Spirits International N.V. v Federal Treasury Enterprise (FKP) Sojuzplodoimport [2007] HCATrans 595 (5 October 2007)

Last Updated: 11 October 2007

[2007] HCATrans 595

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S195 of 2007

B e t w e e n -

SPIRITS INTERNATIONAL N.V. (REGISTERED IN THE NETHERLANDS ANTILLES COMPANY NO 1060883)

Applicant

and

FEDERAL TREASURY ENTERPRISE (FKP) SOJUZPLODOIMPORT

First Respondent

FEDERAL PUBLIC UNITARY ENTERPRISE EXTERNAL ECONOMIC UNION SOJUZPLODOIMPORT (FGUP VO)

Second Respondent

DIAGEO AUSTRALIA LIMITED

Third Respondent

Application for special leave to appeal

GUMMOW J
HEYDON J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 5 OCTOBER 2007, AT 10.06 AM

Copyright in the High Court of Australia

__________________

MR R. COBDEN, SC: May it please the Court, I appear with my learned friend, MR P.W. FLYNN, for the applicant. (instructed by Mallesons Stephen Jaques)

MR J.T. GLEESON, SC: May it please the Court, I appear with MR J.A. WATSON for the first and second respondents. (instructed by Sagacious Legal Pty Limited)

MS A.H. BOWNE, SC: May it please the Court, I appear for the third respondent. (instructed by Freehills)

GUMMOW J: Yes, Ms Bowne. What is your client’s position in this leave application?

MS BOWNE: It wishes to make no submissions, your Honour, either in support or in opposition to the application. I understand that no costs orders are sought against it and it will seek no costs orders in relation to this application.

GUMMOW J: Yes. Thank you, Ms Bowne. Yes, Mr Cobden.

MR COBDEN: May it please the Court. Your Honours, this application for special leave turns on four key matters, in our submission. The first, which is as critical matter, is a finding that the Russian Federation is the real plaintiff in the cross-claim - - -

GUMMOW J: Before we get into that, what do you say about the paragraph at page 44 which has been something that has struck me as a reader, paragraph 22, “In all the circumstances”? In other words, that there are these interesting questions that you put to us but that this is not the right time or occasion to look at them in this Court.

MR COBDEN: We say it is, your Honour, because, first of all, it hinges on finding the real plaintiff, but that is a critical matter, including in answering that paragraph on that page. Secondly, on findings that the Russian respondents, if I can refer to the first and second respondents in that way, are unlikely to have the documents. FKP, for example, the first respondent, does not have the documents but the Russian Federation does and Justice Edmonds found that and the Full Court reflected it, we say. Justice Edmonds found that at application book page 8 at paragraph 16 of his judgment.

GUMMOW J: Paragraph 16?

MR COBDEN: This evidence in paragraph 16 from Ms Mozgovenko was evidence led by the Russian respondents. She was their witness:

established that FKP and FGUP do not hold, and generally do not have, the capacity –

I am sorry, your Honour.

GUMMOW J: What do you say about paragraph 17?

MR COBDEN: That is what Ms Mozgovenko said, your Honour, and in response to that, when formulating the tentative categories that were formulated, identified the particular agencies that would be required to search for documents and so it became much narrower than was reflected in Ms Mozgovenko’s evidence or in his Honour’s summation of that evidence. The Full Court at paragraph 10, page 41 of the application book themselves held, or at least did not dispute the proposition, paragraph 10, the second half:

This is particularly so where relevant and potentially significant documents are held by the Russian Federation or its various instrumentalities which FKP and FGUP do not themselves hold or have power to obtain, and where FKP, at least, is acting in the interests of the Russian Federation and ultimately for its benefit (as is accepted by the appellants).

That was the Russian companies. It really does, in our respectful submission, go back, as so many of the questions in this matter do, to the finding that the Russian Federation is the real plaintiff in the application for rectification of the register or transfer of the marks to FKP. Your Honours know that the mark is Stolichnaya vodka. There are other marks but it is principally Stolichnaya vodka.

