International Hair Cosmetics Group Pty Ltd v International Hair Cosmetics... [2011] FCA 339 | Case summary

REASONS FOR JUDGMENT 1 The Applicant, International Hair Cosmetics Group Pty Ltd (IHC Aust) is an Australian incorporated company. It is the owner of two trade marks registered under the Trade Marks Act 1995 (Cth) (Trade Marks Act): (a) Trade Mark: 702825, AFFINAGE; and (b) Trade Mark: 1157548, AFFINAGE INFINITI. 2 The Second Respondent, Australian Salon Professional Pty Ltd, known until 10 September 2010 as Affinage Salon Professional Pty Ltd (Salon), is also an Australian incorporated company. Shares in Salon are held, as to 35%, by the First Respondent, International Hair Cosmetics Limited, a company incorporated in the United Kingdom (IHC UK) and, as to the remaining 65%, by Jessam Enterprises Pty Ltd, another Australian incorporated company. Another link between IHC UK and Salon is to be found in the person of the Fourth Respondent, Mr Eric Bailey (Mr Bailey). Mr Bailey is a resident of the United Kingdom. He is a director of Salon and is also the "founder and principal" of IHC UK. The other director of Salon is an Australian resident, the third respondent, Mr Wayne Francis Wood. 3 IHC UK is the registered owner of the trade mark AFFINAGE in the United Kingdom and in 20 other countries throughout Europe, the Russian Federation, Tunisia and North America and in some South American countries. It also has trade mark applications pending in respect of AFFINAGE in the Middle East, South Africa and in other European countries as well as applications pending in the United Kingdom and in the United States to supplement existing registrations there. 4 Both in Australia and elsewhere in the world the trade mark AFFINAGE is associated with hair colour and hair styling products. 5 In some of the countries in which it owns that registered trade mark IHC UK has appointed distributors of products bearing that mark. The position in Australia was similar until 2010. 6 IHC Aust was established in Australia in 1992. Mr Bailey and a Mr Richard Jolly (Mr Jolly), an Australian resident since 1988, were instrumental in its establishment. Mr Bailey and Mr Jolly have known each other since 1981 as a result of dealings with respect to other hair care products in the United Kingdom. Initially, Mr Bailey held 51% of the shares in IHC Aust with the remaining 49% being held between Mr Jolly and his wife. These respective shareholdings corresponded with the allocations of units in a unit trust known as the International Hair Cosmetics Group Unit Trust of which IHC Aust was the trustee. 7 IHC Aust was established as the corporate vehicle by which hair care products bearing the AFFINAGE mark were to be distributed in Australia. At that time, AFFINAGE was not a registered mark in Australia. The application for its Australian registration was not made until 1996 with registration following in 1997. AFFINAGE INFINITI was not registered in Australia until 2007. 8 In 2002, Mr Jolly and his wife acquired Mr Bailey's remaining interest (by then 40%) in IHC Aust and in the unit trust of which it was trustee for a total consideration of $480,000. Associated with this acquisition, it seems that Mr Bailey on the one part and Mr Jolly and his wife on the other came to an agreement, which reflected a then existing "gentlemen's agreement" between them, in respect of the territorial allocation, worldwide, of rights for the distribution of AFFINAGE products. In essence, the effect of this was that IHC Aust was allocated those rights for China, South-East Asia, Australia, New Zealand and the South-West and Western Pacific to the International Date Line with IHC UK retaining the balance of world wide distributing rights. 9 On 4 August last year, IHC UK commenced proceedings in the New South Wales District Registry of this Court against IHC Aust (NSD 975 of 2010) in which it sought relief under the Trade Marks Act, the Trade Practices Act 1974 (Cth) (TPA) (as that Act was then known) and also the sum of €299,792.56 in respect of allegedly unpaid accounts (the NSW Proceeding). 10 The present proceeding was commenced in the Court's Queensland District Registry on 20 August 2010. In it, IHC Aust sought relief under the Trade Marks Act, the TPA and for passing off (the QLD proceeding). 11 A mediation was held in respect of both the NSW proceeding and the QLD proceeding in September 2010. The result of this was that, on 8 September 2010, IHC Aust, Mr Jolly, IHC UK, Salon, Mr Bailey and Mr Wood came to enter into a deed of settlement. One of the terms (cl 6) of that deed of settlement was that each of the NSW and the QLD proceedings were to be the subject of orders which, by consent, dismissed them with no order as to costs. Under the deed of settlement (cl 6), the giving of consent to a such an order was, materially, expressly subject to the giving of an undertaking to this Court by the respondents to the QLD proceeding in the terms set out in Annexure 3 to that deed. Salon's change of name also occurred pursuant to the terms of the deed. 12 Notably, another term (cl 4.1(a)) of the deed was that IHC UK, Salon, Mr Bailey and Mr Wood would not, within a territory (defined as the Excluded Territory) which corresponded with that on a map which had been used for the purposes of the agreement made in 2002 in conjunction with the acquisition of Mr Bailey's remaining interest in IHC Aust, use what were defined as the "Excluded Marks". These included AFFINAGE and AFFINAGE INFINITI. The undertaking set out in Annexure 3 to the deed gave further voice to the sentiments apparent in this term. It provided: The Respondents undertake not to use AFFINAGE, INFINITI, AFFINAGE INFINITI, or AFFINAGE SALON PROFESSIONAL as a sign in connection with the importation, marketing, sale or manufacture in Australia of hair care products including hair colours and dyes. 13 An undertaking by the respondents in these terms is recorded in the Court's order of 28 October 2010 by which the QLD proceeding was dismissed with no order as to costs. 