FEDERAL COURT OF AUSTRALIA

Harcourts WA Pty Ltd v Roy Weston Nominees Pty Ltd (No 7) [2017] FCA 1150

ORDERS

THE COURT ORDERS THAT:

1.    Upon the condition that the Applicant/Cross-Respondent will not seek to enforce any judgment which it may obtain against the Respondent/Cross-Claimant without leave of the Court, the Applicant/Cross-Respondent be granted leave to proceed with this proceeding against the Respondent/Cross-Claimant pursuant to s 500(2) of the Corporations Act 2001 (Cth).

2.    The costs of the application be in the cause.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ORDERS

THE COURT ORDERS THAT:

1.    Upon condition that the Respondent will not seek to enforce any judgment which it may obtain against the Applicant without leave of the Court, the Respondent be granted leave to proceed with this proceeding against the Applicant pursuant to section 500(2) of the Corporations Act 2001 (Cth).

2.    The costs of the application be in the cause.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MCKERRACHER J:

INTRODUCTION

1    Harcourts WA Pty Ltd is the applicant/cross-respondent in Federal Court of Australia proceedings SAD 224 of 2012 (SAD Proceedings) and the respondent in Federal Court proceedings WAD 167 of 2013 (WAD Proceedings).

2    Harcourts has brought an application to seek leave to proceed with the SAD Proceedings and WAD Proceedings (collectively, the Proceedings) against Roy Weston Nominees Pty Ltd (in liquidation) (RWN), pursuant to section 500(2) of the Corporations Act 2001 (Cth), for the limited purpose of assessing or agreeing the amounts subject to cost orders arising from the Proceedings with RWN to allow Harcourts to enforce those amounts against the former Directors of RWN (RWN Directors) pursuant to a franchise agreement dated 16 May 2002.

BACKGROUND

3    Harcourts is the registered owner of the following trade marks (Harcourts Trade Marks):

(a)    Australian registered trade mark number 921651, for the words ‘Roy Weston’, in class 36 (Harcourts Roy Weston Trade Mark); and

(b)    Australian registered trade mark number 921677, for the words ‘The House Sold Word in Real Estate’, in class 36 (House Sold Word Trade Mark).

4    At all relevant times, RWN was the registered owner of the following trade marks (RWN Trade Marks):

(a)    Australian registered trade mark number 1336120, for the words ‘Roy Weston Real Estate’, in class 36; and

(b)    Australian registered trade mark number 1154742, for the words ‘Roy Weston Nominees the Trusted Name in Real Estate’, in class 36.

5    On 22 July 2011, RWN filed an application, pursuant to s 92 of the Trade Marks Act 1995 (Cth) (TMA), with the Registrar of Trade Marks for the removal of the Harcourts Trade Marks from the Register of Trade Marks by reason of non-use (RWN Non-Use Application).

6    On 6 September 2012, Harcourts commenced the SAD Proceedings against RWN, alleging that:

(a)    RWN infringed the Harcourts Trade Marks;

(b)    the RWN Trade Marks were substantially identical, or deceptively similar, to the Harcourts Trade Marks; and

(c)    RWN engaged in misleading or deceptive conduct.

7    On 14 March 2013, the Registrar of Trade Marks referred the RWN Non-Use Application to the Federal Court, pursuant to s 94 of the TMA (the WAD Proceedings). The WAD Proceedings and SAD Proceedings were heard together in one trial. On 24 February 2016, I delivered reasons finding (at [309]) that ‘in most respects (but not all), Harcourts WA [had] succeeded in its claim’: Harcourts WA Pty Ltd v Roy Weston Nominees Pty Ltd (No 4) (2016) 116 IPR 269. On 22 August 2016, the Court made a number of orders in Harcourts’ favour: Harcourts WA Pty Ltd v Roy Weston Nominees Pty Ltd (No 5) (2016) 119 IPR 449.

8    On 9 December 2016, the Court made the following costs orders (Costs Orders):

(a)    in relation to the SAD Proceedings, RWN pay Harcourts’ costs:

(i)    up to and including 30 June 2014 on a party-party basis; and

(ii)    from and after 1 July 2014 on an indemnity basis;

(b)    in relation to the WAD Proceedings, RWN pay:

(i)    up to and including 30 June 2014, Harcourts’ costs on a party- party basis; and

(ii)    from and after 1 July 2014, 90% of Harcourts’ costs on an indemnity basis.

9    On 15 March 2017, before the Costs Orders were assessed or agreed, Mr Robert Allan Jacobs of Auxilium Partners Pty Ltd was appointed liquidator of RWN.

