FEDERAL COURT OF AUSTRALIA

Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International BV [2010] FCA 1293

THE COURT ORDERS THAT:

1.                  The following questions be determined as separate questions before the trial in the proceedings (defined terms having the same meaning as in the Further Amended  Cross-Claim, unless otherwise indicated):

(a)                Is Spirits International precluded, by reason of the judgments particularised in paragraphs 14(d)(i) and (ii) of the Further Amended Cross-Claim (‘the Russian Judgments’) from asserting or relying upon any matters relating to the alleged succession of VAO-SPI to Sojuzplodoimport in or about January 1992, namely, any of the matters pleaded in paragraphs 4(h), 5(c)(i), (iii) and (vi), 13(b), 14, 23, 24, 34 and 35 of the First Cross-Respondent’s Defence to the further Amended Cross-Claim (‘the Spirits International Defence’)?

(b)               Is Spirits International precluded, by reason of the judgment of the European Court of Human Rights dated 7 June 2007 in the case of OAO Plodovaya Kompaniya v Russia, Application No. 1641/02, from asserting or relying upon any matters relating to the correctness, validity or finality of the Russian Judgments, namely, the matters pleaded in paragraphs 5(c)(iii), (vi), (viii), (ix) and (x) of the Spirits International Defence?

(c)                Is Spirits International precluded, by reason of the Russian Judgments, from asserting or relying upon any matters relating to any alleged representation made by the Government of the Russian Federation as to the succession of VAO-SPI to Sojuzplodoimport, namely, the matters pleaded in paragraph 66, and paragraph 68 to the extent particularised by the second particular to that paragraph, of the Spirits International Defence?

(d)               Is Spirits International precluded, by reason of the Russian Judgments, from asserting or relying upon any matters relating to any alleged delay by the Government of the Russian Federation in challenging the validity of the succession of VAO-SPI to Sojuzplodoimport, namely, the matters pleaded in paragraph 67, and 68 to the extent particularised by the first particular to that paragraph, of the Spirits International Defence?

2.                  Costs of the motion be costs in the cause.

 

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                                             This is a motion on notice filed 21 February 2008, brought under O 29 r 2 of the Federal Court Rules (Cth) (‘the Rules’) for determination of four separate questions before trial in the proceedings.  I heard the motion on 9 August 2010 and at the time of the hearing gave the cross-claimants leave to file and rely on an amended notice of motion making a very minor amendment to the original motion.

2                                             The reason for the length of time between the date of filing the notice of motion and the hearing of the amended motion was because for a period of about two years following the filing, the proceedings were adjourned by orders of the Court, consequent upon a world-wide arrangement between the cross-claimants and the cross-respondent, while settlement negotiations were pursued.  Those negotiations were not successful, and the proceedings have been reactivated.  The cross-claim forms the only remaining part of the proceedings following the settlement of the claims the subject of the cross-respondent’s statement of claim against Diageo Australia Limited.

Background

3                                             On 12 September 2005 the first cross-claimant (‘FKP’) and the second cross-claimant (‘FGUP’) filed a further amended cross-claim (‘the FACC’) pursuant to orders I made on 18 August 2005.

4                                             Both FKP and FGUP are economic entities of the Russian Federation, organised and existing under its laws.

5                                             The cross-respondent (‘Spirits’) is a company registered in the Netherlands although it was incorporated in the Netherlands Antilles.

6                                             Spirits is the registered owner of various Australian trade marks referred to in the FACC as ‘the House Mark’, ‘the Stolichnaya Label Mark’ and ‘the Moskovskaya Label Mark’, all pleaded in para 15 of the FACC; ‘the Stoli Word Mark’ and ‘the Stolichnaya Word Mark’, both pleaded in para 28 of the FACC; ‘the Ohranj Label Mark’ pleaded in para 46 of the FACC; and claimed rights in relation to the Australian trade mark ‘the Blue Salyt Mark’ pleaded in para 50 of the FACC, although this mark has now been cancelled, (collectively referred to as ‘the marks’).

The Pleadings

7                                             In the FACC, FKP and FGUP relevantly plead that:

Para 4(g): From 1966 to date, the entity Sojuzplodoimport (sometimes referred to as ‘VVO Sojuzplodoimport’ or ‘VVO-SPI’) has been organised under the laws of the former Union of Soviet Socialist Republics (USSR) and subsequently the Russian Federation and from 2001 to date has been known as FGUP;

Para 15: Certain of the marks were originally registered in the name of Sojuzplodoimport – the House Mark with effect from 12 June 1969; the Stolichnaya Label Mark with effect from 16 July 1976; and the Moskovskaya Label Mark with effect from 16 July 1976;

Paras 12, 13 and 14: On 20 January 1992, Foreign Economic Closed Joint Stock Company Sojuzplodoimport (‘VAO-SPI’) was formed as a private corporate entity under the laws of the Russian Federation.  The Charter of VAO-SPI contained a provision to the effect that VAO-SPI was the legal successor to Sojuzplodoimport.  In fact:

(a)                VAO-SPI was formed as a new entity and not by transformation of Sojuzplodoimport;

(b)               the provision in the Charter of VAO-SPI to the effect that it was the legal successor to Sojuzplodoimport was invalid according to Russian law;

(c)                VAO-SPI was not the legal successor to Sojuzplodoimport;

(d)               Sojuzplodoimport continued to exist as a separate legal entity following the formation of VAO-SPI.

By way of particulars, reliance for each of (a), (b), (c) and (d) was placed on:

(1)               Ruling of the Court of Arbitration of Moscow dated 21 December 2000 (‘the 2000 Judgment’);

(2)               decision of the Presidium of the Supreme Court of Arbitration of the Russian Federation of 16 October 2001 (‘the 2001 Judgment’) (the 2000 Judgment and the 2001 Judgment being hereinafter collectively referred to as ‘the Russian Judgments’).

Para 22: On 28 September 1992, in reliance upon a deed of assignment pursuant to which VAO-SPI purported to assign to Caldbeck Pty Ltd (‘Caldbeck’) the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark, Caldbeck applied to the Registrar of Trade Marks to be recorded as the registered owner of those marks.

Para 23: In connection with the application for recordal pleaded in para 22, either or both of VAO-SPI and Caldbeck made representations to the following effect:

(a)                that VAO-SPI was Sojuzplodoimport;

(b)               alternatively to sub-para (a), that VAO-SPI was the legal successor to Sojuzplodoimport;

(c)                that VAO-SPI was the registered owner of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark;

(d)               that Caldbeck was entitled to be recorded as the registered owner of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark by reason of the VAO-Caldbeck Assignment.

Para 24: In fact:

(a)                VAO-SPI was not Sojuzplodoimport;

(b)               VAO-SPI was not the legal successor to Sojuzplodoimport;

(c)                VAO-SPI was not the registered owner of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark;

(d)               Caldbeck was not entitled to be recorded as the registered owner of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark by reason of the VAO-Caldbeck Assignment.

The particulars in paras 13 and 14 were repeated.

Para 25: On 23 December 1992, the Registrar of Trade Marks recorded Caldbeck as the registered owner of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark.

Para 26: The recordal of Caldbeck as the registered owner of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark was made as a result of one or more of the representations pleaded in para 23.

Para 27: Further or alternatively, one or more of the representation pleaded in para 23 was material to the recordal of Caldbeck as the registered owner of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark.

Para 28: On 12 November 1992, Caldbeck applied for registration of the following marks in Australia:

(a)                the Stoli Word Mark;

(b)               the Stolichnaya Word Mark.

Para 30: On 1 March 1993, Caldbeck changed its name to Inchcape Liquor Marketing Pty Ltd (‘Inchcape’).

Para 31: On 4 March 1994, the Stoli Word Mark and the Stolichnaya Word Mark were registered in the name of Inchcape as registered owner with effect from 12 November 1992.

Para 32: On 4 August 1995, VAO-SPI and Inchcape commenced proceedings against the Registrar of Trade Marks in this Court pursuant to s 22 of the Trade Marks Act 1955 (Cth) (‘the 1995 Proceedings’).

Para 33: In the 1995 Proceedings, VAO-SPI and Inchcape sought orders to the effect that:

(a)                the registration of the assignments of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark be declared void;

(b)               the registration of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark be recorded as being owned by VAO-SPI as from 21 January 1992.

Para 34: In connection with the 1995 Proceedings, either or both of VAO-SPI and Inchcape made representations to the following effect:

(a)                that Sojuzplodoimport had ceased to exist with effect from 20 to 21 January 1992;

(b)               that VAO-SPI was the legal successor to Sojuzplodoimport;

(c)                that the rights and obligations of Sojuzplodoimport had been transferred to VAO-SPI by operation of Russian law with effect from 20 or 21 January 1992.

Para 35: In fact:

(a)                Sojuzplodoimport had not ceased to exist with effect from 20 or 21 January 1992;

(b)               VAO-SPI was not the legal successor to Sojuzplodoimport;

(c)                the rights and obligations  of Sojuzplodoimport had not been transferred to VAO-SPI by operation of Russian law with effect from 20 or 21 January 1992.

