Burden v Dixie Cummings New Zealand Limited
[2016] NZHC 729
•19 April 2016
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-002547 [2016] NZHC 729
UNDER the Trade Marks Act 2002 and the
Fair Trading Act 1986
IN THE MATTER OF
Infringement of Trade Mark Infringement and Breach of the Fair Trading Act
BETWEEN
IAN JAMES BURDEN First Plaintiff
PLANTATION GROWN TIMBERS (INTERNATIONAL) LIMITED Second Plaintiff
Plaintiffs continued over
AND
DIXIE CUMMINGS NEW ZEALAND LIMITED
First Defendant
MORROW MARKETING MANAGEMENT LIMITED Second Defendant
Defendants continued over
Hearing: 5 February 2016 Counsel:
J A Hazel and S Aymeric for the Plaintiffs / Respondents
G F Arthur for the Applicant / First DefendantJudgment:
19 April 2016
JUDGMENT OF EDWARDS J
This judgment was delivered by Justice Edwards on 19 April 2016 at 4.30 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
BURDEN v DIXIE CUMMINGS NZ LTD [2016] NZHC 729 [19 April 2016]
PLANTATION GROWN TIMBERS (VIETNAM) LIMITED
Third Plaintiff
ANDCRAIG MORROW Third Defendant
GALAXY HOME VIETNAM LIMITED Fourth Defendant
CIV-2015-404-001608
UNDER the Copyright Act 1994 and the Fair
Trading Act 1986
IN THE MATTER OF Copyright Infringement and Breach of the
Fair Trading Act
BETWEEN IAN JAMES BURDEN First Plaintiff
PLANTATION GROWN TIMBERS (INTERNATIONAL) LIMITED Second Plaintiff
PLANTATION GROWN TIMBERS (VIETNAM) LIMITED
Third Plaintiff
ANDDIXIE CUMMINGS NEW ZEALAND LIMITED
First Defendant
BURDEN FURNITURE (INTERNATIONAL) LIMITED Second Defendant
BURDEN FURNITURE CO LIMITED Third Defendant
LINDSAY JOHN BURDEN Fourth Defendant
Introduction
[1] The applicant is the first defendant in proceeding CIV-2014-404-001608 (Copyright proceeding) and in proceeding CIV-2014-404-002547 (Trade mark proceeding). It seeks an order requiring the plaintiffs to post security in the sum of
$75,000 in each proceeding.
[2] The plaintiffs oppose the order for security but in the event that it is ordered, they say the sum of $44,000 for each proceeding is more appropriate.
Plaintiffs’ claims
[3] The three plaintiffs in each proceeding design, manufacture and export furniture. Mr Burden, the first named plaintiff, is an Australian citizen who spends considerable time in Vietnam. The second plaintiff is a company registered in the British Virgin Islands, and the third is registered in Vietnam. Mr Burden is the managing director of both the second and third plaintiffs, the sole shareholder of the second plaintiff and the beneficial owner of the shares in the third plaintiff company.
[4] The plaintiffs’ claims arise out of the importation and distribution of furniture by the defendants in each proceeding. The Copyright proceeding includes claims that the plaintiffs own or licence copyright in design drawings of furniture products, and that they produce and distribute a range of furniture products by reference to the trade mark “THE CORNWALL COLLECTION”. It is claimed that the defendants have arranged the manufacture and importation of furniture products which infringe the plaintiffs’ copyright works.
[5] The Trade mark proceeding concerns claims that the defendants have imported, manufactured and marketed furniture in New Zealand by reference to the trade mark “TOSCANA COLLECTION”. The plaintiffs claim that this is a breach of their registered trade marks: “PGT THE TOSCANA COLLECTION” and “THE TOSCANA COLLECTION”.
[6] The first defendant in both proceedings, Dixie Cummings New Zealand Ltd, is a New Zealand company. It is a furniture importer and distributor. The second, third and fourth defendants are different in each proceeding. None of those parties have taken any steps in either proceeding.
[7] The first defendant denies the claims in both proceedings. It has counterclaimed against the plaintiffs in the Trade mark proceeding seeking revocation of the plaintiffs’ registered trade marks. The furniture imported by the first defendant is currently detained by Customs pursuant to s 149 of the Trade Marks Act 2002 and s 140 of the Copyright Act 1994.