14 Some further background facts should be recorded. IHC UK established a website www.affinage.com in 1997. That website is hosted in the United Kingdom. That website has been used continuously since then to display material concerning that company's products. It does not offer any "e-commerce" facility. By that I mean that neither orders can be placed nor payment made via any means on any page on that website. The website content is wholly devoted to the provision of corporate and product information and promotion. It does though contain a "contact us" option with corporate contact details. 15 In November 2010 IHC UK applied in Australia for the registration under the Trade Marks Act of the trade mark A.S.P. in respect of hair care products. That application was accepted on 19 November 2010 (acceptance was advertised on 17 February 2011). 16 Another hair care product range is manufactured for and promoted by IHC UK under the name KITOKO. The KITOKO range of products is manufactured for IHC UK by the same factory that manufactures that company's AFFINAGE range of products for international sales. On 9 February 2009, IHC UK became the registered owner under the Trade Marks Act of the trade mark, KITOKO. 17 Here matters rested until January this year. 18 On 27 January, Mr Bennett of IHC Aust's solicitors undertook from Brisbane, Australia a search of the world wide web using the "Google" internet search engine and entering the word "Affinage". In the search results, he noticed "Affinage Salon Professional" at the website www.affinage.com. He followed this search result to that website. On accessing that site he encountered a landing page in which "Affinage" appeared as a large type banner with "Salon Professional" as an added smaller subscript. Under that banner the following statement was made, "Affinage is one of the world's fasting growing haircare [sic] companies using cutting edge technology to produce market leading hair products." 19 Mr Bennett further investigated that site via the "country box" on it. Above the box was, materially, this statement, "Select Australia for information on Australasia and Asian Pacific countries" (similar statements were made in respect of the United Kingdom and the United States of America). By clicking an arrow associated with that box he found that he was able to choose from three countries, the United Kingdom, USA and Australia. He then selected "Australia". What was revealed by so doing was an "ASP" page promoting hair care products, including products in the KITOKO range. Mr Bennett explored the further content linked to this page by selecting the "Profile" tab. This revealed another "ASP" page (www.affinage.com/australia/history.html) in which, under the heading "Company Profile", statements which included the following were made: In 1996 [IHC UK] conceived, created and lunched the premium hair care brand AFFINAGE. Originated as a line of hair colour, the AFFINAGE brand grew rapidly to include [reference to other types of product]… Now we are introducing our exciting new hair care brand, ASP, to the Australian and Asian markets. Having already signed distribution agreements with a number of companies we look forward to fantastic success in 2011. Under the heading, "World Class, Wordwide" [sic] and adjacent to an image of a Kitoko product, the following statement was made: Today our products are sold in over 50 countries - across Europe, Africa, the United States, South America and the Asia Pacific. Our brands are marketed globally by [IHC UK] and through it's associated companies in the USA and Australia. Global distribution is achieved through a worldwide network of wholesalers and specialist distributors [sic] At the foot of the page was a Mercator projection style map of the world in which the British Isles were identified as the "Worldwide HQ" of ASP, a research and development laboratory was shown in Europe, "ASP USA" was designated in the United States and on the Australian continent, "ASP Australia". 20 Mr Bennett also followed the content of the "United Kingdom" and "USA" links in the country box. The content of the company profile page for these was similar to that of Australia, save that there was no reference to "ASP". Instead, each such page was headed, "Affinage Salon Professional" and the Mercator projection style map was annotated with the "Affinage" instead of ASP references, including a reference to "Affinage Australia". 21 Shortly after Mr Bennett conducted this search, IHC Aust filed a notice of motion in this proceeding, i.e. the QLD proceeding. By its notice of motion filed on 31 January 2011, IHC Aust seeks: 1 Pursuant to Order 35 rule 11 of the Federal Court Rules the Respondents be permanently restrained from using AFFINAGE, INFINITI, AFFINAGE INFINITI or AFFINAGE SALON PROFESSIONAL as a sign in connection with the importation, marketing, sale or manufacture in Australia of hair care products including hair colours and dyes. 2 In relation to the website www.affinage.com the Respondents forthwith: (a) Delete from the home or landing page of the website the sentence Select Australia for information on Australasia and Asian Pacific countries; (b) Remove Australia from the list of countries able to be displayed and selected in the country box on the said website; (c) Remove the A.S.P. pages from the said website; (d) Remove any references to Australia from the said website; and (e) Remove any link from the said website to any website marketing or promoting hair care products including hair colours and dyes for sale within Australia. In addition, IHC Aust sought costs on an indemnity basis and further or other relief. 22 The return date for this notice of motion was 18 February 2011. Its filing and serving on the respondents was not preceded by correspondence from the solicitors for IHC Aust drawing attention to the results of the internet search conducted on 27 January 2011 and inviting, so as to avoid further litigation, the making of website modifications so as to address an alleged breach of the undertaking earlier given to the Court. 23 In between 31 January 2011 and the return date of the notice of motion modifications were nonetheless made to the website www.affinage.com. The nature of these is revealed in an affidavit of IHC UK's Australian solicitor, Mr Mitchell of Surrey Partners Lawyers (Surrey Partners). He conducted a search of that website from Sydney on 17 February 2011. On what he describes as the site's "global landing page", which I understand to be the site to which one is initially directed, a "home page", under the heading "International Sales", he selected "Australia". This led to his being redirected to the "global landing page" for A.S.P. www.asphair.com (the ASP website). Included in the products promoted on that site is the KITOKO range of hair care products. 