Federation of Australian Accountants Inc. & Anor v. Australian Society of Accountants [1988] FCA 101

Federal Court of Australia|1988-07-01|Before: Ryan JJ, Woodward J, Northroe J, Lockhart J

This 1S an appeal from the judgment of a single Judge of this Court (Woodward J.) un which his Honour granted injunctions ko

restrain contraventions of ss. 52 and 53 of the Trade Practices Act

1974 (the "Trade Practices Act") and the tort of passing off. Tt is

The proceedings arose From an advertisement placed by Ke1th Lawrence Draper, the second appellant, on behalf of the Federation of Australian Accountants Ine. ("the Federation"), the first appellanL,

in the newspaper published under the masthead The Australian Financial

Review. That newspaper 1s published by John Fairfax and Sons Limited ("Pairfax"), which was a respondent to the application at farst instance but is not involved in this appeal. The advertisement First appeared on 18 March 1987 and was repeated on 25 March and 1 April 1987. After an illustration of the Federation's coat of arms or emblem the advertisement was headed with the words in bold type: "THR FEDERATION OF AUSTRALTAN ACCOUNTANTS". The text of the Federation's

"wish[ed] to invite suitably qualified accountants to join our federation. We are currently running examinations to increase your Status to C.P.A.. Any accountant who wishes to do so with our Federation is encouraged to inquire. Any accountant that becomes a C.P.A. with our Federation will be allowed to use our logos for advertising

Federation of Australian Accountants Inc. Box 87, G.P.O., Adelaide 5001."

The advertisement then contained the heading in bold print: "APPLICATION FOR MEMBERSHIP". This heading was followed by a form which was to be filled out by the applicant giving personal details. The form provided for a reference to be signed by a referee within

certain categories of persons, for a joining fee and for membership

fees which varied as between a "Member" and a "Fellow".

The Australian Society of Accountants ("the Society") (the applicant at first instance and the respondent to this appeal) objected to the advertisement essentially because of the words which appeared in the opening paragraph in which the Federation undertook to

confer the status of C.P.A. on those members who passed tuts examinations. The Society asserted that 1t was the only body which could confer the status of CPA or Certified Practising Accountant on members of the accountancy profession in Australia, and that the advertisement placed by the Federation was therefore misleading and deceptive. The Society did not argue either before his Honour or before this Court that the Federation, which was incorporated in 1974

pursuant to the South Australlan Associations Incorporation Act 1956,

was a trading or financial corporation within the meaning of the Trade

Practices Act so as Lo make 1t primarily liable Cor contravention of

At first instance the Society argued that Fairfax was primarily liable since it had published the advertisement on 1 April after the Society's solicitors had, on 30 March, requested in writing that it refrain from doing so. Fairfax raised no defence to the proceedings and reached an agreement with the Society that it would consent to judgment against it tn the form of a permanent injunction. Although the proceedings before the learned trial Judge began as a hearing for interlocutory injunctive relief, by consent the hearing

was converted into the Final hearing of the matter.

The Society is a large professional organisation of

accountants with some 53,000 members. Its antecedent bodies stem From

The Society jis a very large and reputable professional body

which recruits about 2,500 new members cach year. These now members

represent over 70 per cent of persons who graduate in accountancy from tertiary institut1ons each year. Together with the Institute of Chartered Accountants, the Society has provided the only regulation of

the accountancy profession in most States of Australia over a number

His Honour found that the Society had gone to great trouble and expense, involving an expenditure of something in excess of $3,000,000 to establish the status of its qualification of Certified Practising Accountant or CPA. His Honour found that, even in the comparatively short period of three years, the Society had built up a substantial reputation for that gualification in the accountancy profession and in the general community. The expression Certified

Practising Accountant was apparently unknown in Australia before the

Admission by the Society to the status of CPA 1s entirely governed by the Rules of the Society, although those Rules recognise certain qualifications awarded by the Institute of Chartered Accountants as giving entitlement to that status. The Professional Schedule of the Society's Members Handbook describes the CPA

"The cornerstone of the Professiona] Schedule 1s the Status of the membership level of CPA (AASA CPA and the designation of FASA CPA).

The CPA designation 1s a mark of high professional competence. It aundicates a soundness in depth, breadth and quality of accountancy knowledge."