Relevant legal principles
[8] The Court has the power to order security for costs under r 5.45. The relevant parts of that rule provide:
5.45 Order for security of costs
(1) Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—
(a) that a plaintiff—
(i) is resident out of New Zealand; or
(ii) is a corporation incorporated outside New Zealand;
or
(iii) is a subsidiary (within the meaning of section 5 of the Companies Act 1993) of a corporation incorporated outside New Zealand; or
(b) that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff's proceeding.
(2) A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.
…
[9] There is no dispute in this case that the threshold test under r 5.45(1)(a) has been met as each of the three plaintiffs are resident overseas.
[10] The only issue is whether, as a matter of discretion, security should be ordered. That discretion is to be exercised on a case-by-case basis and is not to be fettered by constructing “principles” from the facts of previous cases.1 What is required is an overall balancing of the interests of each party.2
[11] The parties focused on a number of factors relevant to the exercise of the discretion in their submissions. Each of those factors is addressed below.
Unable/unwilling to pay
[12] The first defendant contends that the plaintiffs are unable, or unwilling, to pay an adverse order of costs should they be unsuccessful at trial and this weighs in favour of an order for security. An inability to pay is one of the thresholds for an order of security for costs to be made. As the threshold under r 5.45(1)(a) is already met in this case, I have considered the submissions regarding an inability to pay together with the submissions regarding a willingness to pay, as matters which are relevant to the exercise of my discretion.
[13] The first defendant points to the lack of any evidence about the plaintiffs’ net worth as justifying an adverse inference being drawn as to the plaintiffs’ ability to meet a costs order. It also points to evidence of the plaintiffs’ failure to pay costs ordered in a copyright proceeding in Ireland. The plaintiffs discontinued that proceeding immediately prior to a security for costs hearing scheduled in the Irish Court. The proceeding was struck out and the Court ordered the plaintiffs to pay costs in the sum of €73,693.01. None of those costs have been paid.
[14] The plaintiffs dispute the fact that they are either unable or unwilling to pay costs if ordered to do so. Mr Burden’s affidavit contains assurances that he will pay costs if ordered to do so and that the plaintiffs’ business (which he says employs up to 700 people) is sufficiently resourced to meet such a costs order. Although the plaintiffs have not paid the costs in the Irish proceeding, they have since paid
security in accordance with judgments in this jurisdiction requiring them to do so.
1 A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 (CA) at [13].
2 At [15] and [16]; Highgate on Broadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [24c]; and Busch v Zion Wildlife Gardens Ltd (in rec and in liq) [2012] NZHC 17 at [15].
[15] Mr Burden also deposes to a Queensland property which is owned by him and his wife. Mr Burden estimates that the current value of the house is at least AUD 3,500,000. There is a line of credit mortgage on the property, but it currently has a zero balance.
[16] The failure to pay costs in the Irish proceeding, and the availability of the Queensland property to meet an award of costs were factors in other security for costs orders made against the same plaintiffs in proceedings similar to the Copyright claim.3
[17] In Burden v Debonaire Furniture Ltd, Brown J said the following about the failure to pay costs in the Irish proceeding:4
A matter which does carry not insignificant weight in my consideration is the fact that the costs which the plaintiffs were ordered to pay in the Irish proceeding have not been paid. Although, as Mr Hazel notes, the certificate of taxation is dated 3 September 2014, in fact the order of the High Court for the taxing of costs was dated 30 September 2013. Against that background I would have expected those costs to have been paid by now. The first defendant’s apprehensions on that account are understandable.
[18] The failure to provide a guarantee that the Queensland property would be available should the plaintiffs be unsuccessful at trial was also a significant factor in security being awarded in both cases.5
[19] The position appears to have remained unchanged in this case. Mrs Burden gives an express undertaking that she will not draw down on the current facility, but Mr Burden does not give the same unequivocal undertaking. Counsel for the plaintiffs submits that this is simply an oversight and Mr Burden is likely to provide an undertaking to the Court in the same terms as Mrs Burden if that is what is sought. He invites me to decline to grant security on the condition that such an
undertaking is provided.
3 Burden v Debonaire Furniture Ltd [2015] NZHC 263 at [22]; and Burden v ESR Group (NZ) Ltd
HC Auckland CIV-2014-404-2456, 1 April 2015 at [15] and [16].
4 Burden v Debonaire Furniture Ltd, above n 3, at [23].
5 Burden v Debonaire Furniture Ltd, above n 3, at [22]; and Burden v ESR Group (NZ) Ltd, above n 3, at [15].
[20] I am not satisfied that the evidence produced shows an inability on behalf of the plaintiffs to pay costs should they be ordered to do so at the conclusion of trial. The evidence of the Queensland property alone would tend to suggest that there is an ability to pay costs if ordered.
