Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc

High Court of Australia Gibbs C.J. Murphy, Aickin, Wilson and Brennan JJ. Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc [1981] HCA 39

ORDER Allow the appeal with costs. Order of the Full Court of the Federal Court (other than par. 2 thereof) set aside, in lieu thereof, order that the appeal to the Federal Court be dismissed with costs. Upon the appellant attending before a judge of the Federal Court within two weeks of today and undertaking to that court in the same terms as the undertaking given to Mr. Justice Smithers on 15 April 1980, save that there be substituted for the words - until 5 May 1980, or, if the trial of the action herein is adjourned until the adjourned date for the trial of the action herein (but not being a date later than 31 May 1980)the words - until the expiration of four weeks from the giving of this undertaking,order that the appellant be released and discharged as from the date on which he gives the undertaking from the undertaking given to Mr. Justice Smithers on 15 April 1980. Remit the matter to the Federal Court in its original jurisdiction to receive the undertaking and to fix a date for trial not earlier than the expiration of the said period of four weeks. Liberty to apply.

The following written reasons for judgment were delivered: -

After a short adjournment The Court made the orders set out hereunder.

Aug. 4 Gibbs C.J., Aickin, Wilson and Brennan JJ.

This is an appeal by special leave from an order of the Full Court of the Federal Court which by majority set aside an interlocutory order made by Smithers J. The appeal was argued in Hobart on 29 April 1981. At the conclusion of the argument the Court ordered that the appeal be allowed, and made consequential orders. It intimated that reasons would be given later.

It is necessary to recite briefly the history of the matter. The dispute arises because the respondents ("Philip Morris") market a cigarette under various trade marks associated with the name "Marlboro", in a packet which carries what has been described as a "red rooftop" design, while the appellant ("Brown") markets items of men's clothing also using these symbols. On 6 June 1979 Philip Morris commenced an action against Brown in the Federal Court seeking injunctions and damages in respect of alleged breaches of ss. 52 and 53 of the Trade Practices Act 1975 Cth and in respect of the tort of passing off. Philip Morris applied immediately for interlocutory injunctions. Those applications came on for hearing before Keely J. in September 1979. The hearing proceeded for five days, and was well short of completion when Brown offered to give an undertaking to the effect that, pending the hearing and determination of the action or until further order, it would not manufacture distribute offer for sale supply or sell in Australia any items of apparel or other goods bearing the Marlboro label or the red rooftop design. Philip Morris agreed to accept the undertaking and in return to give the usual undertaking as to damages. Upon the undertakings being then given, Keely J. adjourned the summons for interlocutory injunctions sine die. The usual order granting liberty to apply was made.

Meanwhile Brown had issued a summons for directions seeking a speedy hearing of the action. That summons came before Smithers J. on 12 November 1979, and appropriate orders were made fixing dates for discovery and the service and answer of interrogatories and a tentative date for the commencement of the trial. The order subject to conditions set out therein, also authorized the parties to adduce evidence on affidavit of the state of mind of the public relating to the use of the Marlboro mark "ascertained by any survey sampling or poll conducted by a professional market or public opinion survey research sampling or polling organisation".

On 2 April 1980 Brown gave notice of a motion to vary the undertaking given to Keely J. on 17 September 1979 by the addition of a proviso which would permit Brown to offer for sale and sell items of apparel or other goods under the Marlboro name and red rooftop design "for the purposes of the conduct of a professional market and/or public opinion survey to be carried out in aid of the defence". That motion came on for hearing before Smithers J. on 10 April 1980. The evidence adduced in support of the motion was based on a recommendation of a professional market research company, coupled with the advice of counsel. It was claimed that the defence would be impeded if evidence of public reaction to the trade symbols in question could not be gained in an actual market situation involving offering for sale and sale. The motion was opposed on a number of grounds, including the proposition, on the authority of the Court of Appeal in Cutler v. Wandsworth Stadium Ltd. [1] , that there was no jurisdiction in the Court to vary an undertaking. In the course of his reply, counsel for Brown sought to amend the motion to allow the defendant to be released from the undertaking subject to it giving another undertaking in amended terms. After hearing considerable argument on 10 and 15 April his Honour ordered, so far as material, as follows:

