James v Nolmont Pty Ltd (subject to a Deed of Company Arrangement) ACN 010 874 834

[2006] FCA 491

FEDERAL COURT OF AUSTRALIA

James v Nolmont Pty Ltd (subject to a Deed of Company Arrangement) ACN 010 874 834 [2006] FCA 491

JESSE JAMES and WEST COAST CHOPPERS INC -v- NOLMONT PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) (ACN 010 874 834)
AND WEST COAST CHOPPERS, INC

VID 1136 of 2004

RYAN J
28 APRIL 2006
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1136 of 2004

BETWEEN:

JESSE JAMES
First Applicant

WEST COAST CHOPPERS INC
Second Applicant

AND:

NOLMONT PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) (ACN 010 874 834)
First Respondent

WEST COAST CHOPPERS, INC
Second Respondent

AND:

NOLMONT PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) (ACN 010 874 834)
Cross-Claimant

JESSE JAMES
First Cross-Respondent

WEST COAST CHOPPERS, INC
Second Cross-Respondent

JUDGE:

RYAN J

DATE OF ORDER:

28 APRIL 2006

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.Pursuant to sub-section 444E(3) of the Corporations Act 2001, the applicants have leave to proceed with this proceeding against the respondent.

2.Such leave does not extend to taking any steps to enforce any judgment that may be obtained in the proceeding against the property of the respondent without the leave of the Court.

3.The applicants have leave to amend the application in this proceeding by inserting a new paragraph 1A after paragraph 1 of the Details of Claim as follows:

‘1AA declaration that the first applicant is the owner of the West Coast Choppers Trademark.’

4.The applicants have leave to issue a subpoena addressed to Jadegear Pty Ltd (ACN 010 910 899) in the form of the draft subpoena annexed hereto and marked “A” (“the subpoena”).

5.The respondent file and serve further and better particulars of its defence and cross-claim in response to the applicant’s request for further and better particulars of the defence and cross-claim dated 22 December on or before 26 May 2006.

6.The respondent comply with the applicant’s notice to produce dated 22 December 2004 on or before 26 May 2006.

7.The subpoena be returnable before a Registrar on or before 2 June 2006 (subject to the availability of a Registrar).

8.This proceeding be returned for further directions at 10.15am on 16 June 2006.

9.The costs of the notice of motion dated 21 April 2006 are reserved.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 1136 OF 2004

BETWEEN:

JESSE JAMES
First Applicant

WEST COAST CHOPPERS INC
Second Applicant

AND:

NOLMONT PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) (ACN 010 874 834)
First Respondent

WEST COAST CHOPPERS, INC
Second Respondent

AND:

NOLMONT PTY LTD (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) (ACN 010 874 834)
Cross-Claimant

JESSE JAMES
First Cross-Respondent

WEST COAST CHOPPERS, INC
Second Cross-Respondent

JUDGE:	RYAN J
DATE:	28 APRIL 2006
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1. There is before the Court a motion by the applicants seeking, first, pursuant to s (444)(e)(iii) of the Corporations Act 2001, that the applicants have leave to proceed with this proceeding against the respondent.  The applicants also seek leave to amend their substantive application to make a claim for;

   ‘(1A)A declaration that the first applicant is the owner of the West Coast Choppers trademark.’

2. The applicants by their statement of claim have alleged that they have manufactured, distributed, promoted, marketed, offered for sale, sold and provided under or by reference to a device or trademark, “West Coast Choppers” various products. The first applicant claims also to be the owner of copyright in artistic work subsisting in the West Coast Choppers trademark. By their prayer for relief in the application the applicants claim, amongst other things, injunctions restraining the respondent, Nolmont Pty Ltd (“Nolmont”), from using the West Coast Choppers trademark or any name, word or marks substantially identical therewith or confusingly or deceptively or misleadingly similar thereto on or in relation to goods not manufactured by or under the authority of the applicants. Further, declaratory relief is claimed together with damages under s 82 of the Trade Practices Act 1974 (Cth) and for passing off or alternatively, at the option of the applicants, an account of profits. Damages for infringement of copyright are also claimed and delivery up on oath of allegedly infringing material.

3. The evidence discloses that Nolmont was placed under external administration on 31 March 2005 and on 31 May 2005 entered into a Deed of Company Arrangement.  In an affidavit sworn by Mr Bolden, the solicitor for Nolmont, it has been indicated that the joint administrator of Nolmont, pursuant to the Deed of Company Arrangement, will by 30 September 2006 have available for distribution funds in the range of $15,000 to $35,000 representing an estimated return to unsecured creditors of between .006 and .014 cents in the dollar.

4. I have been told from the Bar table by Mr Bornstein of Counsel for the applicants, and this has not been contested by Mr Austin of Counsel for the respondents, that the Deed of Company Arrangement effectively creates a fund for distribution to creditors and that the sole function of the administrator under the Deed is the management of that fund.  It has been asserted that it is a term of the Deed that control of the business of Nolmont effectively reverts to the sole director of that company.  In these circumstances it appears to me, prima facie, desirable that the applicants have leave to proceed with this action against Nolmont. 

5. Mr Austin of Counsel for Nolmont opposed that course effectively on two grounds.  One was that there was insufficient evidence to demonstrate an arguable case or an arguable prospect of the applicants’ succeeding in their claim.  In this context, Mr Austin referred to a judgment of a Full Court of this Court in Vagrand Pty Ltd (In Liq) v Fielding (1993) 41 FCR 550 where the Court, comprised by Wilcox, Burchett and Beazley JJ said, at 556-557;

   ‘The test which is actually being applied is akin to that now used in considering whether interlocutory relief should be granted, “a serious question to be tried.”  See Castlemaine Toohey Limited and Ors v State of South Australia (1986) 161 CLR 148 at 153 where Mason A/CJ made it clear with reference to the very same question which arose in the context of an interlocutory debate that the test of “a serious question to be tried” is generally to be preferred to that of a prima facie case.  It is appropriate that the same standard of proof of the merits should be required for each of these forms of relief.  In a particular case an applicant may need both orders.  We would think it anomalous if an applicant had to meet a higher requirement merely to commence an action than that necessary to obtain an order potentially imposing a substantial burden on the respondent.’