[21] However, I do consider that the evidence tends to show an unwillingness to pay costs if ordered to do so. The failure to pay costs in the Irish proceeding, and the failure to provide any undertakings in relation to the current facility secured over the Queensland property, are significant, particularly given the prominence that both these issues took in prior security for costs cases.
[22] In my view, evidence of an unwillingness to pay costs weighs in favour of an order for security for costs.
Strength of the case
[23] The merits of the claim is also a relevant factor in the exercise of the Court’s discretion, although there is a limit to that enquiry where proceedings are at a very early stage.6
[24] The first defendant submits that the strength of the plaintiffs’ claims in both proceedings is very weak and that this favours an order for security for costs. That is keenly disputed by the plaintiffs.
[25] There does not appear to be any dispute at this stage that the first defendant has used the word “Toscana” in relation to its packaging. There is however a dispute about whether “TOSCANA COLLECTION” has been used on the furniture itself, and whether any trade mark over the use of the word Toscana should have been registered in the first place.
[26] The Copyright proceeding is more complex than the Trade mark proceeding. At this early stage, there appears to be a real issue about which of the plaintiffs owns the copyright. There is also an issue about originality and authorship of the artistic
works, and whether the plaintiffs are able to enforce that copyright in New Zealand. Whether the first defendant’s labelling of its furniture is significantly different to avoid liability under the Fair Trading Act 1986 or a claim for passing off is likely to be another issue to be determined at trial.
[27] It is difficult to assess the merits of both proceedings given the preliminary stage that both are at. Nevertheless, I am satisfied that there is a prima facie case to answer in both proceedings. The merits of both claims cannot be said to be so weak that this factor alone would justify an award of security for costs.
Ease of enforcement
[28] The ease, convenience and cost of enforcing a costs judgment against an overseas plaintiff is a primary consideration in security for costs applications against overseas plaintiffs.7
[29] In this case, there is no real dispute that enforcement in Vietnam and the British Virgin Islands will be complicated and expensive and may not be possible at all. However, the parties differ as to the ease with which a judgment may be enforced in Australia.
[30] The Trans-Tasman Proceedings Act 2010 has simplified the reciprocal enforcement of judgments in both Australia and New Zealand. Registration is now a relatively straightforward process. However, given the uncertainty about the availability of the Queensland property to meet any adverse costs award, I consider that enforcement of the Australian judgment may nevertheless be practically difficult for the first defendants should they be successful at trial.
[31] In my view, this factor weighs in favour of an order for security for costs.
Conduct of the parties
[32] Contemptuous or oppressive behaviour on the part of either party may be significant in exercising the discretion to order security.8 Both parties make allegations of improper conduct against the other in this case.
[33] The first defendant claims that the plaintiffs have failed to comply with their Irish costs order; pleaded residence of the first plaintiff as being in Australia when he is actually resident in Vietnam; been inconsistent in the identification of who owns copyright; made allegations about the Irish High Court proceedings to bolster threats against Australian retailers some 10 months after the Irish proceedings were struck out; and wrongly claimed confidentiality in evidence.
[34] The plaintiffs however claim that Mr Carr, on behalf of the first defendant, has gone to great length to disclose information which had been previously redacted from Mr Burden’s affidavits and in which there was a legitimate confidentiality interest. Furthermore, the plaintiffs claim that the first defendant’s Australian counsel has recently contacted New Zealand Customs directly claiming that the continued detention of the first defendant’s goods is “unlawful” and demanding the goods to be released to the first defendant. The plaintiffs say that such conduct is highly inappropriate because it seeks to circumvent the appropriate process for challenging detention of goods and also amounts to an interference with a matter which is currently before the Court.
[35] The allegations that each party makes against the other cannot be determined in the context of this application. I am not satisfied that the conduct complained about is such that it should bear upon the exercise of the discretion to grant security, and I have accordingly not taken the respective allegations into account.
Overall balance of interests
[36] Overall, I consider that the failure to pay costs in the Irish proceedings and the lack of any firm undertaking in relation to the Queensland property raises
concerns about the willingness of the plaintiffs to pay costs, and the ease with which any costs judgment may be enforced against the plaintiffs. In those circumstances, I consider an order that the plaintiffs provide security for costs is appropriate.
Quantum and staging
[37] The quantum of security is also a matter for the discretion of the Court.9
[38] At this stage, there will be separate trials for each proceeding as the second to fourth defendants are different in each proceeding. Security for costs has been assessed for each proceeding on that basis.
