Melhero Pty Ltd v Club X Pty Ltd

[1996] FCA 75

IN THE FEDERAL COURT OF AUSTRALIA )
  )
NEW SOUTH WALES DISTRICT REGISTRY )    No. NG 963 of 1995
  )
GENERAL DIVISION                 )

BETWEEN:MELHERO PTY LIMITED

First Applicant

MITCHELL PRODUCTS PTY

LIMITED

Second Applicant

AND:CLUB X PTY LIMITED

First Respondent

WALTER DELL PTY LIMITED

Second Respondent

ASHWOOD WAY PTY LIMITED

Third Respondent

SHAFT THEATRES PTY LIMITED

Fourth Respondent

JUDGE MAKING ORDERS:    FOSTER J

DATE:     15 FEBRUARY 1996

PLACE:    SYDNEY

MINUTE OF ORDERS

THE COURT ORDERS THAT:

1.The application be dismissed.

2.The applicant, Jeffrey R. Porton, pay the costs of this motion.

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

IN THE FEDERAL COURT OF AUSTRALIA )
  )
NEW SOUTH WALES DISTRICT REGISTRY )    No. NG 963 of 1995
  )
GENERAL DIVISION                 )

BETWEEN:MELHERO PTY LIMITED

First Applicant

MITCHELL PRODUCTS PTY

LIMITED

Second Applicant

AND:CLUB X PTY LIMITED

First Respondent

WALTER DELL PTY LIMITED

Second Respondent

ASHWOOD WAY PTY LIMITED

Third Respondent

SHAFT THEATRES PTY LIMITED

Fourth Respondent

CORAM:    FOSTER J

DATE:     15 FEBRUARY 1996

PLACE:    SYDNEY

REASONS FOR JUDGMENT
  (Extempore)

HIS HONOUR:   This an application by Mr Jeffrey R. Morton brought by way of notice of motion in proceedings NG 963 of 1995 in which the companies, Melhero Pty Limited ("Melhero") and Mitchell Products Pty Limited ("Mitchell") are the applicants.  Certain other companies are the respondents, however, it is not necessary for me to mention them by name.  The application brought by Mr Morton is for his joinder in these proceedings as a party.

It is apparent from the material that has been filed and the submissions and discussions that have taken place, that his wishes are to be joined as an additional applicant.  Such joinders are permissible pursuant to the rules of the Court to which I made reference on the last occasion.  The appropriate rule would appear to be Order 6, rule 8 which deals with the addition of parties.  That rule reads:

"Where a person who is not a party-

(a)ought to have been joined as a party; or

(b)is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon,

the Court, on application by him ... may order that he be added as a party and make orders for the further conduct of the proceeding."

It devolves upon an applicant for joinder pursuant to that rule to satisfy the Court that either he should have been joined as a party in the first instance or that his joinder is necessary to ensure that all matters be effectually and completely determined in accordance with the wording of the rule.

Certain other matters are sought by Mr Morton in his notice of motion but they are all ancillary to the primary order to be joined that he seeks, and I will address my reasoning to that primary application. 

It is necessary briefly to indicate the nature of the proceedings brought by the two applicant companies, as the nature of those proceedings must obviously and logically play a significant part in the question of whether a joinder would be appropriate.  Both these companies are involved in what has been described as "the adult industry".  The second company, Mitchell, is the company Truefeat Pty Limited ("Truefeat") under a change of name.  I mention that at this point of time because Mr Morton has directed a great deal of information to his position in the company Truefeat.

Melhero conducts an adult retail store trading under the name "Adam and Eve", in Fyshwick in the Australian Capital Territory, and has conducted that business since 1993.  Mitchell has conducted a similar business in Mitchell in the Australian Capital Territory since June 1995.  The companies wish to open a third store in Oxford Street, Sydney, which store will trade under the name "Adam and Eve" and will conduct the same sort of business.  It is put that their type of business, although it can be described by the generic term of "adult retail store", has some sort of unique presentation which sets it apart from other businesses in the same industry.

The four respondent companies conduct adult stores in Melbourne, Sydney and Canberra.  Apparently, they have been conducting those stores under the name "Club X", but they have in recent times additionally used the name "Adam and Eve".

They have been requested to desist from the use of that name by the applicants but they have refused to do so.  This has provoked the current litigation.  It is unnecessary to refer in great detail to the allegations that are being made, but I should note that it is the contention of Melhero and Mitchell that customers will be misled by the use of the name "Adam and Eve" by the respondents, and will be confused and will wrongly associate the Club X operations with the operations of the applicant companies to the detriment of those companies.  They also allege that the presentation and product of Club X is inferior with the result that such confusion will seriously damage their trading reputation and goodwill.

The respondents for their part deny these allegations and assert a right to use the name "Adam and Eve" by dint of having a registered trademark.  This has provoked claims of course in relation to the trademark and to an assertion that it should be expunged. 

That sketch I give is sufficient to indicate the nature of the litigation to which the applicant, Mr Morton, wishes to be joined as a party.
         In the affidavit material that he has filed in relation to his application, he has stressed the experience that he has had in this particular industry since 1991.  He has referred in very considerable detail to his association with the second applicant when it was called Truefeat.  He has made some reference to earlier litigation involving that company, being litigation in which he was a respondent and to which I will make brief reference shortly, and litigation in Victoria where that company was a respondent to a claim that it was wrongly using the name "Club".  He claims to be a substantial creditor of Truefeat which is in receivership.  He claims indeed an indebtedness in the amount of $533,000 in round figures.

