* 176 CATCHWORDS TRADE PRACTICES - Application for interlocutory order to compel change of corporate name ~- Adoption and retention by respondent of name suggesting relationship with another company - Respondent not trading - Whether mere retention by company of its name constitutes misleading conduct in trade or commerce - Whether negotiations for sale of right to name constitute trade or commerce - Power of Court to make appropriate order when it appears that respondent "is proposing to engage" in misleading conduct - Effect of failure by respondent to give undertaking not to engage in trade or commerce under its present name. Trade Practices Act 1974 ss.52, 80 Chase Manhatten Overseas Corporation v Chase Corporation Limited (1985) 63 ALR 345, Hutchence v South Seas Bubble Company Pt Limited C1986] ATPR 40-667, Fletcher Challenge Limited v Fletcher Challenge Pty Limited £19813 1 NSWLR 196, Re Ku-ring-gai Co-operative Building Society Limited (No.12) Limited (1978) 36 FLR 134 referred to. NSW G.113 of 1986 AEROSPATIALE SOCIETE NATIONALE INDUSTRIELLE v_ AER€ HELICOPTERS PTY LIMITED & ORS Wilcox J Sydney 9 May 1986 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G.113 of 1986 GENERAL DIVISION BETWEEN: AEROSPATIALE SOCTETE NATIONALE INDUSTRIELLE Applicant AND: AEROSPATTALE, HELICOPTERS PITY LIMITED First Respondent PETER HOOKWAY Second Respondent TREVOR HOOKWAY Third Respondent CORAM: WILCOX J PLACE: SYDNEY DATE: 9 MAY 1986 MINUTES OF ORDER Upon the applicant by its counsel giving the usual undertaking as to damages and upon the applicant by its counsel undertaking to the Court that: (1) In the event that it is ultimately unsucces ;ful in the present proceedings, it will pay all expenses incurred by the respondents or any of them in comnection with the change of the name hereinafter ordered to be effected; and (ii) In the event that it is ultimately unsuccessful in the proceedings, it will do all such acts and things and execute all such documents as may be necessary or desirable to be done or executed in order to enable the first respondent to assume once more its present registered name; THE COURT ORDERS THAT: 1. The first respondent by itself, its servants and agents be restrained: (a) from using in any way in the course of trade or commerce the name "Aerospatiale" or any other name which is substantially identical with or deceptively similar to the name "Aerospatiale"; and (b) from passing off any business as that, or any goods as those of, the applicant; and that the second and third respondents and each of them within fourteen (14) days of this order do all such acts and execute all such documents as may be necessary or desirable to be done or executed in order to procure the first respondent to change its name from "Aerospatiale Helicopters Pty Limited" to some other name not incorporating the word "Aerospatiale", or any word substantially identical with or deceptively similar to "Aerospatiale", and to have the said change of name registered in the register of companies kept and maintained by the Corporate Affairs Commission of New South Wales. The costs of this application for interlocutory relief be the applicant's costs in the principal proceedings. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. Oy Ae ee me ne me ne rei gn ne wn repens Speen eee ee eee es IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY No. G.113 of 1986 ween GENERAL DIVISION BETWEEN: ARROSPATIALE SOCIETE NATIONALE INDUSTRIELLE Applicant AND: AEROSPATIALE HELICOPTERS PIrY LIMITED First Respondent PETER HOOKWAY Second Respondent TREVOR HOOKWAY Third Respondent CORAM: WILCOX J PLACE: SYDNEY DATE: 9 MAY 1986 REASONS FOR JUDGMENT This application for interlocutory orders raises three questions about the nature of the conduct necessary to infringe s.52 of the Trade Practices Act 1974 and to constitute passing off at common law. The questions are: whether it is enough that a corporation -- which is not engaged in active trading -- be constituted under, and continue to bear, a name falsely suggestive of an association with another organization; secondly, if not, whether the situation is changed by negotiations on behalf of the corporation to sell to others the entitlement to use the word in the name which is suggestive of that association; and, finally, what is the effect of registration in a particular name allied to a failure to undertake not to trade under that name. The applicant, Aerospatiale Societe Nationale Industrielle, is a French corporation with an international reputation which is engaged in the production and distribution of helicopters, amongst other products. According to the affidavit of Jean Pascal Huet, Area Sales Manager for Australia of the helicopter division of the company, the applicant is the second or third largest helicopter manufacturer in the world, leaving aside manufacturers in Eastern bloc countries. It exports more helicopters than any other manufacturer. The applicant has sold helicopters in Australia -- mainly, but not exclusively, to government organizations -- since 1970. Initially all sales were made through a French company known as OFEMA (Office Francais d'Exportation de Material Aeronautique). In 1977 Mr Peter Hookway, the second Be ee ce rene respondent, visited the premises of the applicant near Paris and purchased two Ecureuil helicopters, of which he was the first Australian