Federal Court Orders Injunction Against Similar Business Names

OUTCOME: Allowed

FEDERAL COURT OF AUSTRALIA

TRADE PRACTICES - Misleading or deceptive conduct - Passing off - Whether name no longer used but still associated with [NAME] can be subject of passing off - Use of business name which had acquired reputation - Whether reputation continued after change in name - Whether business name descriptive or distinctive - Whether need for compelling and substantial evidence of likelihood of confusion when name can be characterised as descriptive - Effect of change in name - Whether need for evidence of substantial trading by respondents before permanent injunction granted

Trade Practices Act 1974 (Cth) ss 52, 53(c), 53(d), 75B

[COMPANY] v [NAME] [COMPANY] (1976) 12 ALR 363

[COMPANY] v Golden 44 [COMPANY] (1987) 9 IPR 12 [COMPANY] v [COMPANY] (1988) 11 IPR 269 [COMPANY] v [COMPANY] (1987) 78 ALR 171 [COMPANY] v [COMPANY] (1995) 32 IPR 43

[COMPANY] v [NAME]

VG 750 of 1996

JUDGE: NORTH J

PLACE: MELBOURNE

DATE: 11 SEPTEMBER 1997

IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) VG 750 of 1996 ) [NAME] )

BETWEEN: [COMPANY] (ACN [PHONE])

First [NAME]

[COMPANY] (ACN [PHONE])

[NAME[NAME]

AND: [NAME] (ACN [PHONE])

First Respondent

[NAME]

(ACN [PHONE])

[NAME] Respondent

JUDGE(S): NORTH J PLACE: MELBOURNE DATED: 11 SEPTEMBER 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The respondents and each of them be restrained from, whether by themselves their servants or agents or otherwise howsoever: (a) using in any way in the course of trade or commerce the name [NAME] or any other name which is substantially identical or deceptively similar to the name [NAME]; (b) passing off any business as that, or any goods or services as those of, the applicants or either of them.

2. The respondents and each of them forthwith do all such acts and things and execute all such documents as may be necessary or desirable to be done or executed in order: (a) to change or cause to be changed the name of the [NAME] respondent to a name - (i) other than the name [NAME]; and (ii) which does not include the combination of words [NAME] or any word or combination of words substantially identical or deceptively similar thereto; (b) to have the said name change registered with the Australian Securities Commission.

3. The respondents and each of them forthwith deliver up on oath to the applicants or destroy under supervision all signs, cards, advertising material, letterhead and all documents of any kind whatsoever now in the possession, custody, power or control of them or either of them bearing the name [NAME] or any other name which is substantially identical or deceptively similar to the name [NAME].

4. The question of costs is adjourned to a date to be fixed.

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

BETWEEN: [COMPANY] (ACN [PHONE])

First [NAME]

[COMPANY]

(ACN [PHONE])

[NAME[NAME]

AND: [NAME]

(ACN [PHONE])

First Respondent

[NAME]

(ACN [PHONE])

