FEDERAL COURT OF AUSTRALIA

Health World Limited (ABN 73 010 636 165) v

Shin-Sun Australia Pty Limited (ACN 060 792 163)

[2006] FCA 647

PRACTICE AND PROCEDURE– issue estoppel – application for rectification under section 88 of Trade Marks Act 1995 (Cth) (“the Act”) – prior decision of Federal Court pursuant to s 56 of the Act dismissing opposition to trademark – whether issue estoppel arises – standard of proof in opposition proceedings – whether opposition proceedings are final or interlocutory

PRACTICE AND PROCEDURE– Order 29 Rule 2 Federal Court Rules – order for preliminary questions to be determined separately from and prior to other issues in proceedings – difficulties with making order for preliminary questions - whether just and convenient

Trade Marks Act 1995 (Cth) – ss 42, 56, 60 and 88

Federal Court Rules - Order 29 Rule 2

Blair v Curran (1939) 62 CLR 464 cited

Carr v Finance Corporation of Australia (1980) 147 CLR 246 cited

Clinique Laboratories Inc v Luxury Skin Care Brands Pty Limited (2003) 61 IPR 130 considered

Computer Edge Pty Limited v Apple Computer Inc (1984) 54 ALR 767 cited

Cowa Company Limited v NV Organon (2005) 223 ALR 27 referred to

Health World Limited v Shin-Sun Australia Pty Limited [2005] FCA 5 considered

Imperial Chemical Industries PLC v EI Dupont De Nemours & Co [2002] AIPC 91-818 referred to

Kuligowski v Metrobus [2004] HCA 34 cited

Lomas v Winston Shire Council [2003] AIRC 91-839 followed

Reading Australia Pty Limited v Australian Mutual Provident Society [1999] FCA 718 referred to

Torpedoes Sportswear Pty Limited v Thorpedo Enterprises Pty Limited (2003) 132 FCR 326 referred to

Woolworths Limited v BP plc [2006] FCAFC 52 considered

HEALTH WORLD LIMITED (ABN 73 010 636 165) v shin-sun australia pty limited (ACN 060 792 163) and theresa shin

NSD 226 of 2006

JACOBSON J

31 MAY 2006

SYDNEY

THE COURT ORDERS THAT:

1.         The preliminary questions in these proceedings, as identified in the orders of the court of 9 May 2006, be answered in the negative.

2.         The respondents pay the costs of the hearing on the preliminary questions.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     On 9 May 2006, I ordered, pursuant to Order 29 rule 2 of the Federal Court Rules, that two preliminary questions which arise in these proceedings be determined prior to, and separately from, all other issues in the proceedings.

2                     The effect of the preliminary questions is to ask whether the applicant is estopped from alleging that the respondent’s trade mark “Healthplus” (“the respondent’s mark”) is substantially identical or deceptively similar to the applicant’s trade mark “Inner Health Plus” (“the Inner Health Plus Mark”).

3                     The respondents contend that the estoppel arises from a decision of Cooper J in Health World Limited v Shin-Sun Australia Pty Limited [2005] FCA 5 (“the decision”) which was handed down on 11 January 2005.

4                     The decision was an appeal under s 56 of the Trade Marks Act 1995(Cth) (“the Act”) from a decision of the Registrar of Trade Marks dismissing the applicant’s opposition to the respondent’s mark.  The applicant and the first respondent were parties to the decision.  Cooper J dismissed the appeal.

5                     In the proceedings which were the subject of the decision, the applicant relied upon the grounds of opposition stated in ss 42(b) and 60 of the Act.  Those grounds raised the issue of whether the respondent’s mark was substantially identical, or deceptively similar to the Inner Health Plus mark.

6                     Cooper J found that the respondent’s mark was not substantially identical, or deceptively similar to the Inner Health Plus Mark.

