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[1992] FCA 159
Federal Court of Australia
1992-04-14
Hill J
Original judgment source is linked above.
[1992] FCA 159; (1992) 23 IPR 193, (1992) AIPC 90-892 (extract)
;
Intellectual Property - passing off - bases and elements of passing off action - whether carrying on business within jurisdiction or place of business within jurisdiction - sufficiency of nexus with the jurisdiction - necessity and method of establishing reputation within jurisdiction - requirement of goodwill - whether fraud is a necessary element of passing off - relevance of establishing fraud.
Trade Practices - misleading and deceptive conduct - relationship between reputation in passing off action and establishing misleading and deceptive conduct.
Trade Practices Act 1974 (Cth): s. 52, s. 53(c).
R.J. Webb
Solicitors for the Appellant: Baker and McKenzie
Counsel for the Respondent: B.I. Shaw QC
B.J. Hess
Solicitors for the Respondent: A. Tatlock
The cross appeal be dismissed.
The appellant pay the costs of the respondent of the appeal.
The respondent pay the costs of the appellant of the cross
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
This case raises two important questions of law in the field of passing off: first, is it necessary that a plaintiff carry on business or have a place of business in Australia to maintain an action for passing off; and second, what is the significance of fraudulent intention of a defendant?
2. The appeal is brought from the judgment of a Judge of the Court (Hill J.), whose reasons are now reported in (1991) 101 ALR 461. The appellant, ConAgra Inc., is a company incorporated in the United States of America which carries on business there in diverse areas but generally related to food. The appellant manufactures and markets in the United States frozen foods under a number of brand names including the name relevant to this case "Healthy Choice". The concept of the product Healthy Choice originated in September 1985 following a heart attack of the Chairman and Chief Executive Officer of the appellant who found himself unable to obtain food with a pleasant taste that fell within his restricted diet, that is to say, food low in fat, cholesterol and salt. A few years passed before Healthy Choice was marketed as a range of frozen dinners. The name "Healthy Choice" was the result of a "brainstorming session" in June 1987. The packaging design for the product was formulated so that the product would stand out from all other frozen food packaging, would communicate the twin ideas of pleasant taste and good health and prominently feature the nutritional claims of "low fat, low cholesterol and low sodium". The colour green was chosen as the primary background colour of the packaging to differentiate the Healthy Choice product from other products; and a small figure of a running man appeared on the packet to convey, so it was said, an image of health and vitality. Trademark registration was sought and obtained in the United States for the mark Healthy Choice in connection with a number of food items. Since the national launch of the product in January 1989 with an initial range of ten products, the range has expanded so that at the present time it consists of some 79 products.
3. Sales of frozen food products by the appellant in the United States amount to approximately $US1.1 billion a year. Sales of the Healthy Choice products in the twenty-seven month period following the national launch amounted to $US458,210,000 and for the period of twelve months ended 17 march 1991 $US238,533,000. The brand has 7.6% of the overall frozen food, dinner and entree market in the United States.
4. The appellant has expended very substantial sums of money on advertising. Total expenditure by it on television and national print advertising from the date of the launch to December 1990 was $US36,160,100. Together with coupon advertising, the annual cost of advertising the Healthy Choice product in the United States in 1990 was approximately $US50m. The target market for advertising is adults aged 35 years and over where the head of the household earns over $US30,000 per year. Brand awareness of the Healthy Choice product in the United States is 47% of the general population, and among buyers of frozen food dinners at the premium end of the market around 68%.
5. The appellant does not presently manufacture the Healthy Choice products other than in the United States but, due to the geographical position of the United States, there is a spillover of the product both into Canada and Central America.
6. In March 1986 the appellant entered into a licence agreement with Wattie Frozen Foods Limited ("Wattie") whereby Wattie was licensed to introduce and distribute ConAgra Frozen Foods in both Australia and New Zealand and in other Pacific markets. Subsequently, probably in January 1991, Australia was deleted from the agreement. This coincided with the view formed by Mr McNamara (Vice-President, International Business of ConAgra Frozen Foods) in December 1990 that Australia was a strategic market in which to do business. Some research into the possibility of commencing manufacture in Australia is presently being conducted, but no firm decision to do so has, it would seem, yet been made. It is Mr McNamara's present intention, however, to introduce the product range Healthy Choice to Australia by about June this year.
7. The interest in Australia coincided, in part at least, with the purchase by the appellant of part of the Elders IXL operation in Australia and particularly the F.J. Walker business, which included facilities for the manufacture and warehousing of frozen food. This acquisition confirmed and accelerated Mr McNamara's plans for Australia. However Mr McNamara's role has been largely exploratory because he does not have the authority himself to commit the appellant to an Australian venture. The learned primary Judge found that the persons superior to Mr McNamara have, at least in principle, authorised him to proceed on the assumption that it is economically worthwhile to invest in the Australian market. The appellant plans to launch its product in other countries including Canada and possibly Japan and Europe.
8. The respondent, McCain Foods (Aust) Pty Ltd, is the wholly owned subsidiary of a Canadian company. It estimates its sales turnover in Australia for 1990-91 as $A206m. It commenced operations in Australia in 1968 selling imported French Fries, later turned to producing frozen pizzas and frozen vegetables, and in 1987, as a result of an acquisition, moved into manufacturing and marketing frozen food dinners. The respondent now has some 21% of the total frozen food market in Australia, second only to the food brands sold by the Petersville Group of companies and ahead of the competing brands of Nestle and Sara Lee. The respondent's estimated market share of the frozen dinner market in Australia is 23%.
9. The respondent had, in February 1989, commenced manufacturing and selling a low cholesterol range of French Fries. The success of that product prompted the research and development manager of the respondent to write in October 1989 a memorandum to the product manager of the respondent, with a copy to Mr Boyle, the then marketing director of the respondent, that consideration should be given to producing low cholesterol dinners.
10. In October 1989, Mr Boyle travelled to the United States and Canada and noticed the appellant's product on the shelves in supermarkets in various cities in Canada and the United States. He was sufficiently impressed that he obtained five examples of the packaging and took them back with him to Australia along with packets of other products.
11. On Mr Boyle's return to Australia he prepared a report on his trip to the senior management of the respondent saying that "The ... product 'Healthy Choice' (low cholesterol) is getting very favourable comments in the United States. We should look closely at this one." Discussions ensued between Mr Boyle and the product manager. In early December 1989 Mr Boyle instructed a member of the respondent's staff to request the respondent's patent attorney to lodge an application for registration of the trade mark HEALTHY CHOICE. Subsequently in July 1990, after advice, the patent attorney lodged an application for registration of those words together with the McCain logo.
12. Nothing much appears to have happened until about May 1990 when, at a research and development meeting within the respondent, the need for eight varieties of Healthy Choice Meals was referred to as "Priority A". In June 1990 the product manager prepared a written brief to an advertising agency. Various meetings concerning the advertising and the packaging were then held, reports were produced and market research carried out, leading up to the launch of the "McCain Healthy Choice" product with three varieties in February 1991. I need not refer to those products in any detail at this stage as they are fully set out in the primary Judge's reasons at 466-469 of the report.
13. The appellant commenced proceedings against the respondent in this Court on 8 April 1991. On 11 April 1991, the matter was heard on an interlocutory basis before a Judge of the Court and, upon the appellant by its counsel giving to the Court the usual undertaking as to damages, the Court granted interlocutory injunctions restraining the respondent from selling the "McCain Healthy Choice" product and from distributing the Trade Presenter (to which reference will be made later).
14. In its statement of claim the appellant alleged, amongst other things, that the respondent had adopted the name and get-up of the appellant's frozen food products with the intention of passing off the respondent's products as those of the appellant. In the alternative, the appellant alleged that the respondent had contravened s. 52 or s. 53(c) of the Trade Practices Act 1974 ("the Trade Practices Act").
15. The primary Judge considered first the appellant's claim based on passing off and held that he felt constrained to decide in the light of the present state of the authorities that the tort of passing off requires the existence of a business in Australia (albeit slight activities will suffice), and that as the appellant has no business in Australia it must fail in its passing off claim.
16. In so far as fraudulent intent on the part of the respondent might be relevant to the passing off claim, his Honour made findings of fact to which I shall refer later when dealing with the question of fraud. His Honour found that the respondent was guilty of fraud in that from the outset it had deliberately adopted the name of the appellant's product and aspects of its packaging.
17. His Honour found that, given that the words Healthy Choice are used on the respondent's package in conjunction with the McCain trademark and logo prominently displayed, it seemed to him quite clear that no one seeing the McCain product would believe that they were purchasing a product of the appellant and that this was virtually conceded by counsel for the appellant. His Honour said that this was at least in the case where the running man logo no longer appeared on the respondent's packaging, as it initially did. His Honour asked the question whether the use by the respondent of the name and the associated packaging matters to which he referred in his judgment, led to the conclusion that there was a relationship between the respondent or the respondent's product on the one hand and the appellant or its product on the other, albeit by way of licence or whatever. His Honour found that the packages did suggest to a purchaser or at least one familiar with the appellant's product, that there was a relationship of some kind between the appellant and the respondent or their respective products. He relied in large part upon the particular emphasis on "low fat, low cholesterol, low sodium", the position of those words, and in particular the use of the Americanism "sodium" for the common English word "salt", all in association with a green package on which the name Healthy Choice appeared.
18. His Honour went on to say that a connection would only be apparent to a person familiar with the ConAgra product, so he then turned to the evidence of reputation in Australia. I shall refer to this evidence and his Honour's findings relating to reputation in more detail later. It is sufficient for present purposes to say that his Honour found that, while there was no doubt that there were persons in Australia aware of the ConAgra product and while the evidence established that there was a potentially large number of such persons, he was unable to be satisfied on the evidence on the balance of probabilities, that there existed in Australia a sufficiently substantial number of persons who were aware of the ConAgra product and for whom the name Healthy Choice would have acquired a secondary meaning, that is to say, the meaning signifying the ConAgra Healthy Choice product. He found therefore that in respect of the name and get-up on the packaging of the respondent there was no misrepresentation.
19. His Honour found that it was a prerequisite of a passing off action that the plaintiff prove either actual damage or, in a quia timet action, probable damage. No actual damage had been proved because the appellant did not manufacture or market in Australia its Healthy Choice product. He referred to the evidence of the appellant's proposal to market Healthy Choice in Australia in the future. He said that the evidence suggested that the appellant had not yet made a final decision whether to market in Australia, but there was a clear possibility that it would do so and he was satisfied that it was likely that it would do so. He concluded that it was more probable than not that the appellant would commence at some time in the future to manufacture and market its Healthy Choice product in Australia. Should it do so then it was clear that the appellant would suffer damage by there being on the market another product with the name Healthy Choice and that that damage would be great if the name Healthy Choice had by then developed a secondary meaning equating it to the respondent's product. He held that the appellant has shown a probability that it would suffer damage sufficient to found a passing off action.
20. As to the claims under the Trade Practices Act his Honour found that the appellant had not satisfied the onus of proof of showing that the number of persons for whom the name Healthy Choice and the package design would have the necessary secondary meaning was other than insignificant.
21. His Honour turned to the document called the Trade Presenter. The launch by the respondent of the "McCain Healthy Choice" product in February 1991 was accompanied by what is referred to in the evidence as a "Trade Presenter". Fifty-two copies of the document were distributed to the persons responsible for the ordering, largely by wholesale but also by retail, of frozen food products in Australia. The document was prepared by the respondent. His Honour held that in distributing the Trade Presenter the respondent was guilty of misleading or deceptive conduct contrary to s. 52 of the Trade Practices Act, but that otherwise the appellant's case under s. 52 failed.
22. As to the case based on s. 53(c) of the Trade Practices Act, his Honour held that, since he had found that the appellant had no significant reputation in Australia, it must follow that the use of the Healthy Choice name and the similarities of packaging could not constitute a representation by the respondent that its product was associated with the ConAgra Healthy Choice product. There was thus no need to consider, his Honour said, whether a representation of association such as was alleged by the appellant could properly be said to be a representation of "sponsorship" within the meaning of s. 53(c).
23. Accordingly, his Honour found that the respondent had breached s. 52 of the Trade Practices Act in disseminating the Trade Presenter, but that otherwise its claim based on Part V of the Trade Practices Act must fail. His Honour varied one of the earlier interlocutory injunctions so as to restrain the respondent from contravening s. 52 of the Trade Practices Act by disseminating the Trade Presenter, dissolved the other interlocutory injunction, otherwise dismissed the proceeding and ordered the appellant to pay two-thirds of the costs of the respondent.
24. The appellant appeals from his Honour's judgment except that part of it whereby his Honour upheld the appellant's claim in relation to the Trade Presenter. The respondent cross appealed from his Honour's findings in respect of the Trade Presenter, but the cross appeal was withdrawn upon the commencement of argument before us.
25. The basis on which rights are entitled to protection in an action for passing off has moved from time to time as the law has adjusted to changed commercial practices and perceptions. Christopher Wardlow said in The Law of Passing Off 1990 at 10, (and I agree with him):
"The law has advanced on the strength of common
sense and judicial instinct, with
rationalisation and consolidation following.
Despite this, passing off presents an example of
the incremental approach of the common law at
its most effective."
Many learned publications have discussed the origins of the tort of passing off, with two of the finest treatments of the subject being those by Professor W.L. Morison "Unfair Competition and Passing Off" [1956] SydLawRw 2; (1956) 2 Syd L Rev 50 and Mr W.M.C. Gummow, "Carrying On Passing Off" [1974] SydLawRw 5; (1974) 7 Syd L Rev 224. The expression "passing off" is of comparatively recent origin, but in its early stages fraud in one sense or another was essential both at law and in equity. The tort has developed through decisions resting primarily on the premise that dishonest rivals in trade must be prevented from attempting to gain the advantage of a reputation in the market place built up by a trader by hard work, advertising and the quality of his product. The law of passing off arose principally to protect traders and prevent commercial dishonesty.
26. Whether fraud survives as a basis (albeit not an essential basis) for a passing off action or is now obsolete or even no longer an available basis, is one of the two principal questions in this case which I will deal with later.
27. It has been clear since 1838, when Millington v Fox (1838) 3 MyandCr 338; [1838] EngR 377; 40 ER 956 was decided, that equity does not require proof of an intention to deceive as a necessary ingredient in the cause of action. It requires that there be a misrepresentation by the defendant, but it is the property of the plaintiff, namely his business, goodwill or reputation, likely to be injured by the misrepresentation, that the law protects.
