Mobileworld Communications Pty Ltd v Q & Q Global Enterprise Pty Ltd

Federal Court of Australia|2003-08-26|Before: Weinberg J

REASONS FOR JUDGMENT 1 By notice of motion filed on 19 August 2003, the applicants seek interlocutory injunctions restraining the respondent from various breaches of the Trade Marks Act 1995 (Cth), ss 52 and 53 of the Trade Practices Act 1974 (Cth), and the tort of passing off. 2 The application has been heard as a matter of urgency, and these reasons have been delivered ex tempore. 3 The applicants have a large and valuable mobile phone business. It seems that the business has a major presence in Victoria, but there are also outlets throughout New South Wales, and the other States. They operate their business under the name "Crazy John's", and have done so since approximately 1993. Their national sales currently total more than $200 million per annum, more than half of which are generated in Victoria. As would be expected, they spend large sums on advertising. 4 The respondent is the retailer of merchandise at two mobile phone stores in Melbourne, each of which is known as "Crazy Ron's". These stores began operating under that name in early August 2003. The evidence is that the respondent neither owns nor leases the stores, and is not responsible for their signage. The respondent is not the sole retailer of the merchandise sold at the stores. Its products are largely the stock which was acquired when the respondent's business was purchased by other entities within what I shall describe as the BHL Group. 5 The BHL Group consists of a number of companies which trade, in broad terms, under the name "Crazy Ron's". Those companies include BHL Group Pty Ltd ("BHL") and Crazy Ron's Communications Australia Pty Ltd ("CRCA"). BHL owns all of the shares in CRCA. CRCA in turn owns all of the shares in Crazy Ron's Network Pty Ltd ("CRN") and Crazy Ron's Communications Pty Ltd ("CRC"). 6 The "Crazy Ron's" business commenced operation in Queensland in 1996. At that time the founder of that business, Mr Ronny Bakir, operated as a sole trader, utilising the name "Crazy Ron's" as a business name only. The business name was registered in Queensland in December 1996. 7 BHL is the parent company and the holder of dealer agreements with mobile phone network "air-time" providers Vodafone and Optus. Customers of "Crazy Ron's" are connected through either of these providers, some to plans branded as "Crazy Plans". BHL is the owner of the goodwill in the brand, and has the right to use the name "Crazy Ron's". 8 Prior to being acquired by the BHL Group, the respondent traded in two stores in Melbourne, one at Shop 3, 180 Russell Street, and the other at 290A Bridge Road, Richmond. These stores were known as "B Stores". The term "B Store" refers to a telecommunications company named "B Digital" which apparently operates as a wholesale supplier of network air-time. The respondent was the retailer of the stock in the stores, and it employed the staff. Separate entities leased the premises and provided mobile phone network connections to customers. 9 After the BHL Group acquired the respondent, it set in train a series of measures designed to enable it to establish a major presence in Melbourne. At present, there are six stores (soon to be seven) in Melbourne which fall under the effective control of the BHL Group. The evidence is that, unless the BHL Group is restrained, these stores will soon trade under the "Crazy Ron's" name. It is not entirely clear when that will occur, but the supplementary affidavit material filed suggests that it may be as soon as early September, or mid-September 2003. As indicated earlier, the respondent still owns some, but not all, of the stock in the stores from which it operates. CRCA owns the remainder of the stock. The respondent is currently being used solely as a vehicle to facilitate transitional arrangements whereby the BHL Group will take over the running of the stores. Its role is being phased out and, the evidence suggests, will end within a few weeks. The current position is that the respondent now no longer employs staff. The business is effectively run by the BHL Group, with BHL itself selling air-time plans under its dealer agreements. 10 The re-branding of the former B Stores in Victoria as "Crazy Ron's" is being paid for by BHL. That company derives income, and will recoup its investment in Victoria, from its dealer arrangements. 11 According to the evidence filed on its behalf, "Crazy Ron's" has developed a national reputation in the field of mobile phone services through appearances by its founder on national television programs, and through sponsorship of leading sporting identities.

The notice of motion 12 As previously indicated, the applicants seek interlocutory injunctions against the respondent. They plead three distinct causes of action. Their primary claim is for infringement of two trade marks registered in 1999 in the name of "Crazy John", contrary to s 120 of the Trade Marks Act 1995 (Cth). They also allege contraventions of ss 52 and 53 of the Trade Practices Act 1974 (Cth), and passing off. 13 The breadth of the interlocutory relief sought was refined in oral submissions. The applicants, in effect, seek interlocutory injunctions restraining the respondent from trading under the name "Crazy Ron's", but only in the State of Victoria. The orders sought are twofold. The first is an order that would have the effect of restraining the respondent from continuing to operate the two stores already opened under that name. The second is an order that would have the effect of preventing the respondent from opening any other store under the name "Crazy Ron's" in Victoria. 14 The evidence suggests that the applicants will have to give serious consideration to adding other companies within the BHL Group to this proceeding. The respondent appears not to be the appropriate company within that group to be enjoined if the applicants are to achieve their object which is plainly to prevent the name "Crazy Ron's" from appearing on mobile phone stores in Victoria (and possibly elsewhere in Australia having regard to the expansion plans of the BHL Group).