The particulars in paras [13] and [14] were repeated.

Para 36: On 18 September 1995, the Court made orders in the 1995 Proceedings to the effect that the Register be rectified by removing Inchcape as the registered owner of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark and recording VAO-SPI as the registered owner of those marks (‘the 1995 Orders’).

Para 37: On 18 October 1995, the Registrar of Trade Marks recorded VAO-SPI as the registered owner of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark in accordance with the 1995 Orders.

Para 38: The 1995 Orders and the recordal of VAO-SPI as the registered owner of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark were made as a result of one or more of the representations pleaded in para 34.

Para 39: Further or alternatively, one or more of the representations pleaded in para 34 was material to the making of the 1995 Orders and the recordal of VAO-SPI as the registered owner of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark.

Para 40:  VAO-SPI transferred the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark to Inchcape in November 1995.

Paras 41 – 48:  In 1995 VAO-SPI applied for registration of the Ohranj Label Mark and Ohranj Word Mark.  Those marks were ultimately registered in the name of Diageo in 1998.

Para 49:  In 1996 Inchcape transferred the House Mark, the Stolichnaya Label Mark, the Moskovskaya Label Mark, the Stoli Word Mark and the Stolichnaya Word Mark to Diageo.

Para 49A:  In 2005 Diageo transferred all the marks, other than the Blue Salyt Mark, to Spirits.

8                                             Thus, the FACC alleges that the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark ought to have remained registered in FGUP’s name, as VAO-SPI was not its legal successor.  Furthermore, the remaining marks, being derivatives of the Stolichnaya Label Mark, were and are wrongfully recorded in the names of the various registered owners form time to time.

9                                             In its defence, Spirits relevantly pleads that:

Para 4:             That Sojuzplodoimport was created as a legal entity in 1966 but was not known as FGUP from 2001 to date.

Para 4(h):        (i)         On 20 September 1990, the work collective of Sojuzplodoimport and the State Commissioner of the USSR Council of Ministers on Food and Supply passed a joint resolution to effect the transformation of Sojuzplodoimport into an independent foreign economic joint-stock company (VAO), to be known as ‘VAO Sojuzplodoimport’.

(ii)                On or around 19 December 1990, the founders of the proposed VAO Sojuzplodoimport:

(A)       entered into a founders’ agreement to set up VAO Sojuzplodoimport; and

(B)       pursuant to that contract, authorised the management of Sojuzplodoimport to take all necessary steps to effect the legal transformation of Sojuzplodoimport into VAO Sojuzplodoimport.

(iii)       On 5 September 1991, at a constituent conference on the creation of VAO Sojuzplodoimport, the founders and shareholders of the proposed VAO Sojuzplodoimport:

(A)       passed a unanimous resolution to found VAO Sojuzplodoimport;

(B)       passed a unanimous resolution to set the authorised share capital of the proposed VAO Sojuzplodoimport; and

(C)       approved the adoption of Articles of Association of the proposed VAO Sojuzplodoimport.

(iv)              On or around 4 October 1991, USSR Ministry of Foreign Economic Relations approved the Articles of Association of the proposed VAO Sojuzplodoimport.

(v)                On or around 25 December 1991, the Chairman of the proposed VAO Sojuzplodoimport, acting on behalf of the founders and shareholders, filed an application for registration of VAO Sojuzplodoimport with the Moscow Registration Chamber.

(vi)              On 20 January 1992, an entity with the full trading name of Foreign Economic Joint Stock Company Sojuzplodoimport and a short trading name of ‘VAO Sojuzplodoimport’ (‘VAO-SPI’) was incorporated and registered as the legal successor to Sojuzplodoimport.

(vii)             With effect from 20 January 1992, all assets and liabilities of Sojuzplodoimport vested in VAO-SPI by operation of law;

(viii)           With effect from 20 January 1992, Sojuzplodoimport ceased to exist as a legal entity; and

(ix)              FGUP is not Sojuzplodoimport and is not the legal successor to Sojuzplodoimport.

Para 5(c):        (i)         On or around 19 February 2001, the Appellate Board of the Commercial Court of Moscow issued a judgment favourable to VAO-SPI (now known as OAO-Plodovaya Kompaniya) vacating a prior court decision that incorrectly decided that VAO-SPI was not the legal successor to VVO;

(ii)                the appellate court’s decision of 19 February 2001 was not appealed within the time provided for lodging an appeal;

(iii)               as a consequence, under Russian law, the decision of 19 February 2001 was a final and binding decision;

(iv)              the Deputy General Prosecutor of Russia later brought the case for review to the Supreme Court of Arbitration of the Russian Federation (the highest commercial court of the Russian Federation) ‘by way of supervision’ (or ‘Protest’);

(v)                on or about 16 October 2001, the Presidium of the Supreme Court of Arbitration of the Russian Federation handed down the 2001 Judgment unfavourable to VAO-SPI (now known as OAO-Plodovaya Kompaniya);

(vi)              the 2001 Judgment was taken at the request of the Deputy General Prosecutor of Russia based on the ground of the procedure of ‘Protest’ to have the 19 February 2001 judgment set aside, even though that judgment was final;

(vii)             on or around 26 October 2001, the Russian trade marks STOLICHNAYA, MOSKOVSKAYA and RUSSKAYA were registered by the Russian Federation in the name of the Ministry of Agriculture of the Russia Federation pursuant to the 2001 Judgment;

(viii)           on or around 2 January 2002, VAO-SPI (now known as OAO-Plodovaya Kompaniya) lodged an application with the European Court of Human Rights claiming that the 2001 Judgment was made in violation of the European Convention on Human Rights (‘ECHR Application’);

(ix)              the ECHR Application is pending; and

(x)                the method of review referred to in sub-paragraph (iv) above has been held to be in violation of due-process requirements of Article 6 paragraph 1 of the European Convention on Human Rights.

Para 13(b):      In part answer to para 13 of the FACC, that VAO-SPI was in fact the legal successor to Sojuzplodoimport.

Para 14:           Denies para 14 of the FACC; and says in further answer to that paragraph:

(i)                  that the ruling and decision of the Courts referred to in the particulars to this paragraph do not have any force in Australia;

(ii)                repeats the matters pleaded in sub-paragraph 5(c); and

(iii)               refers to and relies upon the decision of this Court in proceedings VG701 of 1995.

Para 23:          

(a)        VAO-SPI was the legal successor to Sojuzplodoimport;

(b)        Prior to the execution of the First Caldbeck Agreement, or alternatively, the Second Caldbeck Agreement, VAO-SPI was entitled to be recorded as the registered proprietor, or alternatively was the registered proprietor, of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark by reason of VAO-SPI being the legal successor to Sojuzplodoimport;

(c)        Caldbeck was entitled to be recorded as the registered proprietor of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark by reason of the First Caldbeck Agreement, or alternatively the Second Caldbeck Agreement; and

(d)        Otherwise does not admit this paragraph.

Para 24:          Denies para 24 of the FACC.

Para 34:

(a)        In the 1995 Proceedings VAO-SPI filed and read evidence to the effect that:

(i)                  Sojuzplodoimport had ceased to exist on or around 20 January 1992;

(ii)                VAO-SPI was the legal successor to Sojuzplodoimport; and

(iii)               the rights and obligations of Sojuzplodoimport had been transferred to VAO-SPI on or around 20 January 1992, and

(b)        The evidence filed and read by VAO-SPI in the 1995 Proceedings was true and correct in all material respects and particulars; and

(c)        Otherwise does not admit para 34 of the FACC.

Para 60:           In answer to the whole of the FACC that:

(a)                the House Mark, the Stolichnaya Label Mark, the Stoli Word Mark and the Stolichnaya Word Mark were each registered in Part A of the Trade Marks Register under the Trade Marks Act;

(b)               the House Mark, the Stolichnaya Label Mark, the Stoli Word Mark and the Stolichnaya Word Mark have each been registered in Australia for a period exceeding seven years and have not at any time ceased to be registered;

(c)                by reason of the matters pleaded in sub-paras (a) and (b) above, the registrations of the House Mark, the Stolichnaya Label Mark, the Stoli Word Mark and the Stolichnaya Word Mark are taken to be valid in all respects pursuant to s 234 of the Trade Marks Act; and

(d)               in the premises, FKS and FGUP are not entitled to the relief in para 4 of their prayer for relief, insofar as that relief is sought in respect of the House Mark, the Stolichnaya Label, the Stoli Word Mark and the Stolichnaya Word Mark.

Para 61:          In further answer to the whole of the FACC that:

(a)                the claims made in the cross-claim are made on behalf of the Government of the Russian Federation;

(b)               the effect of the relief sought by the cross-claimants in their prayer for relief would be the confiscation or expropriation, for the benefit of the Government of the Russian Federation, of personal property located in Australia;

(c)                further, or in the alternative to sub-para (b), the effect of the relief sought by the cross-claimants in their prayer for relief would be to enforce the interests of the Government of the Russian Federation, which interests arise from the exercise of the governmental powers of that government; and

(d)               by reason of the matters pleaded in sub-paras (a), (b) and (c) above, that the claims made in the FACC are not justiciable or enforceable by an Australian Court.