[NAME] Respondent

JUDGE(S): NORTH J PLACE: MELBOURNE DATED: 11 SEPTEMBER 1997

REASONS FOR

JUDGMENT HIS HONOUR: This application is brought under ss 52 and 53(c) and (d) of the Trade Practices Act 1974 (Cth), and in reliance on the common law tort of passing off. The applicants claim that they are well known as "[NAME]" and have established a reputation over many years by reference to that name. Their complaint against the respondents concerns the use by the [NAME] respondent of the words "[NAME]" in its name. The name of the first [NAME] was [APPELLANT], from 13 July 1979 until 16 November 1995, and the name of the [NAME[NAME] was [APPELLANT], from 2 March 1933 until 31 May 1996. The [NAME] respondent changed its name from [NAME] to [NAME] on 7 May 1996. There was no dispute that the applicants were very well known as [NAME] until 31 May 1996, by which date both applicants had changed their names to delete reference to [NAME]. The evidence on this issue was overwhelming. As there was no dispute about it, I will sketch some of it only in the barest outline for the purpose of giving an understanding of other issues raised in the case. The [NAME[NAME] began as a [COMPANY] in Western Australia in 1933. In the 1950s it diversified into other metals and significantly expanded in size, range and geographical spread of operations to become a significant producer and exporter of processed minerals and metals. It is one of the world's largest nickel producers and one of Australia's largest gold producers. It has extensive interests in copper and uranium mining. The first [NAME] was incorporated as a proprietary company in 1970 under the name of [COMPANY]. It became a [COMPANY] in 1979 and changed its name to [COMPANY] on 13 July 1979. It has a 40 per cent interest in [NAME], which is the world's largest producer of bauxite, alumina and alumina-based chemicals, and one of Australia's major producers of aluminium. It carries out very extensive mining, prospecting and mineral exploration activities throughout Australia and overseas. It has approximately 92,000 shareholders. The applicants have 7,225 employees, including contractors working for them. As at 30 June 1996, the first [NAME] had equity accounted assets of $6,982 million, with parent shareholders' equity of $4,168 million. The first [NAME]'s sales revenue in 1995-96 was $2,350 million. If the beneficial interest of the first [NAME] in [NAME] were included, the sales revenue for 1995-96 would be $3,864 million. In 1996, the [NAME] listed the first [NAME] as the thirteenth-ranked company in Australasia as measured by market capitalisation. The first [NAME] was rated by [NAME] in 1993 as the twelfth-ranked Australian exporter for the year ended December 1992. The first [NAME] has regularly received a very high credit rating by the credit rating agencies [NAME] and [NAME]. Given the size and scope of the applicants' operations, it is not surprising that they were often the subject of reports in newspapers, industry publications, the financial press, radio and television. There was evidence before the Court of very many references in the media to the applicants as "[NAME]". The respondents did not concede that the applicants maintained their reputation by reference to the description "[NAME]" after the [NAME[NAME] changed its name in May 1996. In response, the applicants tendered Australian and international press articles published, and videotapes of Australian television news and current affairs programmes screened, after May 1996, which referred to the applicants as "[NAME]". A number of senior managers of the applicants swore affidavits in which they said that, in business dealings since the name changes, the applicants have continued to be known as "[NAME]". There is abundant evidence which establishes that the applicants have been referred to many times after May 1996 in the media by reference to the description "[NAME]". The respondents contended that the name "[NAME]" is descriptive of an activity undertaken at a geographical location and is not a name which is inherently distinctive. When a name is inherently distinctive, it will not be difficult for an [NAME] to demonstrate that use by another would mislead persons to conclude that there is a connection between the user and the [NAME]. But where a name is descriptive, it was contended, it is more difficult for the [NAME] to show that use of the name is misleading or deceptive, or carries an association with the [NAME]. The