Geneva Laboratories Limited v Prestige Premium Deals Pty Ltd (No 2)
[2015] FCA 872
•19 August 2015
FEDERAL COURT OF AUSTRALIA
Geneva Laboratories Limited v Prestige Premium Deals Pty Ltd (No 2) [2015] FCA 872
Citation: Geneva Laboratories Limited v Prestige Premium Deals Pty Ltd (No 2) [2015] FCA 872 Parties: GENEVA LABORATORIES LIMITED and UNION-SWISS (PROPRIETARY) LIMITED v PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427), UNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709), UNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162), ANDREW CHRISTOPHER and CHIEF EXECUTIVE OFFICER OF AUSTRALIAN CUSTOMS AND BORDER PROTECTION SERVICE;
PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427), UNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709), UNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162) and ANDREW CHRISTOPHER v GENEVA LABORATORIES LIMITED
File number(s): NSD 344 of 2014 Judge(s): YATES J Date of judgment: 19 August 2015 Catchwords: PRACTICE AND PROCEDURE – application for security for costs – application granted Legislation: Federal Court Rules 2011 Date of hearing: 6 August 2015 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 31 Counsel for the Applicants/Cross-Respondent: Mr AC Casselden Solicitor for the Applicants/Cross-Respondent: Marque Lawyers Counsel for the First to Fourth Respondents/Cross-Claimants: Mr DC Eardley Solicitor for the First to Fourth Respondents/Cross-Claimants: Russo & Partners Counsel for the Fifth Respondent: The fifth respondent did not appear
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 344 of 2014
BETWEEN: GENEVA LABORATORIES LIMITED
First ApplicantUNION-SWISS (PROPRIETARY) LIMITED
Second ApplicantAND: PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427)
First RespondentUNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709)
Second RespondentUNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162)
Third RespondentANDREW CHRISTOPHER
Fourth RespondentCHIEF EXECUTIVE OFFICER OF AUSTRALIAN CUSTOMS AND BORDER PROTECTION SERVICE
Fifth RespondentAND BETWEEN: PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427)
First Cross-ClaimantUNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709)
Second Cross-ClaimantUNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162)
Third Cross-ClaimantANDREW CHRISTOPHER
Fourth Cross-ClaimantAND: GENEVA LABORATORIES LIMITED
Cross-Respondent
JUDGE:
YATES J
DATE OF ORDER:
19 AUGUST 2015
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The applicants provide security for the first to fourth respondents’ costs of the proceeding in the sum of $165,000.
2.The security referred to in Order 1 be provided by payment into Court of the said sum, such payment to be dealt with in accordance with Div 2.5 of Pt 2 of the Federal Court Rules 2011.
3.The proceeding be stayed until such time as the applicants have complied with Orders 1 and 2.
4.The costs of and incidental to the first to fourth respondents’ amended interlocutory application dated 24 July 2015 be the applicants’ costs in the cause.
5.The first to fourth respondents pay the applicants’ costs of and incidental to the first to fourth respondents’ interlocutory application dated 23 July 2015, as taxed or agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 344 of 2014
BETWEEN: GENEVA LABORATORIES LIMITED
First ApplicantUNION-SWISS (PROPRIETARY) LIMITED
Second ApplicantAND: PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427)
First RespondentUNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709)
Second RespondentUNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162)
Third RespondentANDREW CHRISTOPHER
Fourth RespondentCHIEF EXECUTIVE OFFICER OF AUSTRALIAN CUSTOMS AND BORDER PROTECTION SERVICE
Fifth RespondentAND BETWEEN: PRESTIGE PREMIUM DEALS PTY LTD (ACN 145 497 427)
First Cross-ClaimantUNITED PRESTIGE CLEARANCE PTY LTD (ACN 147 508 709)
Second Cross-ClaimantUNITED PRESTIGE GROUP PTY LTD (ACN 163 773 162)
Third Cross-ClaimantANDREW CHRISTOPHER
Fourth Cross-ClaimantAND: GENEVA LABORATORIES LIMITED
Cross-Respondent
JUDGE:
YATES J
DATE:
19 AUGUST 2015
PLACE:
SYDNEY
REASONS FOR JUDGMENT
By an amended interlocutory application filed on 24 July 2015, the first to fourth respondents (the respondents) seek security from the applicants for the payment of costs that might be awarded against the applicants in the proceeding.