28. In the United Kingdom in 1979, the judgment of the House of Lords in Erven Warnink Besloten Vennootschop v J. Townend and Sons (Hull) Ltd (1979) AC 731 ("the Advocaat Case") squarely placed the basis of the tort in misrepresentation. In the Advocaat Case Lord Diplock said (at 741-2) that Lord Parker of Waddington in A G Spalding and Bros v A W Gamage Limited (1915) 32 RPC 273 (a case I will deal with later) provided a rational basis for the extension of the cause of action and that that case:
"led the way to recognition by judges of other
species of the same genus, as where although the
plaintiff and the defendant were not competing
traders in the same line of business, a false
suggestion by the defendant that their
businesses were connected with one another would
damage the reputation and thus the goodwill of
the plaintiff's business".
29. That the underlying rationale of the tort of passing off is to prevent commercial dishonesty finds further support from Lord Diplock's speech in the Advocaat Case where his Lordship described the question arising in that case as "essentially one of legal policy" (at 739) and he found that the facts disclosed "a case of unfair, not to say dishonest, trading of a kind for which a rational system of law ought to provide a remedy to other traders whose business or goodwill is injured by it" (at 740).
30. A passage from the speech of Lord Diplock has come to be regarded as the authoritative statement of the necessary elements to establish passing off. His Lordship said (at 742):
"My Lords, A.G. Spalding and Bros v A.W. Gamage
Ltd and the later cases make it possible to
identify five characteristics which must be
present in order to create a valid cause of
action for passing off: (1) a misrepresentation
(2) made by a trader in the course of trade, (3)
to prospective customers of his or ultimate
consumers of goods or services supplied by him,
(4) which is calculated to injure the business
or goodwill of another trader (in the sense that
this is a reasonably foreseeable consequence)
and (5) which causes actual damage to a business
or goodwill of a trader by whom the action is
brought or (in a quia timet action) will
probably do so."
The other members of the House concurred in this statement as they did with the speech of Lord Fraser of Tullybelton. The speech of Lord Fraser contains at 755-6 a narrower statement of the cause of action in these terms:
"It is essential for the plaintiff in a passing
off action to show at least the following facts:
- (1) that his business consists of, or
includes, selling in England a class of goods to
which the particular trade name applies; (2)
that the class of goods is clearly defined, and
that in the minds of the public, or a section of
the public, in England, the trade name
distinguishes that class from other similar
goods; (3) that because of the reputation of the
goods, there is goodwill attached to the name;
(4) that he, the plaintiff, as a member of the
class of those who sell the goods, is the owner
of goodwill in England which is of substantial
value; (5) that he has suffered, or is really
likely to suffer, substantial damage to his
property in the goodwill by reason of the
defendants selling goods which are falsely
described by the trade name to which the
goodwill is attached."
31. In Anheuser-Busch Inc v Budejovicky Budvar (1984) 4 IPR 260 ("the Budweiser Case"), Oliver L.J. regarded the two statements of Lord Diplock and Lord Fraser as "complementary" (at 275-276) and O'Connor L.J. regarded the two statements of the essential elements of passing off as "cumulative" (at 284). The English Court of Appeal declined to follow either of those observations in Bristol Conservatories Limited v Conservatories Custom Built Limited (1989) RPC 455 and stated at 466 (in the judgment of Ralph Gibson L.J., with which Butler-Sloss L.J. and the President agreed):
"I am unable to accept that Lord Diplock, or
their Lordships who agreed with him, can be
taken to have intended to exclude from the
protection of the law a trader injured by the
sort of dishonest trading alleged or proved in
such cases as Samuelson or the Plomien Fuel
Economiser case, or in this case. Nor do I
think that Lord Fraser is to be taken as having
intended to lay down essential requirements
which would exclude from the ambit of the tort
such cases which were not under consideration in
the Warnink case itself. In Lego System A/S v
Lego M. Lemelstrich (1983)FSR 155 Falconer
J., after reference to Lord Diplock's list of
characteristics and to Lord Fraser's five
essential facts, said at page 185, 'In so
stating the essential facts to be established by
the plaintiff in a passing off action, I think
that Lord Fraser was, in essentials (1) to (4)
inclusive, stating his formulation in the
context of the case he was actually
considering'. We have been referred to other
expressed views (Oliver L.J. and O'Connor L.J.)
of the relationship between the two speeches,
but it was not argued that those other views
were matters of decision so as to be binding on
this court. For my part, I agree with Falconer
J's view of the matter."
32. The Privy Council, on appeal from Powell J. of the Supreme Court of New South Wales, in Cadbury Schweppes Pty Limited v Pub Squash Co Pty Limited (1980) 32 ALR 387 at 391 regarded the "declarations of principle" of the speeches of Lord Diplock and Lord Fraser of Tullybelton as being of "general application". Lord Diplock's statement of the five characteristics of the tort was referred to with apparent approval by Deane J. (in whose judgment the other members of the Court concurred) in Moorgate Tobacco Co Limited v Philip Morris Limited [1984] HCA 73; (1984) 156 CLR 414 at 443-444. Deane J. then proceeded to paraphrase the following further observations made by Lord Diplock (at 742) in the Advocaat Case (at 93):
"In seeking to formulate general propositions of
English law, however, one must be particularly
careful to beware of the logical fallacy of the
undistributed middle. It does not follow that
because all passing off actions can be shown to
present the characteristics, all factual
situations which present these characteristics
give rise to a cause of action for passing off.
True it is that their presence indicates what a
moral code would censure as dishonest trading,
based as it is upon deception of customers and
consumers of a trader's wares but in an economic
system which has relied on competition to keep
down prices and to improve products there may be
practical reasons why it should have been the
policy of the common law not to run the risk of
hampering competition by providing civil
remedies to every one competing in the market
who has suffered damage to his business or
goodwill in consequence of inaccurate statements
of whatever kind that may be made by rival
traders about their own wares."
33. The first question I propose to consider is whether it is necessary to sustain the tort of passing off that the plaintiff's trade or business is in fact carried on within the jurisdiction or whether it is sufficient that there is a reputation within the jurisdiction in respect of that trade or business carried on elsewhere.
"There is no doubt that, for the applicant to
succeed, it must prove that it had a reputation
in Australia. So much was conceded by the
applicant. The emphasis placed upon the twin
concepts of goodwill and business raises
immediately the further question whether for the
applicant to succeed in a passing off action it
must also establish that it was carrying
business in Australia. The evidence admittedly
fails to establish the existence of any business
in Australia of the applicant.
The preponderance of case law presently favours
the respondent ...
As goodwill is inseverable from the business, it
follows that if no business is carried on in the
jurisdiction then no goodwill exists in the
jurisdiction to protect. Hence if passing off
exists to protect goodwill in the jurisdiction,
it must follow that the plaintiff must carry on
business in the jurisdiction."
The rules as to passing off were, of course,
formulated in simpler times when business was
less internationally based, and when
communications between countries in the form of
advertising messages and travel were virtually
non-existent. In times gone by, a company not
carrying on business in the jurisdiction, not
selling its goods there, might be presumed in
any event to have had no reputation in the
jurisdiction. With the advent of mass
international communications, with television
beaming from one country to another, with
newspapers, magazines and journals being almost
instantaneously available in countries other
than the country of publication, there is much
to be said for rethinking the basis of the
action in passing off to the extent that it
truly is confined to the existence of a business
within the jurisdiction rather than the
existence of a reputation in the jurisdiction."
His Honour then reviewed the authorities both in Australia and other countries concerning the question whether it is an essential element in the tort that the plaintiff's business be carried on in the jurisdiction and said at 474-5:
"Like Powell J in Fletcher Challenge Ltd v
Fletcher Challenge Pty Ltd (1981) 1 NSWLR 196),
I am of the view that the time has come to
recognise that, although the tort of passing off
is based upon the existence of a business or
trade, it does not matter whether that trade or
business is in fact itself carried on in the
jurisdiction, provided that there is in respect
of that trade or business, extant, a reputation
in the jurisdiction. However, neither the
decisions of the High Court nor Full Federal
Court presently go so far and such comments on
the matter as there are point in the other
direction. I think, therefore, that the issue
should be addressed and resolved by an appeal
court rather than by a single judge. As will
become apparent, the question is of little
practical moment in Australia because in
proceedings taken under the (Trade Practices)
Act there clearly can be no need to establish
that the plaintiff is carrying on business in
Australia or has goodwill in Australia if the
issue is whether the respondent is engaged in
conduct which is misleading or deceptive."
35. Different tests, and sometimes substantially the same tests expressed in different language, have been applied by the courts over many years, most relevantly since 1838, but they do not clearly resolve the present question. Some judgments fasten on the actual carrying on of business by the plaintiff in the forum as being an essential ingredient in the cause of action, but the cases vary about the extent to which that business must be carried on; whilst others have found it sufficient that the plaintiff has a local reputation in respect of his name, business, goods or services notwithstanding that he does not carry on business there. The expression "goodwill" is often referred to in conjunction with "reputation" in this context as being the "property right" of the plaintiff that is entitled to protection, and it is the adoption of this expression and the concept which it embodies that has led some courts to require the carrying on of business by the plaintiff in the forum for him to succeed. In my view, to properly resolve this question, it is necessary to analyse many of the relevant reported cases some of which will also be of assistance in looking at the question of the relevance of fraud.
36. As mentioned earlier, in 1838 the House of Lords decided in Millington v Fox that intention to deceive need not be proved and that equity was concerned to protect the plaintiff's property, being the exclusive use of certain marks.
37. In The Collins Company v Brown (1857) 3 KandJ 423, a demurrer heard by Vice Chancellor Wood, the complaint was that a fraud had been committed by the defendant by using the trade mark of the plaintiffs and thus representing that the goods manufactured by the defendant were manufactured by the plaintiffs. The plaintiffs were an American company without any establishment in the United Kingdom and it was not alleged that they ever manufactured or sold goods in the United Kingdom. The defendants argued that the plaintiffs had no right to any trade mark in the United Kingdom and therefore could not be defrauded or wronged by another person using their marks. The Vice Chancellor rejected this argument and held that the true foundation of the jurisdiction in these cases was whether a fraudulent intent existed:
"If a man has been in the habit of using a
particular mark for his goods for a long time,
during which no one else has used a similar
mark, and then another person begins to use the
same mark, that can only be with a fraudulent
intent; and any fraud may be redressed in the
country in which it is committed, whatever may
be the country of the person who has been
defrauded" (428).
38. The Vice-Chancellor thus found that, if the defendant fraudulently intended to represent his goods as those of the plaintiffs, the English Courts could restrain him, notwithstanding that the plaintiffs resided and carried on business in another country and had no establishment in England and did not even sell their goods there.
39. The Commissioners of Inland Revenue v Muller and Co's Margarine Limited (1901) AC 217, is a case on goodwill in the context of the Stamp Act 1891 (UK), but it is often cited in passing off cases for the definition of "goodwill" in the speeches of their Lordships, especially Lord Macnaghten. Lord Macnaghten said (at 223-4) that goodwill was property and that it was:
"bought and sold every day. It may be
acquired, I think, in any of the different ways
in which property is usually acquired.
...
I am disposed to agree with an observation
thrown out in the course of the argument, that
it is not easy to form a conception of property
having no local situation. What is goodwill?
It is a thing very easy to describe, very
difficult to define. It is the benefit and
advantage of the good name, reputation and
connection of a business. It is the attractive
force which brings in custom. It is the one
thing which distinguishes an old-established
business from a new business at its first start.
The goodwill of a business must emanate from a
particular centre or source. However widely
extended or diffused its influence may be,
goodwill is worth nothing unless it has power of
attraction sufficient to bring customers home to
the source from which it emanates. Goodwill is
composed of a variety of elements. It differs
in its composition in different trades and in
different businesses in the same trade. One
element may preponderate here and another
element there. To analyze goodwill and split it
up into its component parts, to pare it down as
the Commissioners desire to do until nothing is
left but a dry residuum ingrained in the actual
place where the business is carried on while
everything else is in the air, seems to me to be
as useful for practical purposes as it would be
to resolve the human body into the various
substances of which it is said to be composed.
The goodwill of a business is one whole, and in
a case like this it must be dealt with as such.
For my part, I think that if there is one
attribute common to all cases of goodwill it is
the attribute of locality. For goodwill has no
independent existence. It cannot subsist by
itself. It must be attached to a business.
Destroy the business, and the goodwill perishes
with it, though elements remain which may
perhaps be gathered up and be revived again. No
doubt, where the reputation of a business is
very widely spread or where it is the article
produced rather than the producer of the article
that has won popular favour, it may be difficult
to localise goodwill. (223-4)"
40. Lord Lindley said, in addition to an oft cited passage to which reference shall be made later:
"I am not aware of any case in which goodwill,
as property, has been treated as having no
locality for legal purposes" (at 237)
41. The Earl of Halsbury L.C. said (at 238-239), in a dissenting speech:
"The goodwill of a business is what the word
itself expresses, although the concurrence of so
many of Your Lordships leads me to doubt what I
should otherwise have had no doubt upon. The
advantages which may be conferred upon a
business, either by its local situation or by
attractive appearance, have nothing to do with
the goodwill, although they may have originally
contributed to procure it, and may, to some
extent, be connected with the nature of the
business, which itself, however, is a different
thing. 'The goodwill thereof' is a thing which
can be assumed to exist separately. Like every
other thing which suggests one simple idea, it
is difficult, if not impossible, to define it.
The right to trade under the name of a firm
which has acquired a reputation is not confined
to a particular locality or to any particular
premises. The right would remain if the
business were transfered to another site
elsewhere, or if the premises were entirely
altered."
42. In La Societe Anonyme Des Anciens Etablissements Panhard Et Levassor v Panhard Levassor Motor Company Limited (1901) 2 Ch 513 the plaintiffs were a well known firm of motor car manufacturers in Paris. Their reputation had extended to England for several years, but they had prior to the action no agency and did not sell directly in England. They sold indirectly in the sense that their cars were bought and frequently imported into England by private individuals and another company, so that England was one of their markets. Farwell J. applied The Collins Company v Brown in holding that the defendant company had the fraudulent intention of annexing the benefit of the plaintiffs' name and granted injunctive relief but not damages because he said (at 517) that no damages had been proved or suffered because the defendant company had not carried on business. He said (at 516) that apart from The Collins Company v Brown he would still have granted relief to protect the foreign trader "who has a market in England ... from having the benefit of his name annexed by a trader in England who assumes that name without any sort of justification." Thus Farwell J. found against the defendants on two bases: first, fraud of the kind in The Collins Company v Brown and second, although the plaintiffs had no establishment in England and did not carry on business there, nevertheless they had a sufficient market for their cars there to maintain a passing off action.
