Need v J H Coles Pty Ltd [1931] HCA 55

Need v J H Coles Pty Ltd [1931] HCA 55 - HCA 1931 case summary — Zoe

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ment : - " J. H. Coles Proprietary Limited, 3d., 6d., 1/- and 2/6 Stores. We are prepared to fit up and stock a limited number of country and suburban stores on similar lines to our own. Particulars from our head office, J. H. Coles Proprietary Limited, 230 Smith Street, Collingwood.'"" The appellant saw the advertisement and interviewed the Company's managing director. An arrangement was made that the appellant should open a shop to be carried on as a store of the kind described in the advertisement, but none of the terms of the arrangement were reduced to writing and some matters which ought to have been foreseen were left undiscussed. So far as the agreement was expressed, we must take the terms to have been these : - The appellant was to secure a shop, taking the lease in his own name ; he was to bear the cost of fitting it up in the style favoured by the Company; he was to buy from the Company a complete stock of goods and afterwards to obtain from it all his supplies. The Company was to paint the shop and fit it up in the style of its own stores with signs "J. H. Coles 3d., 6d. and 1/- Stores" and "J. H. Coles"; it was to provide a stock of goods of the kind usually sold in its stores and afterwards to keep the appellant regularly supplied with such goods according to his requirements ; the price it was to charge the appellant for the stock of goods was to be calculated by adding five per cent to the amount which the goods cost the Company. The business was to be carried on by the appellant as a '"'J. H. Coles 3d., 6d. and 1/- Store." No agreement was made as to the duration of the arrange- ment, unless by implication, and no discussion appears to have taken place as to the time it should last or the conditions in which it should end. A shop was selected in High Street, Northcote ; the appellant obtained a lease of it; alterations were made in it at a cost of £1,300; it was painted and fitted up at a cost of £450, and it was stocked with goods at a cost of £1,500. On 10th February 1928 it was opened for business in the presence of the three persons who constituted the Company's "only personal shareholders," whatever that may mean, and were its directors. A few days before, the Company, under Part II. of the Partnership Act 1915 (Victoria), which deals with the registration of firm names, had registered the

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"J. H. Coles Stores" and "J. H. Coles 3d., 6d. and 1/- " as names under which its business was carried on. The ant conducted the shop under the arrangement without hitch about eight months, when he found the Company could not ipply him with goods which he required. The Company's managing 'director then consented to his making purchases occasionally from sources. The quantity of goods bought by the appellant other suppliers increased as time went on; he says because the ability of the Company to maintain supplies grew progressively In August 1929 the Company wrote to him complaining that he was buying from other sources in violation of the agreement y them, and further that he was doing so in the Company's e and upon its credit. The letter threatened an application an injunction, but, nevertheless, the Company went on supplying s to him, and the parties provisionally agreed that it should ge him five per cent on his purchases elsewhere as well as on e goods supplied to him. After a month or so the appellant und this charge objectionable and, early in 1930 it seems, he ed that it should be reduced to two percent. In the meantime the Company found greater difficulty in carrying on and supplying joods. Indeed, according to the appellant, about ninety per cent his orders were unfulfilled. At length, on 13th June 1930, the ompany went into voluntary liquidation. At the time the uidation began, the Company had six shops, four of which it had et up after the arrangement with the appellant was made. _ After the commencement of the liquidation the appellant bought more goods from the Company, which carried on for the purpose of Winding up. He received a letter from the former managing director, 0 was employed by the liquidator for a short time, which, in asked him to continue buying under the old arrangement, it, in writing this letter, the former director seems to have gone yond his authority. The liquidator informed the appellant that Company could not supply him with all his requirements, but t he could buy goods from it as an ordinary purchaser. On nd December 1930 the Company's solicitors wrote requiring him once to discontinue the use of the Company's trade names.

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The liquidator has now made a tentative sale of the Company's business, but the buyer refuses to proceed with the transaction unless the appellant and others are prevented from using the names "J. H. Coles " and " J. H. Coles Stores." The liquidator accordingly instituted this suit seeking an injunction. Irvine C.J., who heard a motion, which was treated as the trial of the action, does not appear to have thought it doubtful that, if the arrangement were at an end, the Company was entitled to relief. He considered that no implication could be made in the agreement between the parties of a condition that the authority to use the trade names of the Company should not be withdrawn except upon reasonable notice. Moreover, he was of opinion that the agreement was terminated by mutual consent when the appellant assented to the liquidator's proposal that he should buy as an ordinary purchaser. He therefore restrained the appellant from carrying on business under the names "J. H. Coles Stores," "J. H. Coles 3d., 6d. and 1/- Stores," or from otherwise representing that the business carried on at High Street, Northcote, is the business of the Company, or in any manner connected with the Company, or with its business. This order was affirmed on appeal in the Full Court of Victoria by Mann, Macfarlan and Lowe JJ. Macfarlan J., with whom Mann J. appears to have concurred, thought that the arrangement involved no assignment by the Company of goodwill, but gave a mere licence revocable at will, that no question of reasonable notice arose because the appellant's claim was for a right to use the trade names, that the Company's own positive right to the exclusive use of the names arose not only from their registration, but also from the facts proved as to its previous use of the names, from its shops and from its reputation, and that this right had not been lost by reason of any change taking place in the meaning of the names, or by reason of any acquisition by the appellant under the trade names of a local goodwill of which it would be inequitable to deprive him. Lowe J. also considered that there was no more than a licence to use the trade names, that upon any view of the duration of the agreement, it had upon the facts been terminated and that thereupon the appellant ceased to be entitled to use the Company's trade names.

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unauthorized use of the trade names or styles which it employed was clear. It would not matter that the unauthorized use caused no diversion of trade from the Company. If the adoption or imitation of its trade names amounted to an attempt to appropriate any benefit arising from the reputation attaching to them, or was likely to impair or diminish that reputation or any part of the Company's goodwill, the Company would have a prima facie right to an injunction. But when a new shop was established as one of the Company's stores an effect was necessarily produced upon the reputation attaching to the Company's trade names and upon its goodwill. Such a shop would attract public attention and, no doubt, would also form some trade connexion of its own. To its customers and to many others whose interests lay in the locality, the trade names would be primarily a means of identifying that shop and its business, and, if to them the names ever did denote a system of stores, that meaning would become of secondary importance, and, at best, the local branch would be prominent as a component of the system. The opening of the shop at Northcote was calculated to do two things - to create a local business having a goodwill of its own with which the trade names were connected and to enlarge the meaning of the trade names and widen the reputation attaching to them. But there can be no doubt that the appellant was and remains the proprietor of the actual business carried on at the shop at Northcote, and therefore of the goodwill which belongs to it. If the trade names had come to be a description of that business or of its proprietor and nothing more, it is manifest that, whether the parties intended such a consequence or not, the names would no longer form part of the business reputation of the Company and it would have nothing to protect by an injunction restraining their use. But while in the neighbourhood of the appellant's shop the names may in many minds, perhaps, almost: exclusively be associated with the business there carried on, yet, in the vicinity of each of the Company's own six shops, there will be many to whom the names serve to identify that shop, and among the wider public whose information does not depend upon observation confined to one locality, a class which probably includes the greater number of the appellant's customers, the trade descriptions adopted

At a glance

Court

Decision date

Before

Source

Judgment (103 paragraphs)