Stolair Pty Ltd v Friends United International Pty Ltd

[1998] FCA 691

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY	SG 105 of 1996

BETWEEN:

STOLAIR PTY LTD
ACN 008 288 024
FIRST APPLICANT

PHARMALLIANCE PTY LTD
ACN 074 186 548
SECOND APPLICANT

AND:

FRIENDS UNITED INTERNATIONAL PTY LTD
ACN 070 101 156
FIRST RESPONDENT

BETTY JOAN ALLEN
SECOND RESPONDENT

BARRY JONES
THIRD RESPONDENT

JUDGE:	MANSFIELD J
DATE:	16 JUNE 1998
PLACE:	ADELAIDE

REASONS FOR DECISION

This matter commenced by application dated 10 December 1996.  Following certain interlocutory hearings, and directions, an amended statement of claim was filed and served on 1 July 1997, and an amended defence and cross-claim filed and served on 23 December 1997.  The matter was listed for hearing commencing on 16 February 1998 but it did not proceed at that time.  It is not necessary to refer to the reasons for that adjournment.  The matter has not yet been relisted for hearing, as the parties are not yet ready again to proceed to trial.

By notice of motion dated 4 December 1997, the respondents applied for orders as follows:

“1.A declaration that the First Applicant is not entitled to bring these proceedings prior to a Final Form Patent being granted to the First Applicant.

2.A declaration that, by virtue of a Notification pursuant to Section 28(1)(a) of the Patents Act being lodged with the Commissioner of Patents any or any further pursuit by the First Applicant pursuant to the Petty Patent is, prior to the determination by the Commissioner of Patents pursuant to Section 32 of the Patents Act 1990, invalid.

. . .

4.1An Order staying these proceedings pending the determination pursuant to Section 32 of the Patents Act 1990, by the Commissioner of Patents, of the Notification lodged by the Second Respondent pursuant to Section 28(1)(a) of the Patents Act 1990;

. . .

4.7An Order that paragraph 29 of the Statement of Claim be struck out;

. . .

4.9An order that the First Applicant is estopped from asserting that its Director Mr Raymont has or holds qualifications from an institution of tertiary education;

. . .”

There were other orders also sought but, at the hearing of the motion, they were not pressed.  I directed on 16 December 1997 with the acquiescence of the parties that that motion should be adjourned to the start of the hearing.  When the hearing date was vacated, the motion was adjourned to a date to be fixed, with liberty to have it restored to the list for hearing.  Pursuant to that leave, the motion has now been heard.  For the sake of consistency, I shall call the applicants on the motion “the respondents”.

The amended statement of claim asserts that the first applicant Stolair Pty Ltd (“Stolair”) is the registered owner of the trade mark (OxiChel) registration number 656621 granted 27 March 1995, and that by July 1995 it had devised a dietary supplement called OxiChel.  It lodged application for a provisional patent on 21 November 1995, which application is still pending (“the Patent pending”).  It also applied for, and obtained effective from 19 June 1997 a Petty Patent number 679162 (“the Petty Patent”) in relation to the formulation of OxiChel.  It is then claimed that, by a series of events or transactions, the respondents have each had access to the product OxiChel and its makeup, and since July 1996 wrongly claim to be exclusively entitled to distribute and sell OxiChel.  That conduct is said to give rise to an entitlement to damages in the applicants for engaging in deceptive and misleading conduct, and for passing off.  It is also alleged that in and since November 1996 the respondents have caused to be produced, and have packaged and marketed, a product called Oxi-Supa, and that the production of Oxi-Supa is in breach of the Petty Patent and of the patent pending over OxiChel, and further that the packaging and marketing of Oxi-Supa is so similar to the packaging and marketing of OxiChel as to constitute passing off by the respondents of Oxi-Supa as OxiChel.  Detailed and extensive relief is claimed as a result.  Finally, and discretely, there is a claim for damages for the publication by the respondents of brochures of the applicant (which applicant is not specified) in breach of copyright allegedly owned in those brochures.  For the purposes of the present motion it is unnecessary to refer to the amended statement of claim in greater detail.  Again, for the sake of consistency, I shall call the respondents to the motion, the applicants in the proceeding, (“the applicants”).

Affidavit evidence in support of the motion shows that on 19 June 1997 the Petty Patent was granted and published, and secondly that, on an unspecified date an undated notice pursuant to s 28(1)(b) of the Patents Act 1990 (Cth) was given to the Commissioner for Patents by the respondent Betty Allen.  No other evidentiary material was relied upon by the respondents on pars 1, 2 and 4.1 of the motion.