24 On the selecting the "Profile" option on the ASP website, Mr Mitchell was directed to another page where, under the banner title "A.S.P. ™", the following statements are made under the heading, "Company Profile": In 1996 [IHC UK] conceived, created and lunched the premium hair care brand AFFINAGE. Originated as a line of permanent hair colour, the AFFINAGE brand grew rapidly to include [reference to other types of product]… Now we are introducing our exciting new hair care brand, ASP, to the Australian and Asian markets. Having already signed distribution agreements with a number of companies we look forward to fantastic success in 2011. At the foot of the page is a Mercator projection map of the world with the same "ASP" labels as those described by Mr Bennett in respect of the results of his January search. 25 Mr Mitchell also deposed to having been informed by Mr Bailey on or about 11 February 2011 that it had come to the attention of IHC UK in late January 2011 that some references to "AFFINAGE" and "INFINITI" which that company had intended to remove from the ASP website so as clearly to distinguish its new product range from that of IHC Aust had not been made as originally thought. Exhibited to his affidavit was email correspondence between Mr Bailey and IHC UK's British based information technology consultant, Mr R Porter-Brown of 11 February 2011 together with an earlier email of 28 January 2011 to Mr Porter-Brown in relation to amendments of the ASP website. The upshot of that exchange was that Mr Porter-Brown made some changes to that website on 28 January 2011 so as to remove some remaining references to "INFINITI". There was also a suggestion put to him, apparently on behalf of IHC UK (by Ms J Coles), in respect of the "Products" tab on the website that, "it may be worth changing the word 'AFFINAGE' on the photo to ASP?" It is not clear from Mr Porter-Brown's email to Mr Bailey whether the latter suggestion was also actioned on 28 January 2011. However, the removal of the latter as well is asserted in a letter dated 14 February 2011 from IHC UK's solicitors, Surrey Partners to IHC Aust's solicitors, Bennett & Philp. 26 As at 15 February 2011, the electronic "White Pages" entry for Salon continued to list it as "Affinage Salon Professional Pty Ltd" when the words "Affinage Salon Professional" were typed into the White Pages search engine. Later that week, this was rectified so as to prevent such a search result. 27 Also on 15 February 2011, Mr Bennett repeated his World Wide Web search from Brisbane, Australia by entering the word AFFINAGE into the Google search engine. The first three of the search results he obtained were in respect of the Australian web site, www.affinage.com.au. I understand that this is a web site maintained by the applicant, IHC Aust. 28 The fourth search result Mr Bennett obtained was in respect of the website www.affinage.com. This remains the website maintained by IHC UK. Mr Bennett explored this website. He went first to the "global landing page". As it had in January, this landing page retained a large banner, "AFFINAGE Salon Professional". It retained drop down country boxes under the heading, "International Sites". One of the instructions under this heading stated, "Select Australia for information on Australasia and Asian Pacific countries." Facebook and Twitter links were also evident. 29 Mr Bennett did as invited in relation to Australia. So doing brought him to an ASP page in which the KITOKO product range was prominently promoted. An option offered on that page was "Profile". Mr Bennett selected that option. On so doing, he accessed a web page (www.affinage.com/australia/history.html) in which the form of words under the headings "Company Profile" and "World Class, Wordwide" [sic] were unchanged from that accessed by him on 27 January 2011, as was the map at the foot of that page. 30 In a letter dated 15 February 2011 sent, without admission of liability, by Surrey Partners to Bennett & Philp it was put that IHC UK was prepared to make further modifications to the global landing page of the website www.affinage.com. As there stated, these were: (a) Only maintain the drop-down links to the UK site and the US site under the sign AFFINAGE Salon Professional; (b) Insert the sign A.S.P. in the same font size as AFFINAGE; (c) Providing a drop-down link to the Australian site only under the sign A.S.P.. 31 An image of how the proposed modification would appear was attached to this letter and is reproduced below: 32 This offer was not accepted by IHC Aust. Instead, by a letter dated 16 February 2011, it was put on behalf of IHC Aust that the proposed revised page would still amount to a use of AFFINAGE (and AFFINAGE SALON PROFESSIONAL) in connection with the marketing and sale of hair care products in Australia. Concern was also voiced by the solicitors that the proposed revised page continued to include "Facebook and Twitter links which operate to persons visiting the site to link their personal Facebook or Twitter accounts with the Facebook or Twitter accounts maintained by [IHC UK]. These in turn use the Affinage Trade Marks." 33 By way of response, Surrey Partners advised Bennett & Philp on 17 February 2011 that IHC UK intended in any event to implement the website changes proposed in their letter of 15 February 2011 and to draw this fact to the attention of the Court in the event that the matter proceeded to hearing. 34 No agreement in relation to website modifications was reached with the result that the notice of motion did indeed proceed to hearing. 