Prince Manufacturing Inc & anor v ABAC Corporation Australia Pty Ltd & anor [1984] FCA 398

AND: ABAC CORPORATION AUSTRALIA PLY. LIMITED First Respondent

Judae making order: Beaumont, J. Date order made: 22 November 1984.

1. 1 note the undertaking to the Court given on behalf

of the respondents on 15 October 1984. 2. I order that the respondents pay the applicants damages in the sum of $5,000.00 and that there be judgment

AND: ABAC CORPORATION AUSTRALIA PY. LIMITED First Respondent

The first applicant. a New Jersev corporation and the manufacturer and marketer internationallv of tennis racquets and the second applicant, its Australian distributor, seek iniunctions and damages against the respondents as retailers in Melbourne of consumer aoods including tennis racquets. The applicants market a racquet under the name "Prince Pro". The first applicant 1s. and at all material times has besn, the registered proprietor under

the Trade Marks Act, 1955 of the following trade mark and

device. registered in Part B of the Register in respect of,

The applicants allege that the respondents offered for sale and sold in their five Melbourne retail stores under the name "Prince Pro" racquets not of the first applicant''s manufacture. The applicants aliege that the conduct of the respondents was misleading and deceptive or at least likely to be so. Contraventions of s.52 and

s.53(a)(c) and (d) of the Trade Practices Act, 1974 are

alleged. They claim injunctive relief and damages pursuant to ss.80 and 82 respectively of that Act. They also claim that the respondents have infringed the first applicant's trade mark. Injunctions and damages under the Trade Marks Act are also sought. Passing off is alleged. Injunctions

The sales by the respondents of the racquets said to be not of the first applicant's manufacture took place in Melbourne in 1983. It is not suggested by the applicants that any such sales are currently being effected by the

Early in the litigation, the respondents indicated that, although the claim for damages was resisted. they did not prorese to contest the claims for injunctive relief. Undertakings were foreshadowed. Ultimately, on the commencement of the hearing, the respondents proferred a permanent undertaking to the Court that they would not sell

or offer for sale under the name "Prince Pro" racquets not

or the first applicant's manufacture. Since the applicants accept this undertaking in lieu of injunctive relief, only

There is unchallenged evidence that the first applicant has 4a worldwide reputation as the manufacturer and marketer of a range of racquets including the "Prince Pro". Mr. L.E.D. McCabe. the managing director of the second applicant and a former tennis professional, said that the mame of the first applicant. which has enaaced in the manufacture and sale of "Prince" racquets for about 10 vears, is well known in the tennis industry. He said that the first applicant sponsors a number of professional tennis plavers throudnout the world: that sales of the range of "Prince" racquets in the United States account for about one-third of all tennis racquets sold in that countrv; and that the "Prince" range of racquets is recoaqnized in the tennis industry as including some of the most expensive

The first applicant's "Prince Pro" racquet was first marketed in Australia about four vears ago. It has a large head and short shatt. The frame 1s made from anodised aluminium and is black in colour. There are Fine gold lines on the shart and frame. The word "Prince" appears in qold letters on both sides of the throat. The letter "P" appears

an gold on the butt and in black on the strinas. The word

"Pro" appears on one side of the shaft. On the other side

of the shaft. there appears a label bearind, inter alia. the size of the qrip and patent and copyright information. For reasons which will appear. the following siaqnificant

Mr. McCabe also gave evidence that in the period now in question, 1983, the first applicant's "Pro" racquet was sold by retail in Melbourne at prices ranging from