Submissions - Serious question to be tried 15 The applicants submitted that there is a serious question to be tried with respect to each of the causes of action pleaded. 16 In relation to the alleged trade mark infringement, the applicants submitted that the name "Crazy Ron's" is "deceptively similar", within the meaning of that expression in s 10 of the Trade Marks Act, to its registered trade marks: · Australian Registered Trade Mark No. 656212 for CRAZY JOHN MW and device in class 38 for "telecommunications"; and · Australian Registered Trade Mark No. 803950 for CRAZY JOHN (in script) in class 35 for "business advisory services relating to telecommunications; retail services relating to telecommunications products" and class 38 for "telecommunications services and advisory services relating thereto": 17 See generally, Australian Woollen Mills Limited v FS Walton and Company Limited (1937) 58 CLR 641 at 659, and The Shell Company of Australia Limited v Esso Standard Oil (Australia) Limited (1961) 109 CLR 407 at 415. 18 The applicants submitted that the name "Crazy Ron's" was phonetically similar to the name "Crazy John's", with little to set them apart. Moreover, the name "Crazy Ron's" was presented in a colour scheme, font and style of writing which closely resembled that of "Crazy John's". It was therefore contended that the use of the name "Crazy Ron's" was "likely … to cause confusion". 19 In relation to the causes of action pleaded under the Trade Practices Act, and the tort of passing off, the applicants submitted that the respondent's current and threatened use of the name "Crazy Ron's" at its stores was likely to mislead consumers into believing that the respondent had an affiliation of some kind with the applicants. 20 The respondent submitted that the application was wholly misconceived. It submitted that, in view of the corporate structure that underpinned the "Crazy Ron's" business, an interlocutory injunction granted against the respondent (which was only being used as a transitional structure, and would soon cease to have any operational role in relation to the business) would be likely to have significant adverse consequences for third parties not the subject of this proceeding. The third parties were identified as BHL and CRCA. 21 In relation to the claim for trade mark infringement, the respondent submitted that the names, "Crazy Ron's" and "Crazy John's", could not possibly be confused. A side by side comparison of the way in which those names were presented did not suggest any deceptive similarity. There were significant differences between them. These included: · the applicants' composite logo prominently featured a disfigured cartoon character and a globe, whereas the "Crazy Ron's" logo depicted a real person; · the "Crazy Ron's" logo featured the person inside the "o", whereas the applicants' logo had separate words and characters; · the applicants' logo was in yellow writing on a royal blue background, whereas the "Crazy Ron's" logo was red and black on a blue wall; · the applicants' logo featured consistent font size and type, whereas the "Crazy Ron's" logo displayed varying type features; · the applicants' logo usually incorporated the words and character partially inside an oval, whereas the "Crazy Ron's" logo had no similar feature. 22 The respondent submitted that the applicants' disfigured cartoon was a significant feature of its mark. It submitted that the visual impression conveyed by the two logos was so different that it could not possibly be said that they were "deceptively similar": see Shell (Australia) Ltd v Esso Standard Oil (Australia) Ltd (supra) at 414-5 per Windeyer J. In any event, it was submitted that the obvious visual differences between the two were sufficient to overcome any phonetic similarities: see Deeko Australia Pty Ltd v Décor Corporation Pty Ltd (1988) 11 IPR 351. 23 In relation to the claims brought under the Trade Practices Act,and for passing off, the respondent submitted that mere confusion or uncertainty between the two marks would be insufficient: see Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. It was submitted that the applicants had to demonstrate a real possibility that consumers would be misled into believing an association between the two marks. 24 The respondent submitted that "Crazy Ron's" had acquired an independent reputation developed over seven years in Queensland, and nationally through promotional activities. There was little likelihood, let alone a real likelihood, that consumers would be misled. 25 Finally, the respondent submitted that the evidence demonstrated that a very large number of businesses in this country elect to use the word "Crazy" (or a variant thereof, "Krazy") as part of their name. This would militate against any possibility of misapprehension in the minds of consumers. It was also submitted that the word "Crazy" was nothing more than a descriptor. When read in conjunction with the name "Ron", it did no more than represent a legitimate use of that name.