35 IHC UK raised some procedural issues in relation to the notice of motion given by IHC Aust. To understand these it is desirable to set out the terms of O 35 r 11 of the Federal Court Rules: 11 Undertakings (1) Where: (a) a person (whether a party or not) gives an undertaking to the Court to do or refrain from doing any act or to pay any sum of money; and (b) the person fails to fulfil the undertaking; any party may move on notice for a judgment or order requiring that person to do or refrain from doing the act in question, or to pay the sum of money in question. (2) The Court, on being satisfied that the undertaking was binding on the person, shall make the order referred to in subrule (1). (3) The Court may be informed of an undertaking to the Court in the proceedings by (amongst other things) reference to a note made by the Judge hearing the proceedings or by his clerk. (4) This rule does not affect the powers of the Court to punish a person for contempt. 36 The first of the orders sought by IHC Aust in its notice of motion was said to be superfluous because the injunctive relief sought did no more than repeat the text of an undertaking already given to the Court which already had the same practical effect as an injunction. 37 Accepting the latter to be a feature of an undertaking to this Court, O 35 r 11 nonetheless expressly permits the Court, upon being satisfied that a binding undertaking was given and that a person so bound has failed to do an act which he undertook to do, to order that person to do that act. Whether or not, upon the proof of a failure to fulfil the undertaking, O 35 r 11(2) makes it obligatory for an order requiring compliance to be made was left an open question by Nicholson J in Louthean Publishing Pty Ltd v Central West Media Limited [1996] FCA 1388 because it was not necessary, in light of the absence of proof of a failure to fulfil the undertaking concerned, to decide the point. 38 It was necessary for Jessup J to decide the point in ACOHS Pty Ltd v Ucorp Pty Ltd [2009] FCA 577. His Honour (at [49] - [50]) clearly regarded a rule which would deny the exercise of a discretion as to whether, on proof of a failure to fulfil, as an "oddity" but nonetheless held that the language of the sub-rule was such that, upon the requisite proofs, the Court was obliged to make an order. 39 There is no denying that the language of O 35 r 11(2) is imperative but the cautionary note in relation to approaching a question of construction by characterising its language as mandatory or directory, sounded in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [93], and the reminder in that same case, at [69], to construe a provision in context apply just as much to a rule of court as to a section in an enactment. Section 23 of the Federal Court of Australia Act 1976 (Cth) (Federal Court of Australia Act) empowers the Court, "in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate" (emphasis added). The making of an order in respect of an unfulfilled undertaking falls within s 23's broad conferral of power. The words emphasised in that section suggest to me that the exercise of such a power must occur in a way which does justice in the circumstances of a particular case. A rule of court made pursuant to s 59(1) of the Federal Court of Australia Act must not be inconsistent with that Act. To treat O 35 r 11(2) as carrying with it an obligation to make an order would, in my respectful opinion, be inconsistent with the discretionary nature of the source of the power to make orders found in s 23 of the Federal Court of Australia Act. That sub-rule should therefore be construed in a way which does not render it inconsistent with that Act. 40 For these reasons, though the assimilation of an undertaking with an injunction is no reason not to make an order upon the proofs required by O 35 r 11(1) being given, I do not approach the determination of this matter on the basis that, if I am satisfied that such proofs are present, I am obliged to make an order. 41 The order which is contemplated by O 35 r 11(1) is one which, materially, requires the person concerned to do the thing in question. The "thing in question" must necessarily be the thing which was the subject of the undertaking. The second of the orders sought by IHC Aust in its notice of motion is more prescriptive than just the acts which were the subject of the undertaking. Though more prescriptive, the additional relief is not necessarily inconsistent with those acts. Further and fundamentally, a more prescriptive order may be additionally necessary "to prevent an undermining of the court's authority by conduct which is in breach of an undertaking to the court": Macteldir Pty Ltd v Dimovski (2005) 226 ALR 773 at [16] per Allsop J, citing Australian Building Construction Employees' and Builders' Labourers' Federation v The Commonwealth (1981) 53 FLR 396 at 397-398 per Deane J, with whom Bowen CJ and Evatt J agreed (the BLF Case). 42 Regard to the passage from the BLF Case cited by Allsop J shows that Deane J considered that a superior court of record such as this Court had a general power to restrain by injunction, materially, an unauthorised, actual interference with the course of administration of justice, regarding s 23 and s 31 (the contempt power) of the Federal Court of Australia Act as confirmatory of a power which would be possessed in any event. Having regard to the BLF Case, I am satisfied that I have power to make an order such as is sought in paragraph 2 of the application. Put another way, the express reservation, by O 35 r 11(4), that the Court's power to punish for contempt is not affected by r 11 does not mean that the extent of the Court's power to make an order when a failure to fulfil a binding undertaking is proved is otherwise limited to the making of an order of the kind for which O 35 r 2 provides. 43 I should record that IHC Aust did not seek additionally to put its claim for relief on the wider basis that it was seeking to enforce the contract of compromise evidenced by the deed of settlement. Neither was it put for the respondents that a separate "matter" was raised such that it was not possible for IHC Aust to seek the relief claimed by the notice of motion in the present proceeding. In any event, I have no doubt that a motion to enforce the undertaking and to claim ancillary relief is permissibly brought in the present proceeding. 44 Thus the questions are not whether power exists to make the orders sought but rather whether it has been shown that IHC UK and the other named respondents have failed to fulfil the undertaking, properly construed, and, if so, whether the relief claimed should be granted? 