Geneva Laboratories Ltd v Nguyen

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FEDERAL COURT OF AUSTRALIA

Geneva Laboratories Limited v Nguyen [2014] FCA 1270

Citation: Geneva Laboratories Limited v Nguyen [2014] FCA 1270
Parties: GENEVA LABORATORIES LIMITED v STEVEN NGUYEN TRADING AS HEALTH LINE PHARMACY SYDNEY, TANIA HOANG TRADING AS HEALTH LINE PHARMACY SYDNEY, INSPIRED HEALTH (AUST) PTY LTD (ACN 161 693 625), JOHN NGUYEN, VINOD NEGI TRADING AS CINCOTTA DISCOUNT CHEMIST CARLINGFORD and SAMER MEGALLI TRADING AS SHOPSMART WHOLESALE PHARMACY NEWTOWN
File number: NSD 710 of 2014
Parties: GENEVA LABORATORIES LIMITED v OZE-PHARMACY PTY LTD (ACN 092 541 510), RAYMOND SHAHIDI, WARREN TURNER, CASTLE HILL PHARMACY PTY LTD (ACN 166 252 839), ZELIMIR ANTHONY SEMAN, OZE-PHARMACY GROUP PTY LTD (ACN 129 906 912), OZE-PHARMACY NORTHERN BEACHES PTY LTD (ACN 111 485 502), OZE-PHARMACY TUGGERAH SERVICES PTY LTD (ACN 154 500 508) and HIGH STREET PENRITH PHARMACY PTY LTD (ACN 166 252 900)
File number: NSD 711 of 2014
Judge: GLEESON J
Date of judgment: 25 November 2014
Catchwords:

PRACTICE AND PROCEDURE – application for discharge of ex parte search and seizure orders and delivery up orders – where orders for seizure and delivery up of allegedly counterfeit skincare product – where respondents are registered pharmacists – where orders executed – whether applicant breached duty of candour – whether any risk that evidence might be destroyed or caused to become unavailable – whether orders should be discharged because no real possibility evidence would be destroyed or caused to become unavailable – application dismissed

PRACTICE AND PROCEDURE – application for summary dismissal – whether  proceedings frivolous, vexatious or an abuse of process – whether no reasonable prospect of success – application dismissed

Legislation: Civil Dispute Resolution Act2011 (Cth) ss 6(2), 11
Competition and Consumer Act 2010 (Cth) Sch 2 s 18,
Copyright Act 1968 (Cth) ss 37, 38
Federal Court Act 1976 (Cth) s 31A(2)
Federal Court Rules 2011 (Cth) rr 7.42, 7.43, 8.02, 23.12, 23.13, 26.01, 39.05
Trade Marks Act 1995 (Cth) ss 6, 17, 120, 123, 132, 133
Cases cited: Booker McConnell Plc v Plascow [1985] RPC 425
Brags Electrics Pty Ltd v Gregory [2010] NSWSC 1205
Campaign Master (UK) Ltd v Forty Two International Pty Ltd (No 4) (2010) 269 ALR 76
Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45
Dart Industries v Bryar (1997) 38 IPR 389
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588
Dormeuil Frères SA v Nicolian International (Textiles) Ltd [1988] 3 All ER 197
EFG Australia Ltd v Kennedy [1995] NSWSC 58
Flower & Hart v White Industries (Qld) Pty Ltd (1999) 87 FCR 134
Garrard (t/as Arthur Anderson & Co) v Email Furniture Pty Ltd (1993) 32 NSWLR 662
Ghanem v Australian Research Council [2014] FCAFC 132
Hayden v Teplitzky (1997) 74 FCR 7
JC Techforce v Pearce (1996) 138 ALR 522
Jones v Sutton (No 2) [2005] NSWCA 203
Liberty Financial Pty Ltd v Scott [2002] FCA 345
Macquarie Bank Limited v Commissioner of Taxation [2013] FCAFC 119
Norman v Matthews (1916) 85 LJKB 857
Owners of SS…
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Details
Case
[2014] FCA 1270
Decision Date

CaseChat Overview and Summary

In Geneva Laboratories Ltd v Nguyen, the applicants sought to discharge ex parte search and seizure orders and delivery up orders which had been made against various respondents, including registered pharmacists. The respondents argued that the orders should be discharged due to alleged inadequate disclosure by the applicants, the absence of a real possibility that evidence would be destroyed or become unavailable, and the absence of urgency in the application. The respondents also sought summary dismissal of the proceedings, claiming they were frivolous, vexatious, or an abuse of process.

