In-N-Out Burgers, Inc v Hashtag Burgers Pty Ltd

50 While no supporting documentation or explanation was given to justify the legal and accounting costs, an estimate of $4,000 to $5,000 does not strike me as exaggerated. The applicant did not contest the estimates for the registration of a new business name and website domain, but it rightly pointed out that those costs could be avoided entirely if the respondents were to operate their business under their existing registered company name, Hashtag Burgers, using the Hashtag Burgers website at www.hashtagburgers.com.au. 51 Mr Saliba's estimate of $5,000 to $10,000 for creating new logos, marks and associated social media accounts was challenged as "prima facie high". I have no idea whether it is or not. In the absence of any foundation for these figures, however, I am not prepared to accept them. As the applicant submitted, to establish the likely costs the respondents could have provided the invoices issued by Jonathan Paine, the graphic designer retained to create the various DNO marks and logos. There being no evidence that these invoices have been lost or destroyed, I infer that the respondents' failure to rely on them means that the invoices would not assist their application. 52 Ms White's evidence demonstrated that cafe barriers like that used by the respondents' CBD restaurant are available online at a cost of between $260 and $545 and that the actual costs incurred by the respondents to redesign and rewire the neon sign used at their first pop-up at the Sir John Young Hotel, which was the same as, or very similar to, the neon sign in the CBD venue, was $300, indicating that Mr Saliba's estimate of $4,000-$6,000 for external signage was greatly exaggerated. 53 Mr Saliba's estimate of the costs for internal decorations and fit-out was also inflated. The impression the respondents sought to achieve with their décor was of a dive bar. The walls are made of exposed bricks and decorated with cartoons and posters. The DNO marks appear on few items. Ms White's evidence was that 1000 custom-printed A3 posters on premium and gloss paper can be purchased at a cost in the order of $285-$365. The cost of the DNO light box sign installed above the kitchen in the CBD venue is likely to have been similar, since the documents produced by Tablou, the designer collective used by the respondents, show that (excluding shipping) the cost of the light box sign for the Penrith restaurant was $285. 54 Mr Saliba's estimate of branded food packaging and "serve-ware" items appears inflated, too. Ms White's investigations suggest that the placemats are unlikely to cost more than about $285 to $365. Contrary to the inference the Court was presumably invited to draw from Mr Saliba's affidavit, Ms White's evidence shows that the menus at the CBD restaurant do not carry the DNO name and would therefore not have to be changed. 55 The evidence also indicates that the only branded clothing worn by staff or available for sale consists of T-shirts which, based on their appearance and Ms White's evidence, are likely to have been inexpensive to purchase and are therefore likely to be inexpensive to replace. 56 In his affidavit in reply, Mr Saliba attempted to explain the differences. He said that he had reviewed the websites from which Ms White obtained some of her costings and further commented: Based on my experience in the food and beverage industry and in engaging with suppliers of designing, printing and promotional materials, costs typically advertised on supplier websites: A. are the lowest costs and may not always be for products of sufficient quality (e.g. signs not being adequately weather proof or durable for outdoor use); B. do not include costs of full or multiple colour or double-sided options; and C. typically omit details or information of additional or ancillary costs which can include design charges, artwork setting and proofing or charges calculated by reference to the number of characters or colours used. 57 Mr Saliba does not disclose the extent of his experience in the food and beverage industry and the evidence indicated that both he and Mr Kagan were neophytes when they entered the burger business in about 2015. This suggests that his opinion is based on limited experience and, in any event, it is likely to be affected by self-interest. I therefore give it little weight. 58 The likely cost of all the items could have been proved by invoices and/or receipts for items procured in the past. Mr Saliba did not say in either affidavit that those documents had been destroyed or were no longer available. Once again, I infer from his failure to rely on them that they would not have assisted the respondents' case. That inference is bolstered by the documents produced by Tablou on subpoena. I referred above to the cost of the light box in the Penrith restaurant. Other documents produced by Tablou and included in Ms White's affidavit show that the actual cost of the overall fit out, including non-branded items, of the respondents' original CBD and Penrith restaurants was estimated at just $2,777 and $2,301 to $4,076 respectively. 59 Many of the costs Mr Saliba estimated would be incurred by reason of the name change are likely to be incurred in any event. For one thing, the expenses associated with producing branded food packaging and serve-ware items are plainly recurrent. 60 Third, the inconvenience and costs are substantially mitigated by the applicant's willingness to undertake to the Court to arrange for all physical material that the respondents are required to deliver up, that is, items or components of items bearing the DNO branding, together with a USB containing the electronic materials in the respondents' possession that would otherwise need to be destroyed, to be stored until the resolution of any appeal and returned to the respondents if the appeal is successful. 