respondents accepted that a descriptive name could become distinctive. As [NAME[NAME] (as he then was) said in [COMPANY] v [NAME] [COMPANY] (1976) 12 ALR 363, at 369, in relation to a passing off claim: "However, it is clear law that a name composed of descriptive words may become distinctive of the business of a particular person, and if a plaintiff shows that the name in fact distinguishes his business and that the use of the name by the defendant is calculated to deceive persons into supposing that the business carried on by the defendant is that of the plaintiff, and is likely to cause damage to the plaintiff's business, he will be entitled to relief". Rather, the respondents contended that, when a name can be characterised as descriptive, it is necessary for the applicants to provide compelling and substantial evidence of the likelihood of confusion. In [COMPANY] v [COMPANY] (1987) 9 IPR 12, [NAME], at 15 & 16, approached the issue thus: "I think that '[NAME]' is just as descriptive as, for example, 'cellular' applied to a particular sort of cloth. There is an onus in such a case on the [NAME] to establish his right to exclusive use of the description of such a business by satisfying the test referred to - ie, to quote again from the [NAME] case, by showing that the name has 'become distinctive of the business of a particular person' ...... Having chosen a merely descriptive name, the [NAME] must show that its name has come, in the course of time, to acquire 'a secondary meaning so as to indicate a particular trade source': [NAME], The Law of Intellectual Property, p 541. Here, in my view, it is quite unlikely that the name '[NAME]' has acquired such a meaning, in the community generally." It is more accurate to approach the question, as [NAME] did, by asking whether the name has become distinctive, rather than to approach it as a quantitative assessment of evidence, as was urged by the respondents. In my view, the evidence in this case established that "[NAME]" has become a distinctive description of the applicants' business. The applicants are leading companies in the mining industry, and have been so for many years. Throughout those years they have been referred to in the media on many occasions as "[NAME]". The result is that people associate the name "[NAME]" with the applicants' business. For example, [NAME] [RESPONDENT], a stockbroker since 1957, who became chief executive of [NAME], [NAME], in 1990 and chairman in 1995, deposed that he has known the applicants for many years as "[NAME]" and, if he saw another company with a name incorporating those words, he would automatically assume that the company was associated with the applicants. Furthermore, there is evidence that customers, suppliers and government authorities also associate the name "[NAME]" with the applicants. It is impossible, in the light of all the evidence in this case, to find that people dealing with the [NAME] respondent would view the words "[NAME]" in its name as only indicating that the company operated mining enterprises in Western Australia without any association with the applicants. Counsel for the respondents then contended that the applicants had abandoned the use of the name "[NAME]" and could not, therefore, obtain relief. It is convenient, first, to consider whether the [NAME]'s name changes are an answer to the cause of action under s 52 of the Trade Practices Act. A similar situation arose in [COMPANY] v [COMPANY] (1988) 11 IPR 269. In 1985, [COMPANY] ([COMPANY]) purchased from [COMPANY] ([NAME]) a business of manufacturing, distributing and selling glass. The business had been operating under the name "[NAME]" and was well known to be associated with [NAME] and previous owners of the business. [COMPANY] did not continue to carry on business under the name but continued operating a glass business from premises previously occupied by [NAME]. [COMPANY] was a processor and distributor of glass. In late 1987, it commenced using the name "[NAME]" in the course of its business. Lockhart J granted an injunction to prevent the continued use of the name and said, in relation to the claims under the Trade Practices Act, at 276-7: "The names [NAME] and [NAME] are old and well known names in the glass industry in this country and more recently their combined form of '[NAME]' has also become well known to persons engaged at all relevant levels in the glass industry in various states and territories throughout Australia and the [NAME] public. ....

