Leuver Leuver Leuver & Leuver Pty Ltd v Sydney Organising Committee for the Olympic Games (SOCOG)

[1997] FCA 378

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)  No. NG 954 of 1996
)
GENERAL DIVISION	)

BETWEEN:             

LEUVER LEUVER LEUVER AND LEUVER PTY LIMITED
[ACN 051 566 075]
Applicant

  AND:  

SYDNEY ORGANISING COMMITTEE FOR THE OLYMPIC GAMES
(“SOCOG”)
First Respondent

FHAD PTY LTD t/as "FHA IMAGE DESIGN"
[ACN 006 398 090]
Second Respondent

CORAM:

EMMETT J

PLACE:

SYDNEY

DATED:

22 APRIL 1997

EX TEMPORE REASONS FOR JUDGMENT

There are before me two applications for security for costs pursuant to section 1335 of the Corporations Law 1989 (Cth)(“the Law”), one brought by the first respondent and the other by the second respondent.  Section 1335(1), provides as follows:

Where a corporation is a 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 cost of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.

It is common ground that the applicant in these proceedings would be unable to pay the respondents’ costs if they are successful in their defence of the claims.  However, the applicant resists the motions for security on several grounds. First, it says that the claim is a bona fide claim that has not been put in issue by the respondents.  Second, it is contended by the applicant that there is a public interest element involved in the proceedings which would justify the applicant bringing the proceedings, in effect, in the public interest without being required to provide security.  I accept that it would be an appropriate principle for a Court, in the exercise of the discretion which arises under section 1335 of the Law, to take into account that proceedings are brought, at least in part, in the public interest. That is to say, where the community generally might be seen to benefit from a successful outcome of proceedings, that is a consideration which may result in a Court declining to require a plaintiff or applicant to provide security in circumstances where the public interest would not then be vindicated.  

The public interest relied upon by the applicant is said to be the interest in knowing the true circumstances concerning the adoption by the first respondent, the Sydney Organising Committee for the Olympic Games, of a logo to be associated with the first respondent's activities. It is asserted that the public was told that there would be a competition for the selection of the logo and that there would be several stages in the competition. In substance, the complaint made by the applicant is that a public announcement was then made by the first respondent that, after an exhaustive process, the second respondent “emerged in the true Olympic spirit to be the winning designers for the new Sydney 2000 Olympic logo”.  It is said that that was misleading because it did not represent the true facts.

The announcement complained of was misleading, it is said, because it suggested that the second respondent had won the competition. Attention was drawn to a letter written by the first respondent which described the process of selection as follows:

The eight designers made design submissions during Stage One and four of them were then chosen to progress to Stage Two of the process.  FHA was one of the chosen designers but your client did not progress from Stage One to Stage Two.  At the end of Stage Two, the designs submitted by the four designers were all judged unsatisfactory by SOCOG and  SOCOG reconsidered its options. It was then decided by SOCOG that the three-stage competition would be abandoned as a result of the unsatisfactory outcome.  At that time, John Moore and other members of the SOCOG’s Marketing Group first became involved in the process and effectively, the search for the new logo commenced from scratch......

It was decided by the SOCOG to commence a new process. Two designers who had participated in the previous process were selected to take part in the new process. Further additional designers not involved in the previous three stage process were briefed and included in the new process. The briefing to them was that the logo had to be a “Games symbol” with “a sense of Australianness”..... Out of the rebrief and commencement of the design process SOCOG chose an evolutionary series of design(s) created by the FHA to begin work with....

The thrust of the complaint is that the public has in some way been deceived by being told that the second respondent was the winner of something, in circumstances where the public was not also effectively told that the competition had been abandoned.

Assuming in favour of the applicant, as I think I have to, for the purposes of this application, that the applicant's allegations are correct and have substance, I do not consider that the matters referred to give rise to a relevant public interest. It was suggested that the public had an interest in knowing who the designers of the logo were because the public is going to be induced to buy merchandise which employs that logo.

It appears to me that it is not self-evident that that is so. A member of the public buying merchandise which employs the logo of the first respondent will do so because of the association between that merchandise and the first respondent. I would not have thought that a member of the public is concerned with who designed the logo, but only to ensure that the use of the logo is authorised by the first respondent.  

The amended statement of claim alleges that, since 1986, the applicant has carried out a graphic design business in Australia and has won many graphic design awards, as a result of which it has a high reputation as a graphic design company. It is said that the applicant's reputation is derived from the work of the applicant itself and the individuals whose names are incorporated in the applicant's name, in particular, Marita Leuver. The particulars also indicate that Marita Leuver was responsible for a number of achievements of the applicant. 

