Federal Court Throws Self-Represented Litigant a Life-Line

Enviro Pak Pty Ltd v New Horticulture Pty Ltd [2013] FCA 306 (2 April 2013)
Enviro Pak Pty Ltd v New Horticulture Pty Ltd (No 2) [2013] FCA 624 (25 June 2013)

It is not common for the Federal Court of Australia to allow a corporation to be represented by a non-lawyer.  Nor is it common for the court to cede authority to an administrative decision-maker.  So when a judge of the Federal Court does both in the course of the same litigation, there is no avoiding the fact that the court is doing the beneficiary of these decisions a significant favour.

The dispute between Enviro Pak Pty Ltd and New Horticulture Pty Ltd (trading as Green Pack, which is how I shall refer to the company) relates to Australian registered design no. 304960, owned by Enviro Pak.  The registration protects the design of a corrugated paper coffee cup, which Enviro Pak claims to be unique in that the corrugations are aligned vertically, which in turn requires that the width of the corrugations increases from the bottom to the top of the cup (since the circumference of the base of the cup is smaller that that of the lip).  Notwithstanding this functional aspect of the design, it is important to keep in mind that a registered design protects only the visual appearance of the coffee cup, and not its functionality or associated benefits.

Enviro Pak is suing Green Pack, and its sole director and shareholder, for alleged infringement of the registered design.  Initially, Green Pack had legal representation, however the financial circumstances of the company appear to have resulted in termination of this representation in February 2013.  In the meantime, two applications challenging the validity of the registered design had been filed with the Designs Office at IP Australia.

While an individual (i.e. a ‘natural person’) is entitled to represent him- or herself in court, a corporation normally is not, and must be represented by a qualified legal practitioner.  Furthermore, the Designs Act 2003 is structured such that when proceedings are on-foot both in court, and at IP Australia, in relation to the same registered design, the Registrar of Designs is generally unable to proceed without permission from the court.  (The Patents Act 1990, incidentally, is similarly structured.)

This state of affairs creates potential difficulties for a party with financial limitations, once a court action has commenced.  In this case, however, the court has made exceptions for Green Pack.

Background

On 9 August 2012, Enviro Pak sued Green Pack and its sole director Joachim Koesterke in the New South Wales Registry of the Federal Court of Australia, alleging infringement of the registered design.  As you would expect (particularly given the obligation to take genuine steps to resolve a dispute before proceeding to court) there had been some correspondence between the parties beforehand, so Green Pack and Mr Koesterke were on notice of the possibility of litigation. 

On 8 August 2012, i.e. one day before the proceeding was filed with the court, Green Pack filed an application at IP Australia for revocation of the registration under sections 51 and 52 of the Designs Act 2003, on the basis that Enviro Pak is not legitimately entitled to be the owner of the registration.  Subsequently, on 6 December 2012, Green Pack filed a request at IP Australia for an examination of the design under section 63.  This request was effectively for a re-examination, since the registered design had previously been examined an certified.  There is, however, no limit to the number of times a registered design may be examined, and section 69 provides for information relevant to the validity of the design to be provided by any person, including a party who has made a request under section 63.

The Position of IP Australia

The difficulty for Green Pack in the circumstances of this case is that the power of the Registrar to deal with applications relating to registered designs is limited when a matter relating to the registration is before the court.

With regard to Green Pack’s section 51 application, subsection 52(6) stipulates that ‘the Registrar must not revoke the registration of a design under this section while relevant [court] proceedings in relation to that design are pending.’  Furthermore, with regard to its section 63 application, subsection 63(3) provides that ‘if relevant proceedings in relation to a design are pending in a court, the Registrar must not examine the design unless the court orders that the Registrar examine the design.’

IP Australia indicated on 29 November 2012 that it considered there to be a ‘plausible case’ for revocation arising from the section 51 application.  Furthermore, while subsection 52(6) prohibits actual revocation of the registration while court proceedings are pending, it does not prevent IP Australia from determining whether or not, in the Registrar’s opinion, the registration should be revoked. IP Australia thus also indicated that it would proceed with its enquiries (presumably involving the usual rounds of evidence, and ultimately a hearing on the matter).

However, subsection 63(3) is more limiting, and prevents any progress on an examination in the absence of an order by the court.  The purpose of this is, of course, to prevent the potential waste of resources which may occur if parallel proceedings take place at IP Australia and in court in relation to the same questions of validity. 

The Court’s Position

It is appropriate that the court have primacy in such circumstances for at least three reasons.  Firstly, the court has greater power to direct the course of proceedings, to make wider enquiries, and to issue legally-binding orders.  Secondly, the court applies higher standards in relation to the admission of evidence, at least one consequence of which is that if IP Australia were to make a decision based on evidence that would not be admissible in court, it is likely that the decision would be overturned on appeal anyway.  Thirdly, in the event that a different outcome were to result from proceedings in IP Australia and before the court, it is clear that the court’s decision would stand.

