Castlemaine Tooheys Ltd v South Australia

SELECTRODE INDUSTRIES INC and SELECTRODE IAF PTY LID (ACN 003 023 130) v SELECTRODE PTY LTD (ACN 002 764 892) and JOHN FIELDING

IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G 502 of 1994 GENERAL DIVISION )

BETWEEN : SELECTRODE INDUSTRIES INC First Applicant

SELECTRODE IAF PTY LTD (ACN 003 023 130) Second Applicant

AND : SELECTRODE PTY LTD (ACN 002 764 892) First Respondent

accordance with Order 36 of the Federal Court Rules

NEW SOUTH WALES DISTRICT REGISTRY ) No. G 502 of 1994 GENERAL DIVISION ) BETWEEN : SELECTRODE INDUSTRIES INC

SELECTRODE IAF PTY LTD (ACN 003 023 130) Second Applicant

AND : SELECTRODE PTY LTD (ACN 002 764 892) First Respondent

CORAM : TAMBERLIN J PLACE : SYDNEY DATED : 21 DECEMBER 1994 REASONS FOR DGMENT Application

This is a motion for an interlocutory injunction to restrain the respondents from selling, distributing or offering for sale any goods for use in regard to welding, having upon the packaging of the goods or upon the goods themselves the word "Selectrode" or any word deceptively similar to the word

The respondents filed affidavit evidence to the effect that there would be substantial hardship caused if such orders were

made on an interlocutory basis because it would be necessary

-2- to change the name of the company and its printing and packaging requirements at a claimed overall cost in the order of more than $85,000 and major disruption would be caused to their business. In response to this evidence, on the hearing, the applicants stated that they were willing to permit on the

"SUPPLIED BY SELECTRODE PTY. LTD. 7/10 VICTORIA AVENUE

The respondents agreed that such a modification would substantially reduce any hardship which they might otherwise

In the course of the hearing the applicants indicated that they were prepared to give an undertaking as to damages and also to provide the sum of $10,000 as security for any damages which might be held to flow from the grant of the injunctive relief. The respondents contest the grant of the interlocutory injunction but do not dispute that the sum of $10,000 security would be adequate. The question of security arose because the first applicant is a US corporation and there was no evidence that the second applicant, its Australian agent, a New South Wales corporation, has assets readily available in Australia to satisfy any damages which

The application was filed on 4 August 1994 together with the statement of claim. The notice of motion for the interlocutory

The statement of claim makes the following allegations. First, the applicants claim that the first respondent Selectrode Pty Limited (Selectrode NSW) has engaged in misleading conduct in representing to retailers of welding rods and other welding products in Australia that the business conducted by it is the business conducted by the first applicant ("Selectrode US"). Second, it is claimed that Selectrode NSW has represented in regard to the supply of such products that its business has the sponsorship or approval of Selectrode US and will be conducted in accordance with the normal business methods of that company. Third, it is claimed that the first respondent has passed off and continues to pass off welding products supplied by it as products supplied by the applicants. Fourth, it is said that by lodging a trade mark application Selectrode NSW has falsely represented that it is the proprietor of the said mark. Fifth, it is claimed that the second respondent is a person involved in contraventions of the Trade Practices Act. The applicants seek injunctive relief; delivery up of labels and documents bearing the word "Selectrode" and an inquiry as to profits together

At this time, Mr Joseph Paternoster, the principal shareholder and manager of Selectrode US acquired his interest in that company. The company commenced the business of supplying private labelled maintenance welding alloy products, which description includes electrodes. From this time it commenced to solicit business in Australia. The business consisted of supplying products and packages which bear the label of the supplier's customers. The customers are retail suppliers or intermediate wholesalers. The business is such that the identity of the supplier will not commonly be known to the ultimate retail customers but will be known amongst retailers and intermediate wholesalers and competing manufacturers and wholesalers. The principal source of orders for Selectrode US is through advertisements in trade journals circulating in Australia, attendance at trade fairs and using business contacts. The policy of Selectrode US is to explicitly state to its customers that it is a supplier of the customer and not

Mr Fielding, the second respondent, commenced business on his own account by acquiring a company incorporated as Vamheld Pty

Mr Fielding registered the business name "Selectrode Welding Supplies" and thereafter carried on business under that name

as a commission agent and seller of welding products.

Mr Fifield, now the Managing Director of the second applicant, and Mr Fielding had a conversation wherein Mr Fielding informed Mr Fifield that he was working as a commission agent

Mr Fifield engaged Mr Fielding to carry out sales training in Indonesia and New Guinea and paid Mr Fielding for this work as

Mr Paternoster became aware that the respondents had registered the "Selectrode" name and was using it to supply welding consumables. In about August 1992 Mr Paternoster told the second respondent Mr Fielding that the "Selectrode" name could no longer be used. Mr Paternoster did however satisfy a

few "small orders" placed by Mr Fielding and supplied four

• 6- orders of packaged "Selectrode"" rods between October 1992 and

The company of Mr Fielding, Vamheld Pty Limited, changed its

name to Selectrode Pty Limited, the first respondent.