The court considered whether there had been a breach of the applicants' duty of candour or material non-disclosure, and whether the orders should be discharged due to the lack of established grounds. The court found that there was no breach of duty of candour and no material non-disclosure. The court also found that the orders should not be discharged even if there was no lack of disclosure, as there was no real possibility that evidence would be destroyed or become unavailable after the orders had been executed. The court further found that the proceedings were neither frivolous, vexatious, nor an abuse of process.

The court dismissed the applications for discharge of the ex parte orders and for summary dismissal of the proceedings. The court awarded costs to the applicants against the respondents. The court ordered that the respondents' applications filed on 12 and 15 September 2014 be dismissed with costs. The entry of orders was dealt with in Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. The first to fourth respondents’ application filed 15 September 2014 be dismissed with costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. The respondents’ application filed 12 September 2014 be dismissed with costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

There is some overlap between the grounds relied upon by the various respondents, but the cases are not identical. Accordingly, after identifying the relevant legal principles, I will deal with the alleged inadequacy of disclosure by the applicants. I will then deal with the Oze Pharmacy respondents’ case that the orders should be set aside even if there was no lack of disclosure, and finally, the applications for summary dismissal. FURTHER BACKGROUND TO THE APPLICATION In support of the ex parte applications, the applicant relied on affidavits sworn by Christopher O’Toole, a solicitor employed by Marque Lawyers, the applicant’s solicitor. Mr O’Toole deposed to the following facts. In May 2011, Marque Lawyers on behalf of the applicant lodged a notice of objection with the Australian Customs and Border Protection Service (“Customs”) pursuant to s 132 of the Trade Marks Act, in respect of one of its registered trade marks. (By s 132(1) of the Trade Marks Act, the registered owner of a registered trade mark may give to the Customs CEO a notice in writing objecting to the importation after the date of the notice of goods that infringe the trade mark.) On 12 March 2014, the applicant was informed by Customs that it had intercepted a large consignment of “Bio-Oil”, pursuant to s 133 of the Trade Marks Act. The goods were identified by Customs as having been imported by United Prestige. Customs provided Marque Lawyers with samples of the seized goods (“Customs samples”). Those goods were tested at the laboratory of Aspen Pharmacare Australia Pty Ltd (“Aspen”) in Baulkham Hills. Aspen is the exclusive distributor of Bio-Oil in Australia and has sold Bio-Oil in Australia since 2008. An infrared spectroscopy analysis was conducted on the Customs samples and on control samples obtained from Aspen’s head office. The analysis was said to confirm that each of the Customs samples had a significantly different infrared spectra to the control samples, resulting in a conclusion that the Customs samples and the control samples were not the same product. The report of the analysis (“Customs technical report”) observed “that the spectra of the Customs samples are completely lacking in detail and are remarkably similar to paraffin oil which…is often used as a medium for presenting solid compounds for infrared analysis and is thus very familiar to anyone experienced with infrared spectrometry”. The report concluded that “both sets of samples contain paraffin, however, in terms of organic components, the Customs samples appear to contain little else with a near perfect spectra match between the samples and straight paraffin liquid”. On 2 April 2014, the applicant commenced proceedings against various entities including United Prestige Group Pty Ltd (“United Prestige respondents”). On 3 April 2014, Yates J made orders including orders requiring the United Prestige respondents to disclose each and every importation of Bio-Oil or any product to which there was applied substantially similar or deceptively similar marks to the applicant’s trade marks.