In January 1983. the respondents received enquiries from customers as to the availability of "Prince Pro" tennis racquets. At about this time. one of the respondents' directors. Mrs. J.I. McFarlane. approached in this connection Victorian Sporting Distributors Pry. Limited, one of the respondents' suppliers and. until 1982, the Victorian agent of the second applicant. As a result of this approach, Victorian Sporting Distributors Pty. Limited supplied the respondents with 61 tennis racquets. purporting to be "Prance Pro" racquets, at a wholesale price of $115.20 each. Shortly afver this, Mrs. McFarlane ceceéived a visit,

apparentiy unsolicited. from Mr. D. Waters in circumstances

Gescribed by Mrs. McFarlane in her affidavit as follows:

wee Mr. Dave Waters of Asian Pacific Commodities Pty. Ltd. ... called on me and offered me among many other products. Prince Pro tennis racquets at $44.00 each. I asked Mr. Waters how he could supply the tennis racquets so cheaply and stated there must be something wrong with them. Mr. Waters' reply was that there was nothing wrong with them and that they were genuine Prince Pro tennis racquets. He advised me that he could obtain the Prince Pro tennis racquets at a cheap price because he had been buying from Hong Kong and Taiwan for many years and was very friendly with the Manager of the factory that made Prince Pro tennis racquets (which I believe is the firstnamed Applicant) and that through this friendly Manager Mr. Waters could get as many tennis racquets as he wanted and that Mr Waters was happy to work at a very small margin whereas the Applicants or either of them put a very high profit on every tennis racquet sold by them. I was convinced by these statements from Mr Waters and I included 100 Prince Pro tennis racquets in my order. When the racquets I ordered hadn't arrived after a while, I rang Asian Pacific Commodities Pty. Ltd. and was told by Mr. Col Hardy ... that he did not think he would go ahead with 1t because he thought it would be too risky trying to get the tennis racquets through customs and even if he did decide to do so it would be at ieast 3 to 4 months before they could be delivered ... Mr. Dave Waters rang about one or two weeks after my conversation with Mr. Col Hardy to advise that he had brought 100 Prince Pro tennis racquets in for us himself. Mr. Waters further went on to say that they would cost $55.00 per piece. I then asked Mr. Waters why there was such a dramatic increase in price. To which he replied that he had miscalculated his costs. I then advised that the Respondents would not be prepared to pay more than $50.00 each. He agreed to this, but said at that price he would want payment on delivery. I said I would aive him a cheque when the racquets arrived. Mr. Waters then told me that he was sending Mr. Jack Purcell to Melbourne to clear the racquets and asked me if I could give him cash as he would only be in Melbourne long enough to clear the racquets and not have time to clear a cheque. I agreed to give him cash on

_ delivery. ee. ON the 17th March, 1983 Mr. Jack Purcell called at my office and said that he had delivered the 100 Prince Pro tennis racquets and asked me for $5,000.00 cash. I telephoned the Respondents' warehouse manager who confirmed that he had received the tennis racquets and then asked Mr. Purcell to receipt his invoice while I got the cash for him. When I returned to my office with the $5,000.00 cash Mr. Purcell apologised and said that he had left Queensland in such a rush that he had left the invoice behind. Mr. Purcell aqave me his undertaking that he would send a receipted invoice immediately on getting back to his office and I gave him the $5,000.00 cash." (The invoice was never received.)

Another director of the respondents. Mr. 5.P. Ingamells, was called. He said that he was present at the conversation between Mrs. McFarlane and Mr. Waters which occurred in about February 1983. In his evidence in chief,

My. Ingamells recalled the conversation as follows:

"Jan McFarlane brought Mr Waters in and said to me that he had offered a range of products which she thought was very cheap and she asked my opinion as to whether I thought it was too much up market. I said, 'Well, the Maraqin seems to be there' and I asked Dave Waters why it was so cheap. He said - he had also on one occasion previously brought into our office a person whom he said was his wife, who was a Taiwanese girl, and he said that his wife as a friend of the manager of the factory, manufacturing for Prince Pro in the States, in Taiwan. and through his wife's friend. the manager of the factory, he was able to get them, as he put it. out the back door. He was supplying at avery cheap price, and after all they only cost Prince Pro $11 and he paid more than that. I said, 'You know we have to be satisfied thev are

genuine?' He said, 'I will show vou'. and he produced a tennis racquet and he said, 'Thev are no different from these. We aet them from the same factory. They would not like 1t. the fact that we can bring them in'. I said. 'That is no differant from the National TV, video TV cassette recorders brought in the back door, and the Hanimex Roadstar car sound'; and he said 'No, it is all because it 1s the back door and small importers do not have the hich overheads', so I suggested to Jan that it was not really my area and she was responsible for the buying and advertisina and it was her decision. With that she took him away and I was satisfied that they were genuine."

