Evans v Graham [2009] NSWSC 1378 | Case summary

4540/09 PAUL JOSEPH EVANS v RODNEY CRAIG GRAHAM JUDGMENT 1 For 25 years a business has been conducted under the name Bathurst Locksmiths. Paul Joseph Evans, the plaintiff, has conducted a business called Lithgow Locksmiths for approximately 18 years. Mr Evans bought Bathurst Locksmiths in 2005. 2 Like the other locksmiths in town, Bathurst Locksmiths advertised a 24-hour emergency service. 3 Rodney Craig Graham, the defendant, commenced a locksmith business in Bathurst under the name RCG Locksmiths in 2006. It advertised a 24 hour emergency service as did Smith & Co Locksmiths, the largest locksmith business in Bathurst. 4 On 29 June 2009, Mr Graham registered the name Bathurst Locksmiths Emergency Service and an entry was placed in the online yellow pages immediately below Bathurst Locksmiths and immediately above RCG Locksmiths. 5 A complaint was made on Mr Evans' behalf and on 25 August 2009 the name Bathurst Locksmiths Emergency Service was cancelled and the name Bathurst Emergency Locksmith Service was registered and thereafter advertised. 6 Mr Evans seeks injunctive relief and damages for passing off and for misleading and deceptive conduct in contravention of the Fair Trading Act 1987, s 42. 7 In Conagra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302, Lockhart J carried out an exhaustive consideration of the authorities on passing off. At 308 of that fine analysis, his Honour described portion of the speech of Lord Diplock in Erven Warnink Besloten Vennootschap v J Townend & Sons (Hull) Ltd [1979] AC 731 at 742 as a passage that had come to be regarded as the authoritative statement of the necessary elements to establish passing off. His Lordship said: "My Lords, A G Spalding & Bros v A W Gamage Ltd , 84 LJ Ch 449 and the later cases make it possible to identify five characteristics which must be present in order to create a valid cause of action for passing off: (1) a misrepresentation, (2) made by a trader in the course of trade, (3) to prospective customers of his or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) and (5) which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so." 8 Lord Fraser of Tullybelton at 755-756 also considered the elements of a passing off action: "It is essential for the plaintiff in a passing off action to show at least the following facts: - (1) that his business consists of, or includes, selling in England a class of goods to which the particular trade name applies; (2) that the class of goods is clearly defined, and that in the minds of the public, or a section of the public, in England, the trade name distinguishes that class from other similar goods; (3) that because of the reputation of the goods, there is goodwill attached to the name; (4) that he, the plaintiff, as a member of the class of those who sell the goods, is the owner of goodwill in England which is of substantial value; (5) that he has suffered, or is really likely to suffer, substantial damage to his property in the goodwill by reason of the defendants selling goods which are falsely described by the trade name to which the goodwill is attached." 9 These passages were described as declarations of principle of general application by the Privy Council in Cadbury-Schweppes Pty Ltd v Pub Squash Co Pty Ltd (1980) 55 ALJR 333 at 335. And Deane J cited Lord Diplock's statement with apparent approval in Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) [1984] HCA 73; (1983-1984) 156 CLR 414 at 443-444. 10 It was submitted that none of the elements identified by Lord Diplock were established. 11 It was submitted that the plaintiff had not put on evidence that Bathurst Locksmiths business had a value attributable to the use of those words. It was submitted that there was no evidence that there was a perception in Bathurst or the Central West that Bathurst Locksmiths connoted a quality of service as a locksmith that other words did not. 12 Bathurst Locksmiths business was carried on from its premises in Bathurst continuously over the 25-year period. The name Bathurst Locksmiths was prominently displayed for all passers by to see on its shop front as were its services. 13 Mr Evans was aware of the business while he traded as Lithgow Locksmiths. He paid $220,000 for Bathurst Locksmiths of which $169,500 was attributed to goodwill. One might think that was not an insignificant amount in 2005. 14 Bathurst Locksmiths and its services have been advertised in the yellow pages year after year with the name Bathurst Locksmiths prominently displayed. 15 For the year ended 30 June 2008, Bathurst Locksmiths made a profit just under $50,000 on a turnover of just over $272,500. Mr Evans expects the combined total of sales for Bathurst Locksmiths and Lithgow Locksmiths in 2009 to be slightly greater than the combined figure of over $601,000 in 2008. 16 In the competitive market of three locksmiths in Bathurst together with locksmiths from the surrounding area such as Orange advertising into Bathurst, Bathurst Locksmiths must have had a reputation for quality service to be able to maintain an increasing turnover from its business. 17 Mr Evans must have thought Bathurst Locksmiths had a good reputation otherwise he would not have paid so much as he did for goodwill. 