Para 62:          In further answer to the whole of the FACC that:

(a)                The claims made in the FACC concern the validity of the transformation of Sojuzplodoimport to VAO-SPI in or around January 1992;

(b)               in the alternative to sub-paragraph (a), the claims made in the FACC concern the validity of the succession of assets from Sojuzplodoimport to VAO-SPI, including the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark, in or around January 1992; and

(c)                the claims made by the cross-claimants are statute-barred and not maintainable by reason of section 181 of the Russian Federation Civil Code 1994.

Para 66:          In further answer to the whole of the FACC, that:

(a)        During the period January 1992 to 2000, the Government of the Russian Federation represented that:

(i)         Sojuzplodoimport was transformed into VAO-SPI in accordance with applicable law;

(ii)        VAO-SPI was the legal successor to Sojuzplodoimport; and

(iii)       all assets and liabilities of Sojuzplodoimport had vested in VAO-SPI by operation of law with effect from 20 January 1992.

(b)        acting in reliance on the representations pleaded in sub-para (a) above and induced by those representations, VAO-SPI, Closed Joint Stock Company Sojuzplodoimport (‘ZAO’) and Spirits assumed that VAO-SPI acquired ownership of the House Mark, the Stolichnaya Label Mark and the Moskovskaya Label Mark with effect from 20 January 1992;

(c)        acting in reliance on the representations pleaded in sub-paragraph (a) above and induced by those representations, Spirits assumed that it acquired ownership of the Stolichnaya Label Mark, the Moskovskaya Label Mark, the Stoli Word Mark, the Stolichnaya Word Mark, the Ohranj Label Mark and the Ohranj Word Mark from ZAO in or around April 1999;

(d)        on the basis of the assumptions referred to in sub-paragraphs (b) and (c) above, VAO-SPI, ZAO and Spirits have used and registered the trade marks referred to in sub-paragraphs (a) and (b) above in Australia and throughout the world, or alternatively have authorised the use and registration of those trade marks in Australia and throughout the world;

(e)        the allegations made by the cross-claimants in paras 4(f), 4(h), 14, 24, 35, and 54-58 of the FACC are contrary to the representations pleaded in sub-paragraph (a) above;

(f)         the claims made by the cross-claimants in this proceeding are made on behalf of the Government of the Russian Federation;

(g)        by reason of the matters pleaded in sub-paragraphs (a) to (f) above, it is unconscionable for the Government of the Russian Federation, through the cross-claimants, to now assert, and the cross-claimants are estopped from asserting, that the cross-claimants, or either of them, have any right or interest in any of the trade marks referred to in the cross-claimant’s prayer for relief; and

(h)        in the premises, the cross-claimants are not entitled to any of the relief sought in their prayer for relief.

Para 67:           In further answer to the whole of the FACC, Spirits says that:

(a)        All of the claims made by the cross-claimants in the FACC relate to the validity of the transformation of Sojuzplodoimport into VAO-SPI on or around 20 January 1992;

(b)        since 1992, VAO-SPI has held itself out as the legal successor to Sojuzplodoimport with the full knowledge and, until 2000, acquiescence of the Government of the Russian Federation;

(c)        since 1992, VAO-SPI and its successors in title have held themselves out as the owners of all rights in the STOLICHNAYA and MOSKOVSKAYA trade marks throughout the world with the full knowledge and, until the dates specified in sub-paras (d) and (e) below, acquiescence of the Government of the Russian Federation.

(d)        the Government of the Russian Federation did not assert any right or interest in the STOLICHNAYA and MOSKOVSKAYA trade marks, or any claim regarding Spirits International’s ownership of those trade marks, until 2000;

(e)        the Government of the Russian Federation did not assert any right or interest in the House Mark, the Stolichnaya Label Mark, the Moskovskaya Label Mark, the Stolichnaya Word Mark, the Stoli Word Mark, the Ohranj Label Mark and the Ohranj Word Mark, or any claim regarding ownership of those Australian trade marks, until 2004;

(f)         the cross-claimants did not assert any right or interest in the House Mark, the Stolichnaya Label Mark, the Moskovskaya Label Mark, the Stolichnaya Word Mark, the Stoli Word Mark, the Ohranj Label Mark and the Ohranj Word Mark, or any claim regarding ownership of those Australian trade marks, until 2004;

(g)        the claims made by the cross-claimants in this proceeding are made on behalf of the Government of the Russian Federation;

(h)        by reason of the matters pleaded in sub-paras (a)-(e) above, the Government of the Russian Federation is guilty of laches;

(i)         by reason of the matters pleaded in sub-paras (a)-(g) above, FKP is guilty of laches;

(j)         by reason of the matters pleaded in sub-paras (a)-(g) above, FGUP is guilty of laches; and

(k)        by reason of the acquiescence and/or laches of the Government of the Russian Federation, or further or alternatively the cross-claimants (or either of them), the cross-claimants are not entitled to any of the relief sought in their prayer for relief.

Para 68:  In further answer to the whole of the FACC, that if (which is denied) either or both of the cross-claimants is an ‘aggrieved person’ within the meaning of s 88 of the Trade Marks Act and if (which is denied) any of the grounds specified in s 88 of the Trade Marks Act is made out by either or both of the cross-claimants, the Court should in its discretion refuse to grant the relief sought in the cross-claimants’ prayer for relief.

10                                          Subsequent to the filing of the Spirits defence, the ECHR dismissed the ECHR application by judgment dated 7 June 2007, OAO Plodovaya Kompaniya v Russia[2007] ECHR 460, (‘the ECHR Judgment’).  A referral of that decision to the Grand Chamber of the Court was rejected on or about 12 November 2007.  The ECHR Judgment decided that the supervisory review the subject of the 2001 Judgment did not contravene Arts 6, 13 and 14 of the Convention nor Art 1 of Protocol No 1 to the Convention.

The Russian Judgments

11                                          The background to and nature of the 2001 Judgment is conveniently set out in the ECHR Judgment as follows:

‘6.        In 1966 the Ministry of Foreign Trade of the USSR created a State Export and Import Agency “Soyuzplodoimport” …  Its assets included the trademarks to a number of brands of alcohol (such as Vodka Stolichnaya, Vodka Moskovskaya and their derivatives).

7.                  On 5 January 1990 the agency was reorganised into the State Foreign Trade Agency “Soyuzplodoimport” …

8.                  On 20 January 1992 the applicant company was set up in the form of a closed joint-stock company.  It was called the “Foreign Trade Stock Company ‘Soyuzplodoimport’” … and was registered with the relevant state agency, namely the Moscow Registration Chamber.  According to its memorandum of association, it was set up by several founders, including the State Foreign Trade Agency “Soyuzplodoimport”, which held 3,880 of its 17,000 shares.  The memorandum of association provided that the applicant company was a “successor” to the State Foreign Trade Agency “Soyuzplodoimport”.

9.                  In 1998 the applicant company converted into an open joint-stock company.

10.               On 24 December 1999 the general shareholders’ meeting of the applicant company adopted a new memorandum of association.  The company name was changed to OAO “Plodovaya Kompaniya” …  The new memorandum of association contained a declaration that the applicant company was the successor of the State Foreign Trade Agency “Soyuzplodoimport”.

11.               In the above period the applicant company notified the trademark registration authority that the trademarks of the State Foreign Trade Agency “Soyuzplodoimport” had changed ownership through succession and consequently obtained trademark certificates in its own name.  It subsequently used the trademarks as collateral in a number of commercial transactions with third parties.

12.               On 31 October 2000 the Deputy Prosecutor General challenged the applicant company’s new memorandum of association, particularly the declaration of succession, before the Commercial Court of Moscow.

13.               On 21 December 2000 the Commercial Court of Moscow declared the provision on succession null and void [the 2000 Judgment].  It held that the applicant company had had no legal grounds to claim succession to the State Foreign Trade Agency “Soyuzplodoimport”.  The applicant company had been set up as a new company and not converted from an existing one.  It held that a mere declaration by the applicant company in its founding memorandum of association was insufficient to enable it to become the successor of another company.  Likewise, it found that, although the applicant company had de facto acted as a successor before the trademark registration authorities and courts of arbitration, this was irrelevant to the establishment of corporate succession.

14.               On 19 February 2001 the Appellate Board of the Commercial Court of Moscow examined the applicant company’s appeal.  Without entering into the merits it quashed the first-instance judgment and terminated the proceedings on the ground that the prosecutor’s office did not have standing to bring proceedings.  This decision entered into force on the same day.  It was not appealed against either by a cassation appeal or by a separate appeal.

15.               On 18 April 2001 the Moscow Registration Chamber registered the change of name of the State Foreign Trade Agency “Soyuzplodoimport”.  Its new name was the Federal State Unitary Enterprise “Soyuzplodoimport” …

16.               On 13 June 2001 the Deputy Prosecutor General submitted a request for supervisory review of the decision of 19 February 2001.