Mr. Inaamells was briefly cross-examined. His evidence in chief was not challenged. He said that he made no inquiries to ascertain who was the "authorised"

widely in Mslbourne newspapers the sale of the "Prince Pro

Jumbo Head Tennis Racquet" at a price of $118.00. The

Your Mum s the greatest! Tell her anytime, but show her on Mother's Dav. The Liquidator has the girt for vou. Your Mum can have the best aift - vou can have the best price. Our stores are stacked with stock. Listed below are ust some of the items from Which to choose. There are hundreds more. Be quick. Some stocks are limited and so is time. Make

this week a great bargain week for vourself. Make Sunday May 8 a great day for your Mum. Remember we are the original and only liquidators. We do not advertise shopsoiled, marked or old model stocks like some stores. All stocks are bDrand new and carry full manufacturers' quarantees."

The "Prince Pro" racquet was described with a "retail price" of $225.00 and "Liquidator Price" of $118.00. There is evidence from Melbourne sporting goods retailers (Messrs. B.A. Boys, 5B.E. Reynolds and R.A. Flower) that, at the time, they were purchasing "Prince Pro" racquets from the second applicant at a wholesale price of approximately $120.00. Each of such retailers saw the respondents' advertisement. As a result, two of them ceased to purchase "Prince Pro" racquets from the second applicant. Whether they have resumed a trading relationship does not clearly emerge. The third retailer did not stop buying from the second applicant but kept his orders for "Prince

Pro" racquets to a minimum for as long as possible.

It now appears that at least some of the racquets offered for sale by the respondents in this period were not manufactured by the first applicant although, superficially at least, they appeared to be identical. The only external indication of any difference between the genuine product and the spurious article is that on the shaft of the latter type reference to the year of copyright is 1982 rather than 1979

as has been mentioned. Although not obvious to a consumer,

there are other differences: the internal construction of the handle differs and the underside of the label bearing the patent and copyright information differs in colour. In all other respects. the products are identical in name. shape and qet-up. A clear contravention of s.52 of the

Trade Practices Act is established (see Taco Company of

Australia Inc. v. Taco Bell Ptv. Limited (1982) 42 A.L.R.

177: cf. Parkdale Custom Built Furniture Pty. Limited v.

Puxu Ptv. Limited (1982) 149 C.L.R. 191). The first

applicant has also established an infringement of its trade

mark and a passing off of its qoods under the general law.

The applicants first seek damages under s.82 of the

Trade Practices Act in respect of the contravention of s.52.

Damaqes are claimed under a number of heads. The applicants say that they are entitled to be compensated for the loss of the profits sutfered by them as a consequence of the respondents' dealings in the copy racquets. Damages are aiso ciaimed for loss of sales to the three retailers mentioned and for "loss of reputation with retailers

There 15 some uncertainty as to the respective numbers of oqenuine racquets and the imitated version purchased and sold by the respondents. On 28 April 1983. Mr. B. Southaats. an executive of the second applicant, went

to the respondents' Lonsdale Street store and purchased 2

racquet said to be a "Prince Pro". In fact. 1t was a copy. Other racquets were displaved but, it seems. were not inspected closely by Mr. Southgate. On the same day, Mr. Southgate also visited the respondents' Footscray and Keysborough stores where he saw two and five racquets respectively on display. In his opinion. one and four of

On 5 May 1983, Lockhart. J. made "Anton Piller" orders against the respondents. On 6 May 1983. pursuant to this order, legal representatives of the applicant searched each of the respondents' stores. Ten racquets. subsequently found to be copies of the first applicant's product, were seized from the Lonsdale Street store. Subsequently, the respondents made available to the applicants. for their inspection, a further ten racquets. Of these. 9 were found to be not of the first applicant's manufacture. No other

Kacquets were seized from or surrendered by the respondents.