The contention by the respondents, in relation to pars 1, 2 and 4.1 of the notice of motion was that the lodging of the notice of objection to the Petty Patent meant, as a matter of law, that the applicants could no longer maintain the proceeding until the objection had been determined.  No authority in support of that proposition was advanced.  Alternatively, it was put that the proceeding generally should be stayed until the notice of objection had been determined.  The fact that in the proceedings there were also claims against the respondents unrelated to the claims based upon the alleged breach of the Petty Patent or of the Patent pending was not addressed.  There was no material presented identifying any facts or matters relevant to the discretion to stay the proceeding generally, or aspects of it, beyond the fact of the notice of objection, nor any submission put identifying any such considerations.

I decline to make the orders sought in pars 1, 2 and 4.1 of the motion.  In the case of the Petty Patent granted and published under s 62 of the Act, it has a term of twelve months, subject to its extension for a further period of twelve months.  I am told that that extension is being applied for under s 69.  At that point the respondent Betty Allen must be given a reasonable opportunity to be heard:  s 69(3) of the Act.  If, as a result of that process the Petty Patent is not extended, then the respondents might apply to strike out or dismiss parts of the amended statement of claim or of the claim respectively.  If the application for extension is not made, so that the term of the Petty Patent expires, the same steps might be taken.  In the meantime, Stolair is entitled to maintain infringement proceedings under s 120 of the Act.  There is, in my view, no reason shown why the Court should anticipate an adverse decision on the part of the Commissioner on that extension application.  The considerations against granting the stay sought are, in my view, strong.  The applicant’s claim has a number of causes of action identified, and it would be unfair to the applicants that all causes of action should be stayed, when the foundation of one only of them is under question.  The nature of the allegations is such that it would clearly be desirable from the point of view of the parties that all issues between them should be resolved at the one time.  From the more general point of view, that same conclusion is evident to avoid the risk of the Court being called upon to resolve certain issues involving an assessment of the credit of certain persons and then later being called upon to resolve another issue which might also involve an assessment of the credit of certain persons.  That is generally a circumstance to be avoided.  There is also, on the face of the issues, a likely overlap of evidence touching on them and probable savings in time and money by having all issues heard together.  This is not a case where, in my view, there should be a separate trial of issues.  The effect of the orders sought would therefore result in the applicants being delayed in the prosecution of all their claims for an uncertain period.  That would clearly work injustice to the applicants.  The respondents did not assert that any particular injustice would be occasioned to them if the matter generally proceeds at this point.  Accordingly, in my view, I am not as a matter of law obliged to make those orders and in the exercise of my discretion I decline to do so.

I refer to par 4.7 of the notice of motion.  Paragraph 29 of the amended statement of claim contains no more than a prayer for relief:  a declaration that the respondents have infringed s 129 of the Trade Marks Act 1995 (Cth) and have engaged in passing off.  The respondents’ assertion was that the alleged breach of the Trade Mark Act 1995 was “not entirely clear” and was “unsustainable”, but their reasons were not dilated.  The application must be under O 11 r 16 of the Federal Court Rules.  The observations of Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130 show that that power should be used with caution. It was not explained why the material facts alleged, if established, could not on any view make out a cause of action in passing off or, if they do, why as a matter of law the Court could not on any sustainable view grant declaratory relief. Nor was it explained why the material facts alleged, if established, could not on any view make out a cause of action for breach of the registered trade mark, or, if they do, why as a matter of law the Court could not on any sustainable view grant declaratory relief. My own perusal of the amended statement of claim did not readily disclose that the respondents’ assertions are correct. I have also considered whether the claim for relief should be struck out as embarrassing under that rule, given the assertion as to the lack of clarity in the pleading. However, what constituted the lack of clarity was not identified, and no embarrassment was asserted. Whilst I am not sure that the amended statement of claim is a paragon of pleading, I am not persuaded from my own perusal of it that the undeveloped complaint of the respondents is correct. If that is because they did not explain by reference to the pleading the reasons for any difficulty confronting them in understanding it, and why any such difficulty could not be met by the provision of particulars, that consequence is not of the Court’s making. I note also that the respondents have not asserted an inability to plead to the amended statement of claim. They have in fact done so. I am not therefore satisfied, in the light of the brief and undeveloped assertions of the respondents, that I should make this order as sought.