purchaser. At about the same time he applied to the company for appointment as its Australian distributor for the civilian Ecureuil helicopter. However, this application was rejected, Ansett General Aviation being appointed instead. Late in 1980 the arrangement between the applicant and Ansett General Aviation was terminated, The applicant thereupon wrote to three Australian companies inviting them to apply for appointment as a distributor. None of those companies was associated with Mr Hookway, but he applied anyway and was told that his application would be considered. In the event he was again unsuccessful; Rex Aviation Limited being appointed in May 1981 as distributor in Australia of the Aerospatiale Ecureuil helicopter. OFEMA continued to act as distributor in connection with military sales. Since that time all sales in Australia have been made through Rex Aviation or OFEMA. During 1983-84, twenty-four military Ecureuil helicopters were purchased on behalf of the RAAF and the RAN. On average four or five civilian Ecureuils are sold each year in Australia. The name "Aerospatiale" -- a word apparently selected to refer to two main areas of activity of the applicant, aeronautics and space flights -- has been used by the applicant since its incorporation in 1970. The word appears prominently on the company's publications and advertisements. As required under French law, the name appears on all products -- including helicopters -- manufactured by the company. Amongst those interested in products of the kinds marketed by the applicant -- including helicopters -- the name has become associated with the applicant and the goods which it manufactures and sells. During recent months there have been negotiations between the applicant, OFEMA and Rex Aviation for the establishment of a joint venture to sell helicopters to civilian customers in Australia and to provide all Australian customers -- whether civilian or military -- with product support service. The intention has been that the joint venture company be called ""Aerospatiale Helicopters Australia Pty Limited". On 30 January 1980 Coopers & Lybrand, accountants acting on behalf of the parent of Rex Aviation, were instructed to register the name "Aerospatiale Helicopters Australla Pty Limited" in all Australian States and Territories. They found that the name was available to them only in the Australian Capital Territory and the Northern Territory. There had been incorporated in New South Wales on 3 November 1981 a company known as Aerospatiale Helicopters Pty Limited and this company was registered as a foreign ee ene 8 ee epi ee on ee ee ee ee a cor . of -S st Le Bao Ye ' Tee - ae " ' company in each other State. Search reveals that the directors of that company -~- which is the first respondent in these proceedings -- are Mr Peter Hookway and Mr Trevor Hookway, the third respondent. Both men have addresses in Tasmania. The registered office of the company is the office of a Sydney accountant, Mr Wesley Sellen; Mr Sellen and Mr Peter Hookway being the secretaries of the company. The first of the objects of the company, as set out in its Memorandum of Association, is: "To carry on the business of Aeronautical Dealers in respect of Aircraft of ali descriptions and Helicopters and the supply of Spare parts and other equipment in respect thereof." There is no evidence to suggest that the first respondent has commenced to carry on the business referred to in this object, or any other business. Upon becoming aware of the existence of the first respondent, Mr Simon Gaylard of Coopers & Lybrand contacted Mr Sellen to discuss what he called "the possibility of Aerospatiale getting its name back from Hookway and his company". Discussions ensued, with both Mr Sellen and Mr Peter Hookway, over a period of about two months. Mr Gaylard offered to pay $1,500 to cover the costs of a change of name. At a later stage he offered $5,000 but Mr Hookway said that he had "refused an offer of $10,000 from Bell Helicopters" and, in the event, his best offer was to accept $30,000. This was not acceptable to the applicant. — te aad me er en prt RR errr ert et rer ee By a letter dated 15 April 1986 addressed to Mr Sellen as secretary of the first respondent, the solicitors for the applicant drew attention to their client's position -- as summarised above -- and contended that the actions of the first respondent constituted passing off and a breach of s.52 of the Trade Practices Act. The solicitors sought the following four undertakings from the company under its common seal: "(1) Forthwith to refrain by itself, its servants and agents from carrying on business anywhere in Australia under the name 'Aerospatiale Helicopters Pty. Limited' or under any other name (whether as part of a corporate name or as a business name) which is identical with or deceptively similar to our client's corporate name, 'Aerospatiale'. (2) Forthwith to take steps to cause to be passed by the directors of the company a resolution to change the name of the company 'Aerospatiale Helicopters Pty. Limited' to a name which is not identical with or deceptively similar to our client's name, and to lodge such a resolution at the Corporate Affairs Commission together with an application to change that company's name. (3) Forthwith to deliver up to us all its stocks of stationery and any other articles using the name 'Rerospatiale