opinion on the questions put to the expert of the Internal Affairs Department of the town of Lermontov, dated 20 August 1999
Articles of Association of the Open Joint-Stock Company "Plodovaya" Kompaniya, approved and sealed by the Government of Moscow, Moscow Registration Board, dated 8 February 2000
The documents identified at [68], [84(a)-(d), (g), (h)], [85(a)-(b), (f)], [86], [90(a)-(uu)] and [91]-[105] of the Affidavit of Alexey Victorovich Oliynik affirmed on 1 December 2015.
The documents at tabs 70-76 of the Court Book for the interlocutory hearing on 21 and 22 March 2023.
Further particulars may be provided after discovery.
(b)acting in reliance on the representations pleaded in sub-paragraph (a) above and induced by those representations, VAO-SPI, ZAO and the Cross-Respondent assumed that:
(i)VAO-SPI acquired ownership of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark with effect from 20 January 1992; and/or
(ii)insofar as the Russian Federation (or [VVO] if the transformation pleaded in paragraph 4(h) of this Defence did not take place) may have had any right or interest in the trade marks referred to in sub-paragraph (i) above, the Russian Federation would not assert such right or interest against VAO-SPI, ZAO or the Cross-Respondent;
(c)acting in reliance on the representations pleaded in sub-paragraph 65(a) above and induced by those representations, the Cross-Respondent assumed that:
(i)it acquired ownership of the Stolichnaya Label Mark, the Moskovskaya Label Mark, the Stoli Word Mark, the Stolichnaya Word Mark, the Ohranj Label Mark and the Ohranj Word Mark from ZAO in or around April 1999; and/or
(ii)insofar as the Russian Federation (or [VVO] if the transformation pleaded in paragraph 4(h) of this Defence did not take place) may have had any right or interest in the trade marks referred to in sub-paragraph (i) above, the Russian Federation would not assert such right or interest against the Cross-Respondent.
(d)on the basis of the assumptions referred to in sub-paragraphs (b) and (c) above, VAO-SPI, ZAO and Cross-Respondent have used and registered the trade marks referred to in sub-paragraphs (a) and (b) above in Australia and throughout the world, or alternatively have authorised the use and registration of those trade marks in Australia and throughout the world;
Particulars
Deed of Assignment dated 14 September 1992 between VAO-SPI and Caldbeck Pty Ltd
Deed of Assignment dated 5 September 1994 between VAO-SPI and Inchcape Liquor Marketing Pty Ltd
Agreement dated 4 September 1996 between VAO-SPI and Diageo
Deed of Assignment dated 3 October 1996 between Inchcape Liquor Marketing Pty Ltd (formerly known as Caldbeck Pty Ltd) and VAO-SPI
Deed of Assignment dated 4 October 1996 between VAO-SPI and Diageo
Deed of Assignment dated 8 November 1996 between VAO-SPI and Diageo
Licensing Agreement dated 21 March 1997 between VAO-SPI and Diageo
Trademark Assignment Contract dated 26 December 1997 between VAO-SPI and ZAO
Supplement to Trademark Assignment Contract dated 12 January 1998 between VAO-SPI and ZAO
Agreement dated 31 March 1998 between VAO-SPI, ZAO and Diageo
Deed of Assignment dated 2 June 1998 between VAO-SPI and ZAO
Deed of Assignment dated 12 August 1997 between VAO-SPI and Diageo
Contract of Assignment of Rights to the Trade Marks dated 12 April 1999 between ZAO and the Cross-Respondent
Deed of Assignment dated 25 November 1999 between ZAO and the Cross-Respondent
Assignment and Amendment Agreement dated 14 August 2001 betweeen SPI Limited, S.P.I. Spirits (Cyprus) Limited, the Cross-Respondent, ZAO and Diageo
Further particulars may be provided after discovery.
(e)the allegations made by the Cross-Claimants in paragraphs 4(f), 4(h), 14, 24, 25, and 54-48 of the Third Further Amended Cross-Claim are contrary to the representations pleaded in sub-paragraph (a) above;
(f)the claims made by the Cross-Claimants in this proceeding are made on behalf of the Government of the Russian Federation;
Particulars
The Cross-Respondent refers to paragraphs 5, 5A, 6, 7 and 52A of the Third Further Amended Cross-Claim.
