FEDERAL COURT OF AUSTRALIA

Unilver Australia Ltd v RFC Nominees Pty Ltd  [2000] FCA 1021

UNILEVER AUSTRALIA LIMITED (ACN 004 050 828) v

RFC NOMINEES PTY LIMITED (ACN 067 545 117) AND

GEORGE KAROUNOS

NG 732 of 1998

HILL J

26 JULY 2000

SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

1                     Before the Court is a motion brought by Unilever Australia Limited (“Unilever”), the applicant in the present proceedings, against the respondents, RFC Nominees Pty Limited and George Karounos, seeking that they provide security of costs in an amount of $40,000 on or before 2 August 2000.  I should note that the proceedings have been listed for hearing at the beginning of October for some five days.

2                     The statement of claim in its further amended form as filed on 6 June alleges that RFC Nominees Pty Limited, the first respondent, is registered on the Australian Register of Trademarks as the owner of a mark “Real” in five particular classes.  It is also the owner of another mark, “Real Fish and Chips”.  The applicant manufactures and sells various consumer food products with packaging that includes the word “Real”.

3                     In the proceedings the applicant seeks orders that the Register be rectified, claiming that the word “Real” is not distinctive and is not a trade mark within the meaning of the Trade Marks Act 1995 (Cth) (“the Act”) among other matters.  It seeks also a declaration that its use of the word “Real” on various packaging is not an infringement of the trade mark registered by the first respondent.  As is usual in matters of this kind, a cross-claim has been filed by RFC Nominees alleging that Unilever has infringed the registered mark.  The cross-claim alleges additionally breaches of sections 46(1)(a), 46(1)(b) and/or 46(1)(c) of the Act by Unilever.

4                     It was said from the bar table that prior to the present proceedings being commenced the first respondent, or perhaps both respondents, had alleged infringement by Unilever of the mark and in essence the proceedings were commenced by Unilever defensively of the infringement allegation.

5                     The first respondent has apparently been struck off the Register for failing to file its annual return or other documents.  Clearly there are difficulties with that company defending the proceedings or, for that matter, instituting a cross-claim when it is no longer a registered company.  For this reason an undertaking has been proffered by the solicitor for Mr Karounos that an application will be made forthwith to the Australian Securities and Investments Commission to restore the first respondent to the Register.  I propose to accept an undertaking in the form I will indicate later and to review the situation with the first respondent in September in case the application has been unsuccessful.

6                     Mr Karounos, according to the evidence, was bankrupt between 1981 and 1991.  In 1991 he was discharged from bankruptcy by operation of law.  Apparently on 22 April 1997 he entered into a composition under Part X of the Bankruptcy Act 1966 (Cth) making a composition with his creditors with effect from 10 September 1997.  He has no land in New South Wales or South Australia and there is no suggestion that he has substantial assets.  I should perhaps say that RFC Nominees Pty Limited is the trustee of a trust, the beneficiaries of which are members of Mr Karounos' family.  Initially it obtained registration of the mark “Real”.  Subsequently a change of trustees occurred as a result of which Mr Karounos became the trustee of the trust and registration was transferred by RFC Nominees Pty Limited to him.

7                     It appears that Mr Karounos subsequently assigned the marks, the  subject of the proceedings to a company, Real Corporation Australia Pty Limited:

“... to enable the commercialisation of the Real trade marks and to allow the RFC Trust to raise working capital by selling down part of its share holding in Real Corporation.” 

Mr Karounos also apparently mortgaged the mark to another party, Sabre International Limited, which thereafter sought to take possession of the marks as mortgagee and sought to become the registered owner of them.  Proceedings were instituted on behalf of the trust and Real Corporation in this Court in its South Australian division and on 24 July 2000 O'Loughlin J made interim orders restraining further dealings by Sabre in the marks.

8                     It would be a rare case indeed where security would be ordered to be given by a person who was a defendant to proceedings, while it is a normal matter for security to be ordered against an applicant because the applicant has chosen to bring the proceedings.  An order against a defendant has the vice that if granted it would preclude the defendant from defending proceedings brought against it. 

9                     However, the question of who is the applicant and who the respondent is not to be determined by matters of form such as, for example, who is shown in the proceedings as the applicant and the respondent.  The Court will look to the substance of the matter rather than the form: Thunderdome Race Timing and Scoring Pty Limited v Dorian Industries Pty Limited (1992) 36 FCR 297.  It is for that reason the applicant submitted that having regard to the threats that had been made against it before it instituted the proceedings, it should be treated as the real respondent in the proceedings and RFC Nominees Pty Limited and Mr Karounos the real applicants.