43. In Spalding Lord Parker of Waddington, in a speech approved by Lord Diplock in the Advocaat Case and referred to earlier, discussed (from 283) the principles on which a passing off action is founded, and adopted the statements of Turner L.J. in Burgess v Burgess (1853) 3 D M and G 896[1853] EngR 353; , 43 ER 351 and Lord Halsbury in Reddaway v Banham (1896) AC 199 to the effect that "nobody has any right to represent his goods as the goods of somebody else". His Lordship stated (at 283):
"Nor need the representation be fraudulently
made. It is enough that it has in fact been
made, whether fraudulently or otherwise, and
that damages may probably ensue, though the
complete innocence of the party making it may be
a reason for limiting the account of profits to
the period subsequent to the date at which he
becomes aware of the true facts. The
representation is in fact treated as the
invasion of a right giving rise at any rate to
nominal damages, the inquiry being granted at
the plaintiff's risk if he might probably have
suffered more than nominal damages.
The view taken by the Common Law Courts was
somewhat different. The plaintiff's remedy was
said to have been in the nature of an action for
deceit, but it only resembled the action for
deceit in the fact that the misrepresentation
relied on must have been fraudulently made. In
all other respects it differed from an action
for deceit. For example, the plaintiff was not
the party deceived, and even if it were
necessary to prove that someone had been
deceived, nominal damage could be obtained
though no actual damage was proved."
His Lordship referred to the early case of Blofeld v Payne (1833) 4 B and Ad 410[1833] EngR 312; , 110 ER 509 and said (at 284) that there was considerable diversity of opinion as to the nature of the right, the invasion of which is the subject of a passing off action:
"The more general opinion appears to be that the
right is a right of property. This view
naturally demands an answer to the question -
property in what? Some authorities say property
in the mark, name or get-up improperly used by
the defendant. Others say, property in the
business or goodwill likely to be injured by the
misrepresentation. Lord Hershell in Reddaway v
Banham ... expressly dissents from the former
view; and if the right invaded is a right of
property at all, there are, I think strong
reasons for preferring the latter view. In the
first place, cases of misrepresentation by the
use of a mark, name or get up do not exhaust all
possible cases of misrepresentation. ...
Further, it is extremely difficult to see how a
man can be said to have property in descriptive
words, such as "Camel Hair" in the case of
Reddaway v Banham ... where every trader is
entitled to use the words, provided only he uses
them in such a way as not to be calculated to
deceive.
His Lordship's judgment was concurred in by Lord Atkinson, Lord Sumner and Lord Parmoor.
44. In Pioret v Jules Pioret Limited (1920) 37 RPC 177 Paul Pioret, a designer and maker of ladies' dresses and theatrical costumier who carried on business in Paris, sought an injunction to restrain the defendants from using the name of Pioret in connection with the manufacture, sale or advertisement for sale of costumes or dresses. P.O. Laurence J. held (at 187) that Paul Pioret was entitled to injunctive relief notwithstanding that he had no place of business in England because he had acquired a reputation in England in the name Pioret, associated with gowns or dresses, either as the designer or maker of them. His Lordship held that the defendant had deliberately taken the surname Pioret because of the high reputation which it had acquired in the dressmaking business and in order to get the benefit of it.
45. Pioret is a case of a reputation having been established in the England by the plaintiff even though he had no establishment or place of business there. But he visited England, or sent an assistant to England, three or four times a year, with dress models which he sold to dressmaking firms and others thus establishing a reputation by 1909. Indeed, Mrs Asquith, the wife of the Prime Minister of England, held an exhibition of his dresses at No. 10 Downing Street in 1909, which was the subject of lively controversy in the newspapers.
46. In R.J. Reuter Company Limited v Mulhens (1953) 70 RPC 235 prior to 1939, a German business had been the proprietor of numerous registered trade marks for eau-de-cologne and like goods which were in use on goods imported from or compounded at an English factory with essences imported from a German factory. These products had, in the words of Lord Evershed (at 239), a "great reputation" in Europe. After the outbreak of World War II the trade marks were vested in the Custodian of Enemy Property and thereafter were used by the plaintiff, a company controlled by the Custodian, as a registered user. In 1951, the Custodian sold the shares of the plaintiff and assigned the marks and associated goodwill to the plaintiff. Since 1939 bottles bearing the trade marks had been on sale in England and the marks had been, on the face of it, indicative of English origin, namely, the manufacture of the plaintiff. The defendant, who inherited the German business, wrote letters to persons in Great Britain on which he used the trade marks. The defendant had no present intention to trade in Great Britain. The plaintiff sued the defendant for infringement of the trade marks and the defendant counter claimed for passing off. Lord Evershed M.R., with whose reasons Birkett and Romer L.J. agreed, said (at 253):
"... I do not think the Defendant is entitled to succeed
in his claim for passing-off. He is conducting in
England no business, selling here
no goods. As it seems to me, he had not in this
country any proprietary right which he is
entitled to protect."
Romer L.J., with whom Birkett L.J. also agreed, was of the opinion that the goodwill in question was solely attached to the business which the defendant carried on in Britain as a distinct and severable enterprise and found that "the goodwill did possess a locality and that locality was Britain". His Lordship found that approach to be in accord with the following observations of Lord Lindley in Muller (at 235):
"Goodwill regarded as property has no meaning
except in connection with some trade, business
or calling. In that connection I understand the
word to include whatever adds value to a
business by reason of situation, name and
reputation, connection, introduction to old
customers, and agreed absence from competition,
or any of these things and there may be others
which do not occur to me. In this wide sense,
goodwill is inseparable from the business to
which it adds value and, in my opinion, exists
where the business is carried on. Such business
may be carried on in one place or country or in
several and if in several there may be several
businesses, each having a goodwill of its own."
47. It is difficult to draw much of general application to the law of passing off out of this case due to its peculiar factors as the predecessors in business of the defendant did in fact market and manufacture their products in the United Kingdom at material times before 1939 but, due to orders made under the Trading with the Enemy Act 1939 (UK), were effectively stripped of all their trade marks and goodwill; and, as nothing had been done to recreate that part of its business (which the plaintiffs then conducted) in Great Britain, they had no reputation or goodwill in Great Britain to found a passing off action.
48. T. Oertli Ag v E.J. Bowman (London) Limited (1957) RPC 388 was a passing off action. Jenkins L.J. delivered the judgment of the Court of Appeal. It was emphasised by his Lordship (at 397) that it was essential to the success of a passing off claim based on the use of a given mark or get-up:
"That the plaintiff should be able to show that
the disputed mark or get-up has become by user
in this country distinctive of the plaintiff's
goods so that the use in relation to any goods
of the kind dealt in by the plaintiff or that
mark or get-up will be understood by the trade
and the public in this country as meaning that
the goods are the plaintiff's goods. The gist
of the action is that the plaintiff, by using
and making known the mark or get-up in relation
to his goods, and thus causing it to be
associated or identified with those goods, has
acquired a quasi-proprietary right to the
exclusive use of the mark or get-up in relation
to goods of that kind."
He posed the question (at 397) as being whether the plaintiffs, a Swiss company, had established "the requisite association in this country of the word 'Turmix' with machines of the plaintiff's manufacture". The facts showed that the plaintiff had sold 50 machines in England and exhibited them at one exhibition. Their Lordships held (at 398) that such evidence fell "far short" of proof that the word "Turmix" had become distinctive in England of machines of the plaintiff's manufacture. Thus their Lordships regarded more substantial use in England of the mark or get-up in respect of the plaintiff's goods as essential. The appeal to the House of Lords was dismissed: see (1959) RPC 1.
49. Sheraton Corporation of America v Sheraton Motels Limited (1964) RPC 202, a decision of Buckley J., was an application for an interlocutory injunction to restrain passing off, as many of the cases which bear on this question are. The plaintiff was a United States corporation which owned and ran a well known chain of hotels in the United States and elsewhere, but they had no hotel in the United Kingdom. However, bookings for accommodation in the hotels outside the United Kingdom were frequently made in the United Kingdom both through an office which the plaintiff maintained in London and through travel agencies. The defendant company was on the verge of building luxury hotels at Prestwick Airport and other places under the Sheraton name. His Lordship looked at the matter as being one where the plaintiffs may be able to say that they had a reputation and a goodwill which would be (at 204):
"exposed to risk resulting from the confusion
between the plaintiffs and the defendants
notwithstanding that they are carrying on
business in different parts of the world; and
that, moreover, the plaintiff company are
entitled to retain the possibility of exploiting
their own goodwill in this country by opening
hotels here, and that that possibility ought not
to be diluted by anything done by the defendant
company meanwhile."
His Lordship granted interlocutory relief. His Lordship appears to have applied Pioret and seems to have accepted the proposition that somebody who carries on business abroad is entitled to protect his local goodwill notwithstanding that the business which he carries on and the goodwill connected with it relates to a business outside the United Kingdom. The fact that the plaintiff had a London booking office and that bookings were made through travel agencies in the United Kingdom and thus involved use of the name of its hotels seems to have been basic to the decision.
50. An important case is Alain Bernardin et Compagnie v Pavillion Properties Limited (1967) RPC 581 ("The Crazy Horse Case"), a decision of Pennycuick J. It was an interlocutory injunction case based on passing off in which injunctive relief was refused. The plaintiff was the proprietor and operator of a bar and cabaret in Paris known as the "Crazy Horse Saloon". There was evidence that the bar had been continuously and extensively publicised in the United Kingdom for sixteen years. The defendant commenced a place of entertainment in London under the name of "Crazy Horse Saloon" and issued an advertisement stating "Crazy Horse Saloon comes to London". His Lordship said (at 583) that the foundation of the action for passing off is the protection of goodwill and referred to Kerly's Law of Trade Marks and Trade Names 9th ed., 1966, and to Halsbury's Laws of England, 3rd ed, vol 38. He cited from Muller the two well known passages from the speeches of Lord Macnaghten at 223 and 224 and Lord Lindley at 235. He also cited the passage I referred to earlier in Oertli per Jenkins L.J. at 397 with reference to local user and stated:
"that a trader cannot acquire goodwill in this
country without some sort of user in this
country. His user may take many forms and in
certain cases very slight activities have been
held to suffice. On the other hand, I do not
think that the mere sending into this country by
a foreign trader of advertisements advertising
his establishment abroad could fairly be treated
as user in this country. No authority to that
effect has been cited. If that were so, the
range of the action of passing off would be
extended far beyond anything which has hitherto
been treated as its proper scope. That
observation applies I think particularly to such
establishments as hotels and even more to
restaurants. It may well be that the owner of a
foreign hotel or restaurant acquires in this
country a reputation for the name of his hotel
or restaurant in a wide sense, that the travel
agents or other persons to whom he sends
advertisements know of his establishment. Again
he may acquire a reputation in a wide sense in
the sense of returning travellers speaking
highly of that establishment, but it seems to me
that those matters, although they may represent
reputation in some wide sense, fall far short of
user in this country and are not sufficient to
establish reputation in the sense material for
the purpose of a passing off action. It is very
clear that in such circumstances the foreign
trader has not acquired anything which in law
could be described as goodwill in this country."
51. His Lordship referred to Pioret as being a case which went very little along the way towards helping the plaintiff company in the present case because it did not carry on business activities in the United Kingdom of any kind apart from disseminating advertisements (at 586). Even though P.O. Lawrence J. in Poiret held that it was not necessary that the plaintiff in order to maintain the action should have a place of business in London, his Lordship distinguished it from the case before him as the facts of Poiret showed a number of business activities in London. His Lordship also referred to Sheraton and distinguished it because there was no suggestion in the case before him that the plaintiff had an office in the United Kingdom or that bookings could be made in London of tables in the Paris nightclub. His Lordship cited the following passage from Kerly 9th ed, 1966, para 719 which after referring to Oertli v Bowman says:
"This proposition, however, must be read in its
context in this case: if in fact the plaintiff
has the necessary reputation in this country, it
does not matter whether it was acquired by user
here or in any other way."
"It seems to me that that way of putting it is
different from what Buckley J held, and I find
it difficult to reconcile it with these
authorities which are binding upon me. It seems
to me that there must be some kind of user in
this country, as there was in the Sheraton
case."
He concluded "with considerable reluctance" that the plaintiff company had not shown a prima facie ground for injunctive relief and in particular had failed to show that it had acquired by user of the name "Crazy Horse Saloon" in the United Kingdom, any goodwill or reputation such as is entitled to protection by the courts of the United Kingdom.
52. In Suhner and Company A.G. v Suhner Limited (1967) RPC 336 an interlocutory injunction was granted by Plowman J. restraining the defendant company from remaining registered under its current name. The plaintiff was a Swiss corporation manufacturing electronic components and it asserted an international reputation and goodwill in the name of "Suhner". The defendants disputed that the plaintiff had goodwill in the United Kingdom. His Lordship found that the plaintiff had established a clear prima facie case of the existence of its goodwill in the United Kingdom. His Lordship's finding was based upon the fact that from 1946 until some years thereafter another company was the sole distributor in Great Britain of the plaintiff's high frequency connectors and cables. That distribution arrangement was initially a direct relationship, but from about 1960 the plaintiff supplied the distributing company with goods to distribute in the United Kingdom through a Swiss associate. In 1967 the distribution arrangement ended and the plaintiff decided to form its own company to distribute its product in the United Kingdom, but found that the defendant company was already registered with the name "Suhner". It is clear that the plaintiff's goods were in fact sold and distributed in the United Kingdom, though not by the plaintiff but by a company which was its sole distributor in the United Kingdom. There is no suggestion of any further "business activities" on the part of the plaintiff in the United Kingdom.
53. Globelegance BV v Sarkissian (1974) RPC 603 was a decision of Templeman J., again a passing off case where interlocutory injunctive relief was sought. A Mr Valentino Garavani was a fashion designer who in 1960 opened a salon in Rome and in the years that followed built up a reputation in ladies' high fashion under the name "Valentino". His fashion shows in Rome and New York were attended by buyers from various countries including the United Kingdom. In 1966 and 1968 Mr Garavani held fashion shows in London and in 1970 clothes made from his patterns were sold in London under the "Valentino" label. In 1969 Mr Garavani assigned to the plaintiffs, an Italian company based in Rome, some of the business assets which he owned including the trade mark "Valentino" and the goodwill in his business in connection with it. Also he entered into a service agreement with the plaintiffs. In 1970 and 1971 Mr Garavino's activities were given publicity in various international papers and in newspapers including The Times. By 1972 the world wide business carried on under the name "Valentino" was very substantial. Valentino ties were sold in the United Kingdom in August 1972.