17.               The applicant company was summoned to the hearing before the supervisory instance, but those summons were not served on it because it could not be found at its official address.  The representatives of the applicant company learned about the hearing, however, submitted written comments on the merits of the case and attended the hearing.

18.               On 16 October 2001 the Presidium of the Supreme Commercial Court of Russia examined the case in supervisory review proceedings.  The applicant company was represented by the company’s president, who made oral submissions before the Presidium.

19.               The Presidium quashed the decision of 19 February 2001 and reinstated the first-instance judgment of 21 December 2000 [the 2001 Judgment].  On the procedural point, it held that the prosecutor’s office was entitled by law to represent the State in proceedings before commercial courts where public or State interests were  involved.  It found that the proceedings at issue concerned State property, and that this provided sufficient grounds for the prosecutor to intervene.  As to the merits of the case, the Presidium upheld the finding that the applicant company was not entitled to claim succession to the State Foreign Trade Agency “Soyuzplodoimport” because there had been no decision on the latter’s conversion, and the applicant company itself had been created as a new entity and not as a result of any reorganisation of an existing legal person.  Accordingly, the provisions on succession made in its memorandums of association were null and void.  This decision entered into force on the same day and was not subject to further appeal.’

12                                          The 2001 Judgment contained the following passage relating to the question whether VAO-SPI was the legal successor to Sojuzplodoimport:

‘Article 4 of the Law of the RSFSR dated 03.07.91 “On Privatisation of State and Municipal Enterprises in the RSFSR” provided that a transformation of a state enterprise into an enterprise of any other organisational and legal form could only be carried out by decision of the State Property Committee of the RSFSR.  According to the case the State Property Committee of the RSFSR did not take a decision on a transformation of the state enterprise VVO “Soyuzplodoimport”.

According to the foundation documents of VAO “Soyuzplodoimport” it was established by several corporate founders (inclusive of the state enterprise VVO “Soyuzplodoimport’).

As VAO “Soyuzplodoimport” was established as a result of foundation but not transformation, right is the first instance court’s conclusion on invalidity of the provision of that company’s charter pursuant to which it is a legal successor of VVO “Soyuzplodoimport”.’

13                                          The Court concluded:

‘In accordance with Article 180 of the Civil Code of the Russian Federation that transaction is ineffective in relation to legal succession between VVO “Soyuzplodoimport” and VAO “Soyuzplodoimport”.

14                                          The following passage provided the court’s conclusion on the question whether the claim was time-barred:

‘So the claim for declaring invalid the charter provision on legal succession based on the agreement of 05.05.91 being ineffective in that respect could be filed with the Court within the time limit established by Article 181, Paragraph 1 of the Civil Code of the Russian Federation, ie within a 10 year limitation period starting from 20.01.92.

An action was brought by the Public Prosecutor’s Office in November 2000.

In such circumstances the defendant’s reference to the default of the limitation period must not be accepted …’

15                                          In its written submissions, Spirits submitted that, on its face, the 2001 Judgment at most purported to decide only two extremely narrow issues:

(1)               That part of Clause 2 of VAO-SPI’s Charter, which recorded that VAO-SPI is a legal successor of VVO-SPI, is invalid under Russian law;

(2)               the claim by the Public Prosecutor’s Office for the declaration of invalidity of the relevant part of Clause 2 of the Charter was not statute-barred under Russian statute of limitation laws.

As to (1) , it said:

‘It is not clear form the 2001 Judgment that it purported to affirmatively decide that VAO-SPI is not the legal successor of VVO-SPI; all that is clear is that judgment purported to decide that part of  clause 2 of VAO-SPI’s Charter was invalid.’

I cannot agree with this submission.  The basis for the order declaring that the provision in VAO-SPI’s charter was invalid was that VAO-SPI was not the legal successor of Sojuzplodoimport.  So much is apparent from the passage from the 2001 Judgment extracted at [12] above and the passage from [19] of the ECHR Judgment extracted at [11] above.

The Notice of Motion

16                                          The questions as formulated in the amended notice of motion in effect read:

(1)               Is Spirits precluded, by reason of the Russian Judgments, from asserting or relying upon any matters relating to the alleged succession of VAO-SPI to Sojuzplodoimport in or about January 1992, namely, any of the matters pleaded in paras 4(h), 5(c)(i), (iii) and (vi), 13(b), 14, 23, 24, 34 and 35 of its defence to the FACC (‘the Defence’)?

(2)               Is Spirits precluded, by reason of the judgment of the European Court of Human Rights dated 7 June 2007 in the case of  OAO Plodovaya Kompaniya v Russia, Application No. 1641/02, from asserting or relying upon any matters relating to the correctness, validity or finality of the Russian Judgments, namely the matters pleaded in paras 5(c)(iii), (vi), (viii), (ix) and (x) of the Defence?

(3)               Is Spirits precluded, by reason of the Russian Judgments, from asserting or relying upon any matters relating to any alleged representation made by the Government of the Russian Federation as to the succession of VAO-SPI to Sojuzplodoimport, namely, the matters pleaded in para 66, and para 68 to the extent particularised by the second particular to that paragraph, of the Defence?

(4)               Is Spirits precluded, by reason of the Russian Judgments, from asserting or relying upon any matters relating to any alleged delay by the Government  of the Russian Federation in challenging the validity of the succession of VAO-SPI to Sojuzplodoimport, namely, the matters pleaded in paras 62 and 67, and 68 to the extent particularised by the first particular to that paragraph, of the Defence?

17                                          The alternative order sought in [2] of the amended notice, that certain paragraphs of the Spirits defence be struck out, was not pressed on the hearing of the motion.

Applicable Principles for Ordering Questions for Separate Determination

18                                          The principles applicable to ordering questions for separate determination under O 29 r 2 of the Rules are well known.  In Olbers v Commonwealth (No 3) [2003] FCA 651 at [7], [8], French J said:

‘[7]      Authorities relevant to the application of the order were referred to, and applicable principles summarised, by Branson J in Reading Australia Pty Ltd v Australian Mutual Providence Society [1999] FCA 718.  Her Honour’s summary of the principles (omitting reference to the authorities) is as follows:

“(a)      the term ‘question’ in O 29 r 1 includes any question of fact or law in a proceeding.  The distinction in the rule between an ‘issue’ and a “question” is the distinction between that which, when resolved, will result in an adjudication in favour of one party or the other, being an ‘issue, and less decisive matters of dispute being ‘questions’;

(b)        a question can be the subject of an order for a separate decision under O 29 r 2 even though a decision on such a question will not determine any of the parties’ rights;

(c)        however, the judicial determination of a question under O 29 r 2 must involve a conclusive or final decision based on concrete and established or agreed facts for the purpose of quelling a controversy between the parties;

(d)        where the preliminary question is one of mixed fact and law, it is necessary that the question can be precisely formulated and that all of the facts that are on any fairly arguable view relevant to the determination of the question are ascertainable either as facts assumed to be correct for the purposes of the preliminary determination, or as agreed facts or as facts to be judicially determined;

(e)        care must be taken in utilising the procedure provided for in O 29 r 1 to avoid the determination of issues not ‘ripe’ for separate and preliminary determination.  An issue may not be ‘ripe’ for separate and preliminary determination in this sense where it is simply one of two or more alternative ways in which an applicant frames its case and determination of the issue would leave significant other issues unresolved;

(f)        factors which tend to support the making of an order under O 29 r 2 include that the separate determination of the question may –

(i)         contribute to the saving of time and cost by substantially narrowing the issues for trial, or even lead to disposal of the action; or

(ii)        contribute to the settlement of the litigation;

(g)        factors which tell against the making of an order under O 29 r 2 include that the separate determination of the question may –

(i)         give rise to significant contested factual issues both at the time of the hearing of the preliminary question and at the time of trial;

(ii)        result in significant overlap between the evidence adduced on the hearing of the separate question and at trial – possibly involving the calling of the same witnesses at both stages of the hearing of the proceeding … This factor will be of particular significance if the Court may be required to form a view as to the credibility of witnesses who may give evidence at both stages of the hearing of the proceeding; or

(iii)       prolong rather than shorten the litigation.”

[8]        The overarching consideration informing the discretion to make an order under O 29 r 2 is efficient case management.  It is subject to the limitation that the Court cannot give an advisory opinion on theoretical or hypothetical facts even if such an opinion were likely to lead to a settlement or resolution of the proceedings.’