UPON the Defendant by its Counsel undertaking to the Court that pending the hearing and determination of this action or until further order the Defendant will not by itself, its servants, or agents or otherwise howsoever manufacture, distribute, offer for sale, supply or sell or cause to be manufactured, distributed, offered for sale, supplied or sold in Australia any items of apparel or other goods under or wearing or in relation to representation of the Marlboro red cigarette packet including the Marlboro label trademark either or both of the red rooftop design and the trademark "Marlboro" and the trademark "The Marlboro Company" variously referred to in the Statement of Claim herein or any one or more of them or any other name or mark deceptively similar to them or any of them provided always that for the purposes of the conduct of a professional market and/or public opinion survey to be carried out in aid of the defence to the Plaintiffs' claims herein the Defendant may offer for sale in Australia at any one time not more than 240 units of the apparel and goods hereinbefore described and sell in Australia in total not more than 120 units of the apparel or goods hereinbefore described under or bearing or in relation to the representations of the Marlboro red cigarette packet including the Marlboro label trademark either or both of the red rooftop designs and the trademark "Marlboro" and the trade name "The Marlboro Company" variously referred to in the Statement of Claim herein or any one or more of them or any other mark [sic] or mark deceptively similar to them or any of them until the 5th May 1980, or if the trial of the action herein is adjourned until the adjourned date for the trial of the action herein (but not being a date later than the 31st May 1980)

1. The Defendant have leave to amend its Notice of Motion herein dated the 3rd April, 1980, by adding a claim in which it seeks an order that it be released from the undertaking given by it to the Honourable Mr. Justice Keely herein on the 17th September 1979, upon terms that it give the undertaking to the Court hereinbefore set out in this Order.

2. The Defendant be released and discharged from the undertaking given on its behalf herein to the Honourable Mr. Justice Keely on the 17th September 1979.

3. The costs of this application be costs in cause.

4. The parties herein have liberty to apply for any variation or release of the above undertakings upon such terms as to the Court may seem fit.

It must be emphasized that Philip Morris did not consent to the substitution of the varied undertaking, and it did not offer any renewal of its undertaking as to damages. In these circumstances, Brown concedes that the original undertaking as to damages must be taken to have been discharged. 1. [1945] 1 All E.R. 103.

Philip Morris promptly appealed from the decision of Smithers J. The hearing of the appeal to the Full Court (C.A. Sweeney, Northrop and Fisher JJ.) commenced on 28 April and concluded on 12 May. A stay of the order appealed from was ordered on 28 April. On 15 July 1980 the Court by majority (Fisher J. dissenting) allowed the appeal and set aside the order of Smithers J. [2] . The question is whether that order of the Full Court should stand. The opposing contentions fall within a very small compass.

The appellant Brown argues that their Honours C.A. Sweeney J. and Northrop J. approached the problem in the wrong way. They each dealt with it as if the decision of Smithers J. was no more than a discretionary judgment to the review of which it was sufficient to apply the principles so well established by this Court in many cases, including House v. The King [3] , Lovell v. Lovell [4] and Mace v. Murray [5] These principles are, of course, applicable. The decision was a discretionary judgment. But Brown's complaint is that in the application of the general principles their Honours failed to exercise that added restraint which an appellate court should exercise in reviewing a decision made in relation to a matter of practice and procedure. Had they done so, it is said, they would not have disturbed the decision.

1. (1936) 55 C.L.R. 499. 2. (1950) 81 C.L.R. 513. 3. (1955) 92 C.L.R. 370.

On the other hand, the respondent Philip Morris submits that however stringent may be the tests governing the appellate review of a decision such as that in question here, the Full Court of the Federal Court was fully justified in setting aside the order of Smithers J. because it was a decision that was not only infected by error but occasioned substantial injustice to it. The error was said to lie in the fact that his Honour failed to recognize the heavy onus resting on Brown to show cause why it should be released from the original undertaking. The learned judge was content to consider, as if he was considering ab initio an application for an interlocutory injunction, the effect of the proposed variation on the respective interests of the parties by reference to what he called the balance of convenience. In the course of this exercise he neglected to pay due regard to the interests of Philip Morris, thereby occasioning the injustice of which complaint is made.