Submissions - Balance of convenience 26 The applicants contended that the status quo would best be preserved if an interlocutory injunction were granted: see Beecham Group Limited v Bristol Laboratories Pty Limited (1967) 118 CLR 618 at 623, 625-626. They pointed out that it was the respondent (or rather the BHL Group) that was seeking to alter the status quo by introducing the "Crazy Ron's" logo into this State. They contended that, as matters stood, "Crazy Ron's" operations in Victoria were small and relevantly insignificant. In fact, those operations had only just begun within the past few weeks. Moreover, the stores which had been opened by the respondent still retained their former markings ("B Store", and "DDC" which stands for "Digital Direct Communications Pty Ltd", a company which holds a master dealer agreement with B Digital). In those circumstances, it was submitted, the respondent would have little difficulty in "rebadging" the stores already opened. 27 The applicants contended that, on the other hand, they had much to lose if the respondent were permitted to continue to operate in Victoria under the name "Crazy Ron's". They had invested heavily in their two marks, and had built up a substantial national business. That investment would be jeopardised if the respondent were allowed to expand its operations under the name "Crazy Ron's". They expressed concern that their mark, which was extremely valuable, would be tarnished by association with what they submitted was a "fly by night" operation being conducted by the respondent. They also expressed concern that the respondent was a company that appeared unlikely to be able to meet any award of damages if the applicants were ultimately successful in their application for final relief. 28 The respondents contended that there were a number of factors that weighed against the granting of interlocutory relief, based upon the balance of convenience. They included: · the orders, though expressed in prohibitory terms were, in effect, mandatory; · the orders, if made, might require the respondent to close its existing businesses in Victoria, with a number of employees losing their jobs; · third parties (BHL and CRCA which sold merchandise and services from the two stores already opened and those about to be opened) would be adversely affected by any requirement that the stores be renamed; · the closing of the Victorian stores would do irreparable harm to the "Crazy Ron's" national brand; · any damages payable to "Crazy Ron's" in the event that the application for final relief failed would be difficult to quantify because the BHL Group did not have an established business in Victoria, or any record of business performance in that State. 29 More generally, the respondent submitted that the applicants' professed concern for the rights of consumers was difficult to reconcile with their failure to take any steps to prevent "Crazy Ron's" from trading in competition with "Crazy John's" in Queensland. Moreover, there had been unexplained delay on the part of the applicants in bringing proceedings against their competitor. This amounted to laches, and disentitled the applicants to any injunctive relief, more so interlocutory injunctive relief. Finally, the respondent submitted that there was evidence to suggest that the applicants had engaged in a measure of self-help by seeking to persuade a shopping centre proprietor at Chadstone that approval should not be given to the use of the name "Crazy Ron's", and that such self-help should be taken into account in deciding whether interlocutory relief should be granted.

Conclusions 30 Notwithstanding the somewhat extreme positions taken by both sides, the applicants submitting that their case was overwhelming, and the respondent that it was hopeless, the true position, in my opinion, is that there is a serious question to be tried in relation to each cause of action pleaded. For reasons that will become apparent it is both unnecessary and inappropriate for me to say any more regarding my assessment of the strength of the applicants' claims. 31 The Court has been able to arrange for an early hearing of this proceeding. The matter will be dealt with on a final basis in October, a delay of only a matter of weeks. In those circumstances, the issue of balance of convenience assumes a somewhat different significance than might otherwise be the case. Each side contends that I should do no more than ensure that the status quo is maintained until the hearing of the case. However, each side has a very different view of what constitutes the status quo. 32 On balance, I am satisfied that there will be significantly less prejudice done to the applicants if I refuse the interlocutory relief sought than would be done to the respondent if I granted that relief. I note that both parties submit, in aid of their respective positions, that if they are ultimately successful, damages will be difficult to assess. For my part, I accept both submissions. 33 It is true that if the applicants are ultimately successful, an assessment of their damages for the breaches will be difficult. Likewise, the respondent, if ultimately successful, will have difficulty demonstrating its damages particularly at a time when its business model projects that it will invest heavily in Victoria in the near future. The matter is finely balanced, but on the whole I think that the harm done to the respondent would significantly exceed that done to the applicants if I granted the interlocutory relief, and the applicants ultimately failed. 34 I should indicate that I am particularly concerned about the risk to employment of the persons currently working in the two stores operating at present in assessing the balance of convenience. I am also concerned about the utility of granting injunctive relief in the form sought against the present respondent in circumstances where, unbeknown to the applicants when they filed their notice of motion, there were other entities within the BHL Group against whom relief should have been sought. However, had that been done, the issue of laches would certainly have had to be considered. 35 I therefore reject the application for interlocutory relief. I stress that I do so primarily on the basis of the balance of convenience, relying upon the evidence filed by the respondent in relation to that issue. 36 In relation to costs, I am of the view that this case warrants a departure from the general rule that costs follow the event. The issues in this proceeding were finely balanced. In particular, it would have been difficult for the applicants to anticipate precisely the nature of the material adduced by the respondents in their defence to the notice of motion. In my opinion, therefore, the costs of and incidental to the notice of motion should be costs in the cause. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg.

Counsel for the Applicant: Mr R Macaw QC and Ms M Barker

Solicitor for the Applicant: Corrs Chambers Westgarth

Counsel for the Respondent: Mr J B Davis and Mr R J Anderson

Date of Hearing: 25 and 26 August 2003

Trade Practices Act 1974(Cth)ss 52

Trade Marks Act 1995(Cth)ss 10, 120

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