19                                          Of course, the starting point is that in the ordinary course all issues of fact and law should be determined at the one time: Tallglen Pty Ltd v Pay TV Holdings Pty Ltd (1996) 22 ACSR 130 at 140 – 142.  The authorities abound with statements of caution as to the ordering of questions for separate determination, particularly where matters of fact are raised by such questions which are difficult to segregate as issues distinct from the remainder of the proceedings.  Nevertheless, there remain cases in which separate questions are plainly in the interests of efficient case management.  Issue estoppel and its related doctrines are routinely considered by way of separate questions in Australian courts.  See Whiteley-Bond v Abletts Transport Pty Ltd [2009] ACTSC 81; Spencer v Commonwealth [2008] FCA 1256 at [192]; Commonwealth v Cockatoo Dockyard Pty Ltd [2006] NSWCA 322; Kuppers v New South Wales Fire Brigades [2005] NSWSC 193; CEO of Customs v Au [2005] NSWCA 119; Landmark Building Developments Pty Ltd v Toyama Pty Ltd [2004] NSWSC 1103; Lewis v Nortex Pty Ltd (in liq) [2002] NSWSC 124; Tiufino v Warland (2000) 50 NSWLR 104; Minero Pty Ltd v Redero Pty Ltd (unreported, Supreme Court of New South Wales, Santow J, 29 July 1998); Kemeny v Kemeny [1998] FamCA 34; Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508; Dissidomino v Butcher Paull & Calder [2004] WASC 122.  They provide suitable subject matter for separate determination, as the inquiry is confined to the effect of the previous judgment, rather than addressing any evidence as to the underlying facts.  Indeed, it would usually subvert much of the benefit of those doctrines to delay their consideration until trial, as the parties would be put to the cost of litigating the previously decided issues in the meantime.  Where those matters involve the determination and application of foreign law, and they have been decided in the foreign jurisdiction by courts at the highest level, that purpose is all the more compelling.

The Respective Submissions on the Pleadings

Spirits

20                                          Spirits submitted that the determination of the separate questions will not be in any sense decisive of the outcome of the proceedings and that the following matters will remain to be determined at the final hearing regardless of the outcome of the hearing on the separate questions:

(1)               The matter pleaded in para 61 of the Defence;

(2)               the matters pleaded in para 68 of the Defence, which are discretionary factors arising under ss 88 and 89 of the Trade Marks Act, which on any view were not determined by the Russian court and arise purely under Australian law; and

(3)               the matters pleaded in paras 66 and 67 of the Defence, being equitable defences of promissory estoppel and laches respectively, pleaded in answer to a statutory cause of action arising under s 88 of the Trade Marks Act, which on any view were not determined by the Russian court and arise purely under Australian law.

Paragraph 61 of the Defence

21                                          In para 61 of the Defence, Spirits alleges that claims made in the FACC are not justiciable or enforceable by an Australian court, by reason that the claims constitute a confiscation or expropriation for the benefit of the Government of the Russian Federation of personal property located in Australia, or enforces the interests of the Government Federation arising from the exercise of governmental powers.

22                                          The relevant rule of private international law invoked by para 61 of the Defence is an exclusionary rule to the effect that ‘an Australian court will not entertain an action for the enforcement of a penal, revenue or other public law of a foreign state.’  See Robb Evans of Robb Evans & Associates v European Bank Ltd (2004) 61 NSWLR 75 at 79; Attorney-General (UK) v Heinemann Publishers Australia Pty Ltd (1988) 165 CLR 30 at 42.  Whilst the rule was traditionally expressed in terms of a lack of jurisdiction, the modern authorities state that it should be expressed in terms of a refusal to enforce foreign governmental interests.

23                                          Spirits submitted that this pleading militates against the bifurcation of the proceeding into the separate questions on the one hand, and other matters on the other hand, in at least three distinct ways.

24                                          First, the nature and complexity of the issues raised by that pleading is such that they can only be resolved properly in a full trial, with full discovery, cross-examination of witnesses etc, and not in any summary way on a separate question.  As part of that examination, the Court will be required to consider complex factual questions including:

(1)               The circumstances surrounding the issuing of the instruction by the President of the Russian Federation ‘to take urgent measures to reinstate and protect the State’s rights over intellectual property in the area of production and circulation of vodka products, and to identify and bring legal action against the persons involved in infringement of those rights’ (see S.P.I. Spirits (Cyprus) Ltd v Diageo Australia Ltd (No 2) (2006) 155 FCR 150 at [8]);

(2)               the circumstances surrounding the Russian Federation, through what Spirits alleges is its appointed representative, FKP, taking procedural steps in several countries, including Australia, with the aim of wresting ownership of foreign registrations for trade marks from their present owners (see S.P.I. Spirits (Cyprus) Ltd v Diageo Australia Ltd (No 2) at [9]);

(3)               the political circumstances connecting the issuing of the instruction in (1), the taking of the steps in (2), and the political circumstances in which Spirits’ predecessor in title, VAO-SPI, was transformed (on Spirits’ case) or purportedly transformed (on FKP’s case, see FACC paras 13 and 14) from a State-owned corporation (Sojuzplodoimport) into a private corporation around the time of dissolution of the Soviet Union in 1991; and

(4)               what Spirits will allege is the acquiescence by the Russian courts in implementing the plans of the executive in relation to the above, which acquiescence finds expression in, inter alia, the 2001 Judgment.

25                                          That is, in order to determine whether the exclusionary rule is infringed, it will be necessary for the Court to conduct a full examination of the circumstances in which Spirits obtained title to the trade marks and the circumstances leading up to their attempted wresting back by the cross-claimants in these proceedings, and the role of the Russian courts in implementing a political or economic policy of the State through judicial process.

26                                          Secondly, those matters show clear overlap with the factual and legal issues which will arise on the separate question.  The result is that:

(1)               Many of the same expert witnesses on those circumstances will be relevant to both questions (and if separation is ordered would be exposed to credibility findings twice); and

(2)               many of the same documents will be relevant to both questions (and if separation is ordered, the work of the Court and the parties in reviewing, translating and understanding the documents will be duplicated).

27                                          Thirdly, Spirits pleads the exclusionary rule in answer to the cross-claim as a whole.  That is, Spirits submits that because the cross-claim is not enforceable, the Court should not enter into any question regarding the recognition of any issue estoppel in support of any of the matters alleged in the cross-claim.  The content of the exclusionary rule is that the Court should not ‘entertain’ the claim – but once the Court begins hearing the separate question, the Court has begun entertaining the substance of the cross-claim.  Where the exclusionary rule is pleaded in answer to a claim, ordinarily the Court will hear the entire claim on all issues at a final hearing and decide whether the exclusionary rule applies after judgment is reserved.  That procedure allows the Court to find in the judgment, if appropriate, that it is not strictly necessary to determine the remaining matters going to the substance of the claim because the claim is unenforceable, and thus it is clear the Court’s findings on other matters are obiter dicta.

28                                          In contrast, in the present case, if there is a separate question, the Court will be required to make rulings on matters going to the substance of the cross-claim on the separate questions in circumstances before having considered a threshold question of enforceability, a claim that arises logically anterior to the separate questions but one that, when the Court is considering the separate questions, will not yet be before the Court.  If the separate questions are answered, the Court may well then be left in the unsatisfactory position where it has given answers to the separate questions as a matter of ratio decidendi but finds at the final hearing that the entire cross-claim is unenforceable and hence that the separate questions did not arise, and therefore did not need to be answered, notwithstanding that they have already been answered as a matter of ratio decidendi.

Paragraph 68 of the Defence

29                                          As to the matter pleaded in para 68 of the Defence, this relies upon:

(1)               The general discretion that the Court has not to grant relief under s  88 notwithstanding that a ground is otherwise made out (‘a prescribed court may’), and see Health World Ltd v Shin-Sun Australia Pty Ltd (2008) 75 IPR 478 at [204] to [205], and the authorities there cited; and

(2)               the discretion that the court has under s 89(l)(b) and (c) not to grant relief under s 88 even if (contrary to Spirits’ case), the grounds pleaded in paras 56(b), 57(b), 58 to 59 of the FACC were otherwise made out, on the basis that Spirits satisfies the Court that the ground relied upon by FKP ‘has not arisen through any act or fault of the registered owner’.

30                                          Spirits submitted that, on any reading of the translation of the Russian judgment, the Russian court did not purport to opine on any matter arising under s 88 or s 89 of the Trade Marks Act.  Any issue arising under the discretion under s 88 or s 89 was not dealt with by the Russian court, and therefore cannot give rise to any issue estoppel: see Desert Sun Loan Corp v Hill [1996] 2 All ER 847 for the need to precisely identify the issue said to be the subject of the issue estoppel, and for an Australian example see EI du Pont de Nemours & Co v Imperial Chemical Industries plc (2007) 163 FCR 381.

31                                          But even if the Russian court had purported to opine on matters directly arising under s 88 or s 89 of the Trade Marks Act, or opine with a breadth which purported to cover those matters, Spirits submitted that the judgment would not be recognised in Australia to that extent in any event.

32                                          As Spirits will seek to have the Court exercise its statutory discretion in Spirits’ favour even if (contrary to Spirits’ case) a ground were to be otherwise made out under ss 88 or 89, and in support of that argument will seek to canvass all of the matters referred to in [24] above, no determination of a separate question will remove the need for the Court to deal with those issues in relation to all the other claims brought before it.