10    In support of their application, Harcourts relies on an affidavit of their lawyer Mr Simons. In his affidavit, Mr Simons deposes to having been informed by the General Counsel of Harcourts that Harcourts does not intend to enforce the Costs Orders against RWN, and will respect the process for the lodgement of proof of debt under the Corporations Act. Rather, Harcourts intends to claim the amounts the subject of the Costs Orders (Costs Amounts) in separate proceedings against the RWN Directors pursuant to guarantees given by the RWN Directors to Harcourts (RWN Director Guarantees).

LEGAL PRINCIPLES

11    Pursuant to s 500(2) of the Corporations Act, after the passing of the resolution for voluntary winding up, no action or other civil proceeding is to be proceeded with or commenced against the company except by leave of the Court and subject to such terms as the Court imposes. The decision of whether leave to proceed against a company in liquidation ought to be granted involves the exercise of a discretion: Active Adult Management Pty Ltd v Milstern Retirement Living Pty Ltd [2017] NSWSC 1238 (at [43]).

12    In Ong v Lottwo Pty Ltd (in liq) [2013] SASCFC 57, the Full Court of the Supreme Court of South Australia considered the principles governing the granting of leave pursuant to s 471B of the Corporations Act. Nicholson J, with whom Kourakis CJ and Stanley J agreed, distilled previous authorities on the exercise of the discretion and held (at [61]):

Where, as in the present case, the claim alleges a proprietary interest in the company’s assets, such a claim (if successful) falls outside the province of the proof of debt system. Leave is likely to be given in such cases. However, it is important to bear in mind that such a court action, even if the company were to be successful in resisting it, will expose the company to potentially substantial expenditures on costs which it may not recover. For this reason, even where a proprietary claim is concerned an applicant for leave ordinarily will be required to demonstrate that the claim gives rise to a serious dispute and has a solid foundation. In addition, there are other factors that may be relevant to the discretion including the following.

(i)    the impact that the proceedings would have on the company’s creditors, including the pari passu distribution;

(ii)    the impact on the company;

(iii)    whether there is insurance involved;

(iv)    whether the liquidator would be unduly distracted by the proceedings (this is determined by reference to the prospects of success and the utility resulting from the likely outcome of the proceedings);

(v)    the nature of the proceedings proposed, particularly the complexity of the issues involved and the current stage of the proceedings – essentially the question is whether the creditor seeking leave should be forced to submit a proof of debt rather than bringing a separate action;

(vi)    whether the creditor will be able to obtain relief from the liquidation;

(vii)    who the applicant is;

(viii)    the complexity of the proceedings;

(ix)    whether the dispute arose out of the liquidation;

(x)    whether the applicant’s case has a solid foundation; and

(xi)    the stage the proceedings had reached when a liquidator was appointed.

(citations omitted)

13    Ong has been cited with approval in relation to an application for leave pursuant to s 500(2) of the Corporations Act: Active Adult Management (at [46]).

CONSIDERATION

14    Taking into consideration the factors identified in Ong, for the following reasons I am of the view that Harcourts should be granted leave to proceed with the Proceedings.

15    First, the continuation of the Proceedings could have a positive impact on RWN’s creditors and the pari passu distribution. As set out in Mr Simons’ Affidavit, Harcourts intends to rely on the RWN Director Guarantees to obtain payment of the Costs Amounts from the RWN Directors. If successful, this will reduce the quantum of Harcourts’ proof of debt in RWN’s winding up. As Harcourts is RWN’s largest creditor, the enforcement of the Costs Amounts against the RWN Directors will improve the prospects of a dividend for the remaining creditors of RWN. I stress that in this application I am making no finding at all about the availability or strength of such a claim, other than to record that on the limited evidence before me, it may be open.

16    Second, the continuation of the Proceedings will not distract the liquidator. The Proceedings merely involve the determination of the Costs Amounts. The liquidator would be required to determine the Costs Amounts in any event to assess Harcourts’ formal proof of debt. Having regard to the Court’s involvement in the Proceedings to date, the Court is well placed to conduct such an assessment. The Costs Amount may be determined without the need for evidence on behalf of RWN. Significantly, the liquidator agrees that it is appropriate that the Court determine the Costs Amounts and does not oppose leave being granted for the limited purpose of assessing the Costs Amounts.

17    Third, the Proceedings are at an extremely advanced stage. All issues of liability have been conclusively determined and all that remains is an assessment of the Costs Amount. See King v Yurisich (2006) 59 ACSR 598 (at [15]), where Weinberg J granted leave to proceed against a company in relation to the costs of an appeal on the basis that the proceedings had reached an advanced stage.

CONCLUSION

18    For the reasons given above, I am of the view that Harcourts should be granted leave to proceed with the Proceedings against RWN pursuant to s 500(2) of the Corporations Act, upon condition that Harcourts do not seek to enforce any judgment which it may obtain against RWN without leave of the Court.

Associate:

Dated:    26 September 2017