CGM Investments Pty Ltd v Chelliah

REASONS FOR JUDGMENT 1 This is the second stage of the proceeding. Earlier this year I made orders that a franchise agreement between CGM Investments Pty Ltd and Wallera Pty Ltd relating to the use in Melbourne of (1) the name "Electrodry" and (2) an exothermic chemical process for cleaning carpets had by 1998 been abandoned. Accordingly, the licence granted to Wallera to conduct the business and use the name had come to an end. I also made final orders restraining Wallera from, amongst other things, using, operating, licensing or permitting the operation of any carpet cleaning business in Melbourne which utilised the Electrodry name. That left outstanding the claim against Mr Chelliah and his company, Mulsanne Holdings Pty Ltd. According to Mr Chelliah, in June 2002, Mulsanne purchased the Electrodry franchise for the Melbourne metropolitan area. It was for this reason that he and his company were joined as parties to the suit. The applicants seek declarations that Mr Chelliah and his company have infringed the Electrodry trade mark, breached s 52 and s 53 of the Trade Practices Act 1974 (Cth) along with the corresponding provisions in the Fair Trading Act 1999 (Vic) and that they have engaged in passing off. The applicants also seek injunctions restraining Mr Chelliah and Mulsanne from using the Electrodry name and from passing off any business which they conduct as the applicants' business. Damages or an account of profits are also sought. For their part Mr Chelliah and Mulsanne claim that because they own the Melbourne franchise of the Electrodry business, CGM is not entitled to operate the business or use the Electrodry name in Melbourne. There is a cross-claim seeking relief accordingly. 2 In view of my finding that the franchise agreement had terminated by 1998 (a decision binding upon both Mr Chelliah and his company), neither of them could have acquired from Wallera any rights over the business or the Electrodry name. This is not in dispute. The only issue that remains outstanding is what relief, if any, the applicants can obtain against Mr Chelliah or Mulsanne. 3 The applicants alleged, but were unable to prove, that Mr Chelliah or Mulsanne conducted a carpet cleaning business using the Electrodry name. The evidence reveals that whilst Mulsanne believed that it had become the owner of the Melbourne Electrodry franchise, it had not begun operations by the time the action commenced. Thereafter Mulsanne was prevented from conducting the business or using the name because of an interlocutory injunction granted at the suit of the applicants. It appears that Mulsanne proceeded no further than leasing business premises from which it proposed to conduct the business. Mulsanne also entered into inconclusive negotiations to acquire a number of trucks which were to be used in the business. It follows that none of the declarations sought by the applicants can be made. Nor can there be an enquiry as to damages or an account of profits because the applicants are not entitled to such relief in the circumstances of this case. 4 The only issue that remains for consideration is whether the applicants should have a quia timet injunction. The jurisdiction to award a quia timet injunction is not in doubt. Examples of this kind of relief being granted go back at least to 1816: Crowder v Tinkler (1816) 19 VesJun 618; 34 ER 645. The importance of the remedy was explained by Jessel MR in Frearson v Loe (1878) 9 Ch D 48, 65: "No part of the jurisdiction of the old Court of Chancery was considered more valuable than that exercise of jurisdiction which prevented material injury being inflicted, and no subject was more frequently the cause of bills for injunction than the class of cases which were brought to restrain threatened injury as distinguished from injury which was already accomplished." Courts have always adopted a cautious approach when asked to award an injunction prior to actual harm being suffered. Once it was said that there must be a high degree of probability that the harm will actually occur: Fletcher v Bealey (1885) 28 Ch D 688. Nowadays it seems that cases such as Fletcher v Bealey adopt an unduly restrictive approach. Provided that there is a real risk of wrongful conduct which would cause injury which is more than trivial, there may be no good reason to refuse quia timet relief. 5 In this case it would be inappropriate to grant the relief. It would be inappropriate because it would restrain the respondents from doing something which it appears they are unlikely to do without the imposition of a court order: compare Newson v Pender (1884) 27 Ch D 43. Mr Chelliah and Mulsanne understand that the termination of the franchise agreement has frustrated the ability of Mulsanne to acquire the Electrodry business from Wallera. Indeed, they have a cross-claim against Wallera, which is still to be heard, which asserts an entitlement to damages in the event, which has now occurred, that the applicants are entitled to the name and the business. Nevertheless, it is appropriate to grant a declaratory order as to the rights of the parties: Litchfield-Speer v Queen Anne's Gate Syndicate (No 2) Limited [1919] 1 Ch 407. A declaration should be made that Wallera was not entitled to sell any right, title or interest in (1) the exothermic chemical process for cleaning carpets or (2) the name "Electrodry". It necessarily follows that the cross-claim against the applicants should be dismissed. The parties should file submissions on costs by 15 April 2003. I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finkelstein.