Paragraphs 66 and 67 of the Defence

33                                          In paras 66 and 67 of the Defence, Spirits pleads promissory estoppel and laches in answer to the statutory cause of action under s 88.  Those pleadings therefore raise a question of title to an Australian trade mark because they are pleaded as a fetter to a statutory cause of action seeking to obtain title to the Australian trade mark.

34                                          Similarly to the discretionary grounds ventilated in [29] – [32] above, the promissory estoppel and laches grounds were not matters which the Russian court purported to deal with, and in any event for jurisdictional and/or public policy reasons could not give rise to any issue estoppels which would be recognised by this Court.  Spirits submitted that the merits of those defences will therefore need to be determined by this Court in any event, regardless of the outcome on the separate questions.  In support of the promissory estoppel ground, Spirits said it would seek to rely on representations made by the Russian government as outlined and particularised in para 66 of the Defence, and in support of the laches ground, Spirits would rely on the matters pleaded in para 67 of the Defence.

35                                          Spirits submitted that the governing law of the promissory estoppel plea is Australian law, because Australian authority holds that the governing law of an equitable claim or defence is the law of the forum whenever equity is invoked in the forum: National Commercial Bank v Wimborne (1978) 5 BPR 11,958; United States Surgical Corp v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 at 798; Attorney-General (UK) v Heinemann Publishers Australia at 151, 192; Paramasivam v Flvnn (1998) 90 FCR 489.  But, Spirits submitted, the same result would follow even if the correct rule is, as suggested by some commentators, that the governing law of an equitable claim or defence is determined by the governing law of the substantive cause of action as suggested by TM Yeo, Choice of Law for Equitable Doctrines(Oxford University Press, 2004), because here the governing law of the substantive cause of action (an action under s 88 of the Trade Marks Act) is Australian law.  This Court will therefore determine the merits of the promissory estoppel and laches defences in the usual way.

Cross-Claimants

36                                          In response to Spirits’ submissions in [20] to [35] above, the cross-claimants submitted that Spirits’ submissions miss the first and most basic point arising from the separate questions, which is that if preliminary question (1) is decided in favour of the cross-claimants, then that finding will obviate the need for the Court to reconsider the discrete question of the alleged succession of VAO-SPI to VVO-SPI’s assets under Russian law.  That, according to the cross-claimants, represents a substantial saving of time and costs and alone would justify consideration of the matter as a separate question.

37                                          Further, for the reasons advanced below, the cross-claimants submitted that it is doubtful that any of the defences under paras 61, 66, 67 or 68 would survive, or survive in substantial form, if preliminary question (1) is answered in favour of the cross-claimant’s contentions.  According to the cross-claimants, Spirits’ submission notably fail to address the terms of each of the separate questions posed.  If preliminary questions (3) and/or (4) are answered in favour of the cross-claimants then they certainly would not so survive.  That has the consequence that factual and expert evidence will not be relevant insofar as it concerns the pleaded representations that were allegedly made in the Russian Federation in the period from 1992 – 2000.

38                                          Furthermore, as Spirits’ submissions accept, the Russian Judgments specifically considered and rejected arguments to the effect that the Russian proceedings were brought outside of the statutory limitation period.  According to the cross-claimants, the preclusive effect of that decision would, if so found, determine conclusively the issue raised in para 62 of the Defence.  This arises under preliminary question (4).

39                                          According to the cross-claimants, Spirits’ submissions also appear to overlook the point that the pleadings in paras 5(c)(viii), (ix) and (x) of the Defence have been made redundant by the ECHR Judgment.  Insofar as the Defence pleads the ECHR decision then pending, it is of no relevance to the validity of the Russian Judgments and should be removed.  These are the matters raised by preliminary question (2).

40                                          The cross-claimants submitted that Spirits’ assertion that their pleaded affirmative defences, which will require calling ‘complex’ evidence, will remain in issue even if the preliminary questions are considered and answered in favour of the cross-claimants, is incorrect for the reasons set out in [41] to [71] below.

Confiscation case

41                                          The cross-claimants observed that Spirits’ submissions assert that the Russian Judgments are not enforceable because (Defence para 61) ‘the effect of the relief sought by the cross-claimants in their prayer for relief would be the confiscation or expropriation, for the benefit of the Government of the Russian Federation, of personal property located in Australia’.

42                                          According to the cross-claimants, Spirits’ submissions conspicuously fail to identify with any precision what is the confiscation that is alleged to have taken place.  Plainly, it cannot be the commencement of civil action in Australia to rectify the Trade Marks Register.  That is a mere civil action to enforce rights and not a ‘confiscation’ in any sense.  As recognised by the High Court in Attorney-General (UK) v Heinemann Publishers Australia at 42, the confiscation rule does not extend beyond ‘claims enforcing the interests of a foreign sovereign which arise from the exercise of certain powers peculiar to government’ (emphasis added).

43                                          Indeed, in the present case there is no identification, whether in the pleading or in Spirits’ submissions of any ‘penal, revenue or other public law’ which is said to be unenforceable.  Certainly, the cross-claimants do not rely on any such law.  They rely upon the proper application of the law of succession in Russia in 1990 – 1992.

44                                          Furthermore, the very authorities cited by Spirits emphasise the high degree of caution to be exercised in such cases.  As the High Court said in Attorney-General (UK) v Heinemann Publishers Australia at 41:

‘[T]he principle is one of “judicial restraint or abstention” and is “inherent in the very nature of the judicial process”.’

45                                          Nor, according to the cross-claimants, can it credibly be asserted that the Russian Judgments amount to confiscation or expropriation.  Certainly, the Defence at para 61 does not assert as much.  A similar allegation was made in the European Court of Human Rights and (with respect) correctly rejected.  In that court it was argued by interests aligned with Spirits that the Russian Judgments had deprived VAO-SPI of its possessions by declaring their claim to be the holder of the relevant trade marks to be void.  The Court held that at no point had the claimant established that it was entitled in the first place to the property of VVO-SPI.  Accordingly, it could not have been deprived of quiet enjoyment of those possessions by virtue of the Russian Judgments.

46                                          The cross-claimants submitted that the same point holds true in the present proceedings.  If preliminary question (1) is answered in favour of the cross-claimants, then under Russian law VAO-SPI was not ever the successor to the assets of VVO-SPI.  Accordingly, there could not be any confiscation.  Spirits’ arguments do, however, reinforce the benefit to be gained from preliminary question (1): if it is decided in favour of the cross-claimants, then the confiscation case fails at the outset.  The preliminary question is the natural precursor to the confiscation case.

47                                          The cross-claimants observed that Spirits’ submissions assert that ‘what Spirits will allege is the acquiescence by the Russian Courts in implementing the plans of the executive ...  which ... finds expression in, inter alia, the 2001 Judgment’.

48                                          According to the cross-claimants, this wholly general assertion finds expression only in Spirits’ recently filed submissions, where the only detail given is limited to (i) a reference to a memorandum dated March 2000 from the President of the Russian Federation instructing a prosecutor to seek to protect the State’s rights; (ii) the commencement by the cross-claimants of these proceedings (and cognate proceedings elsewhere); and (iii) what is mysteriously said to be ‘political circumstances’ concerning (i) and (ii).  The cross-claimants submitted those scanty matters indicate the paucity of support for this aspect of the case.  They should be given no weight in the current application.  As submitted, the current proceedings, brought under the Trade Marks Act for the rectification of the Register cannot sensibly be alleged to amount to ‘confiscation’.  Further, for the reasons set out below (regarding similarly inchoate allegations as to bias) they should be disregarded as irrelevant to the present application.

Discretionary Factors under ss 88 and 89 of the Trade Marks Act

49                                          The cross-claimants observed that Spirits’ submissions assert that even if the Russian Judgments apply to determine the succession issue, no issue estoppel can apply to preclude the application and reliance by Spirits on the discretion available under ss 88 and 89 of the Trade Marks Act (which is pleaded in para 68 of the Defence).  Accordingly, it is said that as Spirits will ‘seek to canvas all of the matters raised in … [the confiscation case], no determination of a separate question will remove the need for the Court to deal with those issues’.

50                                          The cross-claimants made a number of points in answer.

51                                          First, as noted, the confiscation case depends entirely on a prior determination by the Court that VAO-SPI was in fact the successor to the assets of VVO-SPI, the assumption underlying the confiscation case being that VAO-SPI was the owner of the assets.  If the Russian Judgments are given preclusive effect by the Court, then there can be no question of confiscation (VAO-SPI never having had the property alleged to have been ‘confiscated’ in the first place).

52                                          Accordingly, on the only basis asserted by Spirits to be the basis for the exercise of discretion, preliminary question (1) is a good idea.

53                                          Secondly, if one looks beyond Spirits submissions and turns to the pleaded case, para 68 pleads that, even if a s 88 ground is made out, the Court should refuse relief in its discretion. The first particular relates to delay, and repeats para 67.  The second particular relates to the representations alleged to have been made by the Government of the Russian Federation in the period 1992 to 2000 referred to in para 66.  To that extent, preliminary questions (3) and (4), which address the preclusive effect under Russian law of those representations and that delay, address para 68.  Thus, if the cross-claimants are successful on preliminary questions (3) and (4), Spirits will be precluded from asserting, as part of its argument on the Court’s discretion, that any delay or representation occurring in the period between 1992 and 2000 prevented a finding, under Russian law, that VAO-SPI was not the legal successor to VVO-SPI.