(g)by reason of one or more of the following:
(i)the matters pleaded in sub-paragraphs (a) to (f) above;
(ii)the motivations of the Government of the Russian Federation with respect to the matters in sub-paragraph (a) above and the knowledge of the Government of the Russian Federation with respect to the matters in sub-paragraphs (b)-(d) above;
(iii)the Government of the Russian Federation’s motivations in bringing and maintaining these proceedings through the Cross-Claimants and in seeking to reclaim the trade marks referred to in sub-paragraphs (b) and (c) above, including the benefit or windfall that would be obtained from VAO-SPI, ZAO and Cross-Respondent having used, authorised the use of and registered the trade marks referred to in sub-paragraphs (b) and (c) above in Australia and throughout the world,
it is unconscionable for the Government of the Russian Federation, through the Cross-Claimants, to now assert, and the Cross-Claimants are estopped from asserting, that the Cross-Claimants, or either of them, have any right or interest in any of the trade marks referred to in the Cross-Claimant’s prayer for relief; and
(h)in the premises, the Cross-Claimants are not entitled to any of the relief sought in their prayer for relief.
Two sets of issues arise about these amendments. The first concerns their legal viability which FKP contests. The second is FKP’s contention that the discretion to grant leave to amend should be exercised against Spirits even if the amendments are viable for reasons relating to the procedural history and because Spirits is said to have led evidence on the application which shows that the transformation did not occur.
Legal viability
The proposed new §§65(a)(iv), 65(b)(ii) and 65(c)(ii) introduce what is plainly a pleading of promissory estoppel based on representations about how the Russian Federation would behave in the future. Here it is necessary once again to deal with Mr Shavin’s submission that Waltons Stores v Maher requires the pleading of a pre-existing legal relationship for a plea of promissory estoppel. As I have explained above, this submission is wrong and I reject it. The proposed plea of promissory estoppel is orthodox and legally viable.
The addition of the first particular to §65(a) is unobjectionable and merely clarifies what was plainly the case. The proposed final two particulars to §65(a) are also legally viable. Mr Darke SC, for Spirits, took me through these particulars which are extensive. I am satisfied that the particularised documents are capable of supporting one or more of the representations pleaded at §65(a). I also accept his submission that at any trial it would not simply be a question of examining the particulars in isolation but of reading the documents in the context of the evidence as a whole (T73.15).
The addition to §65(g) of new subparagraphs (ii) and (iii) expands the allegation that it would be unconscionable for FKP now to depart from the assumptions induced by the conduct pleaded in §65(a). Spirits accepts that the unconscionability flows from the failure of the party to fulfil the assumption that has been induced. But it submits that the assessment of unconscionability is to be conducted in all the circumstances of the case citing Commonwealth v Verwayen (1990) 170 CLR 394 at 444-445 per Deane J.
As to the proposed §65(g)(ii), I accept that the knowledge of the Government of Russia that VAO-SPI and Spirits were making the assumptions pleaded at §§65(b)-(c) and acting on them as alleged in §65(d) is relevant to the question of whether a departure from the assumptions induced would be unconscionable. I also accept Mr Darke’s submission that the intentions of the Government of the Russian Federation are also potentially relevant. In Waltons Stores v Maher Brennan J took into account the intentions of Waltons at 418 (‘Waltons intended that he should act on that assumption or expectation by continuing to build the store in order that Waltons should enjoy the option of completing the exchange and proceeding to take the lease if it should appear expedient to do so’). That is not so dissimilar to the plea at §65(g)(ii).
As to the proposed §65(g)(iii), here the point is the motivations of the Government of Russia in causing FKP to bring the present proceeding including, in particular, an alleged motivation it has to obtain a windfall from the value added to the marks by Spirits and its predecessors. In my view, were it shown that this was the motivation of the Government of Russia this would be capable of bearing upon the question of unconscionability. It would be part of the surrounding context against which the unconscionability of any departure from the induced assumptions would be measured. Certainly, this is true at the level of a strike out application.
The pleas at §§65(g)(ii) and (iii) also bear upon the application of the maxim that those seeking equity should do it, remembering that FKP seeks equitable relief in these proceedings: see, e.g., Giumelli at 123-124 [42] per Gleeson CJ, McHugh, Gummow and Callinan JJ; Langman v Handover (1929) 43 CLR 334 at 351-352 per Rich and Dixon JJ.
I would therefore accept that proposed §§65(g)(ii) and (iii) are sufficiently viable to permit the amendments to be made.
Discretion
FKP makes two points as to why I should not grant Spirits leave to amend. First, the application to amend has been brought late and without explanation. Secondly, evidence led by Spirits on its application to amend its laches defence tends to show that a Mr Shefler, who FKP alleges was both an officer of VAO-SPI and Spirits by 1996, had always been aware that the transformation had not occurred and that VVO was the true owner of the marks. The submission was that the Court should not permit the amendments to §65 where the evidence before it showed that VAO-SPI and Spirits knew that the transformation had not occurred and hence that the pleadings of reliance could not be correct.