[NAME] has since before the end of August 1987 carried on business as a processor and distributor of glass and glass products under the name '[NAME]'. The very name, and the combination of names within it, must inevitably be associated in the mind of the public and the trade with the businesses previously carried on under the name of [NAME] or [COMPANY] and more recently under the name [NAME]. ....

.... The use by [NAME] of the very name '[NAME]' has misled and will continue to mislead and deceive the public into believing that, when dealing with [NAME], they are in fact dealing with the company or companies that previously carried on business under that name or some variation thereof. ....

The conduct of [NAME] plainly to my mind contravenes s 52 of the Trade Practices Act. It also contravenes certain provisions of s 53. [NAME] is falsely representing to the public that its goods have the sponsorship and approval of and an affiliation with [COMPANY] or [NAME] and that [NAME] has an affiliation with the businesses previously carried on by those who from time to time have been entitled to use the words '[NAME]' or '[NAME]' or '[NAME]' or some variation thereof. Thus sub‑ss 53(c) and (d) have been contravened.

The name '[NAME]' has not been used by [COMPANY] since it acquired the business from [NAME] in 1985. Even if it was intended by [COMPANY] when it made the acquisition not to use the name when it acquired it, it does not alter the fact that members of the trade and the [NAME] public are being misled and deceived by the conduct of [NAME]. It is, of course, the interests of the public with which the section is concerned. It is well established that any person may bring proceedings to restrain a contravention of Pt V of the Trade Practices Act. The [NAME]'s standing is derived from the fact that his application secures the public interest of consumer protection. It is irrelevant whether any interest of his own is affected or not". Another relevant case is [COMPANY] v [COMPANY] (1987) 78 ALR 171. [COMPANY] was a subsidiary of [COMPANY]. It was a well known [NAME], specialising in the sale of rural properties. [COMPANY] agreed to sell the business to [COMPANY]. This was achieved by transferring the business to another company which changed its name to "[COMPANY]", and [COMPANY] acquiring the shares in that company from [COMPANY]. That company was sold to [COMPANY] in 1981. It did not trade but simply held property. [COMPANY] did not use the name "[COMPANY]" thereafter. [APPELLANT] was the [NAME[NAME]. It was purchased in 1982 by [APPELLANT], the first [NAME]. [APPELLANT] did not use the name "[APPELLANT]" for an operating business. In early 1985, the respondent changed its name to [RESPONDENT]. In mid 1985, the respondent began advertising as "a leading business broker". [NAME[NAME] rejected the claims for an injunction for passing off because the applicants had never traded under the name "[COMPANY]" and did not intend to do so. He then said, at 178: "A different conclusion follows, however, with respect to the claim under s 52 of the Trade Practices Act. The relationship between the obligations created by the law of passing off and those arising under that section are still rather unclear, but it is now accepted that the two are not by any means necessarily co‑terminous. On the findings I have made, the conduct of the respondent must be held likely to mislead; members of the business community who are aware that the old and well-known [NAME] has been absorbed by the first [NAME] may well assume that a business currently advertising as [COMPANY] is in some way connected with or descended from the old [NAME]. From that it appears to follow that those who are aware the first [NAME] has absorbed that [NAME] may well assume that there is a connection between the present [APPELLANT] and the first [NAME]. The probability of the [NAME] step being taken is obviously less than the probability of the first being taken, but is nevertheless substantial enough, in my opinion, to entitle the first [NAME] to relief. The [NAME[NAME], however, is a company which has never traded and is not entitled to succeed under the [NAME] law or under the Trade Practices Act." As I have found, the applicants are well known by reference to the description "[NAME]". The use by others of that description will, or will be likely to, mislead people to conclude that those others are associated with the applicants. The fact that the applicants have decided to no longer use the name "[NAME]" does not prevent the respondents from contravening s 52 of the Trade Practices Act. Counsel for the respondents also contended that the applicants' decision to change their names was a barrier to success in the passing off claim. The law of passing off has moved from the concern with the protection of a person's goods or services, to broader concerns, including the protection of trading names which have become particularly associated with a particular trader. This movement is described by [NAME[NAME] in [NAME], at 175-7. He said, at 176: "Consistently with the tendency I have mentioned not to require that the protected name be attached to particular goods or services, authorities are to be found in which business names have been protected during a suspension of business." In [NAME], Lockhart J reviewed some authorities on the issue. At 279-80, he said: "There are reported cases where the absence of the use of the relevant name or failure of the [NAME] for relief to continue to use the name has been fatal to success in establishing a case of passing off. [COMPANY] v [COMPANY] (1987) 10 IPR 575; [1987] ATPR 40-832 is one such case and it refers to others. They are cases which depended upon their own facts and do not bear upon the present case. Equally, there are reported cases where a failure to use the name in dispute, even over a period of some years' suspension of use, has been held not to deny relief in passing off: [COMPANY] v [NAME] Co [COMPANY] [1957] VR 104; Ad-[COMPANY] v Granville [1972] RPC 673. A case which assists the applicants, at least by analogy, is [COMPANY] v [NAME] [COMPANY] [1981] 1 NSWLR 196, where [NAME] held that the newly incorporated plaintiff could succeed in an action for passing off on the basis of an existing reputation in the jurisdiction, although it had not carried on business in the jurisdiction (at 205)." Once it is seen that passing off applies to protect an acquired reputation in a name, it is a question of fact in each case whether the reputation is so associated with the [NAME] that the use of the name by the respondent represents that the respondent has an association with the [NAME]. Little assistance is to be gained from other cases decided on their own facts. The present case is a clear one. The association of the applicants with the description "[NAME]" is of very long standing and is very well known in the community. It has subsisted until the present time. Because the applicants are currently so well known as "[NAME]", the use of that name by another is likely to signify an association with the applicants. Passing off applies to prevent the use in these circumstances notwithstanding that the applicants have decided not to use the description in the future. This conclusion recognises that a person may have a right to protect an acquired reputation by restraining use of a name associated with that person, even though that person has determined to use the name no longer. Counsel for the respondents then argued that, in three cases in which final relief was granted, [NAME], [NAME] and [COMPANY] v [COMPANY] (1995) 32 IPR 43, there was evidence of substantial trading by the respondents and that this evidence was the reason relief was granted in each case. Counsel said that such evidence was lacking in the present case and, consequently, relief should not be granted. Counsel for the applicants disputed the need for evidence of substantial, as distinct from any, trading. It is convenient to consider this issue by reference to the evidence of the respondents' activities. The [NAME] respondent was incorporated on 20 May 1993 under the name [NAME]. The directors report, made for the purposes of the Corporations Law, for the period ending June 1993 included the following: "2. Principal Activities