10                  In my view this is not a case where it really is appropriate to say that the true substance of the matter is a proceeding brought by RFC Nominees Pty Limited or Mr Karounos even if threats were made, as was suggested from the bar table, by them alleging infringement by Unilever.  The fact is that Unilever chose to bring proceedings, not merely seeking a declaration that it did not infringe, for that declaration was really incidental to the proceedings it brought being proceedings, in essence, to have expunged from the Register the mark.  It is true, though, that RFC Nominees Pty Limited has brought a cross-claim seeking infringement. 

11                  In bringing a cross-claim it is, of course, in a real sense a plaintiff in proceedings and it would be possible for me to order security to be given at least in respect of the cross-claim, even if it would be inappropriate, as I think it is, to order security against those parties in their capacity as respondents to the proceedings brought by Unilever.  However the present is a case where the question of registration and the question of infringement are intimately related.  The common issue of course is the validity, distinctiveness and use of the word “Real” as a mark.  It will be as necessary for these matters to be determined in the proceedings to expunge the mark from the Register as it is for the infringement proceedings which form the substance of the cross-claim.

12                  It is for these reasons that I would not exercise the discretion I have to order security be given in respect of the cross-claim.  There are, however, other matters which I would take into consideration in deciding the question.  I accept the submission of counsel for the applicant that the evidence makes it clear that if things stand as they are it might be unlikely that the applicant’s costs would be paid if it were to be successful in its application and successful, too, in its defence of the cross-claim.  However I do not accept the submission that the present is a case where security would be ordered because Mr Karounos and/or RFC Nominees Pty Limited is or are suing not for his or their own benefit, but for the benefit of some other person.

13                  First that rule, of course, would not overrule the ordinary approach the Court would take in declining to order security against a defendant.  But even if it did, the case is not one where Mr Karounos, to take him alone, is really bringing a proceeding for the benefit of someone else.  First, as far as I understand it, he is not a cross-claimant at all and so is not bringing any proceedings.  But even if he is treated as effectively doing so by virtue of being a defendant, he would be obliged to defend the registration status of the mark both because of the transaction of mortgage he entered into with Sabre and the transaction of assignment that he has entered into with Real Corporation. 

14                  It can, I think, readily be inferred from the evidence as I have summarised it that in assigning the marks to a third party as part of finance arrangements, Mr Karounos would be taken to have warranted title to the mark, just as it can be assumed that no third party would be prepared to lend on the mark in circumstances where the mark would be invalid.  Put in another way, there is a real possibility that Mr Karounos has an interest in the proceedings which goes beyond his being but a mere trustee.  The situation of RFC Nominees is perhaps different in that in one sense it is difficult to see why it is a proper party to the proceedings at all.  However it is perhaps not necessary at the moment to consider its position until the outcome of the application that it be restored to the Register is known. 

15                  It was submitted on behalf of the respondents that to grant the application for security would in essence permit the applicants to take advantage of their misdoing under the Act which led, it is said, to the impecuniosity of the respondents and for that reason that no order should be made.  There are a number of problems with that submission.  The first is that there is no evidence before me that the action of the applicant has led to the impecuniosity anyway.  More significantly, because the applicant is a real applicant in these proceedings and not a formal applicant but in truth a defendant, the more serious consequence of granting security for costs would be to frustrate the ability of the respondents to defend themselves against the proceedings brought against them by the applicant.

16                  I would accordingly dismiss the motion so far as it sought security to be ordered against Mr Karounos.  Because the status of RFC Nominees Pty Limited is presently unclear, I would propose to stand the motion over in respect of that company until 6 September in case the applicant may wish to amend the motion to deal with the status of RFC Nominees Pty Limited in the light of what is then known about that company.  The motion dealt as well with two other matters, namely discovery and extension of time for serving defences.  The orders sought in respect of discovery are consented to and indeed it is obvious that it should have been unnecessary for the motion to have been brought seeking discovery. 

17                  It is for this reason that I would make no order as to costs on the motion itself.  I would make the orders sought in paragraph 4 concerning discovery and in paragraph 2 concerning the extension of time for filing and serving the defence of the second respondent.  As the first respondent is presently not in existence I make no orders at this stage concerning its filing a further amended defence. In the event that the company is restored to the list, it should of course ensure that it does so.  I have, as indicated, dealt with the matter so far as RFC Nominees Pty Limited is concerned on the basis of a proffered undertaking in the following terms to be given by the solicitor for Mr Karounos that:

1.         On or before 4.00 pm on July 28 he will make an application to the Australian Securities and Investment Commission to restore RFC Nominees Pty Limited ACN 067 545 117 to the Register and use his best endeavours to ensure that that application is successful and;

2.         He will keep the solicitors for the applicant advised of the progress of that application from time to time.

18                  The only remaining order I will make as foreshadowed is to stand the balance of the motion over until 6 September with liberty to apply on 48 hours notice.

Associate:

Dated:              26 July 2000