7                     In the present proceedings, the applicant seeks, inter alia, an order under s 88 of the Act rectifying the Register of Trade Marks by cancelling the respondent’s mark.  Section 88(2)(a) of the Act provides that one of the grounds on which such an application may be made is “any of the grounds on which the registration of the trade mark could have been opposed”.

8                     The applicant relies in support of its application for cancellation upon, inter alia, ss 42 and 60 of the Act.  It asserts that the respondent’s mark is substantially identical or is deceptively similar to, the Inner Health Plus Mark. 

9                     The respondent contends that the applicant is estopped, by reason of the decision, from making this assertion or allegation in reliance on ss 42 and 60 in these proceedings.

10                  The applicant seeks to meet this contention by pointing to the structure of the Act which provides in Division 2 of Part 8 for rectification proceedings on grounds which include grounds on which the registration of the mark could have been opposed.  The applicant also points to the observations of a Full Court in Lomas v Winston Shire Council [2003] AIRC 91-839 (“Lomas”) at [17] – [19].

11                  In Lomas it was not necessary for the Court to consider the nature of opposition proceedings or the standard of proof to be applied.  However, the Court, at [18], described such proceedings as summary in nature.

12                  The Full Court in Lomas went on to say at [18]:-

“An unsuccessful opponent would always have the opportunity to bring an expungement proceeding if the opposition proceeding fails.  In an expungement proceeding, the validity of a trade mark can be fully explored.”

13                  Lomas was criticised by Gyles J in Clinique Laboratories Inc v Luxury Skin Care Brands Pty Limited (2003) 61 IPR 130 (“Clinique”)  at [10] – [13].  His Honour pointed out at [13] that the consequence of the approach stated in Lomas is that a party can oppose registration and, even if unsuccessful on an appeal under s 56, can then bring expungement proceedings on precisely the same ground.

14                  The respondent submitted that it was unnecessary for me to resolve the dilemma posed by the remarks of Gyles J in Clinique.  Counsel for the respondent, in support of this submission, relied upon an express finding made by Cooper J at [6] of the decision.

15                  There, Cooper J found that the applicant failed to make out its objection on the balance of probabilities.  I will deal later in my judgment with the significance of this finding.

The Preliminary Questions

16                  The preliminary questions are as follows:-

“1.       Is the applicant estopped in these proceedings by the decision of Cooper J delivered in Health World Limited v Shin-Sun Australia Pty Limited [2005] FCA 5 delivered 11 January 2005 (the ‘Decision’) from alleging that the trade mark ‘HEALTHPLUS’, the subject of Australian trade mark number 874755 (the ‘Respondents’ Mark’), is substantially identical with, or deceptively similar to, the trade mark ‘INNER HEALTH PLUS’ in relation to which the pro-biotic products ‘Inner Health Plus’ and ‘Inner Health Plus Dairy Free’ manufactured by the applicant were marketed, sold and offered for sale in the period March 2000 to 7 May 2001.

2.         Is the applicant estopped in these proceedings by the Decision from seeking an order pursuant to s88(2)(a) of the Trade Marks Act 1995 (‘TM Act’) that the Register of Trade Marks be rectified by the cancellation or removal of the Respondents’ Mark (Australia trade mark 874755) relying on any of the grounds comprised in:

(i)         s41 of the TM Act, as pleaded in paragraphs 13 and 14 of the statement of claim filed in these proceedings (‘Claim’);

(ii)        s42 of the TM Act, as pleaded in paragraphs 15 and 16 of the Claim;\

(iii)     s43 of the TM Act, as pleaded in paragraphs 17 and 18 of the Claim;

(iv)     of the TM Act, as pleaded in paragraphs 19 and 20 of the Claim;

(v)       s60 of the TM Act, as pleaded in paragraphs 21 to 24 of the Claim.”

Whether it was “just and convenient” for the Order under O 29 r 2 to be made

17                  The order for the preliminary questions was made by consent.  Nevertheless, before making the orders, I raised with the parties my concern about the utility of the order in the present case.