Helicopters Pty. Limited'. (4) Forthwith to notify in writing all persons and companies with whom it has had any dealings that it has no connection whatsoever with our client and has ceased to use the name 'Aerospatiale Helicopters Pty. Limited' and to provide us with copies of all such notifications." The solicitors further requested the undertaking of each of the directors of the company that they would procure the company's compliance with those undertakings. The original of this letter was served personally upon Mr Sellen on 15 April wee ene peep men a ear oene cee pee me ee eee een eee Pir Ook ares 1986. Copies were served personally upon each of the directors on 16 April. The directors were each invited to sign a copy of the letter to signify their compliance with the demands made on behalf of the applicant, but each declined to do so. The applicant seeks three interlocutory orders: an erder restraining the first respondent from using the name "Aerospatiale" in the course of business or trade, an order restraining the first respondent from passing off any business as that, or any goods as those, of the applicant and an order that the second and third respondents do whatever is necessary to procure the first respondent to change its present name to a name not including the word "Aerospatiale". Subject to the applicant giving an appropriate undertaking as to damage, the respondents do not oppose the making of the first two of those orders, upon an interlocutory basis. They do oppose the third order sought by the applicant, contending that the mere retention upon the register of a name containing the word "Rerospatiale" does not amount to an infringement, or a threatened infringement, of 3.52 of the Trade Practices Act and does not constitute a passing off by the first respondent of its business as being that of the applicant. In two recent decisions, Chase Manhattan Overseas Corporation v Chase Corporation Limited (1985) 63 ALR 345 and Hutchence v South Seas Bubble Company Pty Limited [1986] ATPR mee ree te eg nee ee Se ee eer peer ee pee rr ee coe 40-667, I have had occasion to discuss the application of s.52 to a case where a corporation uses in trade or commerce a name or word identical with, or similar to, a name or word used by another, unsassociated, trader. I need not repeat what I then said. It is enough to refer to the comment made in Hutchence about the significance of the fact that the relevant name or word is a concocted or fancy name, and so unlikely to have been adopted co-incidentally. In the present case it would not be correct to describe the word "aerospatiale" as a concocted name. As a French word it appears in the Collins-Robert French Dictionary as meaning, when used as an adjective, "aerospace" and, as a noun, "aerospace science". But it is not a word known to the English language and its use in conjunction with the word "helicopter" would inevitably suggest to persons who were familiar with the business and goods of the applicant that there was some commercial association hetween the first respondent and the applicant. The similarity between the applicant's name and activities and the name of the first respondent is too great to be accidental. It follows that, if the first respondent commenced to carry on buginess in accordance with the first object in its Memorandum of Association -- that 13 as an aeronautical dealer in respect of aircraft and helicopters -- there would be a substantial prospect of persons concerned with the helicopter industry being misled into the belief that it was associated with the applicant. This is not' a case, as in Chase, where two established companies in substantially different fields happen to share a common name. This is a case where one company has, under a particular name, an established goodwiil and reputation in a specific field and where another takes a substantially similar name -- under which it has no goodwill or reputation -- for the purposes of trading in that same field. There is little doubt that, under those circumstances, the Court would hold that any active trading in that field by that company under that name would constitute conduct in trade or commerce that was misleading or likely to mislead and, therefore, in breach of s.52. Subject to other relevant Matters, injunctive relief would be likely to be granted. No doubt it is in recognition of that fact that the respondents do not contest the making, upon an interlocutory basis, of the first order sought by the applicant. The respondents contend that, once that order is made, restraining the first respondent from using the name "Aerospatiale" in the course of trade or commerce, there is no infringement, or threatened infringement, of 3.52. As the company is precluded from trading under that name, it is said that it will not be able to do more -- to use the words of Powell J in Fletcher Challenge Limited v Fletcher Challenge Pty Limited £19817 1 NSWLR 1960 at p.207 -- than to "indulge in its present activity of cluttering up the storage shelves ee rere gee en ee en ree aoamee eames 7 - ~ ot So ee an 2 of "> - + 10. in the Corporate Affairs Comrission until, if ever, some useful activity is devised for it to undertake"; an activity which, whilst lacking utility, is unlikely to mislead helicopter purchasers. Counsel for the applicant contend that the incorporation of the applicant