There is no reason to doubt that the disputed decision of Smithers J. concerned a matter of practice and procedure. The essence of such a matter is described in terms which are sufficient for present purposes in Salmond on Jurisprudence 10th ed. (1947), p. 476:

Substantive law is concerned with the ends which the administration of justice seeks; procedural law deals with the means and instruments by which those ends are to be attained. The latter regulates the conduct and relations of courts and litigants in respect of the litigation itself; the former determines their conduct and relations in respect of the matters litigated. An interlocutory order for an injunction is a matter of practice and procedure. See McHarg v. Universal Stock Exchange Ltd. [6] ; Minister for the Army v. Parbury Henty and Co. Pty. Ltd. [7] ; White v. White [8] . 1. [1895] 2 Q.B. 81, at p. 82. 2. (1945) 70 C.L.R. 459, at p. 489. 3. [1947] V.L.R. 434, at p. 438.

Nor is there any serious dispute between the parties that appellate courts exercise particular caution in reviewing decisions pertaining to practice and procedure. Counsel for Brown urged that specific cumulative bars operate to guide appellate courts in the discharge of that task. Not only must there be error of principle, but the decision appealed from must work a substantial injustice to one of the parties. The opposing view is that such criteria are to be expressed disjunctively. Cases can be cited in support of both views: for example, on the one hand, Niemann v. Electronic Industries Ltd. [9] ; on the other hand, De Mestre v. A. D. Hunter Pty. Ltd. [10] . For ourselves, we believe it to be unnecessary and indeed unwise to lay down rigid and exhaustive criteria. The circumstances of different cases are infinitely various. We would merely repeat, with approval, the oft-cited statement of Sir Frederick Jordan in In re the Will of F. B. Gilbert (dec.) [11] :

I am of opinion that, there is a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights. In the former class of case, if a tight rein were not kept upon interference with the orders of Judges of first instance, the result would be disastrous to the proper administration of justice. The disposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant with a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal. See also, Brambles Holdings Ltd. v. Trade Practices Commission [12] ; Dougherty v. Chandler [13] . It is safe to say that the question of injustice flowing from the order appealed from will generally be a relevant and necessary consideration. 1. [1978] V.R. 431, at p. 440. 2. (1952) 77 W.N. (N.S.W.) 143, at p. 146. 3. (1946) 46 S.R. (N.S.W.) 318, at p. 323. 4. (1979) 40 F.L.R. 364, at p. 365; 28 A.L.R. 191, at p. 193. 5. (1946) 46 S.R. (N.S.W.) 370, at p. 374.

We mention these matters in order to clarify and confine the matters that are in issue between the parties. Considerable argument was directed to the question whether a court has power, otherwise than in the case of mistake operative at the time of giving it to release a party from an undertaking, at least in the absence of the consent of the other party. But in our opinion a court undoubtedly has such a power. Just as an interlocutory injunction continues "until further order", so must an interlocutory order based on an undertaking. A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust: cf. Woods v. Sheriff of Queensland [14] ; Hutchinson v. Nominal Defendant [15] ; Chanel Ltd. v. F. W. Woolworth & Co. Ltd. [16] . Of course, the changed circumstances must be established by evidence: Cutler v. Wandsworth Stadium Ltd. [17] .

1. (1895) Q.L.J. 163, at p. 165. 2. [1972] 1 N.S.W.L.R. 443, at p. 447. 3. [1981] 1 W.L.R. 485, at p. 492; [1981] 1 All E.R. 745, at p. 751. 4. [1945] 1 All E.R. 103.

As we have said, counsel for Philip Morris argues that Smithers J. failed to consider properly or at all whether Brown had discharged the onus resting on it of establishing that it should be released from the undertaking in its original form. He submits that the circumstances in which the offer of the undertaking brought to an end lengthy proceedings on Philip Morris' application for an interlocutory injunction, proceedings which it would be both costly and time-consuming to revive, served to place that undertaking beyond the reach of any release or amendment without the consent of the other party. As it was, the only circumstance called in aid of the release was that Brown had discovered subsequently that the undertaking it had offered was restrictive of its freedom to prepare its defence in the way it wished to do so.