During the period the Company engaged in gold and mineral exploration. ......

5. Review of [COMPANY]

As this is the first period of operation, the Company is only starting to purchase tenements options ready for testing and exploration." The directors' report made for the purposes of the Corporations Law for the year ending 30 June 1994 included the following: "PRINCIPAL ACTIVITIES

The principal activity of [NAME] during the financial year was mineral exploration.

OPERATING RESULTS

The loss of [NAME] for the year ended 30 June 1994, after income tax, amounted to $7,823.

......

REVIEW OF [NAME] owns the Queen Elizabeth Prospect (EPM 9579) which comprises 75 square kilometres of ground approximately 60 kilometres northeast of Mt Isa. [COMPANY] ([COMPANY]) has a 30% interest in the tenement.

Previous work outlined inferred mineralisation of approximately 4.2 million tonnes @ 0.65% copper. The best intersection was approximately 18 metres @ 2% copper.

[NAME] has planned a programme of exploration including field checking of aeromagnetic anomalies, BLEG stream sediment sampling, soil sampling of the Queen Elizabeth structural trend, relogging and sampling for gold of 1966 dated diamond drill core and rock chip/soil sampling as appropriate.

......

[NAME] expects to continue the activities referred to in the review of operations.

It is impossible to predict the outcome of an exploration program and as such it is not feasible to comment on the expected results of exploration activities. However, depending on the outcome of the exploration programs, [NAME] may dilute its interest in tenements by joint venturing or by relinquishment." The directors' reports made for the purposes of the Corporations Law for the year ended 30 June 1995 and 30 June 1996 were in similar terms, the operating results showing losses of $32,097 and $20,139 respectively. The Review of Operations in 1995 included: "Regional exploration during the year included stream sediment sampling, review of aeromagnetic and radiometric data, and resampling of diamond drill core. Further work is planned."

The Review of Operations in 1996 repeated this and also included:

"The Company is currently considering whether further work is to be performed in relation to this project."

In the 1996 directors' report, the directors were described as follows: "DIRECTORS

[NAME] (Director and [NAME] Manager) Has 15 years experience in the mining industry covering research and development, plant design and commissioning, and operations. He has project experience in Mexico, North America, Eastern Europe and Russia, several African countries and Australia. Mr [NAME] holds a Bachelor of Science (Mineral Science) degree with 1st class honours from [COMPANY].