Evidence

Evidence Before The Court

Section 11 of the Civil Dispute Resolution Act provides that the Court may, in performing functions or exercising powers in relation to civil proceedings before it, take account of the following: (1)whether a person who was required to file a genuine steps statement under Part 2 in the proceedings filed such a statement; (2)whether such a person took genuine steps to resolve the dispute. EVIDENCENguyen respondents The Nguyen respondents relied on the following affidavits:(1)Three affidavits of Steve Nguyen sworn 23 July, 12 August and 19 August 2014;(2)Two affidavits of John Nguyen affirmed 19 and 28 August 2014;(3)An affidavit of Tania Hoang sworn 22 August 2014;(4)Three affidavits of Jeffrey Lee affirmed 12 September 2014 (two affidavits) and 29 September 2014. By affidavit dated 19 August 2014, the first respondent gave evidence that, had he or his wife (the second respondent) been informed at any time prior to 21 July 2014 that there was a possibility that any “Bio-Oil” product they had bought from United Prestige was not a genuine product, they would have ensured that it was immediately removed from sale at their pharmacies until the matter was resolved. More particularly, had they been asked by the applicant for a sample of any “Bio-Oil” product purchased from United Prestige on the basis that there was a possibility that it was not genuine, they would have provided the applicant with samples for testing, and would have removed the remaining product from the shelves until the matter was satisfactorily resolved. The third respondent swore an affidavit to similar effect on behalf of himself and the fourth respondent.Oze Pharmacy respondents The Oze Pharmacy respondents relied on an affidavit sworn by their solicitor Peter Clinch on 7 October 2014.Applicant The applicant relied on the following:(1)Two affidavits of Mr O’Toole sworn on 16 July 2014 in each of the proceedings; and(2)Two affidavits of Nathan Mattock sworn 2 October 2014 in the Nguyen proceeding and one sworn on 2 October 2014 in the Oze Pharmacy proceeding.ADEQUACY OF DISCLOSUREAlleged non-disclosures The Nguyen parties identified the following four matters as the subject of inadequate disclosure by the applicant at the 17 July 2014 hearing:(1)There was no prima facie case against them, because:(a)The trap purchases were not counterfeit;(b)The technical report was not admissible and was flawed;(2)The Court was misled as to the significance of paraffin oil as an ingredient in the allegedly counterfeit product;(3)The quantities of allegedly counterfeit products involved were trivial; and(4)The application was not urgent. The Oze Pharmacy respondents identified 15 matters as relevant non-disclosures, falling into the following categories:(1)Insufficiency of the evidence to support the ex parte orders;(2)Facts concerning the respondents, relevant to the unlikelihood that they might destroy evidence or cause it to be unavailable for use in evidence; (3)Facts concerning the market for Bio-Oil in Australia, relevant to the strength of the applicant’s prima facie case; and (4)Facts about disputes between Aspen and United Prestige over distribution of Bio-Oil in Australia.

Decision

Reasons for decision

In those circumstances, in my view, the applicant was not required to inform the Court that there was no basis for seizure of any 60ml products. As to whether there was in fact such a basis, in my view, this question is a matter for resolution at any final hearing in the event that there is a claim on the undertaking as to damages. Conclusion I am not satisfied that there was any breach of the applicant’s duty of candour or any material non-disclosure. Accordingly, the applications to have the orders discharged should not be set aside on that basis.OTHER GROUNDS FOR SETTING ASIDE OR DISCHARGING ORDERS As Brereton J said in Brags, an applicant to set an Anton Piller order aside bears an onus of showing some reason why it should be set aside. Even if there was no material non-disclosure, the Oze Pharmacy respondents argued that the orders should be set aside on the basis that the grounds for the order were not established. As appears from my reasons above, I do not accept that argument with the possible exception of the orders relating to 60ml “Bio-Oil”. However, even if I am wrong about that, I am not satisfied that there would be any utility in discharging the orders after they have been executed. In particular, to the extent that it was submitted on behalf of the Oze Pharmacy respondents that the orders carry with them a “stain of dishonesty” that the respondents should not bear, I do not agree. As appears from my reasons set out above, there has been no finding of dishonesty on the part of the respondents and no allegation of dishonesty against them. Accordingly, I decline to set aside on the orders on the basis that the grounds for the orders were not satisfied.SUMMARY DISMISSALWhether proceedings frivolous or vexatious The Nguyen parties contend that the proceedings are frivolous and vexatious because:(1)They would have been unnecessary had a letter of demand been sent first; and (2)Any damages to which the applicant may be entitled are derisory. As to the first matter, I do not doubt the veracity of the affidavit evidence that the parties would have responded cooperatively had a letter of demand been sent. Even so, the submissions made by the Nguyen parties on this point cast substantial doubt on the submission that legal proceedings were unnecessary, because it is far from obvious that any damages suffered are derisory. In this regard, I refer to the passage set out at [31] above. The prospect that the Nguyen parties would have cooperated with the delivery up and testing of goods does not render the proceedings either frivolous or vexatious. The applicants are entitled to take reasonable steps to protect their trade marks. This includes bringing proceedings for relief including damages against parties who sell counterfeit products, whether those parties do so knowingly or unknowingly. There is nothing frivolous or vexatious about the proceedings. Whether proceedings an abuse of process The claim that the proceedings are an abuse of process is made by the Nguyen parties on the following bases:(1)The proceedings are brought for a collateral purpose, being to attack the customers of United Prestige, as part of a broader war between the applicant and United Prestige;(2)The applicant failed to take “genuine steps” to avoid the commencement of proceedings.