The first applicant is incorporated in the British Virgin Islands. The second applicant is incorporated in South Africa. Neither company has assets in the jurisdiction.
There is no dispute that the respondents are entitled to an order for security. The issue between the parties is the amount of that security. The respondents argue that $600,000 should be provided. The applicants argue that a significantly lesser amount is appropriate. They have offered to provide security in the amount of $150,000.
The applicants’ claims in the proceeding relate to the importation and supply in Australia of a skin care product called “Bio-Oil” (the Bio-Oil product or Bio-Oil products).
The applicants allege that the first applicant is the owner of certain Australian registered trade marks, including a mark comprising the word “Bio-Oil”, a composite mark which includes the word “Bio-Oil”, and a mark comprising the words “PurCellin Oil”. The applicants also allege that the first applicant is the owner of copyright subsisting in a work comprising the composite trade mark and in a work said to be a product insert.
The applicants allege that the first applicant granted the second applicant the exclusive right to apply the registered trade marks in certain territories, including Australia. They also allege that another company, Aspen Pharmacare Australia Pty Ltd, is the exclusive distributor in Australia of the Bio-Oil product.
The applicants plead causes of action against the respondents for trade mark infringement, copyright infringement, misleading or deceptive conduct, and passing off. The central allegation underpinning the pleaded causes of action is that one or more of the respondents has imported and supplied products purporting to be Bio-Oil products, but which are in fact counterfeit products.
The respondents have admitted many of the pleaded allegations of fact. For example, they have admitted that the first respondent has imported certain products on certain occasions. They have also admitted that the first respondent has supplied certain products on certain occasions to certain identified purchasers. Except for one importation, which the respondents admit was of counterfeit products, the respondents’ case is that the relevant products supplied in the identified transactions were genuine Bio-Oil products. This is a central issue in the proceeding.
The amount of the security sought by the respondents is based on time and work estimates provided by their solicitor Mr Russo, who is a principal in the firm of Russo and Partners. Mr Russo has made two affidavits that were read at the hearing of the respondents’ interlocutory application for security.
Mr Russo says that some 26 subpoenas or notices to produce will need to be issued and an expected, extensive body of produced documents will need to be considered “in respect of the various assertions and claims made”. Mr Russo says that a total of 120 hours of his time and 30 hours of his employed solicitor’s time will be required to prepare the subpoenas/notices to produce, and to review and collate produced documents. On the basis of an 8 to 10 hours day, this represents approximately 15 to 20 days’ work, mostly at principal’s rates. Mr Russo also says that a number of the subpoenas will need to be issued to “international entities” and this will involve an additional 40 to 50 hours of his time and 15 hours of his employed solicitor’s time in preparation for, and for the hearing of, the applications that will be involved. This represents approximately 6 to 8 days’ additional work, again mostly at principal’s rates.
In light of the issues involved, it is not clear to me why such a large number of subpoenas/notices to produce will be required or why, in any event, subpoenas to “international entities” would be required. Further, it is not clear to me why such a lengthy period of time would be required for the work involved or why the work envisaged would be required to be done substantially by a principal, such as Mr Russo, rather than by a competent employed solicitor.
Mr Russo says that the applicants have provided him with four lever-arch files of affidavit material and records. This material relates to affidavits used in other related proceedings. Leave has been granted to use those affidavits in this proceeding, subject to all just exceptions as to admissibility. I have some familiarity with them. The material particularises the identified transactions on which the applicants rely. As I have noted, these transactions have been admitted by the respondents.