GUMMOW J: Is it a word mark or device mark as well?

MR COBDEN: Your Honour, my learned friend, Mr Flynn, will find them. It includes the word “Stolichnaya”. It includes a number of device marks and it includes some label marks for other words, “Stoli”, “Stolichnaya”, “Ohranj” and “Moskovskaya” and the like, but there is a word mark, Stolichnaya. It is not surprising, with great respect, that finding is made that FKP and FGUP do not have the documents because FKP, which is the principal party seeking the marks be transferred, the first respondent, was created in April 2002. FGUP was created in April 2001, yet the events to be examined in this case all took place in 1992 upon the dissolution of the former Soviet Union and around that time the creation of the Russian Federation. So the first proposition, we say, that is critical and permeates the entire application for special leave is the finding that the Russian Federation is the real plaintiff.

Our next question, we say, that arises is the Russian Federation or any real plaintiff should not be able to obtain the benefits of being a plaintiff without undertaking the obligations of being a plaintiff. That is to say, given discovery especially, it should not be able to claim those benefits by the device that has been used here. Just interpolating there, your Honours know that the device here is to appoint FKP as an agent to recover the rights to the Australian marks. FKP does not claim any right itself other than an annually renewable mandate to go about recovering the marks on behalf of the Russian Federation. It is really a bailiff for recovery of the marks. If you ask yourself, if the bailiff turns up to the property, is the bailiff likely to have documents in his or her possession that go to the title to the property? Very unlikely. They are under an order to go out and get the marks and get them back or get the property and get it back.

We say that if the Russian Federation had sued in its own name – and we say that being the real plaintiff is as good as that – then no question of sovereign immunity, which your Honours see has dominated the particular thinking of the Full Court, would arise because if it turned up itself as a plaintiff, the Foreign States Immunities Act would bite and we say what in effect the Full Court has done here is to impose a requirement or impose a condition relating to the Russian Federation’s sovereign immunity judicially where it would not enjoy it had it been the plaintiff on the record, the paper plaintiff as well as being the real plaintiff - - -

GUMMOW J: One thing I do not understand in all of this. They are Australian registered trademarks, are they not?

MR COBDEN: Yes, your Honour.

GUMMOW J: Who is the registered proprietor?

MR COBDEN: We are.

GUMMOW J: What is this statement about ownership of the marks? What is being spoken of?

MR COBDEN: Your Honour, I will take your Honour to the history. In 1992 the marks were registered around the world, including in Russia and in Australia, in the name of an entity called Sojuzplodoimport - - -

GUMMOW J: Yes, I know, but, look, you have got a registered proprietor. What do you mean when you are talking about somebody else is the owner?

MR COBDEN: They say they are the owner in two ways, your Honour. They say they are the true owner - - -

GUMMOW J: They are entitled to get some relief in the register, are they?

MR COBDEN: Yes, rectification.

GUMMOW J: What?

MR COBDEN: They seek a declaration that they are entitled to ownership. That seems to be the general law. Then they seek an order that the register - - -

GUMMOW J: I am glad I will not be trying that question framed that way. Yes, go on.

MR COBDEN: An order that the register be rectified by recording them as the registered owner in place of us.

GUMMOW J: Yes, I understand that.

MR COBDEN: Or, alternatively, an order that the register be rectified by cancelling our registrations. Now, the reason that they are here, although we put this in issue – presumably we accept it is an arguable case – is that they do not have to have a vested right in the traditional sense. They have to be an aggrieved person or person aggrieved. Now, as an annual holder of a warrant to seek to recover the marks for the purpose of licensing, we can see there is an arguable case they are a person aggrieved, but it does not mean they are the true owner of the mark or the real plaintiff in the case. That is why, perhaps, it is a little - - -

GUMMOW J: Well, I think the sooner you people get rid of this notion of true owner in this litigation it will be better for everyone.

MR COBDEN: We resist it, your Honour, of course.

GUMMOW J: Yes, all right.

MR COBDEN: We say we are on the register and that is the end of it.

