H O Wiles Limited v Bar's Products International Limited

[2022] NZHC 2045

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-991

[2022] NZHC 2045

UNDER

the Contractual Remedies Act 1979 the Fair Trading Act 1986

the Trade Marks Act 2002

IN THE MATTER

of breach of agreement, repudiation,

estoppel, breach of trust and passing off

BETWEEN

H O WILES LIMITED

First plaintiff

BARS LEAKS NZ LIMITED
Second plaintiff

BAR’S LEAKS (AUSTRALIA) PTY LTD
Third plaintiff

BAR’S LEAKS AUSTRALIA LP

Fourth plaintiff

AND

BAR’S PRODUCTS INTERNATIONAL LIMITED

Defendant

Hearing:	15 August 2022
Appearances:	C L Elliott QC for plaintiffs J M Glover for defendant
Date of judgment:	18 August 2022

JUDGMENT OF JAGOSE J

This judgment was delivered by me on 18 August 2022 at 11.00am. Pursuant to Rule 11.5 of the High Court Rules.

…………………………

Registrar/Deputy Registrar

Counsel/Solicitors:

C L Elliott QC, Auckland

J M Glover, Barrister, Auckland McVeagh Fleming, Auckland Woodroffe Lawyers, Auckland

H O WILES LTD v BAR’S PRODUCTS INTERNATIONAL LTD [2022] NZHC 2045 [18 August 2022]

[1]    The plaintiffs (the Wiles Group) licence an Australian- and New Zealand- registered trade mark from the defendant (BPI), a company registered in California. They contend for an agreement by which the trade mark would be transferred to them. It was not.

[2]    By claim of 4 June 2021, Wiles Group asserted BPI was liable to them in breach or repudiation of contract and estoppel, at least inferentially to be determined in accordance with the laws of New Zealand.  BPI defended the claim and raised     a counterclaim on 17 August 2021, to which Wiles Group replied on 21 September 2021.

[3]    Wiles Group’s amended claim dated 5 November 2021 added claims for breach of trust or institutional constructive trust, revocation or invalidity of the trade mark under the Trade Marks Act 2002, breach of the Fair Trading Act 1986 and passing off. Except for the statutory causes of action, Wiles Group included reference to Australian law under each other cause of action. No leave was sought to serve the amended claim.

[4]    BPI objected to this Court’s jurisdiction to hear and determine the proceeding “to the extent that the governing law is now said to be the law of Australia”. Its present application seeks to stay or dismiss the causes of action to the extent of their reference to Australian law, and additionally to stay or dismiss the last two causes of action in their entirety as lacking substance.

[5]    At the hearing of BPI’s application, Wiles Group withdrew the amended claim’s references to Australian law.1 Accordingly, for my decision only is if the causes of action under the Fair Trading Act and in passing off may be maintained.

Applicable law

[6]Rule 5.49 of the High Court Rules 2016 relevantly provides:

Appearance and objection to jurisdiction

(1)    A defendant who objects to the jurisdiction of the court to hear and determine the proceeding may, within the time allowed for filing a

1      For the record, Wiles Group withdrew paragraphs 66, 70, 89, 90, 97, 106 and 152 of its amended claim dated 5 November 2021.

statement of defence and instead of so doing, file and serve an appearance stating the defendant’s objection and the grounds for it.

(2)    The filing and serving of an appearance does not operate as a submission to the jurisdiction of the court.

(3)    A defendant who has filed an appearance may apply to the court to dismiss the proceeding on the ground that the court has no jurisdiction to hear and determine it.

…

(6)    The court hearing an application under subclause (3) … must,—

(a)if it is satisfied that it has no jurisdiction to hear and determine the proceeding, dismiss the proceeding; and

(b)if it does not dismiss the proceeding under paragraph (a), set aside the appearance.

(7)    To the extent that an application under this rule relates to service of process effected outside New Zealand under rule 6.27 or 6.28, it must be determined under rule 6.29.

(7A) But both this rule and rule 6.29 are subject to section 27(1) of the Trans- Tasman Proceedings Act 2010, which provides that a New Zealand court cannot stay a civil proceeding before it on forum grounds connected with Australia otherwise than in accordance with subpart 2 of Part 2 of that Act.

(8)    The court, in exercising its powers under this rule, may do so on any terms and conditions the court thinks just and, in particular, on setting aside the appearance it may extend the time within which the defendant may file and serve a statement of defence and may give any directions that appear necessary regarding any further steps in the proceeding.

