Midas Australia Pty Ltd v Ravecroft Pty Ltd

REASONS FOR JUDGMENT 1 The applicant (Midas) seeks an interlocutory injunction to restrain use of a trademark. Midas is the franchisor of the Australian Midas network and the authorised user of Midas trademarks in a retail business for the servicing of motor vehicles and the sale of mufflers, brakes and suspensions. The first respondent was the franchisee in Townsville of Midas under a franchise agreement, and the second and third respondents Mr and Mrs Borradale are in effective control of the first respondent and have guaranteed its obligations. 2 Mr and Mrs Borradale sent to the Court yesterday an email stating that they would not be able to attend today due to financial incapability. Hence this matter has proceeded unopposed. 3 The affidavit material discloses that since November 2002 the first respondent and Mr Borradale have engaged in a campaign publishing to other Midas franchisees and ex-franchisees allegations of improper conduct by Midas. The allegations have included misuse of advertising funds, intimidations of franchisees, unconscionable conduct, lying and extortion. They have also stated that the Australian Competition and Consumer Commission considers Midas to be a "rogue trader" and has decided to prosecute it. 4 There is a serious question to be tried that this campaign breached the first respondent's obligation under clause 7.8 of the Franchise Agreement to - "do nothing which would tend to discredit, dishonour, reflect adversely upon or in any manner injure the reputation of a Midas franchisee or any other Midas franchisee." 5 On 18 February 2003 Midas gave notice of the breach. On 10 March 2004 the first respondent requested the ANZ Bank to cancel its direct debit arrangement with Midas and has paid no royalties, advertising charges or other fees to Midas since then. By a further notice of breach dated 16 March 2004, Midas gave the first respondent 30 days to remedy that and other outstanding earlier breaches. None of these breaches have been remedied. Midas and the applicant terminated the franchise agreement on 4 May 2004. 6 There is evidence that the first respondent continued to use the Midas trademarks after that date, although in an affidavit filed today it appears that the external sign bearing the Midas trademark has been removed from the premises. However, Mr and Mrs Borradale have refused to authorise the transfer of the entries in the White Pages and Yellow Pages. 7 The balance of convenience favours the grant of the injunction. On the material before me there is no arguable defence. Unauthorised use of the marks would erode their value in a way that would not be compensable. Following termination of the franchise agreement, Midas would no longer be able to exercise the controls designed to protect the marks. Further, there would be a misleading of the public if the first respondent continued to represent itself as a Midas franchisee. 8 The injunction sought would not prevent the first respondent from carrying on its business, but only from carrying it on in a way that uses the Midas marks or falsely represents itself to be a Midas franchisee. 9 On the usual undertakings being given as to damages, I order that: 1. Subject to order 2, until the trial of this proceeding or further order, the first respondent be restrained whether by itself, by its servants or agents or any of them from: (i) using the Midas trademarks identified in exhibit LP2 of the affidavit of Larry Picker affirmed on 26 May 2004, and (ii) otherwise directly or indirectly identifying itself as a Midas or Midas Muffler and Brake outlet store or franchisee. 2. Insofar as order 1 requires the removal of signs from the business premises of the first respondent, this order be stayed until 4 pm on 18 June 2004. 3. The first respondent consent to and uses its best endeavours to procure the registration of telephone numbers (07) 4779-2165 and (07) 4779‑2810 in the name of the applicant including executing any transfer documents or change customer forms required to effect such registration. 4. The applicant file and serve its statement of claim on or before 22 June 2004. 5. The first, second and third respondents file and serve any defence and cross-claim on or before 6 July 2004. 6. The directions hearing is adjourned to 10 August 2004. 7. Costs are reserved.