GUMMOW J: Well, it is not necessarily the end of it at all.

MR COBDEN: Quite so, your Honour. What we say flows from the three propositions - - -

GUMMOW J: The question is, is there some ground flowing from the statute which entitles a change in the register or calls for a change in the register?

MR COBDEN: Yes, your Honour. But, for example, a proprietorship ground - - -

GUMMOW J: We are not talking about common law marks.

MR COBDEN: No, we are not talking about common law marks. The grounds of rectification, section 88, are exclusive, of course. These marks could not have been opposed anyway under the 1995 Act so many of them may well go away, but as to the question of – your Honour knows that one of the grounds of rectification is that we are not the true owner of the mark or true proprietor of the original mark. Now, for somebody who is claiming that they are the true owner and we are holding it for their benefit, it is a curious fight to be having that the marks are able to be expunged under section 58 of the Trademarks Act, but that is the fight that is on the papers - - -

GUMMOW J: Anyhow, that is the framework of the litigation?

MR COBDEN: It is, your Honour. We say that what flows from the Russian Federation being the real plaintiff and a view that it should not be able to hide behind not being the paper plaintiff or the nominal plaintiff, not being able to claim sovereign immunity, had it sued in its own name, that what follows from that is that an order of the type made in Willis v Baddeley, which is the order that his Honour Justice Edmonds made here, is the appropriate order, that is to say, that unless the Russian Federation gives discovery, the proceedings should be stayed.

GUMMOW J: What is the force of this decision of Arhill 23 NSWLR 545 referred to at paragraph 23 on page 44?

MR COBDEN: Yes, your Honour.

GUMMOW J: What does that say?

MR COBDEN: Your Honour, that says that in a case where a subpoena – it is in our volume of cases, your Honour - - -

GUMMOW J: Just tell me.

MR COBDEN: Yes, your Honour. It is a case that said that where there was a subpoena issued to somebody who again was the real plaintiff, which was a Japanese third party but not the Japanese state, that the subpoena – there was an intervention assisted by the Solicitor-General of New South Wales who said – this is at page 554 of the judgment – that it is inappropriate to grant that leave immediately because it would be an intrusion on the Japanese state to seek to compel a third party who was not a party on the record to produce documents and also there was a question of impotence, that is to say, there was no sanction for the failure for them to comply with the subpoena.

GUMMOW J: What is the force of the menace in the statement “the Court has power to ensure”? What is being talked about?

MR COBDEN: Yes, because in Arhill, Mr Justice Rogers said, having held that he had to revoke the leave to issue the subpoena to the third party, foreign company which was in Japan – it is a little confusing. They are referred to in the judgment as just Japan which makes it look like it is the state of Japan. It is not – that it would be intolerable if the third party was not compelled to produce documents one way or another and his Honour said, “In the particular circumstances of this case the court may not be entirely powerless” because if they will not accept service of subpoena voluntarily – that is the third party company in Japan – then his Honour would consider as a second step making the sort of order made here, which is the Willis v Baddeley order. He really broke it into two steps.

We say that in the circumstances of the present case where there is such clear statements in the courts below that FKP and FGUP did not have the relevant documents, the Russian Federation was likely to, that a two-step process would be futile and not a.....way to manage a case. Your Honours know that although we were the applicant below, we never made any claim against the Russian respondents. We started our case against Ms Bowne’s client, Diageo Australia. One part of the case relates to the get up of a drink called Stoli Lemon Ruski. That is nothing to do with what is before the Court today. The other part was we had assigned to them as our distributor the marks for a limited period of time on the basis there would be assigned back to us at the end of the distribution deal. There was some equivocation when we asked them to confirm that they would do that. Indeed, we thought that they were saying that they would not, so we brought the action for an order or a declaration that they had to and an order to make sure they did about six months later.