45 As to the former of these questions, senior counsel for IHC Aust was at pains to emphasise that the issue was not the same as considering whether there had been an in infringement of its trade marks in terms of s 120 of the Trade Marks Act. She submitted (and it is literally the case) that the words of the undertaking do not mirror those of that section of that Act. She further submitted that the present case was to be contrasted with Ward Group Pty Ltd v Brodie & Stone plc (2005) 143 FCR 479 (Ward Group Case). In that case, insofar as the infringement cause of action was concerned, it had been necessary for the Court to determine whether the trade mark concerned had been "used in Australia". In contrast, it was submitted that IHC Aust, "does not need to show that the respondents have used the relevant words in the undertaking in Australia to obtain the relief it seeks today" (emphasis in submission). Instead, it was submitted that the question was the proper construction of the undertaking itself. That is a given. 46 I would, with respect, question whether the Ward Group Case is relevant only by way of contrast, as opposed to also offering assistance by analogy in relation to questions of principle. 47 It is true that the Ward Group Case was one in which entitlement to the relief sought turned, materially, on whether there had been an infringing use in terms of s 120 of the Trade Marks Act, whereas entitlement to the relief presently sought turns in the first instance on whether there has been a failure to fulfil the undertaking. However that may be, the following observation made by Merkel J, at [43], may nonetheless have relevance by analogy: In summary, the use of a trade mark on the internet, uploaded on a website outside of Australia, without more, is not a use by the website proprietor of the mark in each jurisdiction where the mark is downloaded. However, … if there is evidence that the use was specifically intended to be made in, or directed or targeted at, a particular jurisdiction then there is likely to be a use in that jurisdiction when the mark is downloaded. Of course, once the website intends to make and makes a specific use of the mark in relation to a particular person or persons in a jurisdiction there will be little difficulty in concluding that the website proprietor used the mark in that jurisdiction when the mark is downloaded. In that case, Merkel J reached the conclusion recorded in this paragraph as to when a "use in Australia" occurred not just by reference to trade mark cases but rather by way of analogy with authorities concerning where a groundless threat of a patent infringement is to be regarded as made and also to a number of cases in which it had been necessary to determine whether a statement made on the internet had been directed or targeted at persons or subscribers in a particular jurisdiction: see Ward Group Case at [40]-[41]. 48 Before further considering what use the quoted passage may have by analogy, it is first necessary to determine the meaning of the undertaking. 49 As to this, senior counsel for the respondents submitted that a number of principles attend the construction of any undertaking: (a) An undertaking being, if broken, the equivalent of an injunction, a court cannot accept an undertaking finally disposing of a proceeding which would exceed the court's power to grant a final injunction: Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 164-165. As a corollary, if competing constructions of an undertaking are open, that which would render it within the court's power of acceptance is to be preferred. (b) If he undertaking forms part of a court order made by consent, evidence of the surrounding circumstances is admissible for the purpose of construing it: Nokia Corporation v Liu (2009) 179 FCR 422 at [29]-[31]. In this case, those surrounding circumstances include the deed of settlement and the application and the pleadings in the QLD proceeding. 50 I accept as correct each of these propositions. 51 It was also put forward on behalf of the respondents that, "an order of undertaking will be construed so that any ambiguity is resolved in favour of the party bound": Microsoft Corporation v Marks (No 1) 69 FCR 117 at 139-141 (Microsoft Corporation v Marks) per Beaumont J (Lindgren and Lehane JJ agreeing) being cited in support. In that case, Beaumont J (at 139-140) commences his discussion of principle by reference to an observation made by Jenkins J in Redwing Ltd v Redwing Forest Products Ltd (1947) 177 LT Rep 387 at 390 (Redwing Case) in which his Lordship stated, in language later emphasised by Beaumont J that: a defendant cannot be committed for contempt on the ground that upon one of two possible constructions of an undertaking being given he has broken his undertaking. For the purpose of relief of this character I think the undertaking must be clear and the breach must be clear beyond all question. The passage from the Redwing Case quoted by Beaumont J, as his Honour (at 140-141) notes, received a mixed reception in the High Court in Australian Consolidated Press Ltd v Morgan (1965) 112 CLR 483 at 492 per Barwick CJ; cf at 506 per Windeyer J and at 516 per Owen J. In that case, the undertaking concerned, though given by the appellant, had originally been drawn by the respondent's solicitors. In Microsoft Corporation v Marks Beaumont J regarded that case as similar to Morgan. Here, the undertaking formed part of a deed of settlement, which was a sequel to a mediation at which each party was separately legally represented. I am not persuaded in these circumstances that, as the respondents submitted, a contra preferentem approach should be adopted. Rather, the meaning of the undertaking should be ascertained by construing the words used in the context of the surrounding circumstances. If that yields a particular meaning, it would be nothing to the point that others, perhaps even others which are more benign for the respondents, may possibly be open. 52 More particularly, it was emphasised for the respondents that the undertaking was not to use the nominated words "as a sign". When regard was had to surrounding circumstances, this was necessarily to be construed as synonymous with use as a trade mark, it was submitted. In contrast, IHC Aust contended for a wider construction of these words of limitation. 