Those two matters do not lead me to conclude that the defence disclosed is not a reasonable one within the meaning of FCR r 16.21(e). It could succeed. Whether it will do so will depend on why VAO-SPI should have known that it did not own the trade marks and the circumstances which led the Russian Federation to make the representations pleaded in §65(a) in the first place. If one gets to this part of the case what will occur is an apportionment of responsibility between VAO-SPI and the Russian Federation for the fact that the Registrar of Trade Marks and this Court were told that VAO-SPI owned the marks when it did not. From the pleadings, I cannot foresee how this apportionment debate will play out.
But I do not accept at this stage that its outcome is irrelevant to the exercise of the discretion under s 88(1), even taking into account the purity of the Register as explained in Shin-Sun. For example, if it were to emerge at any trial that the origin of the misrepresentations was truly the Russian Federation then there might be much to be said for the view that it was the author of its own misfortune. Having misled VAO-SPI into thinking that it owned the marks as a result of which it and then Spirits used and sought registration of them on a worldwide basis, it is at least arguable that the Russian Federation ought not now have the benefit of having the Register rectified to expunge the downstream consequences of its own actions. That VAO-SPI (on this hypothesis) ought to have detected that it did not own the trade marks would no doubt be a relevant input into this inquiry but I am far from satisfied from a pleading perspective that this entails that such a defence cannot succeed.
Ms Cochrane also submitted on this topic that one needed to bring to account the evidence of Mr Muranov to understand that the representations alleged to have been made in §65 were mere rubber stamping exercises which did not bind the Russian Federation. I have already explained why this is a summary judgment point rather than a pleading point.
I would therefore not strike out the third particular to §67 insofar as it relies upon §65.
The references to §§62-63
Dealing next with the references to §§62-63, I have explained above that these encompass allegations that Spirits acquired its interests in the trade marks for value and without notice of FKP’s claim to the marks.
Ms Cochrane submitted in relation to these allegations that FKP had pleaded at §2A of the Cross-Claim that from about 1996 Mr Shefler was the directing mind of both VAO-SPI and Spirits and Mr Oliynik was also an officer of both. I accept this submission. The burden of this submission was that Spirits knew what VAO-SPI knew from 1996. I note that Spirits does not admit this allegation.
The allegations at §§62 and 63 of the Defence concern two assignments: an assignment of the marks from VAO-SPI to ZAO on 31 March 1998 which ZAO is said to have taken for value and without notice and an assignment from ZAO to Spirits on 12 April 1999 also for value and without notice.
In my view, part of §§62 and 63 cannot ever succeed and part is arguable. One arrives at this part of the case knowing that the registration of the marks resulted from the fraud, false suggestion or misrepresentation of VAO-SPI and/or Caldbeck and that this occurred by 28 September 1992 and 18 September 1995.
If the fraud or false suggestion allegation has been successful then VAO-SPI knew from at least those dates that it did not own the marks. The subsequent bona fide purchase by ZAO and Spirits for value without notice does nothing to avail VAO-SPI. However, the allegation does work in the case of ZAO and Spirits who are not afflicted with this difficulty since there is no allegation that either of these entities were party to the fraud or false suggestion.
Further, if it is the misrepresentation case which has succeeded then necessarily VAO-SPI will not have known (although it should have known) that it did not own the trade marks (see §§24A and 35A of the Cross-Claim). In that circumstance, I do not see how the fact that Mr Shefler and Mr Oliynik were officers of both VAO-SPI and Spirits from 1996 assists. In any event, §2A of the Cross-Claim is not admitted and I do not see how I can treat it as a fact in a pleading dispute.
For completeness, no submission was made by FKP that the fact that VAO-SPI ought to have known that it did not own the trade marks meant that the bona fide purchaser for value without notice contention could not succeed.
The reference to §64
This paragraph alleges an assignment of some of the marks by VAO-SPI on 4 October 1996, 8 November 1996 and 12 August 1997 to Diageo. I do not understand how this paragraph fits in with the rest of the defence. To take the example of the Stolichnaya Label Mark, it is alleged in §63(a) that on 31 March 1998 VAO-SPI assigned this to ZAO which on 12 April 1999 assigned it to Spirits subject to a distribution agreement with Diageo. Yet at §64(a) it is alleged that VAO-SPI assigned the same mark to Diageo on 4 October 1996 without any allegation that the mark was assigned back to VAO-SPI in time for it to be assigned, as alleged in §63(a), to ZAO on 31 March 1998. In short, I am unable to understand what §64 does. No party sought to elucidate this matter. Since I do not understand what §64 is driving at I am unable to see how it can advance §67.
