Lane Industries Pty Ltd v Ponrak Pty Ltd

[1990] FCA 199

JUDGMENT No. !q.?../..?!? _..,

IN THE FEDERAL COURT OF AUSTRALIA	)
1
NEW SOUTH WALES DISTRICT REGISTRY	) NO. G 72 of 1989 )

GENERAL DIVISION 1

BETWEEN: LANE INDUSTRIES PTY LIMITED

and Another

Applicants

AND: PONRAK PTY LIMITED and Others

Respondents

MINUTE OF ORDER

JUDGE MAKING ORDER	: Neaves J.
DATE OF ORDER	: 18 May 1990
WHERE MADE	: Sydney
THE COURT ORDERS THAT:

1.     Further proceedings upon pars 3 - 9 inclusive of the further amended cross-claim filed on behalf of the first to fifth respondents on 10 January 1990 be stayed until the first respondent gives security in the sum of $15,000 for the payment of any costs that it may be ordered to pay to the applicants or either of them in respect of the matters the subject of those paragraphs of the cross-claim, such security to be given by payment into Court or by bond in such manner and form as the Registrar of the Court may approve.

18 MAY !590

2.      The first respondent pay the applicants' costs of the motion for security for costs.

The motion for security for costs be otherwise adjourned generally to be restored to the list at any time on reasonable notice.

RECEI'IED

4.    The time within which the first to fifth respondents are to file any additional affidavits to be relied upon by them in support of their cross-claim against the applicants in so far as that cross-claim is based on the alleged invalidity of trade mark No.A390995 and in opposition to the cross-claim brought against them by the sixth and seventh respondents in the proceeding be extended up to and including 28 May 1990.

5.      Subpoenas for the production of documents may be made returnable at 9.30 a.m. on 30 May 1990.

Note: Settlement and entry of orders is dealt with in Order 36 o f h e Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
1
NEW SOUTH WALES DISTRICT REGISTRY	) No. G 72 of 1989
)
GENERAL DIVISION	1

BETWEEN: LANE INDUSTRIES PTY LIMITED

and Another

Applicants

AND: PONRAK PTY LIMITED and Others

Respondents

CORAM: Neaves J.

DATE: 18 May 1990

REASONS FOR JUDGMENT

This is an application by Lane Industries Pty Limited ("Lane Industries") and Enersun Pty Limited ("Enersun") for an order that Ponrak Pty Limited ("Ponrak") give security for their costs of a cross-claim filed on behalf of Ponrak and others in a proceeding pending in this Court at the suit of Lane Industries and Enersun.

Lane Industries and Enersun are respectively the first and second applicants in a proceeding commenced in this Court on 15 February 1989. There are nine respondents to that proceeding. The first five respondents are Ponrak ( "the first respondent"), David Chapman, Colin Moss, Diane Sewell and Gordon Roberts. The proceeding relates to the sale and installation of window tinting film and the use of the name

"Solartint". Lane Industries is alleged to be the registered proprietor of trade mark No. A390995, being the trade mark "Solartint" registered in Class 37 in relation to services being the application of sun control products to glass. Paragraphs 24 and 25 of the Second Further Amended Statement of Claim filed on behalf of the applicants are in the following terms:

"24. The Third Respondent has on behalf of the First and Second Respondents and with their consent and knowledge installed window tinting film under the name 'Solartint' not being window tinting film supplied or approved by the First Applicant to consumers and has, without the approval or authority of the First Applicant supplied invoices and guarantee forms to consumers bearing the name 'Solartint' or a mark substantially identical with or deceptively similar to the Trade Mark.

25.  The Fourth and Fifth Respondents have on behalf of the First and Second Respondents and with their consent and knowledge have [sic] supplied quotation forms to consumers bearing the name 'Solartint' or a mark substantially identical with or deceptively similar to the Trade Mark with respect to window tinting film not being window tinting film supplied or approved by the First Applicant ."

Relief is sought by the applicants against the first five	respondents to the proceeding for alleged breaches of the Trade
Practices Act 1974 (Cth) and the Fair Trading Act 1987 (N.S.W.), for passing off and for wrongfully appropriating the goodwill and reputation of Lane Industries in and to the trade mark "Solartint". Relief is also sought against the first respondent for infringement of the trade mark.
By the Amended Defence filed on behalf of the first to the fifth respondents, the allegations made in the Second Further Amended Statement of Claim are either not admitted or denied. In particular, it is denied that the first respondent has infringed the trade mark. It is further asserted on behalf of each of the first five respondents that the trade mark is and always has been invalid. Particulars of the objections to the validity of the trade mark have been provided.
The first to fifth respondents have cross-claimed against the applicants. By the Further Amended Cross-Claim filed on 10 January 1990 the first respondent has claimed damages for defamation against the applicants and the first to fifth respondents have claimed rectification of the Register of Trade Marks by the expungement therefrom of the entry in respect of Trade Hark No. A390995. The alleged defamatory publication is said to have occurred in the United States of America.
The hearing of the proceeding before this Court is to commence on 12 June 1990. The estimated duration of the
hearing is 9 days. That hearing is, however, not to encompass the cross-claim filed on behalf of the first to fifth respondents in so far as it claims on behalf of the first respondent damages for defamation. No hearing date has been fixed for that part of the cross-claim.