18                  Notwithstanding my doubts, I was persuaded by the submissions of the parties that the factors to which Branson J pointed in Reading Australia Pty Limited v Australian Mutual Provident Society [1999] FCA 718, favoured the making of an order.

19                  However, in light of an issue which emerged in the arguments of counsel on the hearing of the preliminary questions, I have serious doubts about whether the order should have been made.  I appreciate that the issue which emerged was not apparent when the orders were made and no criticism is directed at counsel or their instructing solicitors.

20                  It is simply an example of the problems which are sometimes thrown up by the desire to shorten proceedings through the mechanism of an order under O 29 r 2.

21                  Here the difficulty is not merely the existence of the debate between the Lomas and Clinique views.  The difficulty arises from a recent decision of a Full Court in Woolworths Limited v BP plc [2006] FCAFC 52 (“Woolworths v BP”).

22                  In Woolworths v BP, Sundberg and Bennett JJ (Black CJ dissenting) considered that the question of the standard of proof to be applied by a single judge in considering an appeal under s 56 of the Act is an open question.  Their Honours said at [84] that it was appropriate for this question to be considered by a Full Court and granted leave to appeal.

23                  The standard of proof to be applied in an appeal against an unsuccessful opposition is central to the question of whether an estoppel arises in proceedings such as the present one.  It goes to the nature of the opposition proceeding, the structure of the Act and the question of whether the decision on the appeal is final or interlocutory.

24                  Thus it would appear that a central plank on which the estoppel question turns will be determined in the not too distant future, by a Full Court.  That determination will of course be binding upon me.

25                  Nevertheless, I do not intend to await the outcome of the decision of a Full Court. 

The reasons for judgment of Cooper J

26                  His Honour was of the view that the test to be applied in considering an appeal under s 56 of the Act is whether the mark should clearly not be registered; see at [4] – [6].

27             In coming to that view his Honour referred to Lomas and to the decision of Bennett J in Torpedoes Sportswear Pty Limited v Thorpedo Enterprises Pty Limited (2003) 132 FCR 326  (“Torpedoes”) in which her Honour applied the “should clearly not be registered” test.  Cooper J also referred to the remarks of Gyles J in Clinique at [12] – [13]that the question is treated as open. 

28                  He His Honour then said at [6]:-

“I agree with Bennett J’s analysis and reasoning in determining the applicable test.  Having said that I am satisfied for the reasons which appear below that the applicant does not make out its grounds of objection on the balance of probabilities.  Accordingly, it has not been necessary to apply the higher standard that a ground of objection is clearly or undoubtedly correct.”

29                  Cooper J went on to find at [40] – [41] that the respondent’s mark was not substantially identical or deceptively similar to the Inner Health Plus Mark at the priority date.

30                  Thus, his Honour rejected the grounds of opposition under ss 42(b) and 60 of the Act.

Discussion

31                  For an issue estoppel to arise, (1) the same question of fact or law must necessarily have been decided;  (2) by a judicial decision that was final; and (3) the parties to the earlier judicial decision or their privies must be the same persons as the parties in which the estoppel is raised; see Kuligowski v Metrobus [2004] HCA 34 (“Kuligowski”) at [21]; Blair v Curran (1939) 62 CLR 464 (“Blair v Curran”) at 531 – 532.

32                  There was no dispute about satisfaction of the third requirement.  The dispute between the parties was as to the first and second requirements.

33                  The question of whether an issue estoppel arises in the present case flows as a matter of logical inference from the debate in the authorities about the standard of proof which applies in an appeal from a Registrar under s 56 of the Act.

34                  In Clinique, Gyles J recognised that it is a consequence of the reasoning in Lomas and Torpedoes that a party can oppose the registration of a mark and, even if unsuccessful on appeal, can then bring expungement or revocation proceedings based on the same ground as was unsuccessfully relied on in the opposition proceedings.