6. In the present case, as Mr Bornstein has pointed out, leave is sought not to commence an action against a company in liquidation but to continue proceedings already on foot against a company under a deed of company administration.  On the view that I take of it, it is not necessary in these circumstances for there to be affirmative proof of each element of the cause of action relied on.  The Full Court in Vagrand Pty Ltd (supra) referred to a judgment of Rogers CJ of the Commercial Division of the Supreme Court of New South Wales in Capita Financial Group Limited v Rothwells Limited (No 2) (1989) 7 ACLC 634 and continued (at 556);

   ‘But it is apparent that he was not using the term “prima facie case” in its technical sense; that is, evidence of all the elements of the cause of action.  His Honour cited in support of his statement a number of cases including all those mentioned above in which there was no prima facie case in the technical sense of the word and no requirement of it.  At 637 Rogers CJ in Comm D said that “it is quite clear from the evidence [which he identified] that there is a real dispute between the parties”.  He referred to the course taken by Street J in Re A J Benjamin [(In liq) (1969) 90 WN (Pt 1) (NSW) 107] and followed a similar course himself.  He directed that the plaintiff’s statement of evidence be verified on oath.  He said that this material “will then stand, no doubt, as adequate evidence of a prima facie case”;  But as an experienced commercial judge, he would have realised that the statements would not necessarily prove every element in the case.  They might well need to be supplemented by documentary evidence.’

7. In my view, that observation can be paraphrased to apply to a case like the present where there have been substantial pleadings and the inference is readily available that there is a real dispute between the parties.  The existence of such a dispute, I consider, is corroborated by the references in Mr Stern’s affidavit to a course of negotiations between the parties which have ultimately been unsuccessful, but, nevertheless, provide a separate basis for inferring the existence of a real dispute in respect of the matters for which the applicants seek relief.

8. The relief, as I have already indicated, is of a kind which would not be obtainable by proving as a creditor under the Deed of Company Arrangement and it is essentially, although not exclusively, relief against what is alleged to be continuing infringing conduct. 

9. The other argument advanced by Mr Austin against the grant of relief on the applicants’ motion is that there are proceedings presently pending in the Office of Trademarks in which the applicants seek registration of the West Coast Choppers trademark and Nolmont seeks to raise opposition proceedings.

10. It is acknowledged on behalf of Nolmont that it has been somewhat dilatory in the prosecution of that opposition, but nevertheless, the existence of those proceedings has been pointed to as a convenient alternative means of resolving the dispute as to the ownership of the West Coast Choppers trademark.  That consideration has not prevailed with me in exercising my discretion against the grant of leave to proceed.  As I indicated in the course of discussion with Counsel, if there is material that tends to suggest that the proceedings in the Trademark Office do offer a real prospect of resolving or narrowing the issues which will be ventilated in the action in which I propose to give leave to proceed, then that can be brought to the Court’s attention and those proceedings can be stayed or otherwise dealt with in the exercise of the Court’s general discretion. 

11. There has been no effective opposition to the other interlocutory directions sought by the applicants.  I propose to condition the grant of leave by stipulating that there be no steps taken to enforce any judgment.  I am not persuaded that it is appropriate to confine the applicants’ pursuit of relief to declarations and injunctions.  I consider that they should, at least as things stand at present, be permitted to pursue their claim for damages, or alternatively, an account of profits.  But, again, if, as the matter proceeds through the interlocutory stages it becomes apparent to the Court that it is desirable to separate the trial of one or other of those issues from the question of liability for the alleged infringement, or to defer the trial of some identifiable issue, then directions can be given to that effect. 

12. In the circumstances the orders of the Court will be that:

    1.Pursuant to sub-section 444E(3) of the Corporations Act 2001, the applicants have leave to proceed with this proceeding against the respondent.

    2.Such leave does not extend to taking any steps to enforce any judgment that may be obtained in the proceeding against the property of the respondent without the leave of the Court.

    3.The applicants have leave to amend the application in this proceeding by inserting a new paragraph 1A after paragraph 1 of the Details of Claim as follows:

    ‘1AA declaration that the first applicant is the owner of the West Coast Choppers Trademark.’

    4.The applicants have leave to issue a subpoena addressed to Jadegear Pty Ltd (ACN 010 910 899) in the form of the draft subpoena annexed hereto and marked “A” (“the subpoena”).

    5.The respondent file and serve further and better particulars of its defence and cross-claim in response to the applicant’s request for further and better particulars of the defence and cross-claim dated 22 December on or before 26 May 2006.

    6.The respondent comply with the applicant’s notice to produce dated 22 December 2004 on or before 26 May 2006.

    7.The subpoena be returnable before a Registrar on or before 2 June 2006 (subject to the availability of a Registrar).

    8.This proceeding be returned for further directions at 10.15am on 16 June 2006.

    9.The costs of the notice of motion dated 21 April 2006 are reserved.

I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.

Associate:

Dated:            4 May 2006.

Counsel for the Applicants:	Mr P Bornstein
Solicitor for the Applicants:	Corrs Chambers Westgarth
Counsel for the Respondents:	Mr H N G Austin
Solicitor for the Respondents:	Boldens Lawyers
Date of Hearing:	28 April 2006
Date of Judgment:	28 April 2006