JUDGMENT No. bas 21 CATCHWORODS TRADE PRACTICES - old-established business name - business absorbed in successive take~overs - use of name abandoned - new company's misleading use of old name - whether cause of action. TRADE MARKS AND TRADE NAMES - passing-off - use of name discontinued - residual goodwill - whether associated company may sue as for passing-off. Trade Practices Act 1974 - 5,52 Elders IXL Limited & Anor. v. Australian Estates Pty. Ltd. Qld G123 of 1985 PINCUS J. BRISBANE 19 NOVEMBER 1987 P="TIVED 19 NOV 1987 \ FEDERAL COURT OF =) AUSTRALIA "\ PRINCIPAL 59 REGISTRY IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G123 of 1985 GENERAL DIVISION ) BETWEEN: ELDERS IXL LIMITED First Applicant AND: AUSTRALIAN ESTATES LTD. Second Applicant AND: AUSTRALIAN ESTATES PTY. LTD. Respondent PINCUS J. 19 NOVEMBER 1987 REASONS FOR JUDGMENT The applicants seek a declaration, damages and an injunction on the basis that the respondent's use of the name "Australian Estates" constitutes passing-off; the claim 1s also based on the Trade Practices Act 1974. In essence, the applicants' case 1s that, although they no longer use the name "Australian Estates" in a public way, the respondent's use of that name 1s likely to make customers think it 1s connected with the applicants. The respondent''s says that it adopted the name "Australian Estates" innocently and without intention to mislead the public, that in fact the public is unlikely to be misled, that the applicants cannot, in any event, obtain protection for a name the use of which they have entirely abandoned and that, if all other defences fail, the applicants have no such interest in the name "Australian Estates" as to entitle them to relief. The evidence is not entirely satisfactory, in that it includes mention of quite a number of names of companies and businesses thought to be connected with the applicants, but whose bearing upon the events in question is obscure. The essential facts appear to be as follows. In 1975 The Australian Estates Company Limited became a subsidiary of C.S.R. Limited; the former had for generations been an important pastoral house. Its activities included arranging the sale and purchase of farms and grazing properties, as well as, to a much lesser extent, the sale of residences 1n country towns. On 20 March 1981, C.S.R. Limited entered into a contract with A.M.L. & F. Holdings Limited under which the business of The Australian Estates Company Limited was transferred to a company named Polecta Limited, and that company in turn was sold to A.M.L. & F. Holdings Limited. Thus, ownership of The Australian Estates Company Limited remained with C.S.R. Limited, but under' the contract it undertook to change its subsidiary's name to Austest Company Limited, and that was done. C.S.R Limited also agreed, under clause 7 of the contract, to exclude the words "Australian Estates" and "Estates" from its subsidiaries' names. Polecta Limited, the company which was thus sold to A.M.L. & F. Holdings Limited, changed its name at the same time to Australian Estates Ltd. and it is the second applicant. Although this transaction was intended to, and no doubt did, vest the right to the goodwill in the name "Australian Estates" in the new company, use of the name "Australian Estates" was dropped fairly soon. Exhibit 5 shows that 1t was. the "intention of A.M.L. & F. that the Estates name will be retained in the future operating company", and so the names "A.M.L. Estates" and "Estates Real Estate" were used. The latter, however, was a business name, not of the second applicant, but of another company, A.M.L. Real Estate Pty. Ltd., a company owned by A.M.L. & F. Holdings Limited. A year after the sale by C.S.R. Limited to A.M.L. & F. Holdings Limited, there was a further takeover; the first applicant bought assets of A.M.L. & F. Holdings Limited, including the shares 1n the second applicant. After that, advertisements for "A.M.L. Estates" began to appear in the newspapers and later "Elders A.M.L. Estates", a business name of the first applicant. That was first used in July 1983. In 1982 and 1983, there was no use of "Australian Estates" as the name of an operating business, but it was inserted in the 1982 and 1983 Brisbane telephone books. On 28 March 1983, the use of one of the variants of "Australian Estates", namely "Estates Real Estate", referred to above, was discontinued. In 1984, the name "Australian Estates" was not being used at all and on 15 November 1984, a decision was made by executives of the first applicant to cancel the registration of certain subsidiaries; the intention was to protect the names in the Registers kept under the Business Names Acts. Im