<JBGMENT No. 9.8:32.../--B Lane IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTR ISTRY » VG No. 413 of 1987 ) y GENERAL DIVISION BETWEEN: BONDPARK PTY LID Applicant AND: GENEX CORPORATION PTY LTD First Respondent GREGORY HOWISON Second Respondent NEIL COTTER Third Respondent MICHAEL KERRISON Fourth Respondent KEVIN McMULLIN Fifth Respondent FRED LERNER Sixth Respondent CORAM: Ryan J DATE: 29 October 1987 Ke 3 OOCT 1987 FEDERAL COUAT OF AUSTRALI RALIA waiter REASONS FOR J The applicant has sought an abridgement of time to enable its application for interlocutory relief to be brought on for hearing quickly, and has sought interim orders to restrain the respondents in the meantime from continuing to engage in conduct allegedly in contravention of ss.52 and 53(c) and (d) of the Trade Practices Act 1974 ("the Act"). The respondents had notice of the application which was made ex parte on 22 October 1986 and appeared by counsel to oppose the grant of any interim relief. The evidence discloses that Mr Uechtritz, the Managing Director of the applicant, was, until the end of 1987, like the second, third, fourth fifth and sixth respondents, a director of the first respondent, a wholly owned subsidiary of Rabbit Photo Holdings Ltd. Mr Uechtritz was a substantial shareholder in Rabbit Holdings Ltd, having about 9.25% of its issued capital after it became a publicly listed company in 1985. In December 1986, after a disagreement with the third respondent, Mr Cottee, the Chairman of Directors of Rabbit Holdings Ltd, Mr Uechtritz sold his shares in that company and resolved to form his own company, the applicant, to engage in vigorous competition in the retail and mail order trade in processing photographic films. Mr Uechtritz's formation of that intention received considerable publicity in the business and financial Press and in journals dealing with the photographic trade. After its incorporation the applicant, in about March 1987, was advised by its solicitors that it had been registered as the proprietor of the business name "Cut Price Photo" under the business names legislation of the States of New South Wales, South Australia and Tasmania and in the Australian Capital Territory. That advice in respect of South-Australia was erroneous. The applicant was further advised by its solicitors at about the same time that it could not register the name "Cut Price Photo" in either Victoria or Queensland because the names "Cut Price Photography" and "Cut Price Photo" respectively were already registered in those States. The applicant also learned that one Rodney Glen Simmons was the proprietor of the existing registered name in Victoria, and Kodak (Australasia) Pty Ltd was the proprietor in Queensland of the name "Cut Price Photo". The applicant attempted, without success, to contact Mr Simmons to induce him to cancel, or assign to the applicant, his registered business name. Then, notwithstanding the impediment presented by the prior registration in Victoria, the applicant decided to trade under the name "Cut Price Photo" at least in New South Wales and Victoria. To that end it leased sites in New South Wales where it presently has ten retail outlets, one of which is attached to its central processing laboratory in the suburb of Carlton. There is no evidence that the applicant has opened any retail outlets in Victoria. However, it has commissioned the production of a "logo" in the form of a stylized shield or tag bearing the name "Cut-Price Photo" surmounting a diamond shaped panel enclosing a dollar sign struck through with a red tick. It has also had printed a quantity of note paper bearing that logo and, at the foot of each page, the legend: "298 Railway Parade, Carlton N.S.W. 2218 Australia P.O. Box 481, Kogarah, N.S.W. 2217 Phone : (02)588-3111 Fax. (02)587-2863" The applicant has, since 19 July 1987, advertised its mail order photograph processing service in various newspapers ' circulating in New South Wales, Victoria, Queensland, South Australia and Tasmania. The evidence does not disclose, in respect of advertisements in the "Sun-Herald" and the "Sunday Telegraph", whether they appeared in the editions of those newspapers intended for distribution in Queensland and Victoria, or if so, whether the text or format of the advertisement in those editions differed from that in the editions intended for distribution in New South Wales. The advertisements in evidence, as they appeared in each of the "Sun-Herald" and the "Sunday Telegraph", each identified "convenient shop locations" in the Sydney metropolitan area at which films might be left for processing and contained a "cut-out" mail order form for use in forwarding films by mail addressed to "Free Post 16, Cut-Price Photo P.0. Box 481 KOGARAH NSW 2217". The applicant's advertisement in the "Age" newspaper of 16 October 1987, circulated principally in Victoria, contained the invitation "Enquiries Customer Service