[NAME] (Director and Company Secretary) holds a Bachelor of Business degree and is a member of the Australian Society of Certified Practicing [sic] Accountants. He has over 10 years experience as company secretary/finance controller of public listed companies in the finance and resource industries.

[NAME] (Director) is a partner of the [NAME] and has accounting qualifications and experience in merchant banking and accountancy. He is also a director of [NAME] and [COMPANY] and holds a Bachelor of Jurisprudence degree, a Bachelor of Laws degree and a Bachelor of Commerce degree from the [COMPANY]." The first respondent holds all 100 of the 25 cent fully paid shares in the [NAME] respondent. In note 11 to the 1996 financial statements, under the heading "Parent Entity", it is stated: "(i)[NAME] provided an interest free unsecured loan to [[NAME]].

(ii) In September 1996, [NAME] resolved that it would continue to financially support [[NAME]]." From incorporation until 30 June 1996, the [NAME] respondent had incurred losses amounting to approximately $60,000. It held a joint venture agreement with [COMPANY] in respect of the exploration permit for minerals No 9579. It had a commitment of future funding support from the first respondent and a stated principal activity of mineral exploration. On 13 August 1996, the [NAME] respondent paid rent of $510.60 to the Queensland Department of Mines and Energy for the permit. However, on 8 November 1996, it wrote to [COMPANY] seeking that company's approval to surrender the exploration permit. The respondents chose to call no evidence. From the evidence called, I infer that the [NAME] respondent intends to continue its business of mineral exploration in the future. Attempted surrender of the minerals exploration permit No 9579 does not mean that the [NAME] respondent will not undertake further exploration projects with the financial support of the first respondent or with other joint venturers. In my view, the scope of the activities of the [NAME] respondent in conducting its mineral exploration business since May 1996, when it changed its name to include the words "[NAME]", was conduct which contravened s 52 of the Trade Practices Act and constituted passing off, and is sufficient to warrant some form of relief. Finally, counsel for the respondents argued that, even if contravention of s 52 of the Trade Practices Act and passing off were found, the circumstances do not justify the grant of a permanent injunction against use of the name "[NAME]". Again, counsel relied upon what he described as "low level" activity by the [NAME] respondent. As set out above, the evidence shows that the [NAME] respondent has a board of directors of experienced, professional people. Its principal activity is mineral exploration. It has consistently engaged in that activity since incorporation in May 1993. It has a recent commitment of financial support from its parent, the first respondent. The respondents have given no evidence about their future intentions. There is no reason to expect that the [NAME] respondent will not continue to conduct mineral exploration activities as it has done since incorporation. For the [NAME] respondent to so continue would be unlawful. In those circumstances, there is no reason why a permanent injunction should not be granted to restrain such contravention. It is also appropriate for the injunction to restrain the first respondent. It is the sole shareholder in the [NAME] respondent and, as such, voted to pass the resolution to change the name of the [NAME] respondent to incorporate the words "[NAME]". It was a person involved in the contravention for the purposes of s 75B of the Trade Practices Act and was party to the passing off. I will therefore grant the injunctions as sought by the applicants, in the following terms:

3. The respondents and each of them forthwith deliver up on oath to the applicants or destroy under supervision all signs, cards, advertising material, letterhead and all documents of any kind whatsoever now in the possession, custody, power or control of them or either of them bearing the name [NAME] or any other name which is substantially identical or deceptively similar to the name [NAME]. In these circumstances, there is no need to further consider the claim brought under s 53 of the Trade Practices Act. In accordance with the request of the parties, I reserve the question of costs for argument following the handing down of these reasons. I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice North

Associate: Dated: 10 September 1997 [NAME]: [APPELLANT]

[NAME]: [APPELLANT]

Counsel for the Respondent: [redacted]

[NAME]: [RESPONDENT] of Hearing: 22 & 23 May 1997

Date of Judgment: 11 September 1997