consequence, the registration of "Australian Estates Limited" (the second applicant) as a recognised company in Queensland, Victoria and South Australia ceased (Exhibit 17), but the intended second step, that of protecting the names in the Business Names Registers, was not immediately taken. On 14 January 1985, a Mr. Eaton caused "Australian Estates" to be registered as a business name and on 21 January 1985, a company controlled by hin, Paramount Properties Proprietary Limited, resolved to change its name to "Australian Estates Pty. Ltd." The change of name was registered on 8 February 1985. On 16 May 1985, a Mr. Chomley, on behalf of the farst applicant, drafted a letter to the Queensland Minister for Justice and Attorney-General explaining that, due to an error, registration of the second applicant had been cancelled; the letter does not appear to be quite accurate in that respect. The letter sought the Minister's assistance to rectify the problem, but apparently without result. On 5 June 1985, there appeared the first advertisements in the "Courier-Mail" on behalf of the respondent, which described itself as "Leading Business Brokers". On 26 June 1985, the respondent advertised that it required "the services of a senior person with an extensive background in commercial fianncing (sic)"; an income of $35,000 was mentioned. On 19 July 1985, the respondent, describing itself as a company "firmly established in the Real Estate Industry" and intending to acquire 40 established real estate agencies, sought operators with capital between $90,000 and $300,000. The advertisement explained: "Since each of these forty (40) offices will operate under the Australian Estates Pty Limited banner, we will require an unparelled (sic) standard of excellence on the part of our Operators." That seems to me to imply that the draftsman of the advertisement thought that the reader might recognise the name "Australian Estates Pty. Limited" and regard it as one to be reckoned with. The inference 1s open that the respondent wished to take advantage of the good name of the famous pastoral house and I draw that inference. On 26 July 1985, the first applicant sought registration of the business name "Elders Australian Estates" (according to annexure "G"" to the statement of Mr. W.R. Richards). That name was registered on 18 November 1985. The applicants adduced evidence designed to show that there was a likelihood that the respondent would be thought to be associated with the former old-established pastoral business. Mr. D. J. Winton was an Australian Estates Real Estate salesman when A.M.L. & F. Holdings. Limited entered into the transaction mentioned above. He saw one of the advertisements by the respondent and thought it was "an advertisement by the Australian Estates Pastoral Company, whom I knew and respected". Mr. N.D. Wilson, who hada real estate business in the western suburbs of Brisbane for some years, also saw one of the 1985 advertisements and made the same mistake as did Mr. Winton. Mr. F.A. Broderson, having seen one of the 1985 advertisements, went to see Mr. Garth Eaton of the respondent, who told him that he (Mr. Eaton) "actually was the rightful owner of the name of Austalian Estates". Mr. Eaton did not claim to be connected with the old business, but told Mr. SBroderson, in substance, that franchised real estate operations under the name Australian Estates "would have ... a positive public relations factor". There was also evidence, on behalf of the applicant, that quite a mumber of articles sent through the post were misdirected. I do not, however, regard this evidence as of very great weight. As I have explained, the applicants have not used the name "Australian Estates" for some time, and continuing trouble with misdirection would seem improbable. I am, however, satisfied on the whole of the evidence that there has been, and still 1s, a likelihood that people seeing the respondent's name will think it to be connected with the former pastoral house. Mr. Eaton, who was made bankrupt in 1976 and discharged in 1981, described himself as business consultant for the respondent and executive chairman of International Innovations Limited, a company which had hopes of being listed on the stock exchange. Mr. Eaton explained he has no real estate agent's licence, but hoped the respondent would be able to purchase 40 real estate agencies. He said that he and his wife had had a chain of nine food outlets in Queensland which had operated successfully before 1985, and those businesses had been sold to acquire funds for buying the 40 estate agencies. He claimed that he had made oral agreements to buy a number of agencies for substantial prices ($425,000 