Additionally, where proceedings at IP Australia are to go ahead, it would normally be necessary, as requested by Green Pack in this case, for the court proceedings to be stayed pending the administrative decision.  A number of factors generally weigh against a stay of proceedings, including the desire and obligation of the court to resolve disputes as quickly and efficiently as possible, to manage its resources and workload effectively, and not to interfere with the general entitlement of a plaintiff to have its action tried in the ordinary course of the court’s business, without undue interference.

In this case, the court determined that it would be appropriate, in all of the circumstances, to order IP Australia to proceed with the examination, and to allow the inquiry into the entitlement issue to be concluded, with the court proceedings being stayed in the meantime.  The main considerations and reasons given were (at [29]-[36] of the No 2 decision):

1. there is substantial overlap between the matters to be decided by IP Australia, and grounds of invalidity raised in the court proceedings;
2. the right of a plaintiff to have its action tried in the ordinary course of the court’s business is not absolute, and the Designs Act clearly contemplates that there may be circumstances in which it is appropriate for the court to order IP Australia to proceed with examination;
3. costs of the proceedings before IP Australia are likely to be lower than costs of litigation, there is some prospect that the dispute could be resolved by IP Australia’s decisions, the entitlement inquiry before IP Australia is already relatively advanced, while examination is subject to strict time constraints, and in any event there is a right of appeal to the court if either party is dissatisfied with the outcome;
4. while there are legitimate concerns that IP Australia may consider evidence which may not be admissible in court, the Registrar is obliged to provide procedural fairness, and is perfectly capable of determining how much weight should be given to particular evidence; and
5. there is no abuse of process in Green Pack’s desire to have the issues heard at lower cost by IP Australia, if it is possible to do so.

Self-Representation

Rule 4.01 of the Federal Court Rules 2011 specifies that:

(1) A person may be represented in the Court by a lawyer or may be unrepresented.
(2) A corporation must not proceed in the Court other than by a lawyer.

Corporations are regarded as ‘persons’ for many purposes, including the ability to sue or be sued.  However, there are many things that people can do that corporations cannot, such as breathing, eating, walking, talking, and appearing on their own behalf in the Federal Court!  A corporation generally exists for the mutual benefit of its owners, or shareholders, and has interests which generally need not be aligned with those of any one of those owners.  There is, therefore, typically no actual person who could appear before the court in the shoes of the corporation, as it were.

A lawyer, by contrast, is an independent professional who has a legal and ethical obligation to act in the interests of his or her client, regardless of whether that be a natural person or a corporate person.

On the other hand, Rule 1.34 of the Federal Court Rules provides that ‘the Court may dispense with compliance with any of these Rules, either before or after the occasion for compliance arises.’  Which effectively means that the Rules apply, except when the court says that they do not!

In the Enviro Pak proceedings, Mr Koesterke was already representing himself, after being no longer able to afford legal representation.  He applied to the court, on behalf of Green Pack, for an order permitting him also to represent the corporation.

In this case, the court determined that it would be appropriate to exercise its discretion under Rule 1.34 to waive the prohibition in Rule 4.01(2).  The main considerations and reasons given were (at [20]-[26] of the No 1 decision):

1. Green Pack was clearly in financial difficulty, and would find it a challenge to engage and continue to pay legal representatives;
2. Mr Koesterke is the sole director and sole shareholder of the corporation and, by any objective assessment, the real force behind Green Pack, such that his interests and those of the corporation are wholly aligned;
3. Enviro Pac had already made the considered decision to join Mr Koesterke as a respondent, along with Green Pack, in the proceedings, and thus would in any event have to deal with the consequences of his decision to represent himself;
4. despite his lack of litigation experience, the court had found Mr Koesterke to be capable of presenting an argument coherently and succinctly, and had not formed any adverse view that his involvement would unduly prolong the proceeding; and
5. the proceeding is well-advanced, with the pleadings having been settled by lawyers, and much of the evidence having already been filed, leaving considerably less procedural work for Mr Koesterke to deal with in the absence of legal representation.

Conclusion

As I noted at the outset, the orders made by the court in this case are unusual.  Ordinarily, a litigant should not expect that they would be successful in having issues of the validity of a registered design – or of a patent, to which similar considerations and legislative provision apply – decided by IP Australia in advance of any consideration by the Federal Court.  Furthermore, a corporation should not expect that it would be permitted to be represented by a person who is not a lawyer.

The court appears to have been particularly swayed in this instance by the specific circumstances of the respondents, including the personal circumstances of Mr Koesterke.  Reading a little between the lines of the two decisions, it seems that the court’s sympathies were aroused by a number of factors, including that:

1. Mr Koesterke and Green Pack find themselves in financial difficulties, which are only being exacerbated by the necessity to defend the action brought by Enviro Pac; and
2. it was Enviro Pac’s own choice to sue both Green Pack and Mr Koesterke, and as a result it now has to face a self-represented respondent whether or not he is also permitted to represent his company.

Had Green Pack and Mr Koesterke been the instigators of litigation, rather than the respondents, it is unlikely that the court would be so generous.  It is one thing to assist someone who is struggling to defend themself, but quite another to make exceptions on behalf of a party who commences litigation, presumably in the knowledge that they cannot afford to do so!

Tags: Designs, Federal Court practice, Litigation, Stay of proceedings