Selectrode US entered into an agreement with Mr Fifield to appoint him as agent for Selectrode Industries in Australia with a view to expanding the business of that company into

Mr Fielding caused an existing company Faz Pty Limited to change its name to Selectrode IAF Pty Limited (the second

Mr Paternoster attended a world welding exhibition in Essen, Germany and was approached by a number of Australian businessmen who asked him whether Selectrode NSW was the

Mr Paternoster wrote to the second respondent alleging that the use of the "Selectrode" name was detrimental to the worldwide operations of Selectrode US. He sought to make arrangements with regard to printing plate changes and informed the second respondent that Selectrode US would no longer print labels or welding rods for Selectrode NSW with

After this date there was a conversation between Selectrode US and Mr Fielding wherein Mr Paternoster said he would "get back" to Mr Fielding about the use of the name "Selectrode".

There was no further discussion between Mr Paternoster and Mr

Prior to this date Mr John Gardner was instructed by Mr Fifield to make application for an Australian trade mark

Mr Gardner wrote to Mr Fifield that Selectrode NSW had applied to register the trade mark "Selectrode" three weeks prior to

Mr Shaddick, solicitor of Brisbane, wrote to Mr Fifield on behalf of the respondents seeking a written assurance that Selectrode IAF Pty Limited (Selectrode IAF) would cease to use

Mr Fifield wrote to Mr Fielding in response to the above

"it as highly unlikely that you will achieve any advantage without litigation..."

The respondents filed a cross-claim against the applicants

seeking to restrain them from using the name "Selectrode".

At present there appear on the packaging of products supplied by Selectrode NSW the statements set out below. The first is described as a "Warning Notice" and the second as a "Standard

é 7/10 Victoria Avenue in Oe Castle Hill, N.S.W. 2154 woe SLE Phone: (02) 894 5347

• _ Fax: (02) 894 5348 . WELDING SERVICES - . _

WARNING Protect yoursell and others, read and understand this label.

FUMES AND GASES can be dangerous to your health, ARC RAYS can injure end bum skin, ELECTRIC SHOCK can kill.

• Read and understand the manufacturers instructions and your employers

safety practices,

• Keep your head out of the fumes, © Use enough ventilation, exhaust at the arc, or both, to keep fumes and

gases from your breathing zone end the general area.

• Wear correct eye, ear and body protection.
• Do not touch live electrical paris.
• Refer to AWRAVAWI Technical Note 7 "Hoatth end Safety in Welding'

AS 1674 °SAA Cutting end Welding Safaty Code' and othior SAA salety publications e.g. CCS, MP17.

Seeoeranverenoerereesereese PYYTTTITITI TIT POPP PPPS EST OT IIIS irirtrrii iti rir s) POOP OR REDO PEO ETE EE SETTERS ESSE DEES OES OLEEESEL ORD

Dereeseracervecenes eaeccsccnes PTTTTTITITITIT IT rr wae

Perroccccnececccccnsse Peenecee Ce ee sea renee reese sSEesesssosaenes

oo 7 / 10 Victoria Avenue, Castle Hill, N.S.W. 2154

• Phone: (02) 8945347 Fax: (02) 894 5348

The case put forward by the applicants is that Selectrode US is a supplier to the wholesale industry in Australia of welding consumables which are the subject of "private labelling". That is to say that the packaging and the welding rods are printed by Selectrode US with the names of the customer on them. The name "Selectrode" is not shown on the packaging or rods. However, the customers of Selectrode US, of course, are aware that the supplier is Selectrode US, which arranges for the manufacture and packaging of the rods and which carries out the printing on the rods and their packaging in the name of the customer. The applicants state that the sales of welding rods in Australia packaged and bearing the name "Selectrode" is minimal. The material before me indicates that the ultimate consumers of the Selectrode US products would generally not be aware of the identity of Selectrode US as the supplier of the rods sold under private labels nor would they be aware of the identity of the manufacturers of such rods. Selectrode US does not itself manufacture the

The applicants contend that it is an important part of the expressed marketing policy of Selectrode US that it will not compete with its customers by supplying rods and packaging under the name "Selectrode". If the respondents continue to market welding consumables to distributors and to end users

the apprehension of the applicants is that their wholesale

-11- customers will see Selectrode as being in breach of this policy. There is further apprehension that the customers may wrongly take the view that Selectrode US has gained an unfair competitive advantage over them by knowing the nature trend and extent of the Australian market as a result of orders placed with Selectrode US by such customers. There is an additional concern that the perceived quality of the applicant's supplied products could be harmed if Selectrode NSW were to continue to supply using the name "Selectrode". It is said that by supplying the goods Selectrode US is in effect giving a stamp of approval or quality endorsement. Accordingly, they seek orders to restrain the use by Selectrode NSW of the name in the packaging and on the rods themselves, with the exception that, on an interlocutory basis only, the use of the notification "Supplied by Selectrode Pty Limited 7/10 Victoria Avenue Castle Hill 2154" would be permitted. The purpose of this temporary exception is to minimise potential damage and disruption which would otherwise be caused to the first respondent's business by requiring it

to change its name and packaging at an interlocutory stage.