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His Honour found that the designation of Certified Practising Accountant or CPA was only awarded following a careful analysis of the applicant's professional abilities, and in the case of younger and Future applicants, after appropriate examinations had been passed by them. lis Honour noted that, of the 53,000 members of the Society, almost 21,000 have the CPA qualification, that the same number have

lesser qualifications and about 12,000 have higher or different

By way of contrast with the Society, the Federation asserts a membership of some 300 persons spread nationally in Australia and 30 in Singapore. His Honour noted that, when the advertisement first appeared, attempts were made over a period of some days to contact Mr. Draper, who is the president of the Federation, at the address given for the Federation in the telephone directory. The premises were those of a Eirm of accountants. However there was nothing at the premises to indicate that they were the offices of the Federation, while those who inquired were informed that Mr. Draper was the only

person there who had any connection with the Federation.

Mr. Draper later moved the office of the Federation to his home. His Honour noted that all the material on behalf of the Federation had heen put before the court by Mr. Draper, and he observed that this material was not very informative. His Honour

«+ does not for example, disclose the identity of any other of€1ce bearers of the Federation or whether meetings are held and, if so, what form they take. Nor does it say what experience the Federation has had in

the conduct of courses for accountants or the setting

of appropriate examinations. Nothing is volunteered about the proposed examinations for CPA status."

The Socicty arqued before the trial Judge that the opening Paragraph of the advertisement was likely to mislead students and other persons wishing to obtain accountancy qualifications into believing they could obtain the Society's CPA qualification or its equivalent from the Federation. Tt was argued thak the users of accountancy services might also be misled by the advertisement into thinking that the Federation was in some way connected with the Society, or that any organisation could award the CPA qualification,

thus devaluing the qualification in the eyes of the potential clients

His Honour accepted the correctness of those arguments. He said that 1t was true that no great harm could have been done by the advertisements which had been published to date, apart from raising questions in the minds of readers and causing some confusion, because the Society had acted swiftly to restrain further publication of those advertisements. His Honour observed, however, that there was no doubt that the advertisements represented the first distinct step in a course of conduct which was likely to mislead and deceive the types of persons to which reference has been made. Il1s Honour accepted that, if the Federation was not restrained, 1t was likely that the damage to the great majority of members of the profession of accountancy, and to

those members of the general public who use the profession's services,

His Honour then turned to the arguments which were advanced before him on behalf of the Federation and Mr. Draper. It was argued that there could be no misleading conduct because the advertisement was headed by the Federation's coat of arms, while the Society's constitution only provided for the qualification CPA to be used in conjunction with the letters AASA or FASA. A similar submission relied on the fact that the advertisement used full stops between the

letters "C". "P". "A". whereas the Society's use of CPA is without

His Honour rejected those arguments. He observed that much of the Society's publicity for its CPA qualification had been oral, and had not linked the expression CPA with 1ts own name or with the expressions AASA or FASA. The Society has sought to achieve the recognition of the CPA status in itself, and his Honour was satisfied that the Society had succeeded in achieving such recognition. The

presence or absence of Full stops would strike very few observers.

It was argued for the Federation and for Mr. Draper that the unitials CPA are widely used by other organisations inelnding Canadian Pacific Airlines and the Communist Party of Australia. Tt was submitted that the Society could have no proprietary tnterest in Lhose

initials or in the ordinary words "certified", "practising" and

"accountant". His Honour found, however, that the three words "Certified Practising Accountant", where used in combination had acquired a secondary meaning and had become distinctive, and that in the same way the initials CPA had acquired a special meaning in

Tk was also argued before the trial Judge on behalf of the Federation and Mr. Draper that the Society had not yet acquired a sufficient reputation in its CPA status to enable it to say that the use of that status by others was misleading within the meaning of s.

52 of the Trade Practices Act, or could amount to passing off at

His Wonour said that the best answer to that contention was provided by the advertisement itself, which used the expression "C.P.A." without explanation, 1n the obvious expectation that it would be understood by many and perhaps most of the readers of The

It was also argued before his Honour that there was no

evidence from the Society that the Federation's C.P.A. status would he of any lower standard than the Society's CPA status. Wis Honour observed that the point was not strictly relevant since the conduct of the Federation could still be misleading even 1f the qualificaLions were of equal value. His Honour observed, however, that any discrepancy between the standing of the CPA status awarded by the Society and that awarded by the Federation was relevant to the extent

of the likely deception and to the nature o€ the public interest to be

protected. For the reasons which he gave, he was satisfied that the

Federation's qualification, 1f 1t were ever awarded, would probably

bear little relation to that awarded by the Society.