53 Especially when regard is had to the circumstances surrounding the giving of this undertaking, I doubt that there is any ambiguity which attends the use of the words "as a sign". The causes of action pleaded by IHC Aust in the QLD proceeding, compromised by the deed, did, it is true, range more widely than just one under s 120 of the Trade Marks Act to include causes of action under the TPA and in tort for passing off. This was not the only proceeding compromised. Further, the concept of a "sign" lies at the heart of a trade mark. "Sign" is specifically defined for the purposes of the Trade Marks Act: s 6. In turn, that Act defines a trade mark by reference to a distinguishing or intended distinguishing use of a sign as so defined: s 17. An element of the cause of action created by s 120 of that Act is the use as a trade mark of a substantially identical or deceptively similar "sign". IHC Aust was the registered owner of trade marks in respect of the "signs" which appear in the undertaking. 54 Against this background, the use of language "as a sign" in the limiting clause, is not a coincidence but inherently likely to carry the meaning that regard to the words alone would suggest in light of the pervasive use of the word "sign" in trade mark law. So to construe the word is not inconsistent with taking into account that there were other causes of action pleaded by IHC Aust in this proceeding and that there was another proceeding compromised by the deed of settlement. 55 It was further submitted on behalf of the respondents, and I agree, that there is no evidence in this case of importation, sale or manufacture. Thus, in respect of this element of the undertaking, the issue truly does become, as they further submitted, whether there is evidence in connection with marketing in Australia of the use of the nominated words, as a "sign"? 56 One of the cases to which Merkel J refers in the Ward Group Case is New Zealand Post Ltd v Leng [1999] 3 NZLR 219, which is noteworthy for the review by Williams J of the then state of authority concerning the protection which domestic courts might afford to locally registered trade marks from the use by others of that mark in commerce via the internet. His Honour sets out (at 230) an excerpt from an article by Russell N of New Zealand's Law Commission, "Postscript and Response" [1998] NZLJ 404 concerning two of these early authorities, Marks & Spencer plc v One in a Million Ltd [1998] FSR 265 and Oggi Advertising Ltd v McKenzie [1999] 1 NZLR 631, in which the learned author opined: The end result of these decisions is to arrive at the unsurprising conclusion that the Internet is not a legal blank slate. Rights cannot, and should not, be undermined simply by changing the medium; this would have the inevitable effect of curtailing the right of an owner to exploit his or her intellectual property to an extent which would reduce its value. The real challenge for intellectual property law in cyberspace is the irrelevance of physical geography. The question the law must answer is, whether a New Zealand domain name infringes on a trade mark registered in, for example, Finland? The geographical distinction is irrelevant to Internet users and invisible to search engines looking for the name only. It is the global nature of the Internet which will ultimately have the greatest impact on intellectual property rights, whether this is "economically efficient" or not. 57 More than a decade later and in an era when, notoriously, the internet is an exponentially greater medium than then for national and international commerce, the challenge for intellectual property law presented by the irrelevance of physical geography in cyberspace is to reconcile that irrelevance with the limits of jurisdictional competence in the protection under domestic law of local intellectual property rights. 58 When, in the manner of the Treaty of Tordesillas (1494, between Spain and Portugal, dividing, by a fixed meridian, the newly discovered lands outside Europe), the parties to the deed of settlement divided what one might describe as the world of Affinage, thereby confirming earlier arrangements struck between Mr Bailey (and entities he controlled) and Mr and Mrs Jolly (and entities they controlled), they divided, as between them, all of that world including, as to targets of marketing, cyberspace. That division is locally buttressed by the trade marks owned by IHC Aust just as much as it is, for example, on the other part buttressed in the United Kingdom by trade marks owned by IHC UK. 59 Yet the internet knows no such physical limits and may be accessed, for example, from either and each of Australia and the United Kingdom. It seems to me, by analogy with the Ward Group Case and with the authorities cited by Merkel J at [40]-[41], that the reconciliation to which I have just referred is achieved, in terms of the undertaking given in this case, by an approach that finds a use of the nominated words in connection with "marketing" in Australia if the words as so used are downloaded in Australia and there is evidence that the use was specifically intended to be made in, or directed or targeted at Australia. 60 That downloading can occur in Australia is evidenced by the searches conducted both by Mr Bennett and by Mr Mitchell. A person seeking information concerning, "Affinage" can readily access from Australia and download here the global "affinage.com" web site maintained by IHC UK. As accessed by Mr Bennett this year, that global web site is, inter alia, directed to or targeted at Australia. That is the whole purpose of the "Australia" option in the drop down box selection offered on the global landing page. 61 For like reasons to those which led me to conclude that the reference to "sign" in the limiting clause, "as a sign" should be read as a reference to "as a trade mark", "use" should bear a corresponding meaning. That means that the test for trade mark use as stated by Kitto J in Shell Co (Aust) Ltd v Esso Standard Oil (Aust) Ltd (1963) 109 CLR 407 at 425 (Shell v Esso) is just as apposite for this undertaking as it is for s 120 of the Trade Marks Act. Referring to the television advertisement in question, his Honour stated that the relevant question was: whether in the setting in which the particular pictures referred to were presented, they would have appeared to the television viewer as possessing the character of devices or brands, which the appellant was proposing to use in relation to petrol for the purpose of indicating, or so as to indicate, a connection in the course of trade between the petrol and the defendant. Adapting this test to the circumstances of this case, the test for "use" becomes whether, in the setting in which the reference to Affinage [it is sufficient to consider this of the words mentioned in the undertaking] was presented, it would have appeared to the internet browser as possessing the character of devices or brands, which IHC UK or, as the case may be, Salon were proposing to use in relation to hair care products for the purpose of indicating, or so as to indicate, a connection in the course of trade between the hair care product and IHC UK or, as the case may be, Salon? 