The relief sought in the proceedings includes a declaration that the respondents have engaged in conduct in contravention of section 52 of the Trade Practices Act 1974 (Cth), damages for passing off or an account of profits, damages for breach of section 52, damages against the first respondent for breach of contract or, in the alternative, a declaration that all of the contracts the applicant has with the first respondent are voidable and an order that all the said contracts be rescinded and an order that all property of the applicant be returned to the applicant, a declaration that the design adopted by the first respondent as the official Games Logo is an obvious adaptation and/or substantial reproduction of the applicant's designs and orders for corrective advertising.

I do not consider that there is sufficient public interest in that relief being granted to justify a conclusion that these proceedings are brought in the public interest in any relevant sense.  They are brought to vindicate the position of the applicant as the alleged designer of the logo in question, or at least as the alleged contributor to that design in a way which has not been attributed to it.  The statement of claim, as I have said, indicates that certain individuals are responsible for the applicant's reputation and that their names are incorporated in the applicant's name.  The individuals, it appears, are four sisters, two of whom are directors of the applicant and three of whom are shareholders. 

It is clear, and this was not contradicted by the applicant, that at least the shareholders of the applicant stand to gain substantially from the successful outcome of the proceedings. On the other hand, they have not been prepared to expose their own personal estates to an order for costs in favour of the respondents in the event that the proceedings are unsuccessful. Evidence has been filed indicating that none of the four sisters could be said to be wealthy and it is clear that, if the proceedings were unsuccessful so far as the applicant is concerned and an order were made against the individuals in favour of the respondents, such an order would be very burdensome. Nevertheless, as I have said, they stand to gain from the successful outcome of the proceedings. Having regard to those considerations and the conclusion which I have reached that there is no relevant public interest in the successful outcome of the proceedings, I do not consider that the residual public interest that may exist in the frank and honest conduct of an organisation such as the first respondent is sufficient to overcome those considerations. 

It was also contended that the second respondent, at least, is the true aggressor. There appears to me to be no substance in that contention. Reliance was placed on the fact that the solicitors for the second respondent wrote to the applicant requiring the applicant to cease making statements which the second respondent contended were defamatory. However, the statement of claim does not, in my view, represent a defensive action brought in circumstances where the applicant was under some legal disadvantage which justified commencement of proceedings. The applicant is seeking positive and substantial relief in the nature of damages and corrective advertising. It is seeking to establish a positive claim for damages. 

Finally, it is said that there is a risk that the litigation will be stultified if an order for security is made.  That would be so if an order were made for the applicant to provide security either by means of a deposit or bank guarantee.  On the other hand, I would not require security in that form if those who stand to gain from the successful outcome of the proceedings were prepared to stand behind the applicant, at least in relation to costs.  Accordingly, I do not consider that this consideration would outweigh the prima facie entitlement of the respondent to an order for security. 

In its notice of motion the second respondent also originally sought orders striking out a number of paragraphs of the original statement of claim. Following correspondence between the parties and following earlier directions which I gave, the statement of claim was amended by an amended statement of claim filed on 6 March 1997.  The second respondent was satisfied that the amendments overcame the matters which had been raised in the correspondence and which were intended to be the subject of the notice of motion.  There is no real opposition, as I understand it, to the contention on the part of the second respondent that it was entitled to an order for the costs thrown away by the amendment and the costs of its notice of motion in so far as the notice of motion sought that parts of the original statement of claim be struck out.

In the circumstances, I would be disposed to order that the applicant provide security in a sum to be determined by the Registrar, and in a manner determined by the Registrar, for the costs of the proceedings up to and including the completion of interlocutory steps which would include completion of pleadings and discovery.  Once the issues have been determined and discovery has been completed, it may be appropriate for further application to be made for additional security. I would say, however, that I would discharge those orders for security if shareholders of the applicant were prepared to accept responsibility for the costs that might be ordered against the applicant in relation to those matters. 

I would otherwise order the applicant to pay the costs thrown away by the amendment, and the respondents’ costs of their motions.

I certify that this and the preceding six pages are a true copy of the Reasons for Judgement of His Honour Justice Emmett.

Associate:       

Date:   22 April 1997

Appearances:              

Counsel for the Applicant:                 W. Covell

Solicitor for the Applicant:                Cutler Hughes & Harris

Counsel for the 1st Respondent:       D.K. Catterns QC

Solicitor for the 1st Respondent:       Blake Dawson Waldron

Counsel for the 2nd Respondent:      D.M. Yates

G. Raffell

Solicitor for the 2nd Respondent:     Freehill Hollingdale & Page

Heard:  22 April 1997

Place:  Sydney

Decision:  22 April 1997