In my opinion, it is probable that the 61 racquets purchased by the respondents from Victorian Sporting Distributors Pty. Limited were genuine. True it is, as the applicants say. that that company's agency relationship with the second appiicant had been terminated by 1983. However.

it was the agent of the second applicant up to 1982 and it

is likely that. by 1983, it still held stocks consianed to it by the second respondent. In any event. it is possible hak YLEtGrlen Sporting Distributors Ptv. Limited could have obtained supplies of the first applicant's product from sources other than the second applicant. Further, the wholesale price of $115.20 paid by the respondents to

Victorian Sporting Distributors Pty. Limited is consistent

On the other hand. it is highly likely that racquets purchased from Asian Pacific Commodities Pty. Limited ("Asian Pacific") were imitations. S30 much emerqes Trom the circumstances surrounding their sale to the respondents, including, of course. the relatively low price at which they were offered. Although 100 ccpy racquets were

acquired by the respondents from Asian Pacific, 20 were

seized cr surrendered under the "Anton Piller" order. It wouid seem from answers by the respondents ote) interrogatories that the remaining 80 copy racquets were

evidence was adduced as to the profit maraqin earned by the First applicant on its sale by wholesale of a "Prince Pro" to its distributors. 1n this case. the second applicant. However, some attempt was made to establish the profit

margin of the second applicant in its wholesale dealings in

the racquets. As at June 1983. the second avplicant purchased strung "Prince Pro" sacquets from the first applicant for the price of $48.00. The second applicant was liable for freiaht from the United States and Australian

customs duty in the sums of $3.60 and $14.40 respectively. Total acquisition cost was thus $66.00 per racquet. Volume discounts apart. the second applicant sold the subject racquets to retailers at a price of $120.00 each, including sales tax of $20.00. Its gross profit margin was thus

$34.00 ($100.00 - $66.00) per racquet or 34% per centum.

From 1 June 1982 to 30 November 1982, the second applicant sold 6,592 "Prince Pro" racquets in Australia. Its gross sales figures for that racquet in this period were $483,180.00. The second applicant's sales of "Prince Pro" racqusts significantly decreased after 1 December 1982. Its sales of these racquets to 31 May 1983 were 2,616 units. Its agress sales figures during that period for this racquet were $220,758.00. As a percentage, its sales of the racquet were reduced by 60.3% ona unit basis as compared to the previous 6 months.

It is difficuit to attribute any particular cause to the downturn in the turnover of the applicants' product. The applicants submit that an inference is open that the imitation version diverted sales awav from them. But. even

if this were so, (and, apart from the aqeneral evidence of

the downturn itself. no serious attempt was made on behalf of the applicants to establish anv such causal connection). there is no reason to visit the whole of these consequences upon the respondents. There was no reliable evidence as to the number of "fake" racquets introduced into the market. In cross-examination, Mr. McCabe guessed at a figure of 5.000. If this were even an approximation of the actual position, it can be seen that the respondents' role. limited as 1t was to 100 or so racquets, could have had only minimal impact upon the overall fall in the second applicant's turnover. At the same time. the respondents' advertising may well have had an anfluence which extended beyond their own retail activities. The evidence of the other Melbourne

'The present claim is made under s.82 of the Trade Practices Act. It empowers the Court to award damages to a person who suffers loss or damage "by conduct of another person that was done in contravention of", inter alia. 5.52. The general principles relating to the assessment of damages under s.82 are now well established. In Brown v. Jam Factory Ptv. Limited (1981) 35 A.L.R. 79 Fox, J. said at

"The correct wav to approach the assessment of damages in this case, in my view. is to compare the position in which the applicants might have been expected to be if the misleading conduct had not occurred with the situation they were in as a result of acting in veliance on that conduct (see Esso Petroleum Co Ltd vw Mardon £19761 1 QB 801; £19761 2 All ER 5). This is the same (as), or analogous to, the general principle respecting the measure of damages in tort. There was not anything promissory in the statements relied upon, and no basis exists for adopting the measure of damages applicable in contract. As an action based on s 52 is more appropriately classified as one of tort, it is possible that the measure of damages will always, fundamentally, be based on principles affecting torts."