The final argument of the respondents at the trial was that 1€ orders were to be made against any respondent they should not be

made against Mr. Draper personally. It was suggested that mr. Draper

had only acted in what was described to his Honour, and tundeed to this Court, as his "corporate capacity". His Honour observed that he had

no doubt that Mr. Draper was knowingly unvolved in, and in fact

procured, the contravention of the Trade Practices Act by Fairfax. He

His Honour then dealt with the issue of passing off. de

referred to the classic statement of the ingredients of that tort by

Lord Diplock in the Advocaat Case (Erven Warnink BV v. J. Townend &

Sons (Hull) Ltd.) [1979] 2 All E.R. 927 at 932-933. Those ingredients

are well known, and need not be further stated here. His Honour noted that the only question as to the formulation by Lord Diplock in relation to the present case was the consistent reference by his Lordship to traders, customers and business. His Honour saw no reason why the principles articulated by Lord Diplock should not be applied to any persons who provide services, in the present case in the form

His Honour found that there was in the present case a misrepresentation made by the Federation as a provider of services in the Eorm of a professional qualification. That misrepresentation was made in the course of the Federation's provision of such services to prospective users o€ those services and to their ultimate clients who would rely on the fact of an accountant holding the "CPA" qualification. That misrepresentation was calculated to injure the goodwill - in the sense of professional standing - of the Society as another provider of services, and would probably cause actual damage to the goodwill of the Society. His Honour therefore found the

Federation and Mr. Draper quilty of the tort of passing off a service

represented by the Federation's proposed C.P.A. qualification for the

service represented hy the Society's CPA gualification.

His Honour was satisfied that Fairfax had contravened ss. 52

and 53, and that the Federation and Mr. Draper had procured and were knowingly involved in that contravention within the meaning of s. 75B

of the Trade Practices Act. In those circumstances, his Honour held

that the Society's case was established, and granted permanent injunctions restraining the Federation, Mr. Nraper and Fairfax from publishing the advertisement or causing it to be published, and from engaging un other conduct in contravention of ss. 52 and 53. Ais Honour also granted injunctions appropriate to restrain the passing

Counsel appearing for the Federation on this appeal argued

the Pederation's case and the case of Mr. Draper on substantially the same grounds as he had argued them before the trial Judge. The principal argument on the appea) was that the absence from the advertisement of a stated and specific link between the initials "CPA" and the Society was fatal to the Society's case, and that his Honour's

Challenge was also made to the trial Judge's finding that Mr. Draper was knowingly involved in, and in fact procured, the

contraventions of ss. 52 and 53 of the Trade Practices Act. It was

argued that all Mr. Draper did was on behalf of, and in the name of,

ll. The mere statement of the latter argument reveals 3ts fallacy. Directors and officers of companies generally act in their capacity as such when engaging in conduct that causes contravention by

the company concerned. Their actions nonetheless amount to a

contravention of the Trade Practices Act by the application of s. 753,

provided that the persons concerned acted with knowledge of the

In my opinion, there was ample evidence to support the findings of the trial Judge; and it has not been established that he fell into error in any respect. The point which resolves the central issues in this appeal is that the letters CPA have plainly acquired a special and distinctive meaning in relation to the accountancy profession in Australia. Tt 1s plain that the opening paragraph of the advertisement is likely to mislead students and others wishing to obtain accountancy qualifications into believing that they can obtain the Society's CPA qualification from the Federation. That is, of

T certify that this and the preceding ten (10) pages are a true copy of the reasons for judgment herein of the Honourable Mr. Justice Lockhart.

BETWEEN: FEDERATION OF AUSTRALIAN ACCOUNTANTS INC. and

Coram: Northrop, Lockhart and Ryan JJ Place: Melbourne Date: 2 March 1988

RYAN dU: My brother Lockhart has comprehensively reviewed the findings of fact made by the learned trial judge. Nothing has been put before this Court to indicate that any of those findings of fact was not open to Woodward

In view of those findings, I can take no exception to Lhe conclusion of Woodward 7. that the Federation's advertisements by holding out to accountants an invitation to "increase your status to C.P.A. ... with our federation" was

likely to mislead students and other persous wishing Lo

obtain accountancy qualifications anto believing Lhat they

could obtain from or under the auspices of the Federation the "CPA" qualifacation or status which had been established by

It also CLollows from the resolution in favour of the Sociely of the factual question whether the acronym "CPA" had become idenLifued in the contemplation of that section of the public concerned with accountancy yualifications with a qualification or status of the Society, that the Society is entitled to relief restraining the Federation and its members from passing off the staLus or qualification "CPA" as and [for its or their status or qualtfication. See Society of

Accountants and Auditors v Goodway and London Association of

T also agree, for the reasons indicated by Lockhart Jd. that no error has been demonstrated in the decision of the learned trial judge to grant injunctive relief against the second appellant, Mr Draper, in his personal capacity.

Accordingly, £ would dismiss Lhe appeal with costs.

i certify that this and the preceding one (1) page are a true copy of the Reasons for Judgment herein of his

At a glance

Court

Decision date

Before

Source

Judgment (100 paragraphs)

Cited By (1)