He provides information that he gave personal guarantees to trade creditors of Truefeat at a point of time when he was occupying a significant managerial role in that company.  He also asserts he gave guarantees in respect of lease payments for the business premises of the company.  He asserts that he was the only Australian shareholder and director of that company at the relevant times.  He provides in effect very considerable detail in relation to those matters and also in relation to activities which he said he undertook in relation to Truefeat.  He complains that he has been wrongfully dismissed from his employment with Truefeat and in relation to that allegation he has brought before the Industrial Relations Court claims for wrongful dismissal.  He
has failed in those claims at first instance and they are currently on appeal to a Judge of that Court.

He makes, in the body of the affidavits, considerable complaints as to the earlier litigation to which I have made brief reference.  He makes complaints as to the administration of Truefeat in its receivership.  The basis of his claim, as I apprehend it, is that unless he is joined as a party in these proceedings, the "true facts", as he puts it, cannot be ventilated.  He also claims that as a substantial creditor he has an interest in joining in litigation, the object of which is to preserve a major asset of the companies and in particular the company Mitchell. 

I have had put before me in some detail the history of earlier litigation and I regard that as being of considerable significance in relation to the decision that I must reach in this motion.  Annexed to the affidavit of Mr Morton of 30 January 1996 are the orders made by Hill J of this Court on 24 October 1994 in what must be regarded as one of the more significant pieces of earlier litigation in these proceedings.  They were proceedings NG 378 of 1994, brought by a Mr and Mrs Franks as applicants.  Mr Morton was the first respondent and certain companies, including Truefeat, were also included as respondents. 

This litigation was clearly substantial.  It involved assertions of a significant proprietary interest by Mr Morton in the companies, in particular in the company Truefeat, now Mitchell.  He was unsuccessful before Hill J in maintaining these proprietary interests.  The result of the litigation was a declaration made that he held all shares in the capital of Truefeat in his name upon trust for the applicants, Mr and Mrs Marks, and that a purported issue of two shares by resolution of directors of which he was one, on 16 May 1994, was void and of no effect.  Also that purported resolution of 16 May 1994 purporting to pay to him as managing director a salary of $200,000 per annum and to enter certain purported agreements, was void ab initio.  It was further declared that all shares registered in his name or allotted or transferred to him in the capital of certain other companies, which companies have been the subject of considerable mention in the material provided by him in relation to this motion, were held by him upon trust for the company Truefeat.

Consequential orders were made by Hill J for the respondent to execute documents transferring the shares subject to these declarations of trust.  A Mr John Vouris was appointed by the Court as Receiver of the assets of Truefeat and other consequential orders were made which it is unnecessary for me to recite. 

The proceedings in the Victoria District Registry of this Court in which Mr morton was a respondent and which obviously involved considerations as to the operations of Truefeat and its purported use of the word "Club" in relation to those operations, were settled.  He complains that although he was a respondent he was not a party to the settlement.  The reason that appears for that state of affairs is that he was at that point of time neither a shareholder nor a director in the companies which entered into the settlement negotiations and the final settlement of those proceedings.  

It is very plain to me from a reading of the material that has been put before me that in very large measure indeed what Mr Morton seeks to do by this application to be joined in the present proceedings, is to re-agitate matters that have been the subject of consideration and determination in other proceedings.

I should add that the proceedings before Hill J were obviously the occasion for the consideration of a very large number, if not all of these matters, either on the basis that they were raised, or otherwise that they were matters which could and should have been raised in those proceedings.  Those proceedings were the subject of appeal to a Full Court of this Court and that appeal was dismissed.  In relation to the other matters in Victoria it would seem to be a substantial consideration that no proceedings have been taken to set aside the settlement or to make the complaints that Mr Morton makes in relation to his interests not being properly considered in those proceedings.  I can only assume from the nature of the case that he puts before me, that he wants to raise those
matters by dint of his being joined as an applicant in these proceedings.

In my view, it would be totally inappropriate for him to be given the opportunity either to re-agitate matters that have already been the subject of determination by this Court, or to have some collateral hearing of matters that are currently before the Industrial Relations Court, by way of his seeking to raise those issues in these proceedings, which are in a narrow compass and, I am informed, in a state of preparation sufficient to enable them to have a fairly prompt hearing.

Mr Morton's complaint that he is a creditor of the second applicant and therefore has some interest in the preservation of the business name of the applicants, does not, in my view, provide a sufficient reason for his being joined in these proceedings.  I should add that it is not clear and he has not made clear the nature of the claim that he would seek to raise as part of these proceedings, were he simply joined as an applicant.  If he wished, and I suspect he does, to agitate a claim that he is owed substantial sums of money by one of the applicants, then quite obviously the appropriate way for that matter to be raised is by him taking separate proceedings which clearly and distinctly spell out the nature of that claim.

It seems to me to be totally inappropriate, even if I was in a position to be clear as to what that claim is, for that claim to be joined as some form of collateral piece of litigation in this current case.  If Mr Morton wishes to make such a claim, he can proceed in the ordinary way and make it in separate proceedings.  It is, in my view, quite inappropriate that it be joined to these proceedings.

For these reasons I am of the view that this motion should be dismissed.  Nothing has been put before me to indicate why the ordinary consequence of that should not follow, namely that I should order the applicant, who has failed, to pay the costs of the motion.  I so order.

I certify that this and the preceding nine (9) pages are a true copy of the reasons for judgment herein of the Honourable Justice M. L. Foster.

Associate:

Date:   15 FEBRUARY 1996

A P P E A R A N C E S

SOLICITOR THE APPLICANT:                   J. REDFERN (HUNT & HUNT)

SOLICITOR FOR THE RESPONDENT:     S.E. DELLA MARTA (ROCKLIFFS)

MR J. MORTON APPEARED IN PERSON

DATES OF HEARING:     12, 15 FEBRUARY 1996

DATE OF JUDGMENT:     15 FEBRUARY 1996