Phone (008) 25 1719" apparently referring to a toll-free telephone service connected to an establishment in New South Wales. The "Age" advertisement contained no reference to any shop locations, but had a ""cut-out" mail order form for use in forwarding films by mail addressed to "Free Post 619, Cut-Price Photo, G.P.0. Box 2977EE, Melbourne, Vic. 3001". Since 18 September 1987, the applicant has had delivered in Victoria 589,000 "mailers" which are envelopes containing an order form specifying the applicant's prices for printing specified numbers of exposures and its charges for postage and packing of prints for return to the owner of the fils. ¢ The envelope also bears statements of a promotional nature emphasising the comparatively low prices charged by the applicant. To facilitate posting of films to the applicant, each mailer is printed with an address: "Preepost AAA619 CUT-PRICE PHOTO G.P.0. BOX 2977EE MELBOURNE, VIC. 3001" The applicant has also had printed paper "wallets" for returning photographic prints and negatives to customers, which are designed to be used by the customers in ordering reprints, if desired, from the applicant by mail. Those "wallets" are posted to customers in larger outer envelopes printed with the applicant's "logo", and in Victoria the address "GPO BOX 2977 EE MELBOURNE VICTORIA 3001". On 1 October 1987, the applicant became aware, through its New South Wales solicitors, that the first respondent was the registered proprietor of the business name "Cut Price Photos" in Victoria. Presumably, in order to obtain that registration, the first respondent had persuaded Mr Simmons to assign to it, or cancel his registration of the name "Cut Price Photography". The applicant was also requested by the first respondent's solicitors to cease its activities in Victoria under the name "Cut Price Photo" by midday on 2 October 1987. On the following day, after being informed that the " applicant would not accede to its request, the first respondent indicated its intention to institute court proceedings and seek interlocutory relief restraining the applicant from using the name "Cut Price Photo". However, by letter dated 6 October 1987, the first respondent's solicitors notified the applicant that they had been instructed not to institute that litigation. It appears that, on 13 October 1987, Mr Uechtritz saw an advertisement placed by the first respondent in the "Sun" (a Melbourne daily newspaper) on 9 October 1987. Under the heading "Cut Price Photos", the advertisement set out prices for developing and printing 12, 24 and 36 exposure films, and invited the reader to "Compare and Save". Below a line in large block letters reading "DISCOUNT PHOTO PROCESSING", appeared a "cut-out" coupon designed to accompany a film or films to be sent by mail to: "CUT PRICE PHOTOS Free Post 218, GPO BOX 9878, Melbourne, Vic. 3001 Tel : 347 2293." By letter dated 13 October 1987, the applicant's solicitors demanded of the first respondent undertakings that it would forthwith cease to advertise, carry on or conduct any business under any name which included the words "Cut Price Photo", and take all necessary steps to cancel the registration of the business name "Cut Price Photos". The letter further indicated that, if those undertakings were not giyen, the applicant would seek injunctive relief and claim damages or an account of profits from the first respondent. The solicitors for the respondents tndicated, on 14 October 1987, that': the undertakings would not be given. That indication was confirmed after further discussions between solicitors on 19 October 1987, and a draft of the application herein, and affidavits in support of the motion for interim relief, were served on the solicitors for the respondent on 21 October 1987. I accept that the applicant has acted with the utmost expedition in bringing the matter to this Court. However, as Iwas informed from the Bar table, a further advertisement inserted by the first respondent appeared in the "Sun" newspaper of 17 October 1987. I was also told that the first respondent has scheduled similar advertisements for publication on 30 October and 14 November 1987. I assume that the text and format of each of those advertisements has been and will be similar to that of the advertisement of 9 October. The evidence presently before the Court discloses that, since mid-September 1987, the applicant has received more than 5,000 rolls of unprocessed film for processing from Victorian consumers, No indication has been given of how many of those films were posted to the applicant using the "mailers" distributed by it through Australia Post, or how many were accompanied by coupons cut from the "Age" or other newspapers. There is presently no evidence of the volume of business generated by the first respondent's advertisements of 9 and 17 October. Several matters were canvassed inthe course of the hearing on 22 October including the