…

[7]    In term of r 5.49(7), rr 6.27–6.29 provide:

6.27   When allowed without leave

(1)    This rule applies to a document that initiates a civil proceeding, or is a notice issued under subpart 4 of Part 4 (third, fourth and subsequent parties), which under these rules is required to be served but cannot be served in New Zealand under these rules (an originating document).

(2)    An originating document may be served out of New Zealand without leave in the following cases:

(a)when a claim is made in tort and—

(i)     any act or omission in respect of which damage was sustained was done or occurred in New Zealand; or

(ii)   the damage was sustained in New Zealand:

(b)when a contract sought to be enforced or rescinded, dissolved, annulled, cancelled, otherwise affected or interpreted in any proceeding, or for the breach of which damages or other relief is demanded in the proceeding—

(i)     was made or entered into in New Zealand; or

(ii)   was made by or through an agent trading or residing within New Zealand; or

(iii) was to be wholly or in part performed in New Zealand; or

(iv)  was by its terms or by implication to be governed by New Zealand law:

(c)when there has been a breach in New Zealand of any contract, wherever made:

(d)when the claim is for—

(i)     a permanent injunction to compel or restrain the performance of any act in New Zealand; or

(ii)   interim relief in support of judicial or arbitral proceedings commenced or to be commenced outside New Zealand:

(e)when the subject matter of the proceeding is land or other property situated in New Zealand, or any act, deed, will, instrument, or thing affecting such land or property:

(f)when the proceeding relates to the carrying out or discharge of the trusts of any written instrument of which the person to be served is a trustee and which ought to be carried out or discharged according to the law of New Zealand:

(g)when any relief is sought against any person domiciled or ordinarily resident in New Zealand:

(h)when any person out of the jurisdiction is—

(i)     a necessary or proper party to proceedings properly brought against another defendant served or to be served (whether within New Zealand or outside New Zealand under any other provision of these rules), and there is a real issue between the plaintiff and that defendant that the court ought to try; or

(ii)   a defendant to a claim for contribution or indemnity in respect of a liability enforceable by proceedings in the court:

(i) when the proceeding is for the administration of the estate of any deceased person who at the time of his or her death was domiciled in New Zealand:

(j)when the claim arises under an enactment and either—

(i)     any act or omission to which the claim relates was done or occurred in New Zealand; or

(ii)   any loss or damage to which the claim relates was sustained in New Zealand; or

(iii) the enactment applies expressly or by implication to an act or omission that was done or occurred outside New Zealand in the circumstances alleged; or

(iv)  the enactment expressly confers jurisdiction on the court over persons outside New Zealand (in which case any requirements of the enactment relating to service must be complied with):

(k)when the person to be served has submitted to the jurisdiction of the court:

(l)when a claim is made for restitution or for the remedy of constructive trust and the defendant’s alleged liability arises out of acts committed within the jurisdiction:

(m)when it is sought to enforce any judgment or arbitral award.

6.28   When allowed with leave

(1)    In any proceeding when service is not allowed under rule 6.27, an originating document may be served out of New Zealand with the leave of the court.

(2)    An application for leave under this rule must be made on notice to every party other than the party intended to be served.

(3)    A sealed copy of every order made under this rule must be served with the document to which it relates.

(4)    An application for leave under this rule must be supported by an affidavit stating any facts or matters related to the desirability of the court assuming jurisdiction under rule 6.29, including the place or country in which the person to be served is or possibly may be found, and whether or not the person to be served is a New Zealand citizen.

(5)    The court may grant an application for leave if the applicant establishes that—

(a)the claim has a real and substantial connection with New Zealand; and

(b)there is a serious issue to be tried on the merits; and

(c)New Zealand is the appropriate forum for the trial; and

(d)any other relevant circumstances support an assumption of jurisdiction.

6.29   Court’s discretion whether to assume jurisdiction

(1)    If service of process has been effected out of New Zealand without leave, and the court’s jurisdiction is protested under rule 5.49, the court must dismiss the proceeding unless the party effecting service establishes—

(a)that there is—

(i)     a good arguable case that the claim falls wholly within 1 or more of the paragraphs of rule 6.27; and

(ii)   the court should assume jurisdiction by reason of the matters set out in rule 6.28(5)(b) to (d); or

(b)that, had the party applied for leave under rule 6.28,—

(i)     leave would have been granted; and

(ii)   it is in the interests of justice that the failure to apply for leave should be excused.