18 The name of a place can acquire a distinctive reputation and goodwill as, for instance, Swiss chocolate (Chocosuisse Union Des Fabricant Suisses de Chocolat v Cadbury Ltd (1997) 41 IPR 1 at 10). 19 I find that Bathurst Locksmiths had established a reputation for the services it offered and because of that reputation there was goodwill attached to the name Bathurst Locksmiths. 20 In terms of the first three elements identified by Lord Fraser, Bathurst Locksmiths sells services to which its name, Bathurst Locksmiths, applies. The name Bathurst Locksmiths distinguishes Mr Evans' services from services provided by RCG Locksmiths and Smith & Co Locksmiths. The other two locksmiths distinguish their services by the prominent display of their names and the identification of their services on their premises and in advertising material. Because of the reputation of Bathurst Locksmiths for its services, there is goodwill attached to its name. 21 As to the fourth element of Lord Fraser, Mr Evans is the owner of that goodwill. What is a substantial value for goodwill is a relative matter. What to one person may be a substantial value may be a pittance to another. Lord Fraser was dealing with a case seeking injunctive relief and it cannot be supposed that his Lordship in his fourth element was referring to anything other than that an injunction would not be granted if damages were an adequate remedy. 22 Damages are not an adequate remedy in this case because, for reasons I will develop, confusion in the market place will remain if Mr Graham continues to list Bathurst Emergency Locksmith Service in the online yellow pages and elsewhere. 23 In the analogous situation of a representation made to the public at large, said to be misleading or deceptive for the purposes of the Trade Practices Act 1974 (Cth), s 52, the High Court said in Campomar Sociedad, Limitada v Nike International Limited [2000] HCA 12; (1999-2000) 202 CLR 45 at 84-85 [101] that the sufficiency of the nexus between the conduct and likely deception is to be approached at a level of abstraction not present where the case is one involving an express untrue representation made only to identified individuals. Thus, the inquiry is to be made with respect to a reasonable hypothetical member of the class of prospective purchasers of emergency locksmith services in or around Bathurst why the misconception has arisen or is likely to arise if injunctive relief is not granted. 24 The advantage Mr Evans has in the online yellow pages listings is that the name of his business precedes the names of his competitors. By causing the name Bathurst Locksmiths Emergency Service to be included in the listings, Mr Graham represented that there was a connection between his new business and Bathurst Locksmiths. In the mind of a reasonable reader of the listings, that name appearing immediately below Bathurst Locksmiths would lead the person to believe that the two businesses were connected. 25 Mr Graham required his employees to wear clothing that prominently displayed the name RCG Locksmiths. Whenever he attended a job he wore the same uniform. That action enforced a distinction between Bathurst Locksmiths Emergency Service or Bathurst Emergency Locksmith Service and RCG Locksmiths and enforced the perception of a relationship between the businesses thus described and Bathurst Locksmiths. 26 In the online yellow pages, a mobile number was given for Bathurst Locksmiths Emergency Service and a telephone number was given for RCG Locksmiths. That difference tended to support an assumption that Bathurst Locksmiths Emergency Service was linked to Bathurst Locksmiths and not to RCG Locksmiths. 27 The linkage of Bathurst Locksmiths Emergency Service to RCG Locksmiths was far more tenuous. Below each entry the same address appeared in small print. There was a Google map on the same page showing the location of each of Bathurst Locksmiths, Bathurst Locksmiths Emergency Services, RCG Locksmiths and Smith & Co Locksmiths by identification numbers. The same identification number linking them to the map appeared before the names Bathurst Locksmiths Emergency Service and RCG Locksmiths. 28 To a highly perceptive reader, then, it might become apparent that Bathurst Locksmiths Emergency Service and RCG Locksmiths operated from the same address. But for the average reasonable reader the immediate effect of the listings was to draw attention to the names of the locksmith businesses and the juxtaposition of Bathurst Locksmiths Emergency Service with Bathurst Locksmiths and the similarity in the names would, in my view, deceive a reasonable reader, whether familiar with the services of Bathurst Locksmiths or not, into believing that Bathurst Locksmiths Emergency Service was part of the Bathurst Locksmiths business. That was a misrepresentation. 29 The substitution in the online yellow pages of Bathurst Emergency Locksmith Service for Bathurst Locksmiths Emergency Service did not, in my view, remove the misrepresentation. The use of the words Bathurst and Locksmith and the positioning of the name immediately below Bathurst Locksmiths conveys to a reasonable reader that Bathurst Emergency Locksmith Service is part of the business of Bathurst Locksmiths. 30 In terms of the elements in Lord Diplock's list, then, Mr Graham made a misrepresentation in the course of his trade to his prospective customers. 