35                  Indeed his Honour specifically pointed out that it is difficult to see how an estoppel can prevent this consequence from occurring if opposition is a summary proceeding decided by reference to a special high onus.

36                  Lomas and Torpedoes were followed by Lander J in Cowa Company Limited v NV Organon (2005) 223 ALR 27 although his Honour had reservations about the test to be applied; see [123] – [141].  Nevertheless, he considered that he was bound to follow the decisions that had applied the test stated in Lomas.

37                  The debate as to the appropriate test is but a reflection of a wider debate as to the nature of opposition proceedings.  This is revealed in the description in Lomas at [18] of such proceedings as “quasi summary”.

38                  This debate turns upon the nature of the statutory scheme revealed in Divisions 1 and 2 of Part 4, Divisions 1 and 2 of Part 5 and Divisions 1 and 2 of Part 8 of the Act; see also ss 195 and 197 of the Act

39                  Whether or not a decision in opposition proceedings can give rise to an issue estoppel must depend upon the proper construction of the statutory language and the necessary implications which flow from it; Kuligowski at [25], [36] and [37].

40                  Two Full Courts have stated in plain terms that if opposition proceedings fail, the validity of the trade mark can then be fully explored in revocation proceedings; see Lomas at [18] – [19] and Woolworths v BP at [55].

41                  The same approach has been applied in patent proceedings; see Imperial Chemical Industries PLC v EI Dupont De Nemours & Co [2002] AIPC 91-818 at [6] – [7].

42                  In trade mark proceedings this approach seems to me to follow from the scheme of the Act and in particular from ss 88(1) and (2).   Those subsections grant to an aggrieved person the right to seek rectification of the Register on “any grounds on which the registration of the trade mark could have been opposed under Division 2 of Part 5”.

43                  What follows from this, and from the observations in Lomas is that the decision on an appeal under s 56 does not necessarily decide the same issue and it is not a final decision.

44                  Thus, in the present case, it would follow that the first two requirements for an issue estoppel have not been satisfied.

45                  In my view, while recognising the force of Gyles J’s remarks, it seems to me that I should follow the observations of the Full Court in Lomas.  It is true that those observations were dicta, but they were clearly considered observationswhich I should follow, at least as a matter of judicial comity.

46                  It is true as Ms Baird, for the respondent, forcefully submitted, that Cooper J’s reasons for the decision did not depend upon whether the higher test of “should clearly not be registered” applies.  Instead, his Honour was satisfied that the applicant failed on the balance of probabilities.

47                  It is also true that this finding necessarily established the legal foundation or justification for the conclusion which his Honour reached; it was legally indispensable to the conclusion; see Blair v Curran at 531 – 532.

48                  However, the effect of what was said in Lomas is that under the statutory scheme which relates to opposition proceedings, the decision cannot be said to be final.  Because of the nature of opposition proceedings, a decision in an appeal under s 56 of the Act cannot, as a matter of law, finally determine the rights of the parties; see Carr v Finance Corporation of Australia (1980) 147 CLR 246 at 248, 253-254; Computer Edge Pty Limited v Apple Computer Inc (1984) 54 ALR 767 at 767 – 768.

Other grounds of rectification

49                  The respondent conceded that no issue estoppel arises in relation to the grounds of rectification which rely on ss 41 and 43 of the Act.

Conclusion

50                  It follows that I will answer “No” to both the preliminary questions.  The respondent must pay the costs of the O 29 r 2 hearing.

51                  Nevertheless, whilst of course expressing no concluded view, the considerations pointed to by Gyles J in Clinique may well suggest that if the applicant fails at the final hearing on the grounds under ss 42 and 60, it would be appropriate for me to order that the costs of the final hearing, at least in relation to those issues, be paid by the applicant on an indemnity basis.

Associate:

Dated:              31 May 2006