54. The plaintiffs sought an interlocutory injunction to restrain the defendant from passing off his business and goods as those of the plaintiffs by the display of the name "Valentino" on his premises and the use of the name "Valentino". The defendant wished to establish a men's fashion business in London. His Lordship said that there was obviously "a very great difference between the activities of the plaintiff outside England and their activities inside England" (at 609). He referred to the Crazy Horse Case and to Pioret and distinguished Pioret on the ground that, though like the Garavani case there was no establishment in England, Pioret made a practice of himself coming or sending over an assistant three or four times a year with dress models which he sold to English dress making firms and he gave a display attended by the then wife of the Prime Minister, Mrs Asquith, at No. 10 Downing Street which caused some resentment amongst his English competitors. His Lordship said that Pioret was a very much stronger case on the facts than the case before him as a great deal more business was done in the United Kingdom notwithstanding that there was no place of business there. Templeman J took up the point left by Pennycuick J. in the Crazy Horse Case that there must be some kind of user in the United Kingdom; but his Lordship said (at 612):
"The question is really: What kind of user?
Pure advertisement is clearly insufficient.
Taking bookings was sufficient in Sheraton.
Carrying out orders in this country was held to
be sufficient in Pioret."
He then referred to the evidence of user in the United Kingdom in the Garavani case and said that the necessary conditions were fulfilled bearing in mind of course he was dealing with the matter at an interlocutory stage only. He also held there were sufficient persons who might become purchasers from the defendants and who would assume a connection between the defendant's premises in Jermyn Street and the name "Valentino" and the activities of the plaintiffs in respect of the "Valentino" products. His Lordship concluded (at 615):
"One knows that in practice the trade in high
fashion is becoming more and more international,
and it does seem to me, in general, that it
would be a very great pity if the strait jacket
of the Crazy Horse decision was found to
constrain me from preventing Valentino from
keeping the name which he has so well
publicised."
55. In Amway Corporation v Eurway International Limited (1974) RPC 82, a claim for interlocutory relief in respect of passing off failed before Brightman J. His Lordship said that in order to sustain a claim of passing off the plaintiff must have a business reputation in the United Kingdom which is entitled to be protected and (at 88): "Some knowledge of the name of the plaintiffs in this country without any business activities here would quite clearly not be sufficient." He relied on the Crazy Horse Case. The second plaintiff was a wholly owned subsidiary of the first plaintiff, incorporated in the United Kingdom. It had engaged in minor trading activities over the previous two years, but over the previous six months had actively begun to organise the promotion of a large scale United Kingdom business and was seeking premises and interviewing senior personnel to run the company. His Lordship referred to the fact that the first plaintiff, an American company, engaged in the business of direct selling of cleaning materials, had over 200,000 distributors in the United States; but it had in addition a large number of Canadian and Australian distributors and many of the distributors had relatives or friends in the United Kingdom and had told them what the plaintiff was doing. The plaintiff had a preliminary list of over 500 names of distributors in the United States who wished to appoint their relatives or friends as distributors in the United Kingdom. The plaintiff placed full page advertisements in a number of American magazines, some of which had quite a large circulation in the United Kingdom; for example, the National Geographic magazine. Also the plaintiff had in the United States and Canada a house magazine with a circulation of over 500,000 copies a month and in which the proposed opening of the United Kingdom operations was publicised. His Lordship held that the evidence was "totally inadequate to show any world-wide business activities" in the United Kingdom which the plaintiffs were entitled to protect by interlocutory injunction.
56. In Star Industrial Company Limited v Yap Kew Kor (1976) FSR 256, a decision of the Privy Council on appeal from the Court of Appeal of Singapore, the plaintiff, a Hong Kong corporation, had for several years before 1965 marketed substantial quantities of toothbrushes known as "Ace Brand" in Singapore, mainly for the purpose of re-export to Malaysia and Indonesia, but some appear to have been sold in Singapore for local use. In 1965 the plaintiffs stopped marketing and selling in Singapore due to the imposition of import duties on toothbrushes by the Singapore government. In 1968 the defendant company commenced marketing toothbrushes under a similar name and get-up to that formerly used by the plaintiff. At the time the plaintiff sued it was not itself carrying on business in Singapore and had not done so for the previous five years and the evidence showed it had no intention of itself resuming that part of its former trade. The opinion of the Judicial Committee was given by Lord Diplock who said (at 269):
"Whatever doubts there may have previously been
as to the legal nature of the rights which were
entitled to protection by an action for 'passing
off' in courts of law or equity, these were laid
to rest more than 60 years ago by the speech of
Lord Parker of Waddington in (Spalding) with
which the other members of the House of Lords
agreed. A passing-off action is a remedy for
the invasion of a right of property not in the
mark, name or get-up improperly used, but in the
business or goodwill likely to be injured by the
misrepresentation made by passing-off one
person's goods as the goods of another.
Goodwill, as the subject of proprietary rights,
is incapable of subsisting by itself. It has no
independent existence apart from the business to
which it is attached. It is local in character
and divisible; if the business is carried on in
several countries a separate goodwill attaches
to it in each. So when the business is
abandoned in one country in which it has
acquired a goodwill the goodwill in that country
perishes with it although the business may
continue to be carried on in other countries."
His Lordship referred to Muller per Lord Macnaghten at 224 and per Lord Lindley at 235. He said that once the Hong Kong company had abandoned that part of its former business which consisted in manufacturing toothbrushes for export to and sale in Singapore it ceased to have any proprietary right in Singapore which was entitled to protection in any action for passing off brought in the courts of Singapore.
57. Baskin-Robbins Ice Cream Co v Gutman (1976) FSR 545, before Graham J., was a passing off case in which interlocutory injunctions were sought by the plaintiffs to restrain the defendants from selling ice cream by reference to the number "32" or the term "Thirty-two flavours" and certain other matters. The plaintiffs sold ice cream through a chain of shops in the USA and Canada and similar shops had been opened in parts of Europe. The plaintiffs did not trade in the United Kingdom; but adduced evidence of their intention so do so at a later date. The defendants unsuccessfully sought a franchise from the plaintiffs to sell ice cream in the United Kingdom but as they were unsuccessful the defendants then began to sell ice cream in the United Kingdom through their own retail outlets by reference to the number 32 or the term "Thirty-two flavours" and by allegedly adopting a style for their shops so as to pass off their goods as those of the plaintiffs. His Lordship said that the existence and extent of reputation was essentially a question of fact, so that similarly the existence and extent of goodwill acquired by virtue of a trader's business and reputation was equally one of fact (at 547). He then said at that page:
"This being so, I do not see how one can
properly lay down artificial limits as to the
geographical areas over which reputation and
goodwill can or cannot extend, nor state rules
as to what a trader must or must not do to prove
the existence of such reputation and goodwill.
Being questions of fact the court must be
guided, and guided only by what the proved facts
establish. In attempting to refute this
proposition (counsel for the defendants) cited
(Star) and relied upon the words of Lord Diplock
at page 269 ... (which his Lordship then stated
and to which I have already referred). What is
said there is, of course, obviously sound sense
and in any event binds this court, but it is not
right, I am sure, to read the phrase 'it is
local in character' (a reference to Lord
Diplock's speech) in the narrowest territorial
sense automatically limiting goodwill to the
boundaries of the country where the particular
business is registered or established. Taking
that particular case of a business in Singapore,
it would I consider to be impossible to hold if
the facts were to the contrary that the goodwill
of a business there must be confined to the
strict legal boundaries of that city and could
not extend some few hundred yards across the
bridge over the Johore Straits to the bank on
the other side in West Malaysia. It must surely
be a question of fact in each case and I do not
believe that Lord Diplock intended his words to
be read in the narrow sense suggested."
His Lordship said (at 547-8) that a similar narrow view to that argued by the respondents seems at first sight to have been expressed by Pennycuick J. in the Crazy Horse Case in reliance upon the words of Jenkins L.J. in Oertli. His Lordship went on to say, (at 548) with reference to those cases, that again it seemed to him that they ought not to be read as going further:
"than requiring that in the normal case
distinctiveness must be established by showing
user of the disputed mark or get-up by the
plaintiff on his goods or premises in this
country, so that the public here understand such
mark or get up to mean him. It may well be very
difficult if not normally impossible for a
plaintiff to establish such a reputation and
goodwill as will support a passing off action
without showing he has user of his mark or get-up
in this country.
Some businesses are, however, to a greater or
lesser extent truly international in character
and the reputation and goodwill attaching to
them cannot in fact help being international
also. Some national boundaries such as, for
example, those between members of the EEC are in
this respect becoming ill-defined and uncertain
as modern travel and Community rules make the
world grow smaller. Whilst therefore not
wishing to quarrel with the decisions in
question, if they are read as I have suggested,
I believe myself that the true legal position is
best expressed by the general proposition which
seems to me to be derived from the general line
of past authority, that that existence and
extent of the plaintiff's reputation and
goodwill in every case is one of fact however it
may be proved and whatever it is based on."
58. Graham J. considered the question again in Maxim's Limited v Dye (1977) 1 WLR 1155. The first plaintiff was a company registered in England in 1907 which owned "Maxim's" restaurant in Paris which was well known in England. In June 1970 another company opened a restaurant named "Maxim's" in Norwich, but in an action by the plaintiff against that company, the company undertook to not operate a restaurant under that name. In December 1975 the defendant opened a restaurant at the same address under the same name. The plaintiff sued the defendant for passing off. The defendant did not put in a defence. The plaintiff then took out a motion for judgment in default of defence. His Lordship pointed out that the judgment of Pennycuick J. in the Crazy Horse Case, being an interlocutory proceeding, did not bind him and said that in the Baskin-Robbins Case "I felt I was unable to adopt its reasoning and follow it as an authority." His Lordship noted that it appeared that the only reported cases cited to Pennycuick J. were Pioret and Sheraton and that the references in the judgment to Muller might well have been quoted from the then current edition of Kerly where exactly the same passages were set out. His Lordship accepted counsel's argument that if the passages in Muller quoted in Kerly 9th ed at paragraph 488 were given too narrow a meaning in defining the "local" nature of goodwill, they gave a wrong impression as to the ratio decidendi of Muller. His Lordship said that a study of the full speeches in that case made it clear that the House considered that though, of course, goodwill cannot exist in vacuo without an associated business, nevertheless its extent in any given case must be a question of fact and he said that he himself had expressed that view in the Baskin Robbins case. His Lordship thought that the Panhard Case was important as establishing that a foreign company having no place of business in England may nevertheless have such a reputation in its name in England as to justify the grant of relief for passing off against a defendant setting up in England under a similar name and he said the Panhard Case did not appear to have been cited to Pennycuick J. He said that he felt himself unable legitimately to distinguish the case before him from the Crazy Horse case. He said it was true that the plaintiff was an English company but it is clear that it had not and had never had any business there, and the statement of claim which he was bound to act on, led him to hold that as a fact the English company had a reputation in England by virtue of its restaurant in Paris. It is not the law, he said, that a plaintiff cannot establish goodwill to be protected by the English courts without actually showing he has a business in England. He relied on what he said in the Baskin Robbins's case at 548 and said that if he were writing the judgment again he would for the purposes of clarity add the words "in his business" after the words "reputation and goodwill" towards the end of the quotation. His Lordship said (at 1160) that:
"a plaintiff's existing goodwill in this
country, which derives from and is based on a
foreign business, such as one in Paris or
elsewhere in the common market, may be regarded
as prospective but none the less real in
relation to any future business which may later
be set up by the plaintiff in this country".
He declined to follow Crazy Horse. It should be noted that he did so after hearing submissions based on the effect of Britain's accession to the EEC treaty and the provisions of Community law, but he relied on those matters as confirming the view to which he otherwise would have come.
59. Metric Resources Corporation v Leasemetrix Limited (1979) FSR 571, a decision of Megarry V.C., was a passing off case where interlocutory injunctions were sought. The plaintiffs did not carry on business in the United Kingdom but did so in the United States and Canada and had a large and well known business there. They claimed they were well known in England by virtue of their advertising in United States journals which circulated in England and by reason of certain dealings with United Kingdom companies. The evidence only established one case of a United Kingdom customer of the plaintiffs having actually brought equipment hired from them in to the United Kingdom. Interlocutory injunctions were granted.
60. The Athletes Foot Marketing Associates Inc v Cobra Sports Limited (1980) RPC 343, a decision of Walton J., was another case of interlocutory injunctive relief for passing off, but this time refused. The plaintiffs carried on in the United States and elsewhere, but not in the United Kingdom, a business in which they granted franchises to independent stores to carry on business in the supply of footwear for athletes under the name "The Athletes Foot". They had a large number of franchised stores and an extensive reputation at least in the United States. During 1978 and 1979 they had taken steps to secure a franchise agreement for the United Kingdom and a prospective franchisee had gone so far as to order goods and stationery with a view to establishing a chain of stores under the name "The Athlete's Foot" in the United Kingdom. They had not concluded a franchise agreement in relation to the United Kingdom and there had been no sales there under the name "The Athlete's Foot", and the evidence did not disclose that sales had ever been made abroad under that name to visitors from the United Kingdom.
61. His Lordship considered the important question of what connection with the United Kingdom was required before the plaintiff could successfully maintain an action for passing off (at 349). He referred to two schools of thought: the "hard line" school of thought which maintained that it is essential for a plaintiff to have carried on a trade in the United Kingdom, perhaps best exemplified by the Crazy Horse Case; and a much less demanding approach which suggested that something less than that will do, well exemplified he said by Maxims. He said he could only echo the same approach taken by Megarry V.C. in Metric, to the effect that the final decision between these two schools of thought was "a difficult matter requiring mature consideration and detailed argument, and is not best dealt with on motion". However his Lordship considered the relevant cases. He said (at 355-356) of the Baskin Robbins case that what was said on this critical point by Graham J. was obiter dicta since his Lordship did not grant an injunction; but if the "crucial distinction" between reputation in the wide sense and goodwill is borne in mind this appeared to him to "square fully" with the "previous current of authority". His Lordship referred to Maxim's case and said it had some curious characteristics including the fact that the averments in the statement of claim had to be taken as correct and they included an allegation that the goodwill of the plaintiff's business extended to England. He said he found its persuasive power very small. He then referred to the Irish case of C and A Modes v C and A (Waterford) Ltd (1978) FSR 126 (which I will consider later) in which the plaintiffs did not carry on business in the Republic of Ireland but did have a very substantial number of customers there. The Court of Appeal of Ireland criticised the Crazy Horse Case; and Walton J. said that he thought the judgment of Henchy J. displayed a complete misapprehension of the Crazy Horse decision. His Lordship then said (at 357) that it did not matter that the plaintiffs were not at present actually carrying on business in the United Kingdom provided they had customers there. Equally it was of no moment if they had no customers there but had a reputation in the general sense of the word in England. It was also of no moment that that reputation might have been brought about by advertising. He said that on the evidence there was not one solitary transaction by way of trade with anybody in the United Kingdom, so it was impossible to say that the plaintiff had any goodwill there whatever.