FKP and FGUP came along at an early directions hearing and asked to be joined as respondents. Over our protests, FKP was joined as a respondent. FGUP was not. There was not a single paragraph in our statement of claim that made any claim against them. There is not still. We do not seek any orders against them in our application but they were joined as a respondent and, as a respondent, then they brought the cross-claim against us, which is why we say that in truth they do have the character of a plaintiff. Whoever the Russian parties are, they came here of their own accord to seek the assistance of the Federal Court. Once you do that, step in and seek the assistance of the Federal Court in effect as a plaintiff, it is our submission that you should take what goes with that and that is to say in some way, the obligation of discovery.

Now, if the Russian plaintiff is the real plaintiff, then we say it should give discovery and there should not be any nonsense about it and no two-step process. They should just give discovery. The critical answer against us the Full Court gave to that proposition was that, accepting, we say, that it was a real plaintiff and accepting, perhaps in that paragraph your Honour just looked at, that a real plaintiff should ultimately get discovery because it would be unfair if it did not, the next question that arose was where the real plaintiff is a foreign state does some special consideration arise? Now, we say that there is a step in that line of territory which first asks the question, if for the moment you treat the real plaintiff as a third party, then is the fact that the real plaintiff is in a foreign place, does that bring in issue the comity?” Yes, it does, because we generally do not go requiring third parties in foreign jurisdictions to submit to coercive processes unless we ask the foreign state in some formal way first because dealing with somebody who is under their umbrella is thought to be a breach of comity.

But a different answer to the question arises, we say, if the third party, the real plaintiff treated as a third party, is the foreign state, because if the foreign state were the true plaintiff in the sense that it was not only the plaintiff with the interest but had put itself on the record, then the Foreign States Immunities Act would make it absolutely clear that all questions of immunity, comity, et cetera, would go away. What we say really is the Full Federal Court’s error is that it has brought in by way of judicial imposition onto the notion of real plaintiff the notion of comity and immunity which would not apply were the Russian state the real plaintiff in its own name. The error that we point to in the Full Court is – their Honours say it is an error of principle, not a matter of discretion. At page 41 of the application book where we say the error arises, having looked at all of those materials and background and the question of the Willis v Baddeley proposition, bottom of page 40, at the top of page 41 their Honours as a joint judgment of the court say:

However, the issue of the appropriateness of the order complained of does not depend upon a resolution of these arguments, but upon different and broader considerations.

That is where their Honours depart into new territory, we say:

Even assuming, in favour of the appellants, that both FKP and FGUP are legal entities –

et cetera. Then there is a bit in our favour –

This is particularly so where relevant and potentially significant documents are held by the Russian Federation –

Paragraph 11, the number may have just disappeared off the margin there:

The question of power no longer being in question –

It was part of the appeal but abandoned at the beginning of the appeal –

the only remaining issue is that of discretion.

One says this is a discretionary case. What are we doing here? We go on to see that then:

Normally an appellate court will not interfere in the exercise of discretion –

That is our way, that the Full Court would not ordinarily have done it, and –

very hesitant about interfering with decisions made in the course of a judge’s management of a case in his or her docket.

That is the end of 11. Paragraph 12:

a significant factor for consideration was the potential impact of the proposed order upon the Russian Federation –

Then the second half of 13:

In considering, however, whether there was an error of principle in making the order, its effect must be looked at to see whether appropriate regard has been paid to international comity and to whether the order involves an inappropriate intrusion upon the sovereignty of a foreign state.

There at the foot of page 41:

It is in these respects that we are persuaded that his Honour made an error of principle. His Honour was undoubtedly concerned about the invasion of the sovereignty –

et cetera. We say that it is not his Honour who made the error of principle, with great respect, it is the Full Court by introducing a principle which is, in effect, this, that before you can engage in even the most indirect attempt to get documents from a foreign state or your plaintiff like the Russian Federation, you must first take a step, albeit formal, albeit that it may not work, of asking them to give something called voluntary discovery.

HEYDON J: Mr Cobden, is there not something peculiar about the order on page 15? Is it not strange to order a stay, which is a very extreme remedy, unless a condition is satisfied which depends on future agreement or future determination by the court? Your complaint is that it was wrong of the Full Court to, in effect, say to you negotiate, negotiate, if you have to negotiate under the order anyway.