under its present name was, in itself, an action which offended s.52 and that the infringement was perpetuated by the subsequent retention of that name. I have some difficulty with the notion that a corporation can engage in misleading conduct by the manner of its incorporation. The relevant conduct, the incorporation of the company under a particular name, must have been the conduct of others. Those people cannot be regarded as having acted on behalf of the corporation, which was then non-existent. The situation in relation to the retention of a name is somewhat different. Once the corporation comes into existence it takes control of its name, in the sense that it acquires the ability to change that name at will. It is not, therefore, far-fetched to regard the retention of a particular name as being conduct of the company itself. However, s.52 does not proscribe all conduct that is misleading or deceptive or is likely to mislead or deceive; the prohibition extends only to such conduct which is engaged in "in trade or commerce". It has been said that, in the context of the Trade Practices Act, this phrase should''be . 11. given "a very wide meaning" -- see Larmer v Power Machinery Pty Limited (1977) 29 FLR 490 at p.493 -- and that it is "clearly of the widest import" -- see Re Ku-ring-gai Co-operative Building Society Limited (No.12) Limited (1978) 36 FLR 134 at p.167. Nonetheless it appears inappropriate to describe the mere retention of a particular name by a company, which is otherwise inactive, as conduct in trade or commerce. The name may be retained with a view to sithsequent use in trading or commercial activity but it is not itself such an activity. By way of alternative submission, counsel for the applicant contend that the first respondent has engaged in trade or commerce by attempting to "sell" its name, that is by attempting to negotiate an arrangement whereby it would change its name, omitting "Aerospatiale", in return for a money payment. It may be that the hawking by a company to potential purchasers of its right to the continued use in its name of a particular word is capable of constituting an activity in trade or commerce. I do not find it necessary to reach a conclusion on that matter because the present evidence does not indicate either that the company has hawked its name or that, in relation to such negotiations as it did undertake, there was any likelihood of anybody being misled. As to the first point, it is clear that negotiations between the first SGPT Tg BT ET oe grr ner tenrgtin geanen gee sees Sarat we we Fs 7 To 3 ooh oon oS . wae - est . - vee -. re ed ' i Se 14%, 8 12. respondent and Rex Aviation were initiated by Mr Gaylard on behalf of Rex Aviation. In relation to Bell Helicopters, the only evidence presently available is that Mr Hookway stated that he had refused an offer of $10,000 from that company. It does not appear who instituted the contact. Mr Hookway may have refused an unsolicited offer. As to the second point, it is clear that, in approaching Mr Sellen, Mr Gaylard was under no misapprehension that there was a relationship between the first respondent and the applicant. He knew for a fact that there was not. There is no evidence as to the state of knowledge of the person who negotiated on behalf of Bell Helicopters but, given the nature of the offer, there is no reason to suppose that that company believed there to be a connection between the first respondent and the applicant. Notwithstanding my rejection of the two specific matters argued on behalf of the applicant, it seems to me that the applicant is entitled, upon proper terms, to the third order which it seeks. Section 80(1) of the Trade Practices Act relevantly provides that "where ... the Court is satisfied that a person has engaged, or is proposing to engage, in conduct that constitutes or would constitute -- a contravention of a provision of Part IV or V" it may grant an injunction in such terms as the Court determines to be "appropriate. Section 52 is, of course, contained in Part V of the Act. 13. For the reasons I have indicated, I do not think that the first respondent has yet engaged in conduct that is misleading or likely to mislead. But, at the date of commencement of these proceedings, the first respondent was in a position which might accurately be described as "proposing to engage" in conduct that would constitute a contravention of s.52. The first respondent continued to maintain as its primary object of existence a purpose which, if implemented under its existing name, would bring it into conflict with s.52. It retained that name notwithstanding requests made on behalf of the applicant -- both by Mr Gaylard and in a formal letter of demand by the applicant's solicitors -- to change the name. It failed to respond to a demand made by the solicitors for the applicant for undertakings to refrain from trading under its existing name, to take steps to change the name, to deliver up stationery and other articles bearing the name and to notify all persons with whom it had had dealings that it had no connection with the applicant. The directors of the company specifically refused to offer personal undertakings in respect of any of those matters. This attitude is consistent only with the assertion of a right by the company to do all of the things complained of. In the absence of other explanation, the proper