In our opinion, the submission is not without substance, but we are not persuaded to accept it. The grounds on which the application for release was based may not have been of overwhelming cogency, but there is no suggestion that they were not bona fide, and they were supported by evidence. It is true that in his extempore reasons Smithers J. focused on the "balance of convenience" to the parties and the public if the proviso were incorporated in the undertaking, but those reasons were delivered by his Honour immediately on the conclusion of extensive argument by counsel the substance of which covered the entire ground. We do not think it is established that the matters relied upon by counsel for Philip Morris were not present to his Honour's mind or that he failed to give proper consideration to the question whether Brown should be released conditionally from its original undertaking.

Then it is said that the decision of the Full Court should be upheld because of injustice occasioned to Philip Morris by the order of Smithers J. The injustice is said to reside in the irreparable damage that could be done to their goodwill if Brown is allowed to market goods bearing the offending label and design. The proviso allows Brown, within a defined period of a few weeks, to offer for sale in Australia at any one time not more than 240 units of clothing and sell in Australia not more in total than 120 units. These limits both as to time and number were imposed by Smithers J. in response to submissions by counsel for Philip Morris related to the threat to goodwill which would arise from unlimited sales, notwithstanding that those sales were confined to a short period. It is clear that his Honour took seriously the adverse effects that might result to Philip Morris from the proviso, but he was entitled, as he did, to evaluate that threat in the context of the allegation that Brown had sold in Australia more than 30,000 of the offending garments before the institution of the proceedings. Furthermore, the submission faces the added obstacle that the only evidence before his Honour on Brown's application were the affidavits showing advice received by Brown from a professional market survey consultant supported by the opinion of counsel that the offering for sale and sale under market conditions were necessary to the preparation of its defence to the action. Philip Morris did not adduce any evidence in support of its opposition to the application. In any event, it is clear that Smithers J. was confronted with competing assertions based on justice, which he did his best to resolve by a strict limitation as to time and number of the items of clothing which Brown would be permitted consistently with its undertaking to offer for sale and sell. It is reasonable to suppose that those constraints were also sufficient in the circumstances to accommodate the public interest; indeed, the entire exercise could be represented as serving the public interest if it facilitated a proper outcome of the proceedings.

It is for these reasons, then, that we agreed that this appeal should be allowed. With great respect, we do not think that their Honours who formed the majority in the Full Court were justified in concluding that Smithers J. had failed to give adequate consideration to the question whether Brown should be released from its original undertaking, and in any event we do not think that in the circumstances they were justified in assuming the responsibility of exercising for themselves the discretion in a matter of practice and procedure. If we may say so with respect, we agree entirely with the reasons of Fisher J.

The appellant contended that an appeal court should be extremely reluctant to interfere with an exercise of discretion in matters of practice or procedure. A distinction was sought to be made between those matters and ones in which the exercise of discretion determined substantive rights. The supposed distinction is inappropriate. There is no mutual exclusion. Sometimes exercise of discretion in practice or procedure effectively determines substantive rights.

However when substantive rights are not effectively determined, an appellate court should be extremely reluctant to interfere (see Sir Frederick Jordan in In re the Will of F. B. Gilbert (dec.)) [18] . Here, no substantive rights were determined by Smithers J.'s order. The Full Court of the Federal Court should not have interfered, and its departure from the proper standard was so extreme as to warrant interference by this Court.

In trade practices cases where the public interest is a very important consideration, the grant or variation or dissolution of interlocutory injunctions may require the application of principles different from those applicable in cases affecting only the parties. So also with acceptance of and permission to withdraw and replace undertakings.

Here, the acceptance of the undertaking was on the hypothesis that the conduct complained of was misleading or deceptive. In deciding whether to release a party from an undertaking and to accept a new undertaking which would allow limited further conduct of the same kind, the balancing of considerations affecting the public interest may often be, and here was, more important than the balancing of the parties' convenience. The public interest factors to be considered were that the conduct might be misleading or deceptive to some 120 purchasers (and perhaps some non-purchasers) but that this would be allowed in order to obtain evidence which might well assist the court to determine whether the conduct was misleading or deceptive. It is the kind of experiment which might have been permitted even if the appellant had obtained an interlocutory injunction (either by consent or after contest) against such conduct. The possible detriment to the public would be small in comparison with the public interest in ascertaining the truth. Further, the injury to individual members of the public (if it eventuated that they were misled or deceived) need not be irreparable; it would have been appropriate for the court to have required a term for recompense of any persons injured by the conduct permitted. The course taken by the primary judge was correct.