Stock Brands Co. Pty Ltd v Leader Products Pty Ltd

[1988] FCA 296

Re: STOCK BRANDS CO. PTY LTD and LEADER PRODUCTS PTY LTD
And: LEADER PRODUCTS PTY LTD; GEOFFREY NOEL DUMBRELL and STOCK PRODUCTS CO.
PTY LTD
No. WAG 153 of 1987
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Practice and Procedure - joinder of additional respondents to cross-claim - O.5 r.1 - policy - cross-claim against applicant - related cross-claims against other persons - convenience - proposed cross-respondent resident in Victoria - possibility that part of hearing conducted in Victoria.

Designs Act 1906

Trade Practices Act 1974 s.52

Companies (Victoria) Code sub-ss. 229(3) and (4)

Federal Court Act s.22

Trade Practices Commission v Queensland Aggregates Pty Ltd (Franki J. unrep. 10/3/81)

HEARING

PERTH

#DATE 31:5:1988

Counsel for the Applicant: Mr R. McCormack

Solicitors for the Applicant: Messrs. Corser & Corser

Counsel for the First and Second Respondents: Mr R. Choudree

Solicitors for the First and Second Respondents: Messrs. Freehill Hollingdale & Page

Counsel for Mr Desmond Dumbrell: Mr N. Moshinsky

Solicitor for Mr Desmond Dumbrell: Mr G.C. Blenkiron

Counsel for Mr John Forehan: Mr R. McCormack

Solicitors for Mr John Forehan: Messrs. Corser & Corser

ORDER

The cross-claimant do have leave to join Desmond Dumbrell and John Terry Forehan as respondents to the cross-claim.

The costs of the motion be in the cross-claim.

Note: Settlement and entry of orders is dealt with in

Order 36 of the Federal Court Rules.

JUDGE1

ON MOTION TO JOIN ADDITIONAL RESPONDENTS TO CROSS-CLAIM

By its amended application and statement of claim, Stock Brands Co. Pty Ltd ("Stock Brands") claims against Leader Products Pty Ltd and Geoffrey Noel Dumbrell injunctions, damages, and, in the alternative, accounts of profits in relation to alleged contraventions of s.52, passing off and conspiracy. According to the amended statement of claim, Stock Brands has been in the business of making and supplying, throughout Australia, Stock Brands' marking devices and tags for the identification of livestock since 1968. During that time the company says it developed a tag designed for identification of sheep. It was initially known as the "Strand Tag". In 1974 it began marketing in all States and Territories of Australia an improved version of the Strand Tag under the brand name "Sidney", being a contraction of "Strand Improved Design". The improved design was said to have been registered under the provisions of the Designs Act 1906. The company has also produced and sold a related product known as the "Sidney Applicator" through all States of Australia. It claims that the names "Sidney", "Sidney Tags" and "Sidney Tag Applicator" have acquired a distinctive reputation as exclusively signifying the company's products.

1. Leader Products Pty Ltd ("Leader") is said to be a Victorian corporation, and Geoffrey Noel Dumbrell one of its directors since 1950. In about 1968, according to Stock Brands, it entered into a distribution agreement with Leader whereby that company was granted a non-exclusive licence to supply Stock Brands' Sidney Tags to retail and wholesale markets in the Eastern States and to promote the company's products. It was said to be a term of the agreement that Leader would not manufacture or cause or allow any other person to manufacture a tag which was the same as, substantially the same as, or deceptively similar to, the applicant's Sidney Tag, and that it would not supply any such tag to the markets covered by the agreement.

2. It is then said that in or about 1983 Leader began to make or have made its own tag, substantially similar to the Sidney Tag, but of inferior quality, and that it has supplied the tag in the Eastern States retail and wholesale markets. The name "Sidney" or "Sidney Tag" is said to have been used in the Leader product. It is also alleged that the company has promoted its sheep ear tag applicator under the name "Sidney Tag Applicator Pliers" without any authority from Stock Brands to do so.

3. Mr Geoffrey Dumbrell is alleged to have aided, abetted, counselled or procured the conduct on the part of Leader and to have been knowingly concerned in or party to it. Leader's conduct is said to have been conduct in trade or commerce which is misleading or deceptive or likely to mislead or deceive in contravention of s.52(1) of the Trade Practices Act. Cognate contraventions of ss.53(a), 53(c), 53(d) and 53(g) are also alleged. Stock Brands includes, in its allegation of misleading and deceptive conduct, the assertion that Leader has led or is likely to lead various members of the public to believe that it has the right to manufacture and supply the tags and to do so under the name "Sidney Tags".