for one) but the present litigation had brought the proposal to buy the agencies to an end. Mr. Eaton said that he thought Australian Estates was a "defunct company". I infer that Mr. Eaton thought (correctly) that no business using that name was trading at the time when he decided to use it, and I find that he thought he was entitled to use the name. Mr. Eaton also gave some evidence about financial dealings, which was relied on by counsel for the applicants in support of the submission that continued use of the "Australian Estates" name might well damage the applicants. He told counsel for the respondent that, apart from trying to purchase reali estate agencies, the respondent had done other work consisting in small business consulting and had earned fees of about §50,000. He said 1t had not engaged in any other real estate activity. It is not easy to reconcile this evidence with the content of the advertisements referred to above, which described the respondent as "leading business brokers" and used similar expressions. Mr. Eaton said that the capital of the respondent was increased in May 1985, a large number of shares being then allotted to his wife - $218,000 worth. He was asked to explain the balance sheet for the year ended 30 June 1985, which showed assets of $218,899, and the reason for the change to a deficiency of $88,385 in the following year's accounts. Mr. Eaton said that "the asset of the company was totally lost"; a snack bar, which was apparently thought at one stage to be worth $280,000, was sold for $5,000. There were, he claimed, substantial losses in the year ended 30 June 1985, because that was the "formative funding stages of the company". In the 1986 year, the income of the company was $1,075 from the sale of a small business and the expenses were $988,000. Again, it is difficult to understand the assertion that a company with a gross income of $20 per week was a "leading business broker". However, Mr. Eaton claimed that in 1985 the respondent had 50 or 60 businesses listed for sale, and 15 houses. It appeared that the advertisements to which I have referred above had not all been paid for. The newspaper company got judgment against the respondent, and Mr. Eaton told me that the accounts were still unpaid. On the evidence, i1t was in effect contended that the continued use of the name "Australian Estates" by the respondent would be unlikely to add lustre to that name. The contention appears sound to me. Although the name "Australian Estates" has not been used, except by the respondent, for some years, 1t 18 my opinion that many business people in Queensland, especially in the country, would still remember the name well. I accept the evidence of Mr. B.A. Campbell, who is prominent in the beef industry, and was for some time general manager of Primac Holdings Limited, that it is well known that the enterprise which was once known as "Australian Estates" is now part of the Elders group. Although it is unlikely that, whatever the fate of the respondent''s business, its use of the name could do the first applicant any great damage, the possibility that some signficiant damage would ensue cannot be denied. For example, if the respondent became insolvent, there is a risk, in my opinion, that business people hearing of it might wrongly assume that an arm of the first applicant's business was in trouble. In essence, then, the facts are that the first applicant seeks to restrain use of a name which, in the minds of business people, may well be associated with it, but the respondent says the applicants have abandoned the use of the name. Counsel for the applicants was unable to refer me to any authority in which use of a name entirely abandoned by an applicant or plaintiff has been prevented. With important exceptions, the tendency of English law appears to have been to confine the tort of passing-off to representations by a defendant that his goods are those of the plaintiff. In Reddaway v. Banham C1896] A.C. 199 at p.204, Lord Halsbury L.C. stated the relevant principle as being that "nobody has any right to represent his goods as the goods of somebody else". In I.R.C. v. Muller & Co.'s Margarine, Limited £19013 A.C. 217 at p.235, Lord Lindley, discussing the notion of goodwill described it as being "inseparable from the business to which it adds value". In A.G. Spalding & Bros. v. A.W. Gamage Ltd. (1915) 32 R.P.C. 273 at p.284, it was said in the House of Lords, in effect, that the right of property protected ina passing-off action is not "property in the mark, name, or get-up" but rather "property in the business or goodwill likely to be injured by the misrepresentation". Recent examples of application