Mr Russo estimates that the further review of this material, and the task of taking instructions on both these documents and the documents expected to be produced on subpoena, will take 65 hours of his time and 15 hours of his employed solicitor’s time. This represents approximately 8 to 10 days’ work, once again mostly at principal’s rates. I do not understand why such a lengthy period of time is required or why the work that might reasonably be required in that regard cannot be undertaken, substantially, by a competent employed solicitor acting under Mr Russo’s supervision.
Mr Russo estimates that the hearing of the matter will take between 12 to 15 days, with potentially 15 witnesses, including expert witnesses. These witnesses have not been identified. I assume that a number of them must be deponents of affidavits filed for the applicants, whom the respondents wish to cross-examine. The respondents have not as yet filed any affidavit evidence in relation to the substantive hearing.
I do not accept that the hearing will take 12 to 15 days. With my present understanding of the issues involved in the proceeding, I think it is more likely that the hearing will take 5 days. This also happens to be the applicants’ present estimate of the hearing time required.
Mr Russo estimates that, prior to the hearing, there will be two weeks preparation by him and his employed solicitor. Mr Russo has not explained why such a lengthy period of time would be required for this particular purpose.
Significantly, these estimates of time and work are in addition to the time and work that Mr Russo says will be necessary to prepare the respondents’ affidavit evidence. Mr Russo says that extensive affidavit evidence will be prepared for the respondents’ case and that six potential witnesses are currently being considered. Mr Russo has not identified these witnesses or the topics or issues to which their evidence will be directed. He estimates that the preparation of affidavits will take 120 hours of his time and 25 hours of his employed solicitor’s time. This represents approximately 15 to 18 days’ work, again mostly at principal’s rates.
Mr Russo says that two witnesses in contemplation are overseas. They will need to be flown to, and accommodated in, Australia. These witnesses have not been identified. Mr Russo estimates that the cost of flying these witnesses to Australia and accommodating them will be $11,000.
Mr Russo says that the testing of the accused products will be necessary, including a review of up to 40 samples “from varying locations”. Mr Russo says that the cost of this, including the preparation of a report, has been estimated at approximately $45,000, based on inquiries he has made at the University of New South Wales. No written quotation has been provided (at least no written quotation adduced in evidence on the present application) and no explanation has been given as to why the review or testing of 40 samples is required.
In this connection, the applicants’ testing of samples of the accused products indicates that particularly those marked with the batch numbers BNB321360 and BNB151343 are, according to the applicants, counterfeit products. The Court will be asked to infer that all purported Bio-Oil products marked with these batch numbers, and some other miscellaneous batch numbers, are counterfeit and were supplied in Australia by one or more of the respondents.
The respondents have not identified any particular challenge to the test reports and results on which the applicants presently propose to rely. The respondents’ position is that they are entitled to carry out their own tests on the accused products to satisfy themselves that the accused products have the composition which the applicants’ test reports say they have. It is, of course, open to the respondents to take that course. But, if the respondents succeed in their defences, it does not follow that they would be entitled to visit such costs upon the applicants, unless the further testing can be shown to have been justified in the circumstances. At the moment, the respondents have not put forward any justifiable reason for re-testing the accused products. Notably, they have admitted that one importation by the first respondent is of counterfeit products. They have not challenged the applicants’ testing of samples taken from those products. The respondents have not yet explained why the other samples stand in a different position.
Putting to one side the respondents’ desire to re-test samples of the accused products, the issue will be whether one or more of the respondents supplied those products. The applicants bear the onus of proving that case. The respondents do not bear any onus in that regard. I am not persuaded that all the work referred to by Mr Russo, including the re-testing of samples, or indeed any other testing, is necessary in the reasonable defence of the claims that have been brought against the respondents.
Mr Russo has also provided estimates of time for senior and junior counsel, namely 200 hours (20 to 25 days) and 325 hours (32 to 41 days), respectively.