31 Mr Graham maintained that he had no intention of trading off the reputation of Bathurst Locksmiths. He said he wanted to provide an easily googled name that could be searched to find emergency services in Bathurst, so he registered Bathurst Locksmiths Emergency Service and then Bathurst Emergency Locksmith Service rather than RCG Locksmiths Emergency Service or RCG Emergency Locksmith Service. 32 In his affidavit, Mr Graham swore that, to his knowledge, there was no emergency locksmith service advertised in the Bathurst area and he wanted to advertise such a service with a new name so that people in Bathurst could easily find the service via directory assistance or via another easily available name search. 33 When it was pointed out to him that all three businesses in Bathurst advertised emergency services, it did Mr Graham no credit to add a rider to his evidence that there was no such service advertised in the Bathurst area as a registered business. 34 I do not accept Mr Graham's evidence that he did not intend to take advantage of the reputation and goodwill of Bathurst Locksmiths. 35 Mr Graham's determination to advertise an emergency service with Bathurst as the first part of its name was intentionally calculated to injure the business and goodwill of Mr Evans and in the sense that this was a reasonably foreseeable consequence. 36 The director of Smith & Co Locksmiths was confused when he saw the online yellow page listing for Bathurst Emergency Locksmith Service. He called Mr Evans and asked whether there was any agreement between him and RCG Locksmiths, which he noticed had the same address as Bathurst Emergency Locksmith Service. He was told there was no agreement. 37 Up until September 2009, Mr Evans' staff received at least ten telephone calls on the business number of Bathurst Locksmiths asking for Rod Graham. There was no Rod Graham, of course, associated with Bathurst Locksmiths. Mr Graham was the proprietor of RCG Locksmiths. 38 The persons who called had associated Bathurst Locksmiths Emergency Service or Bathurst Emergency Locksmith Service with Bathurst Locksmiths. 39 In terms of the fifth elements of the lists of Lord Diplock and Lord Fraser Mr Evans has suffered and will continue to suffer substantial damage to his business or goodwill unless advertising containing a combination of the words Bathurst and Locksmiths or Locksmith interposed with any other words is enjoined. 40 I am satisfied that Mr Evans has made out a case of passing off and that he is entitled to injunctive relief preventing Mr Graham using the names Bathurst Emergency Locksmith Service and Bathurst Locksmiths Emergency Service or any other name incorporating the words Bathurst and Locksmith or Locksmiths. 41 The scope of the Fair Trading Act, s 42 is broader than that involved in the tort of passing off as Hill J observed in Equity Access Pty Ltd v Westpac Banking Corporation (1989) 16 IPR 431 at 440 with respect to the Trade Practices Act, s 52. The provision is limited only by its wording. 42 For the reasons discussed with respect to the passing off action, Mr Evans has established that Mr Graham, in trade or commerce, engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive contrary to the Fair Trading Act, s 42. The court may grant an injunction under s 65(1) since the contravention is of a provision in Part 5. 43 Mr Evans also seeks damages for passing off or under the Fair Trading Act, s 68(1). 44 Reference was made to Anakin Pty Ltd v Chatswood BBQ King Pty Ltd [2008] FCA 1467; (2008) 250 ALR 620 at 645 [109] where Branson J inferred that the custom of a new restaurant named Chatswood BBQ King included the custom of persons who knew of the BBQ King restaurant and, being under a misapprehension that the Chatswood restaurant was associated with the BBQ King restaurant, ate at the Chatswood restaurant rather than travelling to the city to eat at the BBQ King restaurant. 45 Her Honour went on to say that she was satisfied that the respondent decided to operate its restaurant under the name Chatswood BBQ King because it considered that by doing so it might benefit from the reputation of the BBQ King restaurant. 46 Her Honour observed that a precise evaluation of damage was impossible. She looked at gross profit from trading at the Chatswood restaurant. It showed an upward trend over three successive years - approximately $234,000, approximately $270,000 and approximately $300,000. 47 Having regard to what her Honour described as the comparatively modest scale of the restaurant's trading, damages of $20,000 were awarded. 48 It was submitted that in this case I should award damages between $30,000 and $50,000. 49 Ian Montgomery Clarke was an apprentice employee of Mr Graham. He said that he had attended probably 15 to 20 emergency service calls on the new mobile number. He said the charge for the emergency calls was between $80 and $110. 50 The evidence is of limited confusion and the injunctive relief I propose to grant should stem that confusion. The prices charged for emergency services are modest. In my view an award of damages of $5,000 is appropriate. 51 Mr Graham must pay Mr Evans' costs. 52 I direct the parties to bring in short minutes of order reflecting these reasons.

Evans v Graham

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