The respondents’ contention under par 4.9 of the motion is also rejected.  One might have thought that that paragraph of the motion amounted to an attempt to strike out par 3 of the applicants’ reply of 2 April 1997 to the then defence of the respondents of 17 March 1997.  That was the state of those pleadings at the time the motion was issued.  The point then at issue arises from what I suspect is one of the less significant causes of action of the applicants, namely the claim for breach of copyright by the publication by the respondents of a document entitled “Antioxidants v Free Radicals” said to have been authorised by Warwick Raymont (“Mr Raymont”) and with his name on it.  The publication of that document by the respondents is said to have been made without authority, and with Mr Raymont’s name deleted by the respondents.  The respondents acknowledge the distribution, and plead inter alia that:

“21.2the words and letters “Dr. Warwick D Raymont, Ph D., M.A.C.S., M.N.Y.A.S., D.G., O.I.A.” printed on the document were masked by the respondents;

. . .

The respondents say that the words and letters set out in subparagraph 21.2 above were masked as the respondents had been informed that the claims made by the applicants’ director, Warwick Deane Raymont, to the qualifications implied by the letters referred to were untrue (and it is the case that they are untrue), and the respondents were concerned not to make any misrepresentations or untrue statements.”

The reply denies that those qualifications do not exist.

But that was not the substance of the application.  It was, as I was told, for summary judgment on the cross-claim.  The respondents have since the motion filed and served an amended defence and cross-claim on 23 December 1997 and have sought leave to file and serve a further amended defence and cross-claim.

The current amended defence and cross-claim, and the proposed amended defence and cross-claim allege, and it is to be alleged if the further amendment is permitted, that false representations by Mr Raymont as to his tertiary qualifications were relied upon by them in participating with Stolair through a third entity in the promotion and marketing of OxiChel, and that the respondents thereby invested substantial sums in that enterprise and have ultimately lost those investments.  That gives rise to the cross-claim.  The matter of Mr Raymont’s qualifications is, therefore, an integral part of the present cross-claim.  No defence to that cross-claim has yet been filed.

As I have noted, given its timing, par 4.9 of the motion must have been directed initially at the then existing pleadings.  It is now said to be for the purpose of obtaining summary judgment on the cross-claim at large, although its terms are more circumspect:  an estoppel in relation to a particular fact.  The cross-claim is proposed to be further amended.  In my view the uncertain state of the pleadings would of itself be sufficient reason to refuse the order sought at this point.  I think it is quite unsatisfactory for the respondents to be seeking summary judgment on their cross-claim at a time when they have sought to amend it extensively.  However, as the ground for the application was identified, and is likely to remain relevant given the current and proposed pleadings, I propose nevertheless to deal with that ground.  The ground was based upon submissions put by the then counsel for the then respondent in proceedings in the Supreme Court of South Australia on an appeal by Stolair from a decision in the Civil Division of the Adelaide Magistrates Court.  The transcript of the submissions relied upon was put before me.  No concession was made by counsel for Stolair in the course of those submissions on the topic.  No other material was sought to be relied upon.  In particular, counsel for the respondents before me acknowledged that there was nothing put in evidence before me in the nature of an admission made by Mr Raymont or by Stolair in any other way relied upon.  No judgment has been relied upon, nor any finding in a judgment.  I find the proposition bizarre that because in another proceeding a counsel, not acting for Stolair, asserts in submissions in proceedings in which Stolair was a party that Mr Raymont did not have certain qualifications, then in later proceedings Stolair should be “estopped” from asserting that Mr Raymont held certain qualifications.  To state the proposition is to demonstrate its untenability:  because A asserts fact X in proceedings to which B is a party, B may not allege facts inconsistent with fact X in separate proceedings.  It was not suggested the claimed estoppel fell within any recognised legal principle.  I reject the submission.

The motion is dismissed.  I order the respondents to the proceeding as applicants on the motion to pay to the applicants to the proceeding as respondents to the motion their costs of and incidental to the motion to be taxed.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Decision herein of the Honourable Justice Mansfield.

Associate:

Dated:            

Counsel for the Applicants:	Mr M Hoile
Solicitors for the Applicants:	Scales & Partners
Counsel for the Respondents:	Mr M Brown
Solicitors for the Respondents:	Robert Brook
Date of Hearing:	25 May 1998
Date of Decision:	16 June 1998