Ratio Decidendi

Legal Principle Established

At [22], Gillard AJA continued:In my opinion, this jurisdiction is different to the situation when an order made ex parte is set aside because there was a material non-disclosure of a material matter by the party who obtained the order. The order is set aside because of some irregularity and not on the merits. When this jurisdiction is enlivened, the court’s function is to determine on the material that was placed before the judicial officer at first instance, whether a party has failed to discharge the obligation which rests upon any party seeking an order ex parte, namely, making a full and fair disclosure of all matters within its knowledge and which are material, to the court. The court is not concerned whether the order should have been made on the material before the court. Whether or not the court will set aside the order upon proof of the failure to discharge the obligation depends upon the particular circumstances.Discretionary considerations Despite Mahoney AP’s statement in Garrard, there is no absolute right to have an ex parte order set aside; there is a discretion in the court whether to do so or not: Dormeuil Frères SA v Nicolian International (Textiles) Ltd [1988] 3 All ER 197 at 199 (“Dormeuil”). In Dormeuil, Browne-Wilkinson VC expressed the view that the appropriate time for the court to hear and determine an application to discharge a search order on the ground that it was obtained as a result of material non-disclosure is at the trial because, the order usually having been executed, the only consequence of the non-disclosure will be to affect the plaintiff’s liability under his undertaking as to damages, and interlocutory proceedings are not the appropriate time for the court to hear evidence and determine allegations of what has happened in the past. In Dart Industries v Bryar (1997) 38 IPR 389 at 419, Goldberg J, agreeing with Browne-Wilkinson VC, said that “save in exceptional cases it is not the correct procedure to apply to discharge an ex parte injunction on the grounds of lack of full disclosure at the interlocutory stage of the proceedings”. Goldberg J also accepted “the tentative view expressed by Sir Nicholas Browne-Wilkinson VC in Tate Access Floors Inc v Boswell [[1991] Ch 512 at 532-3] that investigations of the circumstances in which an ex parte Anton Piller [or search] order was granted should be restricted to those cases where there has been a serious failure to make a material disclosure”. His Honour declined to discharge the search order in that case. See also Liberty Financial Pty Ltd v Scott [2002] FCA 345 at [71]. In WEA Records Ltd, Donaldson MR said at 727:In the instant case the Anton Piller order is spent in the sense that it has been executed. However, the defendants seek to go back to the beginning of the action saying that, regardless of whether the fruits of the order are such as to show that it was abundantly justified, the judge had insufficient material to justify his action at the ex parte stage. They therefore invite us to set the ex parte order aside and to order the return of the …seized material …I regard this as wholly absurd. The courts are concerned with the administration of justice, not with playing a game of snakes and ladders. If it were now clear that the defendants had suffered any injustice by the making of the order…the defendants would have their remedy in the counter-undertaking as to damages. But this is a matter to be investigated by the High Court judge who is seised of the matter…