54                                          Thirdly, the cross-claimants will contend that s 88 of the Trade Marks Act (a) does not allow scope for the operation of the pleaded equitable principles; and (b) to the extent that such principles may be considered in the operation of s 88 of the Act, they would not be applied in the present case.

55                                          It follows that, if the cross-claimants succeed on preliminary questions (3) and (4), then the Court will not be obliged to consider:

(a)                the effect under Russian law of events set out in paras 66, 67 and 68 of the Defence as to the asserted countenance of the Russian Federation of the existence of VAO-SPI as the legal successor to VVO-SPI;

(b)               substantive law matters under Russian law concerning the effect of the asserted factual matters; and

(c)                expert evidence relating thereto.

56                                          Moreover, according to the cross-claimants, Spirits has nowhere explained why the Court would, as a matter of discretion under s 88, refuse to grant relief on the basis of the representations and delay if, under Russian law, those representations and delay have no relevant significance.

57                                          In summary, Spirits’ pleading as to the exercise of discretion under ss 88 and 89 of the Trade Marks Act does not affect the utility of preliminary question (1), and further suggests that preliminary questions (3) and (4) are a good idea.

Defences of promissory estoppel and laches to the statutory cause of action under s 88 of the Trade Marks Act

58                                          Spirits contended that the defences of estoppel and laches (Defence paras 66, 67) are not the subject of the Russian Judgments and, it is said that those pleadings ‘therefore raise a question of title to an Australian trade mark because they are pleaded as a fetter to a statutory cause of action seeking to obtain title to the Australian mark’.

59                                          Paragraph 66 of the Defence relates to the period from January 1992 to 2000, being the period from the formation of VAO-SPI to the commencement of proceedings culminating in the Russian Judgments.  In particular, it alleges that the Government of the Russian Federation represented that VAO-SPI was the legal successor to VVO-SPI during that period, by reference to a series of documents apparently created and communicated in Russia.  Thus, the cross-claimants are said to be estopped from asserting that VAO-SPI was not the legal successor to VVO-SPI.

60                                          The cross-claimants submitted that the effect of the Russian Judgments on this defence is twofold.

61                                          First, Spirits is precluded from joining issue on the primary allegation that VAO-SPI was not the legal successor to VVO-SPI.  That includes not only positively pleading that it was the successor, but also pleading an estoppel defence in respect of the allegation that it was not the successor.  If that is correct, Spirits would be precluded from raising an estoppel defence at all. The outcome of that argument is for debate on the separate question.

62                                          Secondly (even if the primary position is not accepted), Spirits will be precluded from raising significant matters of Russian fact and law on any estoppel defence by reason of the following matters.  The 2001 Judgment, delivered on 16 October 2001, decided that VAO-SPI was not the legal successor of VVO-SPI and accordingly that the provision in its charter to the contrary was void.  Plainly it did not consider that any representation which may have been made between 1992 and 2000 prevented it from so deciding.  Indeed, the alleged representations were available to be raised, and were raised, in the proceedings.  The Court of Arbitration of Moscow decided that they were immaterial to its decision that VAO-SPI was not the legal successor of VVO-SPI.  The Appeals Instance of that Court recorded the same argument but did not address it, and the first instance decision was subsequently affirmed by the 2001 Judgment.  Thus, Spirits is precluded in the proceedings in this Court from arguing that the alleged representations in the period from 1992 to 2000 prevented a finding, under Russian law, that VAO-SPI was not the legal successor to VVO-SPI.

63                                          Preliminary question (3) addresses these matters.  If the cross-claimants succeed either on their primary position or their secondary position on preliminary question (3), then the Court will not be obliged to consider:

(1)               the effect under Russian law of events set out in para 66 of the Defence as to the asserted countenance of the Russian Federation of the existence of VAO-SPI as the legal successor to VVO-SPI in the period from 1992 to 2000;

(2)               substantive law matters under Russian law concerning the effect of the asserted factual matters; and

(3)               expert evidence relating thereto.

64                                          If the cross-claimants succeed in their primary position as to the effect of preliminary question (3), then the Court will further be spared consideration of Spirits’ estoppel argument in its entirety.

65                                          The same points apply in relation to para 67 and arising under what is said to be a plea of laches under Australian law, which also relate to the period between 1992 and 2000.  Preliminary question (4) relates to this issue.

66                                          Similarly to the estoppel plea, the cross-claimants submitted that the effect of preliminary question (4) on this defence, if the cross-claimants are successful, is twofold, that is:

(a)                Spirits is precluded from asserting a laches defence at all in response to the proposition that VAO-SPI was not the legal successor to VVO-SPI; and

(b)               in any event, Spirits would be precluded, as part of its laches defence, from traversing the proposition that any delay or acquiescence occurring in the period between 1992 and 2000 did not prevent a finding, under Russian law, that VAO-SPI was not the legal successor to VVO-SPI.

67                                          On either view, the Court would be relieved of the obligation to consider the effect under Russian law of events set out in para 67 of the Defence as to the asserted countenance of the Russian Federation of the existence of VAO-SPI as the legal successor to VVO-SPI; substantive law matters under Russian law concerning the effect of the asserted factual matters; and expert evidence relating thereto.  Further, if the cross-claimants’ primary position is correct, the Court would not need to consider Spirits’ laches defence at all.

Estoppel and laches arguments of Spirits contain errors of law

68                                          Further, Spirits’ assertion that the Australian law of estoppel and laches would apply is, according to the cross-claimants, open to considerable doubt.  Spirits’ case appears to be that Australian equitable defences would apply:

(a)                to conduct (being representations and delay) occurring in Russia;

(b)               so as to prevent the cross-claimants from asserting a proposition as to Russian law and fact, namely, that VAO-SPI was not the legal successor to VVO-SPI,

(c)                notwithstanding that the alleged representations and delay did not prevent a Russian court from finding that VAO-SPI was not the legal successor to VVO-SPI.

69                                          The cross-claimants’ position is that, on the principles set out in Murakami v Wiryadi [2010] NSWCA 7 at [128] – [149], either Russian law would apply in such circumstances, or to the extent Australian law applies, it would do no more than ‘enforce the expectations created under’ Russian law.

70                                          Of course, the Court need not, on the present application, reach a concluded view about those arguments.  As set out above, even if Australian law applies, the separate determination of preliminary questions (3) and (4) would relieve the Court once and for all of at least a substantial component of such a case.

71                                          Finally, even if, contrary to the above, Spirits’ estoppel, laches and s 88 discretion claims remain intact following the determination of the preliminary questions, that would not, according to the cross-claimants, affect the utility of separately determining preliminary question (1).

The Respective Submissions on Matters Arising on the Separate Questions

72                                          Spirits asserted, first, that on the separate questions it would be entitled to go behind the Russian Judgments and contend that they should not be recognised as they were tainted by bias and secondly that issues arising under the question of the preclusive effect of the judgments would require complex facts and detailed evidence.  Each is considered below.

Alleged bias

73                                          The Spirits’ submissions asserted that, on the separate question, Spirits would be entitled to argue that the Russian Judgments involved a denial of natural justice, and it would do so on the basis that the Presidium of the Supreme Court of Arbitration was biased in favour of the Deputy Prosecutor-General, who represents the interests of the Russian Federation.  It further submitted that the issues on the bias case would then fall to be reconsidered at the final hearing in the context of Spirits' confiscation case.

74                                          According to the cross-claimants, this submission is replete with difficulties.

No particulars given of the bias case

75                                          The only basis on which the Russian Judgments are pleaded as being unenforceable in Australia is by reference to Spirits’ application to the ECHR (Defence [5](c)(iii), (vi), (viii), (ix), (x)) which, as noted in [10] above, was dismissed.  Now Spirits asserts a fresh allegation, namely, that it will challenge the decision of the Russian courts on the basis of bias.  The allegation is that ‘the question for this Court depends on common law concepts of natural justice, including relevantly, the bias rule’.  

76                                          According to the cross-claimants, the allegation that there was political interference in the decision of the Russian Courts is extreme.  It has not been made in these proceedings before now.  It concerns decisions made in 2000 and 2001.  According to the cross-claimants, one immediately wonders how seriously it can be pressed, given that the intermediate court in Russia, in reversing the decision at first instance, decided adversely to the Prosecutor in the Russian proceedings.

77                                          Spirits goes on to assert that its bias allegation would involve:

‘[A] complex examination of the facts relating to the relationship between the Russian Government, FKP and FGUP, the circumstances of their creation, and in particular the circumstances of the distribution of assets upon dissolution of the Soviet Union, the attempt by the regime in place in 2001 and 2002 to wrest back, after years of acquiescence, assets that were privatized by the prior regime, and the acquiescence by the Russian Courts in those attempts.’