4. Other causes of action pleaded as arising out of essentially the same conduct are passing off, breach of the distribution agreement and breach of fiduciary duty.

5. Leader has filed a defence and with it a cross-claim against Stock Brands. It now seeks to amend its defence and cross-claim and to join as additional cross-respondents Desmond Dumbrell and John Terry Forehan . Although the motion before the Court seeks only the joinder of Dumbrell and Forehan, the supporting affidavit exhibits a proposed amended defence and cross-claim. The argument in opposition to the joinder included reference to the proposed amendments.

6. By its defence Leader says that the names "Sidney" and "Sidney Tag" have become descriptive of types of products, that is to say, generic terms and not distinctive of Stock Brands. It admits an agreement with Stock Brands which, it says, was for exclusive distribution rights in all States of Australia (except Western Australia) and in New Zealand, South Africa and the United States. Various other terms are pleaded including a provision that should Leader wish to sell a modified version of the Strand Tag, it would make that product available to Stock Brands at its manufacturing cost together with the cost of freight to Western Australia.

7. In or about 1971, according to Leader, the agreement was varied from an exclusive to a non-exclusive basis. It manufactured and sold tags substantially identical to the design of the Sidney Tags and says it did so with the leave and licence of Stock Brands pursuant to the distributorship agreement.

8. By the proposed amended cross-claim, Leader repeats various paragraphs of the defence and goes on to allege that Desmond Dumbrell, one of its officers and employees, had conspired with John Terry Forehan, a director of Stock Brands "to unlawfully damage the goodwill and reputation" of Leader Products and otherwise to damage its business. Particulars of the conspiracy are given whereby it is alleged that Desmond Dumbrell and Forehan agreed that Dumbrell would enter into a partnership or other business arrangement with Stock Brands or, in the alternative, with Forehan, or, in the alternative, with both Stock Brands and Forehan. This partnership would be established in Victoria. According to the particulars, steps were taken by Stock Brands, Dumbrell and Forehan to establish the business of that partnership from July 1987. The nature of its business would be to manufacture or cause to be manufactured and to promote and sell stock tags and other plastic and rubber goods in competition with Leader. The parties are also said to have conspired and agreed to approach Leader's customers, both during and after Dumbrell's employment with that company, in order to solicit their business away from Leader to the partnership. The conspiracy is said to have extended to the use of information confidential to Leader both during and after Dumbrell's employment so as to advantage the partnership and in breach of Dumbrell's obligation of confidence owed to Leader. A further element of the conspiracy was that Dumbrell would divert business opportunities available to Leader and direct them to the partnership. It is to be noted that all of the particulars to date which were set out as paragraphs (a) to (f) of paragraph 60 of the amended cross-claim, relate to the terms of the agreement rather than conduct pursuant to it. Paragraph (g), however, goes on to allege that:-
   
   

"In or about December 1987 the First Respondent to the Cross-Claim and the Second Respondent to the Cross-Claim approached customers of the Cross-Claimant both during and after the term of the employment by the Cross-Claimant of the First Respondent to the Cross-Claim and made false and misleading statements to such customers to the effect that the Cross-Claimant was unable to supply or sell "Sidney" stock tags to such customers."

1. Paragraph 63 of the proposed amended cross-claim then goes on:-
   
   

"Insofar as the aforesaid conduct of the First Respondent to the Cross-Claim and the Second Respondent to the Cross-Claim as particularised in sub-paragraphs 60(d),

(e), (f) and (g) hereof was carried out on behalf of the Cross-Respondent it was conduct by the Cross-Respondent in trade or commerce which was misleading or deceptive or likely to mislead or deceive contrary to Section 52 of the Trade Practices Act."

The amended cross-claim further alleges that by their conduct Desmond Dumbrell and Forehan aided and abetted, counselled or procured and were knowingly involved in the alleged contravention by Stock Brands of s.52 of the Trade Practices Act. It should be noted that on the assumption that the mere formation of the agreement would not constitute misleading and deceptive conduct, the only allegation which seems to fall within the description of conduct relevant to the purposes of s.52 is that relating to the making of false and misleading statements to customers of Leader to the effect that it was unable to supply or sell Sidney Stock Tags to them.