The submission on behalf of the respondents is that there should be no interlocutory relief for two reasons. The first is that there is no serious question to be tried. The second is that the balance of convenience does not justify the

In relation to this question the respondents submit that the case of the applicants is an extremely weak one for a number of reasons. First, that there is no evidence to support the assertions ain the statement of claim that the name "Selectrode" or "Selectrode Industries" is well and favourably known in Australia, among retail vendors of maintenance welding alloy products, as denoting the business and products of Selectrode US and no other. Second, there is no evidence to support the allegation that the names "Selectrode" and "Selectrode Industries" is distinctive of and exclusively associated with the business of Selectrode US in relation to welding consumables. Consequently it is said that there is no evidence that Selectrode US has acquired a _ substantial exclusive and valuable reputation in Australia in those names

Whilst it is true that no third party evidence has been given in support of these claims, on the material before me I think there is some evidence in the affidavit of Mr Paternoster to support the assertions made in the statement of claim in relation to the matters raised by the respondents although

A second matter raised is that there is evidence that since about 1960 a Swedish company known as ESAB AB of Gothenburg,

claimed to be the biggest manufacturer of welding products in

-13- the world, has been selling products in Australia using the name "Selectrode". There is no evidence of any protest or claim by the applicants in respect of the use of the name "Selectrode" in relation to these products. The boxes in which the Swedish products are supplied contain the labels "OK Selectrode 83 50". However, the consumable rods which are contained in the package tendered only contain the terms "OK 83.50" printed on them and do not have the word "Selectrode" on them. These rods are packaged in distinctive yellow boxes

In relation to this matter the applicants say that the Swedish product is well-known in the industry to be clearly a Swedish product closely associated with the name ESAB which has a world wide reputation and that the term "Selectrode" is of little or no significance in relation to these products. The

At this interlocutory stage of the proceedings I am not in a position to express any firm view on the applicants' prospects of success but in my opinion there is at least one serious question raised for trial as to the rights of the parties and that is whether Australian customers of Selectrode US may be misled by the marketing of the products of Selectrode NSW into believing that Selectrode US is competing with its own

It is clear from the material before me that the applicants have known of the business and marketing of the respondents' products since the period July to August 1992. No action was commenced until 4 August 1994 in relation to the claimed passing off and misleading conduct. The present application

for interlocutory relief was not filed until 29 November 1994.

Although generally delay will not of itself be a defence in proceedings for interlocutory relief, it does afford some indication that there is little significant damage being caused to the applicants. Otherwise, of course one would normally have expected such proceedings to have been

The delay of over two years in bringing these proceedings is, in my view, a factor of some significance in refusing

As far as the packaging is concerned, in my view, there is no important difference between the reference which the applicants are prepared to allow to be printed on the packaging on a temporary basis, namely "Supplied by Selectrode Pty Limited 7/10 Victoria Avenue Castle Hill 2164" and the marks which presently appear on the packaging by the company in relation to the warning and the name of the despatcher set

-~ 15 - The labelling on the packaging of the respondents on its face simply indicates that the goods are despatched by Selectrode Pty Limited of Castle Hill. There is no link up with Selectrode US or Selectrode IAF Pty Limited. Neither the Warning nor the Despatch Notification imply in my view that the goods are manufactured by Selectrode NSW. Indeed, the reference to "Selectrode Welding Services" is consistent with a representation that Selectrode is a type of operation or company which provides services as opposed to supplying or manufacturing goods. It was suggested in argument that the symbol of the shield and the welding helmet represented that Selectrode NSW was a manufacturer, when taken in conjunction with the claimed history of that symbol, but on the evidence

presently before me I do not think that this argument has been

Finally, there should generally be established a "real" as opposed to a "bare" possibility that damages will not be an adequate remedy for the applicants. In the present case I am not satisfied that the applicant has satisfied this general requirement. See Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 141 at 153; Richardson v Forestry Commission

Accordingly, weighing all the above considerations I do not consider that the applicants have made out a case at this stage that there will be sufficient detriment to them to

justify interlocutory relief in this matter if the respondents

• 16 - are permitted to continue packaging and shipping rods which are imprinted with the name "Selectrode" on them and/or which

For the above reasons I dismiss the application for an interlocutory injunction and order the applicants to pay the

the preceding fifteen (15) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Tamberlin.

( , Associate | 2 Date : 21 December 1994 Counsel for Applicants : Dr Cc J Birch Solicitors for Applacants : Pigott Stinson Stuart Thom Counsel for Respondents : Mr C R Newlinds Solicitors for Respondents : A R Walmsley & Co Date of Hearing ; 13 December 1994