question of whether the application of general equitable principles should operate to Preclude the applicant from relief because of its knowing contravention of s.5 of the Business Names Act 1959 (Vic). That section, so far as relevant, provides: "5(1) A person shall not either alone or in association with other persons carry on business in the State under a business nane unless- (a) the business name consists of the name of that person and the name of each other person if any in association with whom that person is so carrying on business without any addition; or (b) the business name is registered under this Act in relation to that person and each other person if any in association with whom that person is so carrying on business- and where the business name is so registered such of the provisions of section twelve which are required to he complied with by or on behalf of the person or persons in relation to whom the name is registered have been complied with. Penalty : $200. Default penalty." I was referred in the context of that provision to Aerospatiale Societe Nationale Industrielle v Aerospatiale copters Pt Ltd (1986) 65 A.L.R. 477 where an interlocutory injunction was granted restraining the respondent from carrying on business under the name under which it was incorporated on 3 November 1981. However, in that case the applicant had been incorporated under its name in France in 1970 and, since then, had acquired an international reputation in the production and distribution of helicopters. By contrast, in the present case the applicant has estabiished any reputation which it may have in Victoria in the processing of photographic film only since mid-September 1987, and has set about establishing that reputation with the knowledge that its use of the business name "Cut Price Photo" is in contravention of Victorian law. I was also referred to Volt Australia Ltd v Directories (Aust.) Pty Ltd (1985) 7 A.T.P.R. 40-573 where the applicant obtained an interlocutory injunction restraining the respondent from attempting, Dy any means, to procure registration of a company anywhere in Australia under the name "Australian Directories Services Pty Ltd", and from attempting to reserve or to maintain or renew the reservation of the said name anywhere in Australia, and from using, or causing to be used in trade or commerce, the name "Australian Directories Services". However, in that case the applicants were themselves registered in Victoria as the proprietors of the business name "Australian Directories Services" and had carried on business under that name for some months before Jenkinson J. gave judgment on 16 May 1985. The respondent, on the other hand, had not carried on any business under the name "Australian Directories Services Pty Ltd", and had done no more than apply to reserve that name under s.40 of the Companies Code in each State and Territory. Mr Fajgenbaum QC, who appeared with Mr. Jopling for the - 10 - respondents, urged that the applicant had not demonstrated even prima facie that it had acquired any reputation or goodwill which attached to the name "Cut Price Photo". He referred to the descriptive nature of those words and adopted the observation of Stephen J. in Hornsby Building Information Centre Pty. Ltd. vi Sydney Building Information Centre Ltd. (1978) 140 C.L.R. 216 at 230 that: "To allow this section of the Trade Practices Act to be used as an instrument for the creation of any monopoly in descriptive names would be to mock the manifest intent of the legislation. Given that a name is no more than merely descriptive of a particular type of business, its use by others who carry on that same type of business does not deceive or mislead as to the nature of the business described. Thus both the Hornsby and the Sydney Centres are building information centres and no one is being deceived as to the nature of the service which is available there. Any deception which does arise stems not so much from the Hornsby Centre's use of the descriptive words as from the fact that the Sydney Centre initially chose descriptive words as its title and for many years thereafter was the only centre in Sydney which answered the description which those words provide. In consequence members of the public have come to associate its particular business with that type of activity. Evidence of confusion in the minds of members of the public is not evidence that the use of the Hornsby Centre's name is itself misleading or deceptive but rather that its intrusion into the field originally occupied exclusively by the Sydney Centre has, naturally enough, caused a degree of confusion in the public mind. This is not, however anything at which s.52(1) is directed." The use by the applicant of a business name, consisting exclusively of words descriptive of the nature of the service which it offers, carries with it the risk that confusion may arise in the minds of some members of the