(2)    If service of process has been effected out of New Zealand under rule 6.28, and the court’s jurisdiction is protested under rule 5.49, and it is claimed that leave was wrongly granted under rule 6.28, the court must dismiss the proceeding unless the party effecting service establishes that in the light of the evidence now before the court leave was correctly granted.

(3)    When service of process has been validly effected within New Zealand, but New Zealand is not the appropriate forum for trial of the action, the defendant may apply for a stay, or for a dismissal of the proceeding under rule 15.1.

(4) This rule is subject to section 27(1) of the Trans-Tasman Proceedings Act 2010 (see rule 5.49(7A)).

[8]    Also material is r 15.1:

Dismissing or staying all or part of proceeding

(1)    The court may strike out all or part of a pleading if it—

(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

(b)is likely to cause prejudice or delay; or

(c)is frivolous or vexatious; or

(d)is otherwise an abuse of the process of the court.

(2)    If the court strikes out a statement of claim or a counterclaim under subclause (1), it may by the same or a subsequent order dismiss the proceeding or the counterclaim.

(3)    Instead of striking out all or part of a pleading under subclause (1), the court may stay all or part of the proceeding on such conditions as are considered just.

(4)    This rule does not affect the court’s inherent jurisdiction.

Discussion

[9]    Notwithstanding the Court of Appeal’s rejection r 5.49 objections to this Court’s jurisdiction are “all or nothing”,2 but can be upheld in relation to individual causes of action, I have my doubts such objection reductively may be applied to address individual components of a cause of action, such as here “to the extent that the governing law is now said to be the law of Australia”. That should not matter now,

2      Wing Hung Printing Co Ltd v Saito Offshore Pty Ltd [2010] NZCA 502, [2011] 1 NZLR 754 at [68].

given Wiles Group’s withdrawal of those allegations. But BPI argues its objection continues to have resonance in its application to stay or dismiss the Fair Trading Act and passing off causes of action.

[10]   The issue arises through BPI’s reliance on r 6.28(5)(b)’s “serious issue to be tried on the merits”, which is argued to offer a lesser threshold for stay or dismissal than the more orthodox alternative r 15.1’s “no reasonably arguable cause of action”. Under the former rule, “the Court must be satisfied there is a serious legal issue to be tried and that there is a sufficiently strong factual basis to support the legal right asserted”.3 If there is a materially different threshold, then it only is the cause of action be “sufficiently plausible”.4 But some sense no different threshold ultimately is intended can be drawn from r 6.29(3)’s reference to r 15.1.

[11]   The argument is — in exercising discretion to assume jurisdiction  over  Wiles Group’s objected proceedings, served on BPI out of New Zealand without leave

— I must dismiss the claim unless Wiles Group establishes the relevant criteria under r 6.29(1), which includes I should assume jurisdiction by reason of, among other things, r 6.28(5)(b)’s “serious issue”. The difficulty with that argument here is BPI’s objection is made only “to the extent that the governing law is now said to be the law of Australia”, which no longer is maintained (and was not made in relation to the Fair Trading Act claim in any event). Without the foundation objection, no question of assumption of jurisdiction arises.5

[12]   Instead, I address BPI’s application under r 15.1 alone. The principles are well-understood: pleaded facts are presumed true; the target pleading must have no prospect of success; and the jurisdiction is exercised only in clear cases.6 An ‘abuse of

3      At [37], citing Harris v Commerce Commission [2009] NZCA 84, (2009) 12 TCLR 379 at [57]– [61].

4 At [41].

5      Unaddressed in argument is if BPI’s submission to this Court’s jurisdiction, by filing its defence to Wiles Group’s original claim, necessarily includes the prospect of amended pleadings (which may introduce fresh causes of action): High Court Rules, r 7.77. If not, BPI’s appearance under protest to jurisdiction was due within 10 working days of the amended claim’s service, which appears not to have been met: rr 5.49(1) and 7.77(6). Given this judgment’s result, I have not needed to determine these issues.