MR COBDEN: We do, your Honour. We were concerned about that very point before Justice Edmonds. We said we would like to have the categories dealt with before the order is made and the Russian respondents said, “No, we want an order in a form from which we can appeal and so we would like the order to be made in that form without having spent the time on debating the discovery categories so that we have a question crisply formulated for an appeal to the Full Court”. So it was formulated in that way, your Honour, in order – I am sorry.

HEYDON J: The crispness is a question of opinion.

MR COBDEN: It is, your Honour, but it was not at our doing. I know that is not going to make a difference to this Court ultimately in some ways, but we said – my learned friend, Mr Catterns, who then appeared for the Russian respondents said – and it is as page 182 of the application book, the transcript before Justice Edmonds:

it seems to us, with respect, that it’s silly to have an argument that might take a whole day of your Honour’s time arguing about categories that might turn out to be futile.

They wanted a vehicle for appeal. There are other references. Over the page at 183 at line 19 I said:

The only concern I have, your Honour, is not one of my own but one I’ve imagined a Full Court might have –

perhaps I could have added another court –

which is that an order in that form . . . is, in effect, an indeterminant order that will self execute, in effect, because there are two ingredients in that order.

That what his Honour changed a little bit to make it firmer. It is a vehicle created to be sufficiently certain between the parties so as to raise the question, and in particular what the Full Court now identifies as the question of principle.

GUMMOW J: Now, what is going to happen if the Full Court judgment stands in the conduct of the litigation? How will this be taken forward, these questions of discovery?

MR COBDEN: We would have to see what – I think the Full Court’s approach – have to see what discovery is given by FKP and FGUP, that is despite findings by the Full Court and the primary judge that they are not going to give us anything, and then consider what further application would be made which would either be this application all over again. One could, of course, plainly interpolate that - - -

GUMMOW J: By what process will the Russian Federation be invited to give discovery?

MR COBDEN: One could write to them. We do not really understand what the concept of voluntary discovery is, but presumably we would write to them and say, “Your case against us is that there was some shenanigans in 1992 involving corruption, et cetera. Our answer to that is there was not but there may have been later. Could you, the Russian Federation, please give us voluntarily documents that go to those issues?” Our submission is that it is an unrealistic process. The other thing that is said against us is we
have not asked the Russian Federation yet. We say in truth we have. If you accept that the Russian Federation is the real plaintiff, then the first and second respondents here are its eyes and ears.

GUMMOW J: How is that issue ever going to be tried as to the identity of the “real” plaintiff?

MR COBDEN: There is a great deal of material. Justice Edmonds set it out. It is not just the dates, your Honour. There is a lot of material that Justice Edmonds summarises at paragraphs 18 and 19, page 8 of the application book, those are his Honour’s findings. There was a significant amount of affidavit material.

GUMMOW J: Anyway, there is a finding by his Honour to that effect at paragraph 18.

MR COBDEN: There is, your Honour, yes.

GUMMOW J: Has that finding been disturbed?

MR COBDEN: We say not. No, your Honour. The Full Court having looked at the error of principle I have just referred to said at application book 44, paragraph 24, “we see no other error” of principle.

GUMMOW J: I see. Yes, thank you, Mr Cobden. Yes, Mr Gleeson.

MR GLEESON: Your Honours, there are three or four factual errors in what Mr Cobden has put. Can I deal with those first. Firstly, he submitted to you he has a finding that the first and second respondents do not have any documents within the categories. That is a misreading of page 8 of the application book. At about line 15 the trial judge said, “save, of course, to the extent that copies of such documents are actually held in the files of” the first and second respondents. So there has been no finding, we do not have documents.

Related to that and the second matter, your Honours, is in terms of the actual orders made at the moment. On page 15 we have the order staying our cross-claim. On page 16 we have the inter partes discovery orders which were made over a year ago and both parties are overdue in providing their discovery. There are many categories of discovery which are found at pages 17 and following. So that one critical matter that still needs to occur in this matter in the Federal Court is for the parties to provide their discovery. At the end of that process one will be able to see whether there are gaps or deficiencies.