61 Fourth, there is no evidence that refusing a stay will have a material impact on the respondents' trade or revenue. To the contrary, Mr Kagan has made public statements which suggest otherwise. He was quoted in articles about the result of the litigation in the online city guide, Broadsheet, on 28 February 2020 and another digital city guide, Concrete Playground, on 11 March 2020 saying (without alteration): We have always done our own thing and we are disappointed with the outcome, however we know that our fans will continue to support us regardless of what our name is. We may be down at the moment but we sure as sh#t aren't out. 62 Fifth, there is no reason to believe that the respondents would lose much in the way of goodwill because they were obliged to change their name. The goods and services would not need to change. Neither would any other aspect of the business. Apart from removing the name and logos, no other change would be required to the décor of the restaurant or the food truck or to the get-up. A post on the DNO Sydney Facebook page on 13 May 2020 announced that the food truck was getting an upgrade. As the applicant submitted, in that event it would be a simple matter to paint over the DNO mark. The change of name would provide the respondents with a new marketing opportunity. 63 Indeed, until recently the respondents seemed resigned to renaming their business. They used their social media platforms to solicit suggestions for a new name, offering free burgers for life to the winning suggestion. The clear inference from the evidence is that the respondents had issued a media release informing the market that, as a result of the judgment, they would be changing the name. As the applicant submitted, not following through with the name change would lead to mixed messages. Moreover, those who were enticed to respond to the respondents' call for suggestions for a new name by the prospect of free burgers for life would doubtless feel disappointed, if not duped. 64 In the principal judgment I found that the applicant's brand, "In N' Out Burger", had a substantial and significant reputation in Australia but observed that there was no evidence to indicate that the same could be said of the respondents' business. The evidence adduced on the stay application does not prove otherwise. Accordingly, the loss of reputation the business may suffer does not support the grant of a stay: Melbourne Chinese Press at [9] (Moore J). Besides, whatever reputation the DNO brand may have was acquired in the face of the applicant's objections and by appropriating elements of the applicant's branding with the intention of confusing consumers. In any event, the respondents will have 60 days before the injunctions take effect which should be sufficient time to alert the market, particularly since the respondents embarked on that course weeks ago. 65 I now turn to the other relevant considerations. 66 I am cognisant of the fact that the applicant has no restaurants in Australia. Its physical presence in this country to date has taken the form of temporary "pop-up" restaurants. Mr Bevan placed significant emphasis on these facts during the hearing of the stay application. Nonetheless, I held that the applicant would be entitled to damages under the "user principle" (see [288]-[299] of the principal judgment). The amount may well be difficult to quantify but, at this stage at least, there is no reason to think that it would be less than the cost to the respondents of changing the DNO name. 67 Neither side offered an undertaking as to damages. Although the applicant had no obligation to do so, that fact is relevant to the exercise of the discretion to grant a stay: Red Bull at [9]-[10]. 68 On the other hand, the respondents have not offered the applicant anything to secure or protect it against intermediate damage should the appeal fail, such as a security or bank guarantee: cf. Red Bull at [17]; Westaflex (Aust) Pty Ltd v Wood (1990) 18 IPR 168 at 169 (Gray J). And, while the respondents are likely to suffer some irrecoverable loss if the appeal succeeds and a stay is not granted, if the appeal were to fail and the injunction lifted, the applicant is likely to suffer "unquantifiable loss": Red Bull at [19]. As in Red Bull, even if the loss were quantifiable, the respondents have not established that its current financial position is such that it would be good for the money if it were significant. Ms White's evidence discloses that Hashtag Burgers has no significant assets. Mr Saliba's evidence is that the COVID-19 pandemic is putting financial pressure on the business. And neither Mr Kagan nor Mr Saliba has seen fit to reveal his financial position. 69 What is more, given the respondents' failure to comply with discovery orders, which was unexplained at trial and remains unexplained, I have no confidence in the undertakings the respondents have offered. 70 Of course I could grant a stay on condition that the respondents lodge security but in the absence of any such offer to do so or any indication that they would be in any position to do so, it seems to me that that would be an exercise in futility. 71 Finally, although the applicant brought the action to protect its commercial interests, the case involved questions of consumer protection and therefore has "a public interest dimension" which militates against the grant of a stay: Red Bull at [18]. I note the respondents' submission that the applicant would have the benefit of the declarations which they did not seek to stay. This might go some way towards addressing the public interest dimension but it provides no protection for the applicant's commercial interests and is of little assistance to the consumer who is unaware of the Court's orders. 72 Taking all relevant matters into account and giving them due weight, I am not satisfied that the respondents have made out an appropriate case for a stay. Accordingly, their application must be refused. Costs should follow the event. I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.

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