All up, Mr Russo estimates that the future time to be spent in preparation and for the hearing of the applicants’ claims will be 340 hours for himself, 305 hours for his employed solicitor, 325 hours for junior counsel and 200 hours for senior counsel, at a total estimated cost of $561,950. To this, he adds an estimated $45,000 for an expert’s report and $43,000 for disbursements, giving total estimated future costs of $649,950. With GST, the sum comes to $714,945. Mr Russo then applies a discount of approximately 16% to yield the sum of $600,000 for which security is sought.
In my view, the estimates of time and work that have been provided are excessive and do not reflect the time and work that should be involved in defending the case that the applicants bring. That case has a degree of factual complexity, but nowhere near the complexity which Mr Russo’s time and work estimates suggest. Unfortunately, I am not able to place any real reliance on these estimates.
The applicants’ solicitor, Mr Mattock, has made an affidavit in which he challenges Mr Russo’s time and work estimates. Mr Mattock has expressed the opinion that the total future costs of the respondent in defending the case brought against them is $200,000, to which a discount of 25% should be applied to arrive at an estimate of the respondents’ likely party/party costs. Mr Mattock has not provided a break-down showing how this estimate has been calculated or the rates that have been applied. Nevertheless, considered as a lump sum, it seems to me that this estimate of the respondents’ likely party/party costs is a more realistic one, and certainly one that is more likely to reflect the costs that might be awarded should the respondents obtain an order for costs in their favour.
I am satisfied that security should be ordered for the respondents’ future costs, but I am not satisfied that Mr Russo’s estimates provide a reliable guide. It seems to me that an allowance for one-third of the time and work referred to would be a somewhat generous estimate of likely solicitor/client costs. Even then, I am not persuaded that any allowance should be made for overseas witnesses (given that no reason has been given, and there is no apparent need, for overseas witnesses) or for re-testing the samples of the accused products (once again, given that no reason has been given, and there is no apparent need, for re-testing). Making these allowances leads to an estimate of approximately $218,000, for which a suitable discount should be applied to reflect likely party/party costs. If I apply a discount of 25%, which seems to be me to be reasonable, the resultant amount is approximately $165,000. This is far closer to the applicants’ estimate than it is to the respondents’ estimate. I propose to order that security be provided in this amount.
The costs order in relation to the respondents’ interlocutory application for security for costs should reflect the fact that the only issue in contest was the amount of the security required and that the respondents’ estimate was excessive. It should also reflect the fact that the applicants have offered to provide security in an amount that is very close to the amount that I propose to order. In the circumstances, the appropriate order is that the costs of the respondents’ interlocutory application for security for costs be the applicants’ costs in the cause.
There is a related matter. On 16 July 2015, the applicants issued a notice to produce on the respondents seeking fee notes, costs agreements and time records relating to the proceeding. The respondents initially resisted production of these documents and, on 23 July 2015, filed an interlocutory application seeking to set aside the notice to produce. Ultimately, no argument was necessary and the respondents answered the notice to produce, albeit by redacting some information from some of the documents that were produced. This is a step that could have been taken much earlier than it was and, in all likelihood, would have avoided the need to file this interlocutory application. The applicants say that the respondents’ initial opposition to producing the documents was misguided. They seek their costs of that interlocutory application.
The respondents resist an order for costs on the basis that the documents sought were not relevant to the interlocutory application for security for costs. I disagree. In my view, the documents sought had an apparent relevance to the issues raised in the interlocutory application for security for costs, one of which was whether the costs charged by the respondents’ solicitors to their clients had a significant solicitor/client component that should be recognised when considering Mr Russo’s estimates of time and work required. The produced documents were in fact tendered in the application for security for costs on that issue.
It is appropriate that the respondents should pay the applicants’ costs of and incidental to the interlocutory application filed on 23 July 2015 seeking to set aside the notice to produce.
I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate:
Dated: 19 August 2015
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