1. In the alternative, and by reason of the conduct alleged, Desmond Dumbrell is said to have been in breach of his contract of employment with Leader and in breach of his duties as its officer and employee. His conduct was said to have been carried out with the knowledge and consent of Stock Brands and Forehan and it is alleged that they and each of them aided and abetted, counselled and procured and were knowingly involved in and party to his wrongful conduct and that they conspired and agreed with him that he would carry out such acts. His conduct was further said to be in contravention of duties imposed on him by sub-ss.229(3) and (4) of the Companies (Victoria) Code as an employee of Leader.

2. A claim of unlawful interference with contractual and economic relations of Leader is also raised in paragraph 72 and, separately in paragraphs 69 to 71, there is pleaded an allegation that registered designs in respect of the Strand and Sidney Tags were neither new nor novel at their respective priority dates and had, in any event, been at that time applied industrially and by reason thereof were not capable of registration.

3. Leader claims against Desmond Dumbrell and Forehan injunctive relief, save for a claim for an order against Forehan cancelling the registration of the registered designs in respect of the Strand and Sidney Tags. Counsel for Stock Brands did, however, indicate from the bar table, that it is intended to claim damages against the proposed cross-respondents.

4. The proposed joinder has to be considered in the light of the policy embodied in s.22 of the Federal Court Act which provides:-
   
   

"The Court shall, in every matter before the Court, grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided."

The rules governing the position in this case are to be found in O.5 r.1 which provides:-

"(1) A respondent may cross-claim against an applicant for any relief to which the respondent would be entitled against the applicant if the applicant were a respondent in a separate proceeding commenced in the Court by the respondent for that purpose.

(2) A respondent may cross-claim against any person whether another party or a third party for any relief which is related to or connected with the subject of the proceeding.

(3) Without prejudice to the generality of sub-rule

(2), a respondent may cross-claim for contribution or indemnity."

1. A leave requirement is imposed by O.5 r.8 which provides:-
   
   

"(1) Subject to sub-rules 9(1) and (2), a respondent may cross-claim against an applicant or any other party without the leave of the Court, but may not cross-claim against any other person not being a party without such leave."

1. In Trade Practices Commission v Queensland Aggregates Pty Ltd (unrep. 10/3/81), Franki J. described the purpose of O.5 r.1(2) as enabling respondents to obtain relief against another party or a third party, thus facilitating the policy set out in s.22 of the Federal Court of Australia Act. Now, it is to be noted that O.5 r.1 does not impose the same limit on the scope of the cross-claim against an applicant as r.2 does on a cross-claim against another party. In this case the cross-claim against the applicant which is already in place raises many allegations which, upon joinder, it is sought to bring against Dumbrell and Forehan and in the course of doing so the pleading as it presently stands names Dumbrell and Forehan as the parties to the alleged conspiracy with the applicant. In the circumstances it is not possible to say that the relief which Leader seeks against Dumbrell and Forehan is not related to or connected with the subject matter of the proceeding.

2. Notwithstanding Mr Moshinsky's clear submissions, I am not prepared to find that the refusal by the solicitors for Leader to supply particulars of their affidavit in support of the cross-claim, supports an inference that the cross-claim is somehow colourable. That is not to say that it may not, at an appropriate time and on an appropriate basis, be the subject of a motion for summary disposal as to all or part. That is not a matter which is before the court today.

3. As to the question of convenience, Mr Moshinsky has pointed out that his client, Mr Desmond Dumbrell, resides in Victoria and would find it an expensive and time-consuming matter to contest the claim in Western Australia. The appropriate forum, he suggests, for the cross-claim against his client, is the Supreme Court of Victoria and in support of that he points to the predominance of common law in the proposed claims against his client.

4. That, with respect, is not a particularly compelling argument. If the matter goes to trial and considerations of convenience require it, there is nothing to prevent this court from conducting such part of the hearing as is appropriate in the State of Victoria. In the event, I am of the view that it is appropriate to grant to Leader the leave it seeks and permit the joinder of Desmond Dumbrell and John Terry Forehan as respondents to the cross-claim.