Copyright proceeding
[39] The first defendant seeks security in the sum of $75,000. It has calculated scale costs for the Copyright proceeding on the basis of a 10 day trial to be $79,165 (2B); $146,957 (2C); and $217,470 (3C). Expert fees of $25,000 have been estimated in addition.
[40] The plaintiffs estimate 2B costs of $44,154 on the basis of a five day trial. They have not included any estimate for expert fees in their calculations.
[41] The Copyright proceeding has been categorised as a complex defended proceeding. This means that claims for costs on a 3C basis may be appropriate for some, but not all, steps. I accept that discovery, inspection and interrogatories are likely to be extensive and this needs to be accounted for in the quantum of security ordered to be paid.
[42] I consider a 10 day estimate of trial is appropriate for the Copyright proceeding. Associate Judge Bell estimated the trial in the ESR proceeding would take 10 days and awarded security of costs on that basis.10 The trial in fact went for
15 days.
9 A S McLachlan v MEL Network Ltd, above n 1, at [13].
10 Burden v ESR Group (NZ) Ltd, above n 3, at [21] and [22].
[43] Taking into account a 10 day trial period, the complexity of the trial and expert fees, I consider security in the sum of $75,000 is fair and reasonable for the Copyright proceeding.
Trade mark proceeding
[44] The first defendant seeks $75,000 in this proceeding also. It has estimated costs on a 2B basis for a five day trial to be $57,757, with expert witness fees likely to be at least $15,000. The plaintiffs have calculated 2B costs for the proceeding based on a five day trial to be $44,154. No provision has been made for the expert witness fees. The plaintiffs’ calculations exclude steps already taken by the first defendant.
[45] The Trade mark proceeding is not complex and the trial is likely to take considerably less time than the Copyright proceeding. I consider a five day estimate to be reasonable. An allowance for expert fees needs to be made also. In all the circumstances, I consider the sum of $50,000 to be an appropriate quantum for security in the Trade mark proceeding.
Staging
[46] Both parties propose security to be paid in three stages. The first stage includes steps up to completion of interlocutories. The second stage involves preparation of briefs or affidavits, lists of issues, authorities and common bundle. The third stage includes preparation for the hearing and attendance at the hearing.
[47] I consider the staggering of the payment of security in accordance with the three stages proposed to be appropriate. Orders requiring the payment of security prior to each of these stages are set out at the conclusion of this judgment.
Stay or strike-out
[48] The first defendant seeks an order that if security is not paid by the due date, then the proceeding should be struck out. The first defendant submits that a strike-
out order would allow for the goods which are currently held in detention by
Customs to be released.
[49] Both the Trade Marks Act and the Copyright Act have a procedure by which application may be made for the release of goods subject to detention. I do not consider those processes should be effectively circumvented by an order bringing the proceedings to a premature end should security not be paid, or should there be a delay in making the payment by the due date. In my view, a stay of the proceedings adequately meets the first defendant’s interests.
Result
[50] The application for security for costs in both the Copyright and Trade mark proceedings is granted. The applicant has been successful and is entitled to an order of costs.
[51] I make the following orders:
(a) The plaintiffs shall provide security for costs in proceeding CIV-2015-
485-001608 in the sum of $75,000 to be paid as follows:
(i)the sum of $15,000 to be paid into Court within 10 working days of receipt of this judgment;
(ii)the sum of $25,000 to be paid into Court at least 10 working days prior to the date set for the service of briefs of evidence or upon completion of discovery (whichever is the later); and
(iii)the sum of $35,000 to be paid into Court at least 20 working days before the commencement of trial.
(b) The plaintiffs shall provide security for costs in proceeding CIV-2014-
404-002547 in the sum of $50,000 to be paid as follows:
(i)the sum of $10,000 to be paid into Court within 10 working days of receipt of this judgment;
(ii)the sum of $15,000 to be paid into Court at least 10 working days prior to the date set for the service of briefs of evidence or upon completion of discovery (whichever is the later); and
(iii)the sum of $25,000 to be paid into Court at least 20 working days before the commencement of trial.
(c) Non-compliance with the orders set out in (a) and (b) above will result in the proceeding in which there has been default being stayed.
(d)Costs and disbursements are awarded to the applicant on a 2B basis for a single hearing.
Edwards J
Counsel: G F Arthur, Wellington
Solicitors: James and Wells, Auckland
11
3
0