public between the applicant's business and the business of some competitor who - ll - uses similar descriptive words as part of a business name or in otherwise advertising or promoting the same type of services. However, the existence of such confusion does not necessarily signify that the competitor has engaged in deceptive or misleading conduct within the meaning of s.52 of the Act. (See e.g. McWilliams Wines Pty Ltd v McDonald's Systems of Australia Pty Ltd (1980) 49 F.L.R. 455). The inference that the use of descriptive words is misleading or deceptive may be stronger where the same words are used in a business or company name without any distinguishing addition like that provided by the adjectival use of "Sydney" in the corporate and business name of the respondent in Hornsby Building Information Centre Pty. Ltd. v Sydney Building Information Centre Ltd. (supra). In this context, counsel for the respondents pointed to evidence that the first respondent in its mail order business had traded as "Discount Photo" and in New South Wales had also traded as "Rock Bottom Photo". From that evidence [I was taken to examples of the applicant's newspaper advertising which prominently feature the phrases "Discount photo processing" and ""Rockbottom prices on all services". From those facts, the respondent erected an argument that, if by its use of the name "Cut Price Photos" it had deceptively or misleadingly suggested its business to be identical to or connected with that of the applicant, the applicant had made a similar suggestion by appropriating to its own advertising, the phrases "Discount Photo" and "Rock Bottom" from trade names used by the respondent. It may later emerge that the - 12 - applicant intended by its use of those phrases to suggest some identity or connexion between its services and those of the first respondent. However, it has not used either phrase as the whole or part of its trade name, and I am not prepared to conclude on the evidence, as it presently stands, that the applicant's advertisements have been misleading or deceptive in the way contended by the respondent. I consider that counsel for the respondents have pointed to matters which individually, and in combination, indicate formidable evidentiary and other obstacles which the applicant must overcome before it can obtain a favourable exercise of the court's discretion in the form of a permanent injunction. However, I am not persuaded that those obstacles are such that it can be said that there is not a serious question as to whether the applicant should succeed in obtaining final injunctive relief. I turn then to consider the balance of convenience against the background that the Court can afford the parties a hearing of the application for interlocutory injunctions at 10.15 am on 30 October 1987, by which time the respondents will be able to file and serve any affidavits on which they wish to rely. The only active use by the respondents of the name "Cut Price Photos" between now and then will be in a further advertisement to appear in the "Sun" newspaper to be published on the morning of 30 October. Since the first respondent's business in Victoria is at present exclusively - 13- by mail order in response to advertisements of that kind, the profits to be derived from its use of the name "Cut Price Photos", until any order which may be made on 30 October has come into effect, will be readily ascertainable for the purpose of translation into an award of damages, should it ultimately be held that the applicant has suffered any. Correspondingly, any decline in the volume of the applicant's business as a result of the first respondent continuing to trade until next Friday will be fairly readily measurable. The business generated by the distribution of the "mailers" in mid-September has probably been almost exhausted, and if the applicant chooses to seek mail order business by advertising again ina Victorian newspaper any decline in customer response to those advertisements can be measured by comparing it with the numbers of films returned for processing using the "cut-outs" from the "Age" advertisement of 16 October 1987. On the other hand, the loss of momentum in building up its business which would be suffered by the first respondent if it were restrained until next Friday from trading, or even from publishing its scheduled advertisement under the name "Cut Price Photos," would be much less accurately measurable. Accordingly, the Court can be less confident that the damages offered by the applicant's undertaking will adequately compensate the first respondent if it successfully resists the application for interlocutory injunctions. It was for these reasons that I refused the motion for interim relief. - 14 - I certify that this and the thirteen (13) preceding pages are a true copy of the reasons for Judgment herein of his Honour Mr. Justice Ryan. ZO ean Associate Dated: 29 October 1987