6      See Gartside v Sheffield, Young & Ellis [1983] NZLR 37 (CA) at 45; Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267; and North Shore City Council v Attorney-General [2012] NZSC 49, [2012] 3 NZLR 341 at [146], all endorsed by the Supreme Court in Sandman v McKay [2019] NZSC 41, [2019] 1 NZLR 519 at [113].

the process of the court’ is “improper use of [the court’s] machinery”;7 use of that process “for a purpose or in a way significantly different from its ordinary and proper use”.8

[13]   Wiles Group alleges BPI’s application to register a trade mark in New Zealand is misleading or deceptive conduct in trade in breach of ss 9 and 10 of the Fair Trading Act, or otherwise of a mark so confusingly similar to Wiles Group’s asserted intellectual property to pass itself off as associated with Wiles Group. BPI argues its filing the application for registration is neither ‘in trade’ nor misleading or deceptive, whether of some substantial proportion of consumers or otherwise, and points out there is a statutory process for trade mark registration opposition to be addressed,9 which should be to the exclusion of any collateral challenge. Thus BPI argues these causes of action disclose no reasonably arguable cause of action or otherwise are an abuse of process, justifying their stay or dismissal.

[14]   I cannot say the Fair Trading Act cause of action has ‘no prospect of success’. BPI is pleaded to be in trade, carrying on business as a licensor and distributor of automotive chemicals, which may or may not extend to its application for registration of trade marks. Neither can I say such application could not relevantly be misleading and deceptive, however implausible. Those are matters for trial.

[15]   While the grounds for trade mark registration opposition appear unconstrained,10 under s 17(1) of the Trade Marks Act, the Commissioner:

… must not register as a trade mark or part of a trade mark any matter—

(a)    the use of which would be likely to deceive or cause confusion; or

(b)    the use of which is contrary to New Zealand law or would otherwise be disentitled to protection in any court ….

7      Simon Goulding, DB Casson and William Blake Odgers Odgers on Civil Court Actions (24th ed, Sweet & Maxwell, London, 1996) at [10.15] as cited in Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [87].

8      Attorney-General v Barker [2000] 1 FLR 759 (QBD) at 764.

9      Trade Marks Act 2002, s 47.

10     Rob Batty and Kevin Glover Intellectual Property Law (online ed, LexisNexis) at [TMA47.4].

But those are not a precise analogue for these causes of action. Instead, the act of seeking registration is pleaded to be in breach of the Act or, if the cross-referenced pleading is understood,11 to constitute passing off.

[16]   Nonetheless, the balance of these causes of action focus on alleged confusing use of Wiles Group’s asserted intellectual property. Opposition conceivably could include the act of seeking registration was itself confusing or contrary to law. If so, the opposition process — which includes a right of appeal12 — may offer “an alternative and more appropriate method of resolution”, and maintenance of these two causes of action thus would be an abuse of process.13

[17]   In weighing up the alternative, ultimately I conclude contended illegality in seeking registration sufficiently is distinct from any opposition to registration in itself not to warrant stay or dismissal of these two causes of action. There is no ‘clear case’ for their strike out. I cannot say these causes are “‘so certainly or clearly bad’ that [they] should be precluded from going forward”.14

Result

[18]BPI’s application is dismissed.

Costs

[19]   As advised to counsel, costs were reserved pending this judgment. If it assists, my preliminary view is costs should lie where they fall — that is, be borne by the party incurring them — because both parties have obtained roughly equal degrees of success and failure: BPI obtaining Wiles Group’s withdrawal of the Australian law references, but Wiles Group resisting BPI’s attempt to strike out the last two causes of action.

11 The drafting of these causes of action leaves much to be desired. In particular, other than BPI’s application for registration, the pleading of contended contravening conduct is anticipatory: that otherwise unparticularised use of intellectual property “would be” in breach of the Act and constitute passing off. The passing off pleading particularly is dense: it appears to cross-reference back to “aforesaid conduct” alleged as Fair Trading Act breach.

12 Trade Marks Act, s 170.

13 Reihana v Rakiura Titi Committee [2018] NZCA 325, [2018] NZAR 1652 at [15]–[16].

14 Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33], citing W v Essex County Council [2001] 2 AC 592 (HL) at 601.

[20]   If that is not accepted by the parties and they cannot otherwise agree, costs are reserved for determination on short memoranda each of no more than five pages — annexing a single-page table setting out any contended allowable steps, time allocation and daily recovery rate — to be filed and served by any party claiming costs within ten working days of the date of this judgment, with any response or reply to be filed within five working day intervals after service.

Next steps

[21]I direct:

(a)                  BPI file and serve any defence to Wiles Group’s amended claim dated

5  November  2021  (omitting  the  withdrawn  paragraphs)  within   10 working days of the date of this judgment; and

(b)the proceeding be called in a duty judge list for the week commencing 12 September 2022 for further case management directions.

—Jagose J