The Court has power to order security for costs under s.533(1) of the Companies Code 1981 (N.S.W.), a provision made applicable by 6.79 of the Judiciary Act 1903 (Cth). Section 533(1) of the Companies Code provides:

"533 (1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs and stay all proceedings until the security is given."

The Court also has a wide power to order security for costs under s.56(1) of the Federal Court of Australia Act 1976 (Cth) which provides:

"56. (1) The Court or a Judge may order a plaintiff in a proceeding in the Court or an appellant in an appeal to the Court to give security for the payment of costs that may be awarded against him."

The discretion to make an order under s.56(1) must be exercised judicially but that is the only relevant limitation: eel1

Wholesale Co. Ltd. v. Gates Export Corporation (1984) 2 F.C.R. 1

at p.3.

The first respondent does not carry on business on its own behalf, its sole activity being to act as trustee for The Tint Unit Trust. It has a paid up capital of $3.00. The material before the Court includes financial statements (unaudited) of the first respondent as trustee of the unit trust for the year ended 30 June 1989. An examination of the balance sheet as at 30 June 1989 shows total assets of $1,371,746 comprising current assets of $830,619 and non current assets of $541,127. The current assets include cash $13,418, stock valued at $66,250, trade and other debtors of $528,792, unsecured loans to various companies being unitholders totalling $123,520 and other loans totalling $97,839. There is no information before the Court as to the financial position of any of those companies. The non-current assets comprise shares in private companies $95,010, property, plant and equipment $81,670 and intangibles $364,447. The latter figure includes goodwill of $344,406 representing an increase from $6,085 as at 30 June 1988.

Current liabilities as at 30 June 1989 are recorded at $1,265,555 and non-current liabilities as at that date $88,209, making total liabilities $1,353,764.

The first respondent thus is shown to have had, at 30
June 1989, net assets of $17,982. If one disregards the goodwill
of $344,406, liabilities exceeded assets as at that date by

$326,424.

The statement of profit on the operations for the year ended 30 June 1989 shows expenses of $1,248,450 against gross profit from sales of $1,093,719. The net profit shown of $204,718 was achieved by the receipt of "Other income" totalling $359,449. The net profit for the year ended 30 June 1988 was $192,891.

In the affidavit of Robert John Neil sworn 22 December 1989 and filed on behalf of the first respondent reference is made to indemnities having been provided to the first respondent by its directors. Details of such indemnities have not been provided.

On the material before the Court as to its financial situation, I am satisfied that there is reason to believe that the first respondent will be unable to pay the costs of the applicants if they are successful in defending the cross-claim of the first respondent.

There are, however, other considerations to be taken into account so far as that part of the cross-claim as alleges invalidity of the trade mark is concerned. The invalidity of the trade mark is one of the matters upon which the first respondent relies by way of defence to the applicants1 claim. It follows that the same facts will be canvassed in determining the applicants' claim against the first respondent as will be canvassed in determining that part of the cross-claim to which I

have referred. That circumstance militates against making the	order sought by the applicants: see Sydmar Pty Ltd v. Statewise
Developments Pty Ltd (1987) 73 A.L.R.	289 at p.300.

A further consideration is that the cross-claim

concerning the invalidity of the trade mark is a cross-claim made not only by the first respondent but also by the second to fifth respondents. To order that the cross-claim in so far as it is made on behalf of the first respondent be stayed in the absence

of security for costs being provided by that respondent would not prevent the same cross-claim being pursued by the second to fifth respondents. This circumstance also militates against making the order sought by the applicants: see James v. Australia and New Zealand Banking Group Ltd (No.1) (1985) 9 F.C.R. 442 at pp.446-7.

In the result, I am of opinion that the application that the first respondent give security for costs of the cross-claim should not be granted in so far as the cross-claim is based on the invalidity of trade mark No.A390995. I am, however, of opinion that the application should succeed in so far as the cross-claim is based on the alleged defamatory publication. I, therefore, order that further proceedings upon pars 3 - 9 inclusive of the further amended cross-claim filed on behalf of the first to fifth respondents on 10 January 1990 be stayed until the first respondent gives security in the sum of $15,000 for the payment of any costs that it may be ordered to pay to the applicants or either of them in respect of the matters the subject of those paragraphs of the cross-claim, such security to be given by payment into Court or by bond in such manner and form

must pay the applicants' costs of the motion for security for	as the Registrar of the Court may approve. The first respondent	costs. That motion is otherwise adjourned generally to be restored to the list at any time on reasonable notice.
I further order that the time within which the first to fifth respondents are to file any additional affidavits to be relied upon by them in support of their cross-claim against the
applicants in so far as that cross-claim is based on the alleged invalidity of trade mark No.A390995 and in opposition to the cross-claim brought against them by the sixth and seventh respondents in the proceeding be extended up to and including 28 May 1990. Subpoenas for the production of documents may be made returnable at 9.30 a.m. on 30 May 1990.

I certify that this and the preceding 7 pages are a true copy of the Reasons for Judgment herein of the Honourable Mr Justice Neaves.

Associate *

Dated: 18 May 1990

Counsel for the applicants : Mr S.T. White

Solicitors for the applicants : Corrs

Counsel for the first to : Mr A.S. Martin

fifth respondents

Solicitors for the first to : Kevin Stapley & Associates

fifth respondents

Date of hearing : 17 May 1990

Date of judgment : 18 May 1990