62. In the Budweiser Case, a decision of the Court of Appeal of England mentioned earlier, Oliver L.J. referred to the "exegesis of the essential elements of a claim in passing off" by Lord Diplock in the Advocaat Case at 742 and said that the essentials were expressed "slightly differently" by Lord Fraser. He said (at 277) that the mere existence of a trading reputation in England was insufficient in the absence of customers here and this was well exemplified by the Athlete's Foot Case and quoted a passage from Walton J. judgment at 350 where he said:
"as a matter of principle, no trader can
complain of passing off as against him in any
territory - and it will usually be defined by
national boundaries, although it is well
conceivable in the modern world that it will not
- in which he has no customers, nobody who is in
a trade relation with him. This will normally
shortly be expressed by saying that he does not
carry on any trade in that particular country
... but the inwardness of it will be that he has
no customers in that country: no people who buy
his goods or make use of his services (as the
case may be) there".
He did add (at 278) the "caveat" that "'customers' must not be read restrictively as confined to persons who are in direct contractual relationship with the plaintiff, but include persons who buy his goods in the market." He referred to the Panhard Case and said that there was in that case an English market for the cars in that there was an importer in England who bought the plaintiff's cars for resale, and referred to Pioret as a case where a successful foreign plaintiff had no actual place of business in England but exhibited his goods there and sold to customers there directly or through an agent. He then referred to Sheraton which he described as the high water mark because in that case the plaintiffs carried on no business in the United Kingdom save that bookings for the overseas hotels were effected through an office which they maintained in London and through travel agents in the United Kingdom. He described it as a somewhat slender authority since it was a motion for interlocutory injunction. He said it is not every activity in the United Kingdom which might "loosely" be called a business activity that qualifies as the carrying on of business there and referred to the Crazy Horse Case as one in point. His Lordship said that the evidence in the Budweiser Case was only of sporadic and occasional sales in the United Kingdom which could not be said to constitute in a "real sense" the carrying on by the plaintiff of a business there. The evidence showed substantial sales of the plaintiff's beer on American bases, only occasional insignificant sales in American-style restaurants but that the name "Budweiser" was well-known in England as the name of a beer brewed in the United States.
63. O'Connor L.J. held (at 283) that the evidence of significant reputation was not sufficient to found an action in passing off and that "it was the goodwill of a business carried on in this country that can be protected, not the reputation - goodwill if you like - of a business carried on in another country". Due to the highly specialised form of trading, O'Connor L.J. held (at 284) that the passing off case failed. Dillion L.J., for similar reasons to O'Connor L.J. (at 288) reached the same finding.
64. Home Box Office Inc v Channel 5 Home Box Office Limited (1982) FSR 449 is a judgment of Peter Gibson J. where the plaintiff, an American corporation, had since 1972 carried on business in the United States as Home Box Office Inc, a business concerning the programming and marketing of pay television, in respect of which it enjoyed substantial goodwill and reputation in the United States. The plaintiff sought an interlocutory injunction based on passing off to restrain the defendant from marketing video tapes in any way under the name "Home Box Office". The plaintiff had no place of business in the United Kingdom but had sold there a number of its programs and had also produced by itself or in collaboration with United Kingdom companies a variety of original programs. His Lordship said there were certain other ways by which the plaintiff would be known in the United Kingdom, namely, advertisements in trade magazines and journals, some published in the United Kingdom, others published in the USA but circulating in the United Kingdom. Also, commercial newsletters and other magazines and journals circulated in the United Kingdom.
65. As to the requisite goodwill, his Lordship referred to Lord Macnaghten in Muller and said that there must be goodwill established in England and adopted Walton J.'s analysis in Athlete's Foot. He said at 455:
"It is not sufficient to have a reputation
abroad; there must be some business activity
conducted by the plaintiff by which that English
goodwill is established; though it is not
necessary that the plaintiff should have a
business establishment in this country, nor, it
seems, need the business activities here be very
extensive."
His Lordship referred to Sheraton and Metric and said that he was not prepared to say that the plaintiff had no properly arguable case on goodwill (at 456). He said the business was an international one and it was significant that, with unimpressive exceptions, all in that business who gave evidence for any party knew of the plaintiff (at 456).
66. In Lettuce Entertain You Enterprises Inc v Lauren Sabin Soll and Grunts Investments Limited, 12 December 1979, unreported judgment of Dillon J., the plaintiffs carried on a restaurant business in the United States, principally in or near Chicago, where it owned and operated seven restaurants using the name "Grunts". The restaurant business was very successful. His Lordship, in hearing an application for an interlocutory injunction, accepted that the plaintiff's restaurants were very well known and popular in Chicago but had not been advertised widely outside Chicago. There was some evidence of publicity in certain periodicals distributed on a small scale in the United Kingdom but they were not the periodicals on which substantial goodwill with the public would be based. His Lordship also accepted that the plaintiffs had shown that their restaurants were known to citizens of the United States then in London who had been to Chicago and also to some British citizens who had been to Chicago. He was not satisfied the class was minimal, although it was impossible to say how many people fell into those categories. The plaintiffs never carried on business in the United Kingdom and never dealt there with any customers of their business. His Lordship said that the case bore some resemblance to Maxims but that the facts were different in the actual extent of reputation. He noted that Maxims had been treated with somewhat limited respect by Walton J. in his judgment in Athlete's Foot. He said that Walton J did not seem to him to go as far as Pennycuick J had in the Crazy Horse Case in holding there could be no passing off actions successfully brought unless the plaintiff company actually had a place of business at which it was carrying on a business in the United Kingdom, but Walton J did conclude that a passing off action could not be brought unless the plaintiff company either was carrying on business in the United Kingdom or was dealing in the course of its business with customers in that country. Dillon J. said that it seemed to him to be somewhat artificial that the right to bring a passing off action in the English courts to protect a very extensive overseas goodwill should depend on whether the plaintiff has done some act of business in the United Kingdom. Nevertheless, he applied Walton J.'s analysis of the authorities and left it to a higher court to resolve any inconsistencies between the authorities. He dismissed the motion for injunction. Grunt and Athlete's Foot were discussed and criticised by Mr C Morcom in an article in (1980) 2 European Intellectual Property Review 169.
67. See also Elida Gibbs Limited v Colgate-Palmolive Limited (1983) FSR 95, a judgment of Goulding J., another claim for interlocutory relief by a quia timet action to prevent the defendants from passing off their product as that of the plaintiffs where relief was granted.
68. My Kinda Bones Limited v Dr. Pepper's Stove Co Limited (1984) FSR 289 involved a motion to strike out of a statement of claim in a passing off action. Slade J. cited with approval (at 269) Lord Diplock's statements in Star Industrial and Lord Fraser's test in the Advocaat Case. His Lordship said that Lord Fraser and the other members of the House in the Advocaat Case were not directly considering the question as to what connection with the United Kingdom was required before a plaintiff could successfully maintain a passing off action. However, he agreed with Walton J. in the Athlete's Foot case that the question was a difficult one requiring detailed argument and did not decide it.
69. It is interesting to note the recent decision of the House of Lords in Reckitt and Colman Properties Ltd v Borden Inc [1990] UKHL 12; (1990) 1 WLR 491. While the case did not consider the question in point, the speeches of Lord Oliver of Aylmerton and Lord Jauncey of Tullichettle (Lord Goff of Chieveley, Lord Brandon of Oakbrook and Lord Bridge of Harwick agreed with their speeches) do consider the general nature of a passing off action and the necessary elements required. Neither speech refers to an "element" of local business activity. Lord Oliver said (at 499):
"this is not a branch of the law in which
reference to other cases is of any real
assistance except analogically. It has been
observed more than once that the questions which
arise are, in general, questions of fact. ...
The law of passing off can be summarised in one
short general proposition - no man may pass off
his goods as those of another. More
specifically, it may be expressed in terms of
the elements which the plaintiff in such an
action has to prove in order to succeed. These
are three in number. First, he must establish a
goodwill or reputation attached to the goods or
services which he supplied in the mind of the
purchasing public by association with the
identifying 'get-up' (whether it consists simply
of a brand name or a trade description, or the
individual features of labelling or packaging)
under which his particular goods or services are
offered to the public, such that the get-up is
recognised by the public as distinctive
specifically of the plaintiff's goods or
services. Secondly, he must demonstrate a
misrepresentation by the defendant to the public
(whether or not intentional) leading or likely
to lead the public to believe that goods or
services offered by him are the goods or
services of the plaintiff. Whether the public
is aware of the plaintiff's identity as the
manufacturer or supplier of the goods or
services is immaterial, as long as they are
identified with a particular source which is in
fact the plaintiff. For example, if the public
is accustomed to rely upon a particular brand
name in purchasing goods of a particular
description, it matters not at all that there is
little or no public awareness of the identity of
the proprietor of the brand name. Thirdly, he
must demonstrate that he suffers or, in a quia
timet action, that he is likely to suffer damage
by reason of the erroneous belief engendered by
the defendant's misrepresentation that the
source of the defendant's goods or services is
the same as the source of those offered by the
plaintiff."
Lord Jauncey, after referring to Lord Diplock's five essential characteristics, said (at 511):
"The fact that the proprietary right which is
protected by the action is in the goodwill
rather than in the get-up distinguishes the
protection afforded by the common law to a
trader from that afforded by statute to the
registered holder of a trade mark who enjoys a
permanent monopoly therein. Goodwill was
defined by Lord Macnaghten (sic) in Inland
Revenue Commissioners v Muller and Co.'s Margarine
Ltd. as 'the benefit and advantage of the good
name, reputation and connection of a business.
It is the attractive force which brings in
custom.' Get-up is the badge of the plaintiff's
goodwill, that which associates the goods with
the plaintiff in the mind of the public."
70. In C and A Modes v C and A (Waterford) Limited (1978) FSR 126 Finlay P., the President of the High Court and the Judge at first instance, said (at 135) that he disapproved of the distinction drawn in Crazy Horse between user arising from some actual commercial activity carried on within the jurisdiction of the court and user arising from advertisement and publicity distributed within the jurisdiction of the court and resulting in the attraction of persons within that jurisdiction to make use of the business or services of the plaintiff company. Hence the absence of a retail outlet or agency within the Republic of Ireland owned or operated by the plaintiffs was not a bar to their action for passing off.
71. On appeal O'Higgins C.J. agreed with the judgment of Henchy J. Henchy J disapproved of the proposition that a plaintiff's reputation which owes nothing to user in the forum is not sufficient to support a passing off action (at 138-9) and agreed with Kerly 10th ed at 386 that it was difficult to see any rational basis for the distinction. Henchy J. said that there was ample authority in principle and in the decided cases for the conclusion that no matter where the plaintiff's business is based it is entitled to be protected against its being taken away or dissipated by someone whose deceptive conduct is calculated to create a confusion of identity in the minds of existing or potential customers (at 139). Kenny J. also rejected the submission of counsel for the defendant that goodwill can only exist in the forum if there is user or trading there. He said (at 140) that the idea that goodwill must be acquired by user or trading in the country where it is sought to be protected comes from the days when television and radio were unknown and when international trade in domestic goods was not as extensive as it is today. Kenny J. said that it was not an appropriate rule for this age and as no authority bound him to accept it he refused to do so.
72. In Tan-Ichi Company Limited v Jancar Limited (1990) FSR 151, an interlocutory injunction was sought in the Supreme Court of Hong Kong. The plaintiffs owned a chain of Japanese restaurants in Japan. They had no active business in Hong Kong although they were well known in Asia. Sears J. referred to the problem of reputation without local business presence and said that clearly it was an evolving field of law and that a court must respond to the changes which have occurred in international communications (at 154). He referred to the speed and efficiency of modern technology which caused business reputation to be more widely spread and recognised than in the past and to the fact that courts in other jurisdictions have responded to the change. He referred to Dominion Rent A Car v Budget Rent A Car Systems (1987) 9 IPR 367; in New Zealand and Orkin Exterminating Co Inc v Pestco Co of Canada Limited (1985) 19 DLR (4th) 90 in Canada as cases which recognise international reputation and said it was really essentially a question of fact to be determined on the evidence as a whole (at 154), which his Honour then proceeded to do and granted injunctions.
73. The leading Canadian case is Orkin, a decision of the Ontario Court of Appeal. The plaintiff was a United States company which did not carry on business in Canada, but had a reputation in Ontario because Ontario customers used its services in the United States and many Canadians were exposed to its advertisements on radio and television, in magazines and through other means.