prima facie conclusion is that the company continued to adhere to the intention discernible in the choice of name and objects, namely to engage in trading activities in relation to helicopters under its present name. 14, Once it is concluded that, at the time of the institution of the proceedings, the first respondent proposed to engage in conduct contravening 3.52, the Court has power to grant any appropriate injunction. It is not usual to grant, by way of interlocutory relief, a mandatory injunction but such a course is within power. Section 80(1) empowers the grant of an injunction "in such terms as the Court determines to be appropriate". Whether a mandatory injunction should be granted depends upon the circumstances of, and the balance of convenience in, the particular case. The evidence in the present case is that the negotiations between the applicant, OFEMA and Rex Aviation were successfully concluded on 17 April 1986. Joint venture operations have commenced. Because of the unavailability to the joint venturers of the name originally selected by them, they have had to resort to the use of a company name -- Fecuda Pty Limited -- which fails to suggest any connection with the applicant. They are anxious to rectify this position, by changing the name of that company to Aerospatiale Helicopters Australia Pty Limited at the earliest oppertunity. It is not aifficult to see the commercial advantage to them in being able to trade under a name which immediately suggests their association with the applicant and its products. Pe TE DD TN ee cm ee oe pk en esa EM. OFA? 15. The first respondent, on the other hand, obtains no legitimate advantage in retaining its present name during the period before the final hearing. As the respondents now recognize, the first respondent could not trade under its existing name without contravention of s.52. The only issue for the first respondent is the name under which it continues to clutter the shelves. Considerations of convenience point strongly in favour of requiring the first respondent to change its name at this stage. The conclusion which I have reached accords with the view taken by Powell J in Fletcher Challenge. That was a passing off case; as, indeed, is the present case in its alternative formulation. Powell J thought it enough that there was a prima facie case that, if the defendant were to commence trading, it is probable that it would in the minds of relevant commercial people be associated with, or be treated as part of, the group of companies of which the plaintiff was a member, "a situation which, if it arose, could well affect the reputation of the plaintiff": see pp.205-206. In relation to the alternative claim, in the present case, the same approach is appropriate. In Fletcher Challenge there were offered to the Court, and accepted, certain specific undertakings, additional to the usual undertaking as to damages. Counsel for the applicant has offered the same undertakings in this case. I 3: 16. propose to accept them and, upon the basis of those undertakings, to make all three interlocutory orders sought by the applicant. These orders will be as follows: Upon the applicant by its counsel giving the usual undertaking as to damages and upon the applicant by its counsel undertaking to the Court: 1. that, in the event that it is ultimately unsuccessful in the present proceedings, it will Pay all expenses incurred by the respondents or any of them in connection with the change of the name hereinafter ordered to be effected; and 2. that, in the event that it is ultimately unsuccessful in the proceedings, it will do all such acts and things and execute all such documents as may be necessary or desirable to be ~ done or executed in order to enable the first respondent to assume once more its present registered name; order that the first respondent by itself, its servants and agents be restrained: 17. (a) from using in any way in the course of trade or commerce the name "Aerospatiale" or any other name which is substantially identical with or deceptively similar to the name "Aerospatiale"; and (b) from passing off any business as that, or any ge-''s as those of, the applicant; and that the second and third respondents and each of them within 14 days of this order do all such acts and execute all such documents as may be necessary or desirable to be done or executed in order to procure the first respondent to change its name from "Aerospatiale Helicopters Pty Limited" to some other name not incorporating the word "Aerospatiale"", or any word substantially identical with or deceptively similar to "Aerospatiale", and to have the said change of name registered in the register of companies kept and maintained by the Corporate Affairs Commission of New South Wales. I certify that this and the sixteen (16) preceding pages to be a true copy of the Reasons for Judgment of the Hon Mr Justice Wilcox beter Or' Associate: YWromre A H. Date: 9 May 1986 nga Carpe eee ne CEO REY SS MPT EIT 7 m ae ~ oles era oa na - 1a te fleet ost - etna - . e woe sve US Pete ae ee TE ee tw . - os z Fort ays ee Te eee . ere Sr Sn De . 18. Counsel for the Applicant: Mr BC Oslington 9c with Mr N R Burns Solicitors for the Applicant: Messrs Allen Allen & Hemsley Appearance for the Respondents: Mr R Lewis, Solicitor Solicitors for the Respondents: Messrs Rodney Lewis & Co Date(s) of hearing: 1 May 1986