Mister Fiagins Pty. Limited v. Centrepoint Freeholds Ptv.

Limited (1981) 36 A.L.R. 23 at p.59, and by Lockhart. J. in

Hubbards Pty. Limited v. Simpson Limited (1982) 41 A.L.R.

509 at ~ p.517. In Prith v. Gold Coast Mineral Sprinas Pty.

Limited (1983) 47 B.L-R. 547, Fitzgerald, J., after referring to the tendency of the Court to speak of the appropriate measure of damacqes as that applicable at common law in actions for deceit and, less frequently, as that applicable in actions for negligent misstatements, observed (at p.565) that. whilst common law rules as to the measure of damages in tort may, in appropriate circumstances, provide a uséstul auide, no justification exists for confining the damages which are recoverable under ss.82 and

87 of the Trade Practices Act by ceference to common law

in my opinion, where the conduct which constitutes a contravention of s.52 also constitutes the tort of passing orf anda claim is made under s.82 for damages. it is appropriate to apply a measure of damages similar to that

applied under the general law of passing off (see Hornsby

Building Information Centre Ptv. Limited v. Svdnev Building

Information Centre (1978) 140 C.L.R. 216 at p.227). In

particular. in my view. qeneral damages for loss of business profits may, in a proper case. be recovered under s.82. By general damages 1s meant damages which are not capable of precise proof and calculation but which could be expected to result in the normal course of things from a particular tvpe of conduct. Damages of this kind may be awarded even though a claimant does not produce evidence of particular losses

from particular transactions (see Taperell, Vermeesch and

Harland, Trade Practices and Consumer Protection, 3rd Ed. at

p.127: Spalding v. Gamage (1918) 35 R.P.C. 101: Draper v.

frist £19393 3 All E.R. 513: Procea Products Limited v.

Evans & Sons Limited (1951) 68 R.P.C. 216; Wilson v. Smith

£19023 2 S.R. (N.S.W.) 174: cf. The Maqnolia Metal Company

v. The Atlas Metal Company (1897) 14 R.P.C. 389: Simpson

Limited v. Hubbards Pty. Limited (1982) 44 A.L.R. 695:

Locklin v. Dav-Glo Color Corporation (1970) Trade Cases

Further, although the applicants were unable to adduce any specific material demonstrating a nexus between the respondents' actions and thse decline in their Australian turnover ain 1983. there was evidence from the three Melbourne retailers from which it could be inferred that some sales were lost. There was also evidence from Mr. McCabe that the imitation racquet is very much inferior in

quality to the genuine product. He was not cross-examined

on this aspect. It is proper to infer some damage to the

On the other hand, the respondents are only retailers of the offending product. Whilst the circum- stances of their dealings with Asian Pacific put them on notice that the product under offer was probably an imitation, it cannot be suggested that the respondents had any role in the affair other than that of a retail outlet. Thus, whilst the respondents were not totally innocent in the matters. it would be wrong to hold them responsible for any more than a fraction of the loss that the applicants may

In the absence of a specific case being made for special damages, the applicants must be confined to a case for general damages. In my opinion, an appropriate compensatory award in all the circumstances is the sum of

i. I note the undertaking to the Court given on behalf

2. I order that the respondents pay the applicants damages in the sum of $5,000.00 and that there be judgment

It should be noted that the applicants accepted at the hearing that 1f the Court were disposed to grant relief under s.82 by reason of a contravention of s.52. the applicants could do no better under any of their other

certify that this and the !7 preceding Feges are @ true ccpy of the reasons for Jacgment herein cf The Hsnourable Mr Justice Beaumont.