74. The plaintiff intended to expand its business into Ontario. The judgment of the Court was delivered by Morden J.A. The proposition that in order to have goodwill in the forum a company must have carried on business there or at least been involved in some form of business activity there was said to rest mainly upon Star Industrial, Crazy Horse and Budweiser. Morden J.A. said he did not think it was of any practical use to analyse in detail the exact ratio of the many cases which showed exercises of wide and narrow interpretation because none of the authorities were binding upon his court and so the issue turned on considerations of principle and policy. He referred (at 102) with approval to the judgment of Buckley J. in Sheraton and carefully reviewed many of the cases. He said (at 103) he was not satisfied that Buckley J. in Sheraton regarded the booking office as being important, but said that assuming that he did, what was its significance? Morden J.A. said that it really had no bearing at all with respect to the plaintiff competing with the defendant for hotel customers in England because the plaintiff had no hotel facilities there. It was at most a "symbolic" feature of the case (at 104). He treated the defendant's conduct in Orkin as being one of deliberate deception, and said that the plaintiff had laboured long and hard and made substantial expenditures to create the reputation which it then had, which reputation had spread to Ontario, and was entitled to be protected from misappropriation (at 105). The spectre of the plaintiff having a monopoly in Ontario in its name and distinctive logo even though not now carrying on business here was considerably less troubling, than the deceptive use of its name and symbol by another (at 105). The defendant submitted that even if it was guilty of deliberate deception it was irrelevant and in particular could not create a right in the plaintiff which the plaintiff apart from the deception did not already have. Morden J.A. rejected that argument and said that the defendant's conduct was highly relevant (at 106). So far as freedom of trade and reasonable expectations of business people are concerned, the interests of a dishonest defendant were entitled to less weight than those of a defendant who had acted in good faith. He said (at 106) that this has been recognised by the courts of the United States and referred to Hanover Star Milling Co v Metcalf [1916] USSC 79; (1916) 240 US 403 at 415 per Pitney J; and to United Drug Co v Theodore Rectanus Co [1918] USSC 182; (1918) 248 US 90 per Pitney J at 100. His Honour said (at 107) that he need not and did not say that the defendant's bad faith alone would confer a cause of action on a foreign plaintiff, but it must be a relevant factor to take into account in adjusting competing interests; the significance of a defendant's state of mind has for some time been an important factor with respect to several different torts and he referred to Ames "How Far an Act May be a Tort because of the Wrongful Motive of the Actor" 18 Harv L Rev 411 (1905). His Honour (at 107 et seq) contrasted the English decisions (or at least some of them) as appearing to require some business activity by a foreign plaintiff in the jurisdiction of the Court with the Canadian and United States authorities which do not. Morden J.A. explained this as being possibly because the various North American jurisdictions are places where plaintiffs and defendants carry on business having substantially more in common with respect to language and other cultural features including consumer attitudes than do the places from which the parties in the English cases come. He said that having regard to the travel patterns of the population and mass advertising through television, radio and various publications, a flow of "trans-border" goodwill is almost inevitable in North America. His Honour mentioned that a number of English cases have established that a plaintiff's goodwill cannot exist outside the area where it carries on business and referred to the Budweiser Case and said it would appear to be a meaning assigned from a tax case, (Muller at 224, but particularly at 235). He said that he did not think that the meaning appropriate in the Muller Case is necessarily appropriate in a passing off case which involves issues of remote territorial use. The main consideration should be the likelihood of confusion with consequential injury to the plaintiff. Generally where there is such confusion there is goodwill deserving of protection (at 108).
75. Goodwill in the United States law of unfair competition has a much broader meaning than it does in England. In Callman, The Law of Unfair Competition Trademarks and Monopolies, 4th ed 1983 ss. 19.20-1 the learned author states it is recognised by United States law that there are "goodwill zones" (compared to potential goodwill, or expansion zones) which are otherwise known as "selling zones, advertising zones and reputation zones". Callman recognises that there is a growing tendency throughout the world to recognise the protection of a mark which has not yet been used or registered in a given country. The question is whether in the territory in which the defendant's designation is used there are or are likely to be a considerable number of prospective purchasers of the goods or services in connection with which the trade mark and the designation are used that are likely to be confused or misled by the defendant's designation. See also the American Law Institute's Restatement of the Law of Torts, tentative draft No. 8, 1963, at 113.
76. In Dominion Rent A Car v Budget Rent A Car Systems the Court of Appeal of New Zealand made some interesting obiter comments on the current issue. Cooke P. said (at 378) that decisions of the Privy Council and the House of Lords have treated the tort of passing off as dependent essentially on damage to business goodwill; that while this approach was virtually unquestioned, it leads to problems when the business for which protection is claimed is carried on outside the jurisdiction in which the passing off is alleged to have occurred. Doubtless this stems, he said, partly from a sense that unless a trader has already entered or at least is clearly about to enter the local market and thus contribute to the local economy, the law should not allow him to stifle local enterprise. Cooke P. said that, whatever the underlying reasons, some form of business connection with the jurisdiction is generally thought to be necessary to enable a successful suit and that it is often said that mere reputation within the jurisdiction does not by itself constitute a property which the law protects and referred to the Budweiser Case per Oliver L.J. at 470. He said that no distinctively New Zealand approach had emerged and referred to the fact that in New Zealand there were divergent streams, some fairly conservative on the one hand but others with a readiness to develop the law somewhat. He said that in the Star Industrial Case the observations by Lord Diplock about goodwill being "local in character and indivisible" must be read in the light of the particular subject matter and that the weight of judicial opinion appeared to recognise the possibility that an international business may have one individual international goodwill, the reputation of any local branch or agency being that of association with the international organisation (at 379). He referred (at 379 and 380) to a number of cases to support that proposition and to New Zealand decisions in harmony with that approach. His Honour said that in General Electric Co v The General Electric Co Ltd (1972) 2 All ER 507 Lord Diplock himself used language (at 519) suggesting that as a business expands in localities or markets its goodwill may correspondingly expand without necessarily being divided. He did not understand Lord Diplock to be adopting an unnecessarily myopic attitude to restrict this process to national boundaries. His Honour said an Australian company's reputation and goodwill can extend to New Zealand and vice versa and, at least if there is a sufficient business connection with New Zealand, it will be entitled to protection there. His Honour said that goodwill transcends national boundaries; that with the consequence of internationalisation of trade the possibility of confusion of names tends to increase because more situations arise in which it would be inequitable to refuse to allow traders to use similar names adopted bona fide in the territories where their respective businesses are.
77. Richardson J., McMullin J. both expressed agreement with Cooke P. whilst Richardson J. also expressed agreement with Somers J. Somers J. said (at 397) that the existence of a trading reputation in the forum was not itself sufficient but went on to say (at 398):
"In the end the question of the existence and
extent of reputation and of goodwill must be a
matter of fact. In the case of a business
having an international reputation which extends
to New Zealand not much in the way of activity
in New Zealand would, I think, be required to
establish a goodwill. In such cases the
reputation itself may be almost tantamount to
goodwill, activity having importance in
localising that reputation in New Zealand."
Casey J., dissenting, did not consider the present issue but he did adopt the
test which found favour with Lord Fraser in the Advocaat Case and he regarded Lord Diplock's five characteristics as complementing Lord Fraser's list. However, Casey J. in Esanda Limited v Esanda Finance Limited (1984) FSR 96 made clear his views (at 100):
"Notwithstanding some modern views suggesting
otherwise, it seems clear that in a passing off
action a party with no commercial or marketing
presence in New Zealand cannot gain protection
of its business name here, no matter how
substantial its world or local reputation. Only
the goodwill attaching to its business interest
in this country will be protected, and before an
injunction may be granted there must be a
likelihood of damage to that interest as a
result of the defendant's use of a name or
description for its business so closely
resembling that associated with the business of
the plaintiff, that there is a genuine
possibility of confusion among the latter's
actual and potential customers."
He went on to say that cases such as Panhard, Poiret and Sheraton all demonstrated that reputation plus some market activity in the jurisdiction - although the evidence of it may be weak - is enough to establish a business goodwill entitled to protection.
78. In Midas International Corporation v Midas Auto Care Limited (unreported, 27 November 1987, Eichelbaum J. granted protection to a foreign plaintiff who was only able to claim that its trade mark "Midas", associated with automotive components and services, had an international reputation which "spilled over" into the jurisdiction of the court by advertising, this giving it a sufficient reputation in New Zealand. The evidence showed that "Midas" was advertised in international magazines that circulated in New Zealand; citizens of New Zealand who visited abroad were exposed to the mark; and people who immigrated from countries where "Midas" operated were aware of its trade mark significance. His Honour relied on affidavits from persons in the trade attesting to the fact that "Midas" was known in New Zealand. His Honour said that a less demanding approach to the requirement of goodwill was called for in view of the diminishing importance of international boundaries in the face of communication explosion. Some degree of actual activity was held to be necessary in the forum, but even slight activity (which in that case merely consisted of the plaintiff's negotiations for the establishment of a franchise in New Zealand) was held to be sufficient. But his Honour said that it may not be long before a requirement of a degree of business activity is seen as otiose. He said that real harm exists to a plaintiff and his reputation because the defendant may run a business badly which does not measure up to the international standards set by the plaintiff. Further, the plaintiff could be deprived of the opportunity of expanding his business into New Zealand under the "Midas" trade mark and the use of that mark by the defendant might interfere with the satisfactory conclusion of the franchise agreement with the potential franchisee.
79. In Weingarten Bros v G and R Wills and Co. [1906] SALawRp 7; (1906) SALR 34, Way C.J. described (at 53) what in his view, were "the various remedies provided for the wrong committed when one man's goods are sold as the goods of another", the non-statutory ones being: first, the old common law action for passing off, in which fraud had to be alleged and proved and referred to Sykes v Sykes 3 BandC 541; second, the old suit in Chancery, to prevent a passing off which he said was really ancillary to the common law action referring to Collins Co v Reeves 28 LJ NS Ch 56; and third, the original jurisdiction of the Court of Chancery to restrain any invasion of property, in which case it is unnecessary to show fraud: Edelsten v Edelsten 1 D J and S 185. Way C.J. said that in cases under the second remedy it was unnecessary to show local user and that it was sufficient if the business or business reputation was injured. He then referred to what was said by Wood V.C. in The Collins Company v Brown that fraud was the true foundation of the jurisdiction in passing off and in the same context referred to Panhard's case per Farwell J. at 516. The absence of express fraud in Weingarten, in Way C.J.'s opinion, differentiated the two lastmentioned cases from it. He then considered the case within the third remedy and said:
"In this class of case the plaintiff need not
prove fraud, but it is necessary to show the
existence of the property or right which he asks
the Court to protect; in other words, his trade
mark upon goods vendible upon the market."
80. The Chief Justice's judgment rather proceeds on the assumption that the common law remedy involving the proof of fraud is still available as a cause of action and has not been superseded by the relief granted in Chancery where proof of fraud is not necessary; and he referred to the fact that the leading case in this area is Millington v Fox, in particular the judgment of Lord Cottenham at 352, and also the judgment of Lord Westbury in Edelsten v Edelsten at 199.
81. In Turner v General Motors (Australia) Pty Ltd [1929] HCA 22; (1929) 42 CLR 352, an American manufacturer of motor cars, which had a trade reputation in Australia, marketed them here through agents whose operations it controlled by means of a subsidiary. The American company decided to form a new company in Australia with a name based on its own name, which would assemble its cars in this country and market them here. The American company advertised its intention to do this and formed the Australian company which commenced to erect a factory here. The American company did not assign any of its goodwill to the new company. The defendants commenced to carry on business in Sydney as dealers in secondhand motor cars under names which resembled both those of the American company and its new company. The Australian company sued the defendants for passing off. It was held that the Australian company was entitled to succeed in its action. Isaacs J., after referring to the classic statement of the cause of action by Romer J. in Joseph Rogers and Sons Limited v W.N. Rogers and Co. (1924) 41 RPC at 291, referred to Levy v Walker (1878) 10 ChD 436 per James L.J. at 447-8, who plainly placed the genesis of the cause of action as being fraudulent misrepresentation. Isaacs J. said (at 362) that "fraud" is not necessarily such as would support an action of deceit "but would be constituted by persistence after notice". He referred to Cochrane v MacNish (1896) AC 225 per Lord Morris at 230-1, who delivered the opinion of the Judicial Committee to the effect that although the respondents erred unwittingly at first they nevertheless persisted in their error after their attention was called to the fact that they were infringing the appellant's rights and in those circumstances their conduct in the eye of the law amounted to fraud. Isaacs J. also referred to Nocton v Lord Ashburton (1914) AC 932 per Viscount Haldane L.C. at 952. He mentioned that in Borthwick v The Evening Post (1888) 37 Ch D 449 Bowen L.J. said at 463 that the gist of the action was the making of an untruthful representation, which Isaacs J. said involved the notion of the probability of deception and the probability of injury to the business of the plaintiff. Isaacs J. said (at 364):
"But on principle the whole contention is
fallacious (that is the contention that the
appellants had done nothing legally wrong as
regards the respondent). In the first place, a
man who digs a pit in a path along which he has
reason to believe another man will shortly
travel, does nothing of which the man can
legally complain before he comes to it. But if
the latter happens to fall into the hole and
suffers injury, does the argument of original
freedom from responsibility avail the man who
digs the pit? What Ernest Samuel Turner for all
the defendants in the suit did was to dig a
commercial pit in advance. If there ensued
injury, or probability of injury, there is
surely a remedy. But I do not for a moment
concede that before October 1926 the respondent
would have been helpless. Having the undoubted
intention to commence business, it could, in the
circumstances, in my opinion, have obtained
protection against the injury that the
appellants were preparing in advance. Intention
in such a case is an important factor."
His Honour then referred to Beazley v Soares (1882) 22 ChD 660 at 662; Montreal Lithographing Co. v Sabiston (1899) AC at 614 and Kerly on Trade Marks 5th ed at 577.
82. Dixon J. at 368 referred to the decision of Harvey C.J. in Eq. at first instance who considered that the defendant's conduct was fraudulent and that it was calculated to lead the public to believe that his business was that of the plaintiff or connected with the plaintiff and granted an injunction. Dixon J. said of the appellate's intention and desire to appropriate to himself the advantage of a business reputation which belonged to another there can be no doubt at all:
"business reputation, in the view of the Courts
of Equity, is a right of property which should
be protected from misappropriation and that
protection is not confined to cases where loss
simply consists in the diversion of trade from
one to another. Indeed, the argument is
sufficiently answered by the authority of
Lloyd's v Lloyd's (Southampton) Limited (1912)
83. In Selfridge's Limited v Selfridge's (Australasia) Limited, Sydney Morning Herald, 6 and 7 April 1933, Harvey C.J. in Eq heard a motion for interlocutory injunction. Selfridge's Limited carried on a large business in London but did considerable business with Australian visitors to London and by mail with customers in New South Wales. Harvey C.J. expressed the view that "goodwill rests in the minds of (Australian) customers" which was of value to Selfridge's Limited and granted the injunction sought.
84. In Ramsay v Nicol [1939] VicLawRp 48; (1939) VLR 330 O'Bryan A.J. rejected the submission that the courts will grant relief only where the business or goods which are sought to be protected is a business carried on within the jurisdiction or goods which have a market in the jurisdiction. He said (at 342-3):
"In my opinion, that is not the true test, but
the test to be applied in such a case is: Has
the person acquired a reputation under that name
in the jurisdiction, is that reputation
subsisting at the relevant time, will the use of
the same or a similar name by the other person
in all the circumstances be calculated to
deceive the public into thinking that that other
person is the former, and is there a real
likelihood of such deception in all the
circumstances causing damage to the former? If
all those circumstances subsist, then, in my
opinion, it is immaterial that the plaintiff is,
for the time being, not within the jurisdiction,
or has no business being conducted at the
relevant time within the jurisdiction (as in the
... Panhard Case, or has for some time been
outside the jurisdiction as in ... Pioret).