of these 10. authorities in the Privy Council are to be found in Star Industrial Company Limited v. Yap Kwee Kor [1976] F.S.P.L.R. 256 and Cadbury Schweppes Pty. Ltd. v. Pub Squash Co. Pty. Ltd. (1980) 32 A.L.R. 387. In the former case, the Board held that an abandoned trade name could receive no protection. The plaintiff had made toothbrushes in Singapore under a certain brand and device. When it ceased todo so, it (in effect) assigned its unregistered trademark to another company for ten years, the plaintiff taking a half-interest in the other company. It was held that the plaintiff could not sue to protect the use of the name and device in Singapore, because it "had abandoned that part of its former business that consisted in manufacturing toothbrushes for export to and sale in Singapore ..." (p.269). In the latter case, the Privy Council did not fault, save in one respect, the trial judge's approach of inquiring "whether the consuming public was confused or misled by the get-up, the formula or the advertising of the respondent's product into thinking that it was the appellants' product" (32 A.L.R. at p.393). In the Spanish champagne case, Bollinger, J. v. Costa Brava Wine Coy., Ed. C1960] R.P.C. 16 and subsequent similar cases, the traditional notion of a passing~-off action was extended to protection of descriptions of articles made by a group or category of businesses, and those cases were approved and explained by the House of Lords in Erven Warnink B.V. v. J. Townend & Sons (Hull) Ltd. £1980] R.P.C. 31. There Lord Diplock gave a definition of passing-off as including five ll. elements, none of which corresponds to or includes Lord Halsbury's formulation in Reddaway v. Banham; whereas he spoke of someone representing his goods as those of somebody else, Lord Diplock imports no such requirement. 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 The Berkeley Hotel Company Limited v. Berkeley International (Mayfair) Limited £1972] R.P.C. 237, a famous hotel had been demolished with the intention of rebuilding on another site. Before the new hotel was built, the defendants built on the old site and proposed to call their hotel the "Berkeley International". In another case in the same volume, Ad-Lib Club Lamited v. Granville £19723 R.P.C. 673, a similar situation prevailed with respect to the Ad-1lib Club, with the difference that there was no immediate rebuilding proposal. In both cases, the plaintiff obtained an interlocutory injunction and in the latter Pennycuick V.C. said at p.677: "It must be a question of fact and degree at what point in time a trader who has either temporarily or permanently closed down his business should be treated as no longer having any goodwill in that business or in any name attached to it which he is entitled to have protected by law." The Ad-Lib Case was a strong example of protection of such a business, for the club had been closed for five years. An even stronger example of application of the same line of reasoning is to be found in Ballarat Products Ltd. v. Farmers Smaligoods Co. Pty. Ltd. (1957) V.R. 104. There the plaintiff 12. carried on a business of making goods under the name "Farmers", but that business was closed "for the time being" in 1949 and had not been reopened seven years later when the matter came before Hudson J. An injunction was granted, because there was found to be a likelihood of the plaintiff or its assignee resuming business under the name "Farmers"; here, there is no corresponding likelihood. The applicant gained some assistance in an indirect way from the line of authorities steming from Henderson v. Radio Corporation Pty. Ltd. (1960) 60 5.R.(N.S.W.) 576 at p.591, which was referred to with approval by the High Court in Moorgate Tobacco Co. Ltd. v. Philip Morris Ltd. (1984) 56 A.L.R. 193 at p.214. An example of an application of the doctrine of Henderson's Case is to be found in Childrens Television Workshop Inc. v. Woolworths (NSW) Ltd. £1981] 1N.S.W.L.R. 273. There, the plaintiff obtained an anjunction restraining the defendants' selling toys which were representations of characters from the television series "Sesame Street". The point of present importance is that the injunction did not protect any toymaking Business of the plaintiffs, or indeed any manufacturing business at all; the plaintiffs sued in virtue of thelr ownership of the characters. As was said in the reasons at p.281: ",.. the deception is that the public will believe that the plaintiffs, or the first plaintiff, as a licensor are, or is, associated with the defendants in putting these goods on the market for sale, or in permitting the defendants to sell them. That amounts to a connection, in respect of the marketing of these three character representations, between the business of the plaintiffs and the business of the defendants." 