62 An internet browser coming to the global landing page www.affinage.com, as did Mr Bennett, is immediately confronted with the bold type banner, "AFFINAGE" and with the further reference to that word immediately below it as "one of the world's fastest growing haircare [sic] companies using cutting edge technology to produce market leading hair products". That, in my opinion, is a "use" of a sign in the sense described by Kitto J in Shell v Esso. The use of the word Affinage in the setting presented has trade mark significance. As so used the word has the character of a device or brand. IHC UK is perfectly entitled to engage in such a use in the United Kingdom, for it holds the registered trade mark there. It is not so entitled when it targets or directs its presentation at Australia for IHC Aust, not IHC UK, holds the trade mark registration here. That Australian targeted use on the global landing page controls all that follows when one selects, as did Mr Bennett, the "Australia" option in the drop down box. 63 The qualification in the undertaking of use in connection with, materially, "marketing" does not remove this use from the scope of the undertaking. The web site is patently a means of marketing. 64 A like conclusion does not follow in respect of the Facebook and Twitter links displayed on the global landing page in that neither of these is not specifically targeted or directed at Australia. 65 Following the "Australia" link on the global landing page, as did Mr Bennett, leads one to the "company profile" statement, detailed above. Here, the "AFFINAGE brand" is twice mentioned. Products of this brand are said to have been "enthusiastically embraced by consumers and the hairdressing industry worldwide". Then follows a reference to the launch of the new brand ASP. Under the heading "Word Class, Wordwide" [sic] it is said that "our products" are sold in over 50 countries" (emphasis added). The "Asia Pacific" region is one location mentioned. It is then stated that, "Our brands are marketed globally by IHC UK and through its associated companies in the USA and Australia" (emphasis added). 66 As a matter of history, it is true that IHC UK created the Affinage brand. It is also true that it holds trade mark rights in respect of that brand there and in may other places in the world, but not in Australia. The undertaking was one means by which a compromise in the deed of settlement, which included the division of the Affinage world, was given effect. As used on this Australia specific profile page the purpose is to create a connection with a brand which, in Australia, is not that of IHC UK or Salon. That, in terms of the undertaking, is the use of a sign in Australia. It is patently a use in connection with marketing. Having divided the Affinage world and IHC Aust having the registered trade mark in Australia, IHC UK and its Australian distributor, Salon cannot, in terms of the undertaking, use that brand as a sign in Australia in connection with, materially, marketing. Representations which did not constitute a "use" as described in Shell v Esso would not transgress, but that is not this case. 67 When one reads the language of the "Profile" page in context, the repetition of AFFINAGE and the repeated use of "our brands" in conjunction with "worldwide" and "are marketed globally by IHC UK and through its associated companies in the USA and Australia", the reference to Affinage is not just to a matter of foreign history but part of a current promotion that our goods worldwide, including those offered in Australia, include goods with the AFFINAGE brand. The end to which the profile is directed is to persuade those reading the profile to purchase or seek information as to how to purchase the goods of IHC UK and, materially, its Australian distributor, Salon, and to distinguish those goods from those of others partly because of an affiliation with the AFFINAGE brand: Mark Foy's Ltd v Davies Coop & Co Ltd (1956) 95 CLR 190 at 205 per Williams J, Dixon CJ agreeing. The respondents have not, in this manner, made it clear, since giving the undertaking, that the current commercial origin in Australia of goods with the AFFINAGE mark is neither IHC UK nor Salon. 68 In my opinion, and though the issue is not without difficulty, even after taking into account the modification of the global landing page, which IHC UK proposed to implement in any event and which became Exhibit 1 on the hearing of the notice of motion, there remains a use contrary to the undertaking. 69 The modification divides the global landing page as between an AFFINAGE Salon Professional banner and an "A.S.P." banner with the latter appearing in the lower half of the page. AFFINAGE and A.S.P. appear in equally large type but A.S.P., being the lower, in this sense strikes the viewer as being subordinate. Under the AFFINAGE banner the following appears, "Affinage is one of the world's fastest growing haircare [sic] brands using cutting edge technology to produce market leading hair products." In turn, under this the "International Sites" portion contains drop down boxes and directions only in respect of the United Kingdom and the USA. The "Australia" drop down box has been removed. Instead, it appears as a discrete, fixed link under the "A.S.P." banner in the lower half of the landing page. "Australia" is thus immediately visible on the global landing page. Also under the A.S.P. banner is the following statement, "products formulated by [IHC UK] are now marketed in Australasia & Asian Pacific countries under the ASP brand." 