The cases cited by plaintiff's counsel, such as
(his Honour then referred to a number of cases
including Levy v Walker (1879) 10 Ch D 436 at
- are all cases in which the Court held,
either that it was not satisfied that there was
any real likelihood of deception, or that it was
not satisfied that damage would ensue. Both of
these facts are essential ingredients in an
action of this sort. The language used in such
cases, which might appear to limit the
protection in the manner contended by the
plaintiff, must be read in relation to the facts
of a particular case under consideration. The
case of Clark v Freeman ((1848) [1848] EngR 217; 11 Beav. 112),
which appears to be contrary to the above view,
has been disapproved on several occasions ..."
85. The Commissioner of Taxes (Queensland) v Ford Motor Company of Australia Pty Limited [1942] HCA 16; (1942) 66 CLR 261 is a case involving the interpretation of s. 34(1) of the Income Tax Assessment Act 1936 (Qld) and, in particular, the provision for determining the capital of the company under s. 34(4)(c) where reference is made to goodwill. In the joint judgment of Latham C.J. and Rich J., which was relevantly concurred in by McTiernan J., their Honours (at 272) referred, apparently with approval, to what was said by Lord Macnaghten in Muller in the famous passage: "Goodwill has no independent existence. It cannot exist by itself. It must be attached to a business."
86. Ballarat Products Limited v Farmers Smallgoods Co Pty Limited [1957] VicRp 12; (1957) VR 104 was a passing off case heard by Hudson J. where the plaintiff had formerly carried on business in Victoria but had ceased to do so. His Honour (at 108) applied the principles expounded by Lord Parker in Spalding at 283-4. He rejected the argument of the defendant that as no business was being carried on by the plaintiff in Victoria there could be no goodwill of which the name could form part (at 108). He said that goodwill may continue to exist despite the cessation of the business or operations that gave rise to it. If the plaintiff ceases to trade but has nevertheless acquired a valuable reputation it does not immediately disappear once he does cease his trade. It remains as something of value which he can turn to account whenever he chooses; though his Honour said it is no doubt right that the law gives no remedy for the invasion of a right of this kind in the absence of proved or presumed injury, and if it appears that no further commercial use is likely to be made of it, no presumption of injury would arise (at 108). His Honour said he gained support for his conclusion from the decision of O'Bryan J. in Ramsay v Nicol and distinguished the judgment of Eve J. in Pink v J.A. Sharwood and Co Limited (1913) 30 RPC 725 on the ground that there the plaintiff has discontinued manufacturing "altogether" and it could not be treated as authority for the proposition that, because on a temporary cessation of trading, there were no goods of the plaintiff on the market, this must inevitably result in a finding that there had been no deception and no passing off (at 109). His Honour said that if this were so it would be very difficult to reconcile with the decision in Pioret.
87. Westinghouse Electric Corporation v Thermopart Pty Limited (1968) WAR 39 was a passing off and infringement of trade mark case heard by Wolff C.J. His Honour said (at 48) that while it was not necessary to prove the defendant had any intent to deceive in a passing off case, proof that it persisted in using the mark after attention had been drawn to the fact that it belonged to the plaintiff may be enough to establish what in equity is regarded as fraud, as distinct from the more rigid concept of fraud in the common law and referred to Derry v Peak [1889] UKHL 1; (1889) 14 App Cas 337 and to what was said by Isaacs J. in Turner v General Motors at 362.
88. The Chief Justice rejected an argument that there was not any goodwill in the State of Western Australia. The plaintiff carried on business in the USA and elsewhere as the manufacturer and vendor of electric washing machines and it had in Australia trade mark protection for the word "Laundromat" in respect of electric laundry machines but it had not established any laundries in Western Australia. His Honour's findings of fact show that the plaintiff had carried on and was at the time of the case carrying on a vigorous and expensive advertising program, both in the USA and abroad, including Australia (at 40). Also, although not supplied directly by the plaintiff, there was Westinghouse automatic electrical laundry equipment for sale and in use in Australia. His Honour referred in relation to goodwill to the passage from Lord Macnaghten's speech in Muller previously mentioned and to Lord Lindley in Muller. In his view the plaintiff's connections in Western Australia had not "grown to any large dimensions" however his Honour held that the plaintiff was entitled to an injunction quia timet. The plaintiff was not carrying on business there; but his Honour said that the plaintiff did have connections with the State of Western Australia in that it had been in negotiation with the defendant and the plaintiff was contemplating setting up its business in Western Australia.
89. B M Auto Sales Pty Limited v Budget Rent A Car System Pty Limited (1976) 12 ALR 363 is a passing off case in which it was argued that it was not proved that the respondent had at any material time acquired a reputation under its business name in Darwin and that the fact it had acquired a reputation elsewhere was not enough. To this Gibbs J., with whose reasons for judgment Barwick C.J. and Murphy J. agreed, said (at 370) that in England in the Crazy Horse Case and the Amway case it was held that in order for a plaintiff to succeed in maintaining in the English courts an action for passing off, the plaintiff must have acquired a business reputation in the United Kingdom which was entitled to be protected, that this could only be acquired by some sort of user in the United Kingdom and that some knowledge of the name of the plaintiff, without any business activities of the plaintiff, in the United Kingdom, would not be sufficient. Without commenting on the proposition his Honour went on to say that, however, very slight activities in England have been held to suffice. For example, it was enough that the plaintiff took bookings in England (Sheraton) or carried out orders in England (Pioret). He said the judgments of Knox C.J. and Dixon J. in Turner are consistent with those authorities. His Honour said that Isaacs J. appears to have taken a different view at 364 and to have thought that it would not have mattered if the company had not had any business activities in Australia. Gibbs J. thought it unnecessary to discuss the apparent difference as the point did not arise in the Budget Case because the respondents had commenced business activities in the Northern Territory before the first appellant began to use the name Budget Rent A Car (at 370).
90. In Olin Chemicals Pty Limited v Pace Chemical and Swimming Pool Equipment Pty Limited, a judgment of Needham J., (unreported, Supreme Court of New South Wales, 22 December 1978) his Honour said (at 11) that there are cases where it was held that a plaintiff in passing off proceedings must establish goodwill in the country in which it sues and referred to B M Auto Sales Pty Limited v Budget Rent A Car System Pty Limited, Crazy Horse and Oertli as examples. It was not necessary to consider the contrary argument. His Honour said (at 11) that the sales of the plaintiff at the date of commencement of proceedings were extremely limited, but the plaintiff was one of the largest suppliers of swimming pool chemicals in Australia and the defendant knew it was inevitable that the plaintiff would commence marketing pool chemicals under the name Pace and that such activity on the plaintiff's part would result in the defendants goods obtaining the benefit of the confusion. Needham J. likened this to the statement by Isaacs J. in Turner about digging "a commercial pit in advance" of the plaintiff's coming by.
91. In Fletcher Challenge Limited v Fletcher Challenge Pty Limited (1981) 1 NSWLR 196 Powell J. heard a motion for interlocutory injunctive relief based in part on passing off. He posed the relevant question as being whether the plaintiff had the necessary reputation rather than whether the plaintiff itself carried on business here (at 205). He said this would seem to have been the view adopted by Plowman J. in Suhner where the evidence did not establish either that the plaintiff had ever traded in its own name in the United Kingdom or that such of its goods as were in fact sold by agents there were in fact identified with the plaintiff.
92. In Taco Company of Australia Inc v Taco Bell Pty Limited [1982] FCA 136; (1982) 42 ALR 177, the appellants had franchised restaurants throughout the United States, Canada and Guam but at the relevant time had not carried on business in Australia nor had they used the mark "Taco Bell" or that name in relation to restaurants or goods or services supplied in any restaurants in the Sydney metropolitan area. The evidence showed that a number of people in the relevant area knew of restaurants operated in America by one of the appellants or under franchises granted by one of them, but there was no evidence that either appellant had sold in the Sydney metropolitan area goods or goods of the class to which the particular trade name applies.
93. After referring to the declarations of principle of Lord Diplock and Lord Fraser in Advocaat, Franki J. said (at 187) that:
"it is now beyond argument that to succeed in a
passing-off action a plaintiff must have
goodwill in the geographical area for which the
injunction is sought and show that the conduct
sought to be restrained is such as has caused,
or is really likely to cause damage to the
property in that goodwill."
His Honour said (at 188) that neither appellant had any relevant goodwill or business in the Sydney Metropolitan area at the relevant time. His Honour also referred to The Athlete's Foot Case and to the fact that in Cadbury-Schweppes the Privy Council referred to the speeches of Lord Diplock and Lord Fraser in the Advocaat Case and said they were of general application (at 189). Franki J. found that there was no relevant goodwill in the name "Taco Bell" in any of the appellants so that the claim as to passing off must fail.
94. In their joint judgment, Deane and Fitzgerald JJ referred to the fact that Ellicott J. (the trial Judge) had concluded that the reputation of the appellants in Sydney at the relevant time was wholly dependent on user of the name "Taco Bell" overseas and that it did not entitle them to bring a passing off action here. Their Honours said that there was a degree of inconsistency in the cases, but found it unnecessary to consider the question whether any goodwill or any reputation which the appellants possessed was sufficient to base their action for passing off because they disposed of the case on a narrower ground, namely, that it had not been established that there was any actual or probable damage to the appellants (at 196).
95. In Enzed Holdings Limited v Wynthea Pty Limited [1984] FCA 373; (1984) 3 IPR 619, Sheppard, Morling and Wilcox JJ. in a joint judgment said (at 631) that in passing off cases a plaintiff needs to establish reputation in the country or part thereof where the passing off is alleged to have occurred, but that this did not require the plaintiff to be present or to be himself carrying on business in that place. It is the existence of the reputation in that place which is the deciding factor. Their Honours cited no authority and their comments were obiter dicta.
96. In Chase Manhattan Overseas Corporation v Chase Corporation Limited (1985) 6 IPR 59 the applicants sought orders based partly on passing off to prevent the first respondent, a company based in New Zealand, from using the name "Chase" in respect of its Australian operations. In response to an argument by the applicants to the effect that none of the history of the respondents in New Zealand is relevant Wilcox J. said (at 70):
"In my opinion it is wrong to postulate a rule
that an overseas company commencing operations
in Australia for the first time is necessarily
in the same position as a newly incorporated
company. There may be cases in which an
overseas company is unknown in this country
before commencing to trade here. In other cases
the opposite may be true. Many markets are
international in nature. Communications are
speedy and comprehensive. Just as an overseas
company may have a "slopover" reputation
sufficient to sustain a passing off action in a
country where it does not trade - see (Fletcher
Challenge) - there may be cases in which a
reputation precedes the newcomer so that upon
the commencement of its operations, it is
recognised for what it is. This is likely
particularly to be the case where the newcomer
is a significant and well known company in a
country with close links with Australia, such as
New Zealand."
97. In Contal Co Pty Limited v Szozda (1986) AIPC 90-317 Bryson J. granted an interlocutory injunction based on passing off. The defendant argued that the plaintiff had no reputation in the word "Contal" in New South Wales, the plaintiff being primarily a Melbourne enterprise. On this point, Bryson J. said at 36,957:
"A trader has a reputation to protect where he
has customers, not simply where he has a
presence in the form of an office, warehouse or
shop, and in relation to the Melbourne
enterprise's services State boundaries would not
be of much significance to customers. In
probability personal communication amongst
customers was a significant element in the
course and maintenance of reputation. Walton
J.'s explanation of the significance in
territorial boundaries in (the Athlete's Foot
Case) shows that an actual office or
establishment in New South Wales is not
necessary for entitlement to protection. The
restatement undertaken by the Privy Council in
(Pub Squash) shows, in my view, that the element
to be located is the goodwill, which can exist
even in places where there is no office or
establishment."
98. In 10th Cantanae Pty Limited v Shoshana Pty Limited (1987) 10 IPR 289, a judgment of the Full Court of this Court, Gummow J., in a dissenting judgment, reviewed the role of the defendant's fraud in passing off cases and said (at 312-3):
"Various decisions have proceeded on the footing
that where the court intervenes to protect the
goodwill of the plaintiff, it does so to protect
property rights situated in the forum, with the
result that if the plaintiff's goodwill is
'international' but not 'local' because the
plaintiff has no place of business in the forum,
no case is made out; this has been held to be so
even though local customers of the defendant
believe they are dealing with the plaintiff or
purchasing the plaintiff's goods or services:
(The Athlete's Foot Case). The apparent
stringency of such a rule has been alleviated in
some decisions by treating as sufficient to
establish local goodwill, both sales by local
distributors of products made abroad by the
plaintiff: Hospital Products Limited v United
States Surgical Corp. [1984] HCA 64; (1984) 156 CLR 41 at 100-1,
144-5; and other business activities falling
short of actual establishment of a local place
of business: (Fletcher Challenge; Taco Bell)."
99. In Merv Brown Pty Limited v David Jones (Australia) Pty Limited (1987) 73 ALR 504 Northrop J. said (at 512) that reputation or goodwill is divisible and to arise it must be with respect to a trade relation with persons within the relevant geographical area. His Honour said that this was made clear in the Taco Bell case, the Crazy Horse case and the Athletes Foot case and the fact that some persons in Australia know of the reputation or goodwill of the name "Miki House" with respect to Miki Shoko does not prevent Merv Brown from acquiring its reputation or goodwill in Australia with respect to that name. The essential feature, he said, is the existence in Australia of a trade relation with respect to articles and that name. He also said (at 513) that the fact that no sales had taken place does not prevent the reputation or goodwill being acquired, the negotiations and activities directed to the prospective sale of clothing by Merv Brown apparently being enough, and referred to Volt Australia Limited v Directories (Aust) Pty Limited [1985] FCA 160; (1985) 5 IPR 140. On appeal to a Full Court of this Court, reported in (1988) 10 ATPR 40-858 Lockhart J., with whose reasons for judgment Sweeney and Spender JJ. agreed, said at 40,278 that:
"Very slight activities have been held
sufficient to establish that a name has become
distinctive of a person's business in a
particular country: (referring to Sheraton,
Pioret, Volt, B.M. Auto Sales Pty Ltd v Budget
Rent-A-Car System Pty Ltd, Elida Gibbs). The
cases of Volt Australia, B.M. Auto Sales and
Elida Gibbs also support the proposition that it
is not necessary that Merv Brown had commenced
retail sales in order to acquire the relevant
reputation for the purposes of passing off ..."