13. The law in Australia is, in my opinion, moving closer to protection of names and other symbols as such; that weakens' the force of the respondent's argument here that the applicants do not apply the name "Australian Estates" to any goods or services sold by then. A further example of the same liberal tendency is the decision in Fletcher Challenge Ltd. v. Fletcher Challenge Pty. Ltd. £1981] 1N.S.W.L.R. 196. The plaintiff was a completely new company which could not claim to have built up any goodwill in the name "Fletcher Challenge". Its newborn reputation was protected by an interlocutory injunction, partly on the basis that 1t was entitled to the combined goodwill of the three companies which had formed it, one of which had the word "Challenge", and another' the word "Fletcher", in its name. Mr. Bain, who appeared for the respondent, argued that no matter how far the law of passing-off extends, it cannot assist either applicant here. His contention was that on the evidence neither applicant has such an interest in the name "Australian Estates" as to be entitled to protection. The first applicant, as I have explained above, bought assets of A.M.L. & F. Holdings Limited, including the shares in the second applicant. It was contended on behalf of the applicants that that share purchase gave the first applicant an interest in the mame or in the goodwill associated with the name; in my opinion, that is not so. Mr. Bain further pointed out that after the first applicant's acquisition of the assets just mentioned, it did not ever use the 14. name "Australian Estates" or cause it to be used. That is, at least in substance, correct. As to the second applicant, a similar difficulty arises. The evidence is that it has not traded, whether in real estate or otherwise. Another company (Australian Estates Real Estate Pty. Ltd.) was used at relevant times to conduct real estate business and that company was wound up in June 1982. The second applicant holds property, but does not engage in any other business activity. It has no public presence and it would seem to me clear enough that the law of passing-off cannot assist it. It is not quite so clear whether the first applicant may sue as for passing-off. Not only has it never traded as "Australian Estates"; from the time of its acquisition of the assets just mentioned, use of the name was substantially abandoned. Its claim to succeed under the general law must overcome the obstacles that it seeks to prevent the use of a name 1t has never used and does not propose to use. On the whole, I have come to the conclusion that the principles relating to the law of passing-off do not justify granting relief to the first applicant. A different conclusion follows, however, with respect to the claim under s.52 of the Trade Practices Act 1974. 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 15. ° oS conduct of the respondent must be held likely to mislead; members of the business community who are aware that the old and well-known pastoral house has been absorbed by the first applicant may well assume that a business currently advertising as "Australian Estates" is in some way connected with or descended from the old pastoral house. From that it appears to follow that those who are aware the first applicant has absorbed that pastoral house may well assume that there is a connection between the present "Australian Estates" and the first applicant. The probability of the second step's being taken is obviously less than the probability of the first''s being taken, but is nevertheless substantial enough, in my opinion, to entitle the first applicant to relief. The second applicant, however, is a company which has never traded and 1s not entitled to succeed under the general law or under the Trade Practices Act. In summary: 1. The first applicant is entitled to relief under s.52 of the Trade Practices Act, on the basis of the finding that the conduct of the respondent, in using the name "Australian Estates" in its business, is likely to mislead or deceive. 2. The applicants' claims otherwise fail. I shall hear counsel as to the form of relief and on costs. 1 certify that this and the 14 preceding pages are a true copy of the reasons for Judgment herein of His Honour Mr. Justice Pincus Associate Dated 19 November 1997. Counsel for the Applicants: Solicitors for the Applicants: Counsel for the Respondent: Solicitors for the Respondent: Dates of Hearing: Mr. J.S. Douglas Messrs. Feez Ruthning Co. Mr. R.G. Bain Messrs. J.B. Stevenson Company 23-26 February 1987