Conclusions on §67
All of the first particular should be struck out but Spirits should have leave to amend the particular by relying on the matters pleaded in the laches defence in §66. The second particular should be struck out. The references to §61 and §64 of the third particular should be struck out.
The application to amend §67
Spirits seeks to amend §67 as follows:
In further answer to the whole of the Third Further Amended Cross-Claim, the Cross-Respondent says that if (which is denied) either or both of the Cross-Claimants is an “aggrieved person” within the meaning of section 88 of the Trade Marks Act and if (which is denied) any of the grounds specified in section 88 of the Trade Marks Act is made out by either or both of the Cross-Claimants, the Court should in its discretion refuse to grant the relief sought in the Cross-Claimants’ prayer for relief.
Particulars
The Cross-Respondent refers to paragraphs 15 to 51 of the Third Further Amended Cross-Claim and to paragraph
6766 of this Defence and says that the Government of the Russian Federation, or alternatively the Cross-Claimants, are guilty of gross delay in bringing any application for rectification pursuant to section 88 of the Trade Marks Act.The Cross-Respondent refers to the matters pleaded in paragraph 65
6(a) of this Defence and says that the allegations made by the Cross-Claimants in paragraphs 4(f), 4(h), 14, 24, 35, and 54-58 of the Third Further Amended Cross-Claim are contrary to representations made by the Government of the Russian Federation generally and further or in the alternative to VAO-SPI, ZAO and the Cross-Respondent during the period 1992 to 2000.The Cross-Respondent refers to the Government of the Russian Federation’s knowledge and motivations in bringing and maintaining these proceedings through the Cross-Claimants, including as to the benefit or windfall that would be obtained from VAO-SPI, ZAO and Cross-Respondent having used, authorised the use of and registered the trade marks referred to in sub-paragraphs 65(b) and (c) above in Australia and throughout the world.
The Cross-Respondent also refers to the matters pleaded and particularised in paragraphs 61 to
, 62, 63, 64 and 6566 of this Defence. The Cross-Respondent relies on the allegations and particulars in each sub-paragraph of those paragraphs, irrespective of whether all of the allegations in each paragraph are made out.Further particulars may be provided following discovery.
As I have indicated I would permit the first particular to the extent that it refers to §66 but not otherwise.
The proposed amendments to the second particular do not solve the problem I have identified with it in its unamended form and leave to amend should be refused.
In relation to the new third particular, I have already explained that I would not permit amendments to raise the knowledge and motivations of the Russian Federation.
In relation to the fourth particular (which is an amended version of what was the third particular) I have indicated that I would only permit Spirits to rely on §§62, 63 and 65. I would permit the addition of the words ‘and particularised’ since this amendment simply reflects what is the case anyway. In relation to the proposed second sentence I see no prejudice to FKP in allowing this amendment.
Spirits does not seek in relation to the reference to §65 in the fourth particular the amendment it sought in relation to §65(a) in the second particular; namely, the addition of words which allege that the representations in the estoppel case were made both generally and to VAO-SPI, ZAO and Spirits in particular.
The application to add the definition of the Government of the Russian Federation
At present, Spirits has not defined in the Defence the expression ‘the Government of the Russian Federation’ but now seeks to do so as follows:
For the purposes of this Defence, “Government of the Russian Federation” includes the ministries, agencies, officials and bodies:
(a)referred to in Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (Permanent Stay) [2019] FCA 802 at [15]-[16];
(b)referred to in the affidavit of Mikhail Tsyplaov, sworn 28 February 2006 at [30]-[31];
(c)identified as the author(s) or recipient(s) of the documents referred to in the affidavit of Alexey Victorovick Oliynik affirmed 1 December 2015 at [68]-[71], [84(a)-(h)], [85(a)-(f)], [86]-[89], [90(a)-(uu)] and [91(a)-(l)] and [92]-[105] (other than VAO and VZAO); and
(d)referred to in the particulars to [65] and [66] of this Defence.
Since the definition has been at large until now, this amendment merely ties Spirits to what was otherwise a rather amorphous concept. FKP submitted that the amendment should not be permitted because the list was large. I accept that the list is large but that is to be expected with something as large as the Government of the Russian Federation. In any event, FKP is better off knowing what it is that Spirits alleges the Government of the Russian Federation is in advance of the trial. I therefore do not see anything prejudicial about the amendment. I reject FKP’s submission that the amendment should be rejected on the basis that Spirits has not identified how the conduct of these entities was to be attributed to the Russian Federation. That is a trial point, not a pleading point.
Result
The parties should bring in a short minute of order to give effect to these conclusions. Each party should bear its own costs.
I certify that the preceding one hundred and ninety (190) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Perram. Associate:
Dated: 12 March 2024
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