70 The "setting" for the viewer of this global landing page has undoubtedly changed and changed in a way that seeks to create a discrete Australian "target". What remains though is a determined endeavour to place AFFINAGE in the mind of the viewer who has an interest in reading further in relation to Australia. The Australian "target" remains on the global landing page as a fixed feature. A connection between the AFFINAGE brand product and the ASP brand, each formulated by IHC UK is promoted and promoted to an Australian viewer. What the global landing page does not say is that IHC UK has no connection with the AFFINAGE brand in Australia. Instead, the overall "setting" is that there is an Affinage world brand in which the Australian province is known as "A.S.P.". This, in my opinion, remains a use of that sign in Australia in connection with marketing contrary to the terms of the undertaking. 71 It follows that the respondents have failed and continue to fail to comply with the terms of the undertaking. This is not a contempt proceeding but I nonetheless record that I am satisfied that such failure is established even taking into account the considerations set out in s 140(2) of the Evidence Act 1995 (Cth). 72 IHC Aust is entitled to an order in terms of paragraph 1 of the notice of motion. Further, in light of the events which have transpired since that undertaking was given and in order to prevent an undermining by the respondents of the Court's authority, there is a need for the addition of more prescriptive orders directed to the respondents in respect of the website, www.affinage.com. The additional orders sought in paragraphs (b) (modified to take account of the modification of the global landing page), (c), (d) and (e) of paragraph 2 of the notice of motion are necessary to achieve this. The order sought in paragraph 2(a) is not necessary in light of these orders and the modification already made of the global landing page. 73 I reject the submission of the respondents that there is no utility in the making of such orders or that, as to those sought in paragraph 2 of the notice of motion, they are beyond power. As to power, I have already referred to the BLF Case. As to utility, on the whole of the evidence, the names referred to in the undertaking have value in Australia. The respondents have each submitted to the jurisdiction of the Court. They show a continued interest in the use of the signs in Australia. There is also evidenced an ability on their part to change the website if so disposed. That the obligation entailed in an undertaking may have the same practical effect as an injunction may be accepted but the orders proposed and the reasons for them will reinforce that obligation and address the inadequacy to date of the respondents' compliance with it. They will also reinforce that the obligation is more than just a term of the commercial bargain represented by the deed of settlement. 74 In Bacchus Marsh Concentrated Milk Co Ltd (in Liquidation) v Joseph Nathan and Co Ltd (1919) 26 CLR 410 at 449, Higgins J, referring in so doing to Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co [1894] AC 535, observed: If A sell a horse to B, there would be no unreasonable restraint of trade in a covenant by A not to use the horse. Such an obligation is, indeed, implied in the sale. The same principle applies to the sale of a patent or of knowledge of a process. As Lord Herschell said in the Nordenfelt Case, "A covenant entered into in connection with the sale of the goodwill of a business must be valid where the full benefit of the purchase cannot be otherwise secured to the purchaser"; and the same principle must surely apply to the sale of processes, patented and unpatented. To adopt the homely phrase made use of by Lord Macnaghten, the vendor "may not sell the cow and sup the milk." Freedom of contract as to sale is as valuable to the public generally as freedom of an individual to sell a specific class of commodities. [Footnote references omitted] 75 This observation applies with equal force, by analogy, to the undertaking given by the respondents. Its utility is not affected by the particular dissent voiced by Higgins J in the circumstances of that case. It also explains why it is that there is no public interest, as the respondents also submitted, arising from a promotion of a restraint of trade, telling against the granting of the relief sought. 76 As to costs, I accept that the categories of case in which an order for costs on an indemnity basis are not closed. I am not satisfied on the evidence to hand that the respondents have acted in deliberate disregard of the undertaking which they gave. Rather, it seems to me that they have endeavoured to do no more than they undertook. It is just that a failure to comply with the undertaking remains the end result of that. That does not strike me as a circumstance warranting an order for costs on an indemnity basis. IHC Aust did not, prior to filing the notice of motion, seek to address by informal correspondence its concern as to non-compliance with the undertaking. It is to be remembered though that the undertaking was a sequel to a deed of settlement which compromised earlier litigation. Though reasonable minds might reasonably differ as to the course first to have followed, it was not unreasonable for IHC Aust, in the then circumstances, to form a view that the institution of proceedings forthwith was necessary in order to bring home to the respondents its concern that there was a failure to comply not just with a bargain but with an undertaking to this Court. Thereafter, the evidence is that each party did try informally to resolve matters. I do not, in these circumstances, regard the conduct of IHC Aust as disentitling it to an order for costs. 77 There will be orders accordingly. I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.

International Hair Cosmetics Group Pty Ltd v International Hair Cosmetics Limited

At a glance

Court

Decision date

Before

Source

Judgment (13 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (12)

Cited By (6)