GUMMOW J: So you say that is the next thing to be done really?

MR GLEESON: There are two things to be done. That is one. The parties should meet their obligations. They are obviously taking time. There is a reason. The documents are in Russia. The documents will be forthcoming on both sides. So that should be done. The next thing is, if they really want the Russian Federation’s documents, they have still not taken up the invitation of the Full Court at page 44, line 25, which is to make a request.

GUMMOW J: Request to whom?

MR GLEESON: They would direct it to the entity they call the Russian Federation and presumably say, “Here is our litigation, here is our need for documents. Can you tell us whether you will give us anything voluntarily? If you will not, can you tell us what difficulties there may be by reason of practice or immunity or privilege in Russia in producing documents?” At the end of that - - -

GUMMOW J: How is this communication made? Through the diplomatic representatives in this country or what?

MR GLEESON: The short point is they have not chosen to take any steps to make it whether by what your Honours suggests or whether by - - -

GUMMOW J: I am not suggesting anything. I am just wondering whether the legal practitioners have turned their minds to these questions of diplomatic practice.

MR GLEESON: The short answer is they have not, because they say they do not want to make the request, they just want to rely upon the current order. Now, the final error of fact that I wanted to refer to was Mr Cobden said that the finding of real plaintiff was undisturbed by the Full Court. That is not correct. What in fact happened was the Full Court did not deal with our argument on that point. That is clear from the bottom of page 40 at paragraph 9, “There was much argument” on the question. Then over on page 41:

However, the issue of the appropriateness of the order complained of does not depend upon a resolution of these arguments –

That is clear again on page 43 at about line 15:

Whether or not the Russian Federation was the ‘real’ party . . . the order made clearly intrudes upon the sovereignty –

So what has in fact happened here is no more than this. The Full Court has taken an approach to power which is most favourable to the applicant. They have said, whatever be the degree of connection between the foreign state and the named parties, whether it be real plaintiff within Willis v Baddeley or something looser, section 23 is broad enough to make this sort of order but, as a matter of discretion, before we make an order intruding on the sovereignty of a foreign state, one should consider whether there are less invasive means of doing justice between the parties to the case. We submit there is no error of law in taking that approach. Those are our submissions, your Honour.

GUMMOW J: Thank you. Yes, Mr Cobden.

MR COBDEN: Your Honour, the reference to the likelihood of the important document not being in FKP and FGUP’s possession is at paragraph 10 of the Full Court on page 41. Inter partes discovery is certainly in the state that Mr Gleeson described. The Full Court is saying that we – what my learned friend describes as the invitation of the Full Court to ask the Russian Federation. Of course, the question was we did not ask them before we went before Justice Edmonds but, your Honour, the Full Court says that the invitation should have been issued because caution is required. That is at page 44, line 29. That “caution” is the caution their Honours referred to about the foreign state immunity caution, which we say is already answered and when we said the real plaintiff, I think I agreed the real plaintiff finding was not disturbed by the Full Court. They left it in precisely the way Mr Gleeson pointed out.

In our respectful submission, there is an important question of principle here and that is to say there is a real plaintiff of this kind. Whether one should proceed, as it were, straight to getting the means, the two-step means in Arhill, are seeking discovery from them directly. May it please the Court.

GUMMOW J: We will take a short adjournment.

AT 10.34 AM SHORT ADJOURNMENT

UPON RESUMING AT 10.37 AM:

GUMMOW J: Given the state of the preparation of this case, including the outstanding orders for discovery which appear in the application book at page 16 and the statement made by the Full Court in paragraph 22 of its reasons, it will be premature for this Court now to enter upon a consideration of the questions of general principle said to arise. Accordingly, special leave is refused and the applicant will pay the costs of the first and second respondents.

MR COBDEN: May it please the Court.

GUMMOW J: We will adjourn to reconstitute.

AT 10.38 AM THE MATTER WAS CONCLUDED