78                                          Presumably any allegation of bias would relate to specifically alleged and proven ties between the Presidium of the Supreme Court of Arbitration and the Russian Government at the time the relevant decision was handed down.  The cross-claimants submitted that the Court would be slow to accept that these matters could legitimately be raised in the currently constituted proceedings.

Availability of bias argument should be treated with caution

79                                          Secondly, the cross-claimants submitted that Spirits would bear the onus of establishing that a bias allegation forms a relevant ‘defence’.  On the basis of the current law as the cross-claimants understand it, that would be a novel proposition.  The only authority cited by Spirits, Boele v Norsemeter Holding AS [2002] NSWCA 363, relates to a quite different context, namely, an application at common law to enforce a foreign court order.  By contrast, the authorities on issue estoppel only point to the requirement that the foreign court, as a matter of jurisdiction, be competent to decide the question: DSV Silo-und Verwaltungsgesellschaft GmbH v Owners of The Sennar (No 2) [1985] 1 WLR 490.  The only exception identified in the authorities is in relation to judgments obtained by fraud (A/S D/S Svendborg v Wansa [1997] 2 Lloyd’s Rep 183), which even on the basis of Spirits’ more adventurous submissions, has not been asserted.  In any event, Spirits’ submissions are entirely silent as to whether a bias defence is available in respect of a judgment in rem.

No relevant overlap

80                                          Spirits submitted that certain issues on its bias case ‘substantially overlap with the issues set out in [the confiscation case] and [the argument as to discretion under ss 88 and 89 of the Trade Marks Act] above, and the factual matters and representations referred to in [the estoppel case] and [the laches case] of the Defence, being the matters that will arise on the final hearing in any event’.

81                                          The alleged issues which are asserted to arise on the bias case are those set out in [77] above.  According to the cross-claimants, the issues are described in sweeping terms and unsupported by any particulars; but in any case, it is not correct to conclude that there will be any relevant overlap of issues.

82                                          In relation to the confiscation case, the cross-claimants previously submitted that, if preliminary question (1) is decided in favour of the cross-claimants, the confiscation case fails at the outset.

83                                          In relation to the balance of the arguments, according to the cross-claimants, they relate to the conduct of the Russian government between 1992 and 2000 prior to the commencement of the proceedings in Russia.  The bias allegation relates to a decision taken by the Presidium of the Supreme Court of Arbitration in 2001.  Accordingly, that allegation, if pursued, concerns a different factual and legal matrix.

Privies

84                                          Spirits submitted that, on the separate question, it would be entitled to argue that the cross-claimants are not privies of the Russian Prosecutor-General (‘the privies argument’), and that regardless of the outcome of the separate questions, the issues on the privies argument would also overlap with the issues on the confiscation case.

85                                          Similarly to the position it has taken in relation to bias, the cross-claimants submitted that Spirits has not identified any basis upon which it proposes to resist the argument as to privity of interest or title between the cross-claimants and the Deputy Prosecutor-General set out in the cross-claimants’ submissions in chief.  Rather, it simply asserts that a ‘detailed examination’ will need to be undertaken.

86                                          According to the cross-claimants, the argument that the matters the subject of the privity argument will arise on the confiscation case in any event suffers the same vice as the argument in relation to the bias case; if the cross-claimants are successful on preliminary question (1), then the confiscation case fails at the outset.

‘Complexity’ arguments

87                                          Spirits also submitted that matters such as the bias case and the confiscation case raise such sensitive and complex matters that they should not be dealt with ‘on the papers’.

88                                          According to the cross-claimants, Spirits appears to misapprehend the nature of the determination of a separate question.  They say a separate question is a determination on a final basis; a separate determination as to the preclusive effect of a judgment is no less a final determination than any other question; the parties are entitled to lead such evidence of fact and law as they wish in support of a final determination of such questions.  Either a judgment has preclusive effect or it does not; the ‘sensitivity’ of matters for decision may be a relevant matter in considering whether they should be dealt with in an interlocutory application, but that is not a relevant consideration for determining whether a separate question should be ordered.  For example, the determination of liability before quantum in intellectual property cases is a routine example of a separate question in which ‘sensitive’ and ‘complex’ questions may arise and properly be dealt with.

Expert evidence and disqualification

89                                          Spirits also argued that the experts which Spirits would use in addressing the bias case, the privies argument and the confiscation case will be the same, giving rise to the so-called ‘Livesey problem’.

90                                          First, it said, because Spirits will use the same expert witnesses (namely as to Russian law) on issues that will arise on the final hearing in any event and on the separate question, the Court ‘will be’ placed in the undesirable position where it may be forced to make two sets of ‘credit ... finding[s] with regard to the same witness’.  If the cross-claimants are successful on the separate questions, they submitted that it is not clear what issues of Russian law Spirits says would remain for an expert witness to opine upon.  Indeed, they say, a purpose of the separate questions is to relieve the Court of all or substantially all of such questions.

91                                          But in any event, the cross-claimants submitted that Spirits did not say how conflicting findings of credit may arise as a real risk in the case of such expert evidence; nor does it point to any authority in which the ‘Livesey problem’ has been held to arise in such circumstances.  They submitted that the Court would not be satisfied that there is any such real risk in the present case.

92                                          Secondly, Spirits has submitted that ‘regardless of findings in relation to particular witnesses, issues which will be before the Court on the separate question (such as whether the Russian Court is biased towards the Russian executive) are of such a nature that any finding on the separate question ... could very well invoke a Livesey application’.  According to the cross-claimants, that submission is entirely opaque.  They say that Spirits has not identified, as required by the authority it cited, namely, Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 2) (2009) 174 FCR 175 at [71], any circumstance in respect of such matters which might lead a judge to decide a question otherwise than on the merits, nor any logical connection between that circumstance and the fear that the judge might not apply proper judicial method.

93                                          Thirdly, Spirits cited the authority of Betfair Pt Ltd v Racing New South Wales (No 14) [2010] FCA 696 for the proposition that the possibility of disqualification is a ‘real one’.  That case involved a finding that a party had ‘misbehaved’ in the setting of a statutory fee.  There is no similarity with the present case.

94                                          For the reasons identified, the cross-claimants submitted that any alleged risks that the Livesey problem will arise are chimerical, and would in any event not outweigh the substantial benefits promised by determination of the separate questions.

COnclusion

95                                          Without any real doubt, I have come to the conclusion that it is in the interests of the efficient case management of this proceeding that I should accede to the motion of the cross-claimants and order, pursuant to O 29 r 2 of the Rules, the determination of the four (4) questions, set out in the amended notice of motion filed in Court on 9 August 2010, before trial in the proceeding.  I am persuaded to this conclusion by my overall preference for the cross-claimants’ submissions over Spirits’ submissions, but in particular to the following:

(1)               The terms and form of Spirits’ pleadings in its Defence (see [9] above).

(2)               The 2001 Judgment, its relevant reasons and conclusion (see [7], [11], [12], [13] and [14] above).

(3)               The ECHR Judgment and its relevant reasons (see [11] above).

(4)               My disagreement with Spirits’ submission (see [20] above) that the determination of the separate questions will not be in any sense decisive of the outcome of the proceeding.

(5)               My agreement with the cross-claimants’ submission that if preliminary question (1) is decided in favour of the cross-claimants, then that finding will obviate the need for the Court to reconsider the discrete question of the alleged succession of VAO-SPI to VVO-SPI’s assets under Russian law (see [36] above).

(6)               My further agreement with the cross-claimants’ submission that it is doubtful that any of the defences under paras 61, 66, 67 or 68 would survive, or survive in substantial form, if preliminary question (1) is answered in favour of the cross-claimants’ contentions and that they certainly would not survive if preliminary questions (3) and/or (4) are answered in favour of the cross-claimants (see [37] above).

(7)               My agreement with the cross-claimants’ submission that if preliminary question (1) is answered in favour of the cross-claimants, then under Russian law VAO-SPI was not ever the successor to the assets of VVO-SPI and Spirits’ confiscation case fails at the outset (see [46] above).

(8)               My agreement with the cross-claimants’ submission that there is utility in preliminary questions (1), (3) and (4) notwithstanding Spirits intention to rely on discretionary factors under ss 88 and 89 of the Trade Marks Act (pleaded in para 68 of the Defence), certainly so far as the factors of delay and representation during the period between 1992 and 2000 are concerned.

(9)               The same applies to preliminary question (3) insofar as Spirits relies on the defences of estoppel and laches as pleaded in paras 66 and 67 of the Defence.

(10)           Finally, I am not persuaded that this is a case where if the four (4) preliminary questions are separately dealt with prior to trial, there is a real risk of conflicting findings of credit arising in respect of expert evidence on Russian law.  Indeed, as the cross-claimants contend, the prior resolution of the four questions has the potential to substantially reduce, if not extinguish, the need for such expert evidence at trial.

96                                          I therefore propose to make the orders sought in the motion.  I will hear the parties for the purpose of setting a timetable to ready the hearing of the four (4) preliminary questions in the second half of next year.

Associate:

Dated:         26 November 2010