100. Lastly, in TV-am PLC v Amalgamated Television Services Pty Limited (1988) 12 IPR 85 Einfeld J. dismissed an application by the applicant, a British company broadcasting in the United Kingdom, suing the respondents, who had begun broadcasting a program called "TVAM". After reviewing the cases on the question of the necessity for a business presence in the forum, Einfeld J. said that the evidence showed only a minimal Australian reputation and certainly not the carrying on of any business by the applicant. But he disposed of the passing off action in the case on the basis that, even if the applicant had a sufficient reputation, it had not established a misrepresentation for the purposes of passing off (at 96).
The basis of passing off and the test of local connection
101. I shall draw together the threads from this review of cases on the question of whether it is necessary to sustain the tort of passing off that the plaintiff's trade or business is in fact carried on within the jurisdiction or whether it is sufficient that there is a reputation within the jurisdiction in respect of that trade or business carried on elsewhere. I have not mentioned all the relevant cases but have referred to those that most directly concern the question of the true basis of the tort and of the necessity or otherwise for local business in the forum. Fraud is a closely related question and I do not suggest that by considering it separately I am ignoring it for present purposes. It is simply for reasons of convenient discussion that I defer it at this stage.
102. It is now beyond argument that the plaintiff's right which the law of passing off protects is a proprietary right in the goodwill or reputation of his business likely to be injured by the defendant's conduct. I do not consider that this Court, sitting as a Full Court, is bound by any decisions of higher or equal authority on the question of the necessity or otherwise of local business in the forum. But the cases provide considerable assistance in resolving this difficult question.
103. On examination of the relevant authorities it becomes clear that the basis of the cause of action lies squarely in misrepresentation, for its underlying rationale is to prevent commercial dishonesty. The tort of passing off protects the business of the plaintiff with its many facets: its assets, goodwill and reputation. It stops persons and companies gaining a commercial advantage through wrongfully taking the attributes of another's business if it causes or is likely to cause that other person's business some damage.
104. Using goodwill as the crucial facet of a business upon which to focus passing off actions has problems. The cases on passing off have attempted to define the term "goodwill" with reference to cases involving the construction of revenue statutes. Lord Macnaghten's speech in Muller (at 223-4) is the classic statement most frequently adopted. His Lordship did state (at 224):
"if there is one attribute common to all cases
of goodwill it is the attribute of locality.
For goodwill has no independent existence. It
cannot subsist by itself. It must be attached
to a business."
"No doubt, where the reputation of a business is
very widely spread or where it is the article
produced rather than the producer of the article
that has won popular favour, it may be difficult
to localise goodwill."
The speeches of their Lordships in Muller are however all to be seen in the context of that case which involved the question whether the goodwill of the relevant business was property "locally situate out of the United Kingdom" within the meaning of the Stamp Act 1891 (UK). Hence the speeches were directed to the question whether goodwill can have a separate locality from the business to which it is attached and it was this question that caused the dissent of the Lord Chancellor, The Earl of Halsbury.
105. Similarly the reasons of the High Court in the Ford case concerned the construction of a revenue statute, (s. 34(4) of the Income Tax Assessment Act 1936 (Qld). The statements at 272 of the judgment must be read in light of that fact.
106. Reputation is the key business facet that passing off protects. In my view, the "requirement" of goodwill was not meant to have a different meaning to reputation and its inclusion only serves to complicate the matter. Further, by using the notion of reputation as distinct from goodwill, the law of passing off is not trammelled by definitions of goodwill developed in the field of revenue law.
107. It is quite right to say that the reputation of a business cannot be severed from the business itself or a person who owns it, each is inevitably intertwined with the other. Reputation is a result of the carrying on of business. But it is, in my view, quite wrong to assert in 1992 that the law of passing off cannot protect a plaintiff or his goods (or services) in a country where he does not carry on business or has ceased to carry on business or has no place of business. In most cases a plaintiff does have a physical presence of some kind in the forum either through a physical location such as an office, factory or warehouse or by the presence of a market for his goods, being sold or distributed by himself or his agent, but in my opinion this is not a necessary element of the tort.
108. In the United Kingdom there are two opposed lines of authority on the question of whether the tort will protect a plaintiff's business, goodwill or reputation where there is no business carried on in the United Kingdom. The "hard line" cases require, in addition to any reputation in the United Kingdom, a form of business presence or activity within the jurisdiction or some use of that reputation. However, even within the "hard line" authorities there is inconsistency on the question of the extent or degree of use.
109. I agree with Cooke P.'s comments in the New Zealand Budget case that the "hard line" approach may be the result of a reluctance of the courts in the United Kingdom to diminish the test too much when they are, after all, restraining somebody in their own territory and, as a result, would stifle local competition and enterprise. In earlier times when television and radio were in their infancy and when international trade in domestic goods was less extensive than it is today, it is understandable why the "hard line" cases developed with England separated from foreign plaintiffs by the English Channel and the Atlantic Ocean. But in to-day's age of satellite television stations, massive improvements in all forms of global communications and frequent international travel, the maintenance of a "hard line" is no longer defensible, at least in Australia.
110. Although Star Industrial and Advocaat are sometimes referred to in certain of the cases and articles by learned authors as supporting the "hard line" approach, in my view Lord Diplock in Star Industrial and Lord Diplock and Lord Fraser in Advocaat were not directly considering the question of the particular connection with the United Kingdom which is required before a plaintiff can successfully maintain an action for passing off; so the observations of their Lordships must be read with this clearly in mind. In this respect, I agree with the observations of Slade J. in My Kinda Bones. Further it is interesting to note, as I mentioned earlier, that in the recent decision of the House of Lords in Reckitt and Colman Properties Ltd v Borden Inc, their Lordships, in describing the elements of the tort of passing off, made no reference to a requirement of local business activities.
111. The "softer" line of cases do not require an actual place of business or business activity or the presence of customers within the jurisdiction. The rationale for the protection of a trader's business and reputation was explained convincingly by Graham J. in Baskin Robins at 547-8 (passages cited earlier by me) who stressed that it is impossible to prescribe artificial limits as to geographical areas over which reputation and goodwill can or cannot extend and to state rules as to what a trader must or must not do to prove the existence of his reputation and goodwill; these are questions of fact in each case.
112. The Canadian and United States cases seem to take a much broader approach but, as was pointed out in the Canadian case of Orkin, this may be explicable, at least in part, by the large elements of commonality within North America, not necessarily dependent upon national boundaries of the United States and Canada. Similar considerations apply in my view as between Australia and New Zealand. There obviously must be some link with the forum and, it seems to me, reputation is the most appropriate link. There must be evidence of local reputation, but business activities need not be carried on within the forum.
113. The test for whether a foreign plaintiff may succeed in a passing off action is, according to most of the more recent English cases, not that he must have business activities or a place of business in the United Kingdom; but whether, as a question of fact, his business has goodwill or a reputation in England. This is a broader, though more uncertain and elastic, concept than its predecessors. In my view the approach to this question adopted by the Canadian, United States and New Zealand courts, together with the English cases of which Baskin Robins is one example, are more in harmony with the realities of contemporary business.
114. The Australian authorities do not present an entirely clear picture. In Taco Bell, as mentioned earlier, the Judge at first instance and Franki J., a member of the Full Court on appeal, followed fairly closely Athletes Foot, although Deane and Fitzgerald JJ., after noting "a degree of inconsistency in the cases", did not find it necessary to decide the question whether any goodwill or reputation which the appellants possessed was sufficient to base their action for passing off because they disposed of the case on another ground. The High Court in Turner, in particular Isaacs J., and the High Court in Budget left open the point that arises in this case. However it was made clear by the High Court in Budget, that for a plaintiff to succeed, whether he conducts his business here directly or through agents or other intermediaries, the courts will often accept minimal evidence that a business is being carried on, though the cases do show that this may depend on the extent to which he has a substantial reputation there.
115. It is no longer valid, if it ever was, to speak of a business having goodwill or reputation only where the business is carried on. Modern mass advertising through television (which reaches by satellite every corner of the globe instantaneously), radio, newspapers and magazines, reaches people in many countries of the world. The international mobility of the world population increasingly brings human beings, and therefore potential consumers of goods and services, closer together and engenders an increasing and more instantaneous awareness of international commodities. This is an age of enormous commercial enterprises, some with budgets larger than sovereign states, who advertise their products by sophisticated means involving huge financial outlay. Goods and services are often preceded by their reputation abroad. They may not be physically present in the market of a particular country, but are well known there because of the sophistication of communications which are increasingly less limited by national boundaries, and the frequent travel of residents of many countries for reasons of business, pleasure or study.
116. In my opinion, the "hard line" cases in England conflict with the needs of contemporary business and international commerce. A trader's reputation may be injured locally by many means. A trader may have a famous and well-known commodity, yet a person, totally unconnected with him, may in a country where the trader's goods are not sold and where he has no place of business nevertheless cause confusion in the marketplace and lead the consumers to believe that a business connection exists between the two. The local person may produce a product inferior in quality to the product of the overseas trader and this may taint irreparably the reputation of the original product and of its maker. The reality of modern international business is that contemporary consumers are not usually concerned about the actual location of the premises of a company or the site of its warehouse or manufacturing plant where the goods are produced, but they are concerned with maintenance of a high level of quality represented by internationally known and famous goods.
117. The requirement in some of the cases that a very slight form of business activity is sufficient is really a somewhat artificial concept. The real question is whether the owner of the goods has established a sufficient reputation with respect to his goods within the particular country in order to acquire a sufficient level of consumer knowledge of the product and attraction for it to provide custom which, if lost, would likely to result in damage to him. This is essentially a question of fact.
118. As I outlined in more detail earlier, it is still necessary for a plaintiff to establish that his goods have the requisite reputation in the particular jurisdiction, that there is a likelihood of deception among consumers and a likelihood of damage to his reputation. But reputation within the jurisdiction may be proved by a variety of means including advertisements on television, or radio or in magazines and newspapers within the forum. It may be established by showing constant travel of people between other countries and the forum, and that people within the forum (whether residents there or persons simply visiting there from other countries) are exposed to the goods of the overseas owner (see for example C and A Modes, Orkin and Midas).
119. Certainly the law of passing off does not confer protection on the owners of goods who have no reputation in a particular jurisdiction, otherwise they would have an international monopoly with respect to the name, get-up or mark applied to their goods (and services) and may never intend to exploit it in the particular jurisdiction. It is the likelihood of deception among consumers and of damage to reputation that are the critical requirements to establish a case of passing off and they prevent any such unauthorised international monopoly being granted to a plaintiff. A quia timet injunction is a good illustration of this point for, in most cases, while such an injunction will be granted where the plaintiff has at the time of action no relevant business connection with the particular jurisdiction but has a reputation there and has established a likelihood of deception amongst consumers, he must go on to establish a likelihood of damage to his reputation and that he intends to establish in some way his business or sell his goods in that jurisdiction. Indeed, it is the nub of the present case whether the facts sufficiently establish reputation of the appellant and a likelihood of deception among consumers here and damage to the reputation of the appellant, a matter to which I shall turn later.
120. I will discuss shortly the question of fraud because it bears on what I have just said. It is sufficient for me to say at this stage that proof of fraud on the part of the defendant is a well established means of assisting the plaintiff to prove his case on the ground that the infringer would not have bothered to copy the plaintiff's goods unless he thought it was worth doing so for his own advantage. For reasons which I shall give later, I do not think that by proving fraud on the part of the defendant, the plaintiff can acquire an international monopoly in his reputation unless there exists in the forum reputation in the sense mentioned earlier.
121. For these reasons, I am of the opinion that it is not necessary in Australia that a plaintiff, in order to maintain a passing off action, must have a place of business or a business presence in Australia; nor is it necessary that his goods are sold here. It is sufficient if his goods have a reputation in this country among persons here, whether residents or otherwise, of a sufficient degree to establish that there is a likelihood of deception among consumers and potential consumers and of damage to his reputation.
122. The second question which I propose to consider is the relevance of fraud to maintaining a passing off action.
123. The origins of passing off are obscure as exemplified by the two 17th century cases of Southern v How (1618), 15 Cro Jac 468 and Dean v Steel (1626) Latch 188: see the article by Professor W.L. Morison "Unfair Competition and Passing Off" at 53-55 mentioned earlier. Passing off emerged from the common law action for deceit, but as Lord Parker of Waddington observed in Spalding at 283-4:
"it only resembled the action for deceit in the
fact that the misrepresentation relied on must
have been fraudulently made. In all other
respects it differed from an action of deceit.
For example, the plaintiff was not the party
deceived, and even if it were necessary to prove
that someone had been deceived, nominal damage
could be obtained though no actual damage was
proved. "
Passing off emerged as a species of the genus of the action for deceit permitting it to be brought not by the customer deceived but by the trader whose goods had been used to effect the deception. See Blanchard v Hill [1742] EngR 148; (1742) 2 Atk 484; 26 ER 692 and Crawshay v Thompson (1842) 2 ManandG 357; [1842] EngR 608; 134 ER 146.
124. An intention by the defendant to deceive has not been a necessary ingredient in the cause of passing off since 1838 when Millington v Fox decided that equity concerned itself with the protection of property rights of the plaintiff. As I have already discussed, it was in Spalding in 1915, which was confirmed in 1979 in Advocaat, that the modern basis of the tort was put squarely as injury to the plaintiff's reputation or business or goodwill by the defendant's conduct irrespective of any intent to deceive.
125. The relevance of fraud to-day is a matter of uncertainty: see the articles by Professor Morison and Mr W.M.C. Gummow mentioned earlier; Gummow and Lehane, "Equity Doctrines and Remedies", 2nd ed 1984, para 2127; the discussion by Gummow J. in 10th Cantanae Pty Limited v Shoshana Pty Limited at 321-2, a dissenting judgment, but where the majority took a different view of the facts to his Honour and did not find it necessary to consider his Honour's observations on the relevance of fraud; and the observations of Gummow J. in Telmak Teleproducts (Australia) Pty Limited v Coles Myer Limited (1988) 84 ALR 437 at 446 (his Honour's judgment in Telmak was overruled by the Full Court of this Court by majority (reported in [1989] FCA 272; (1989) 89 ALR 48) but again their Honours did not find it necessary to discuss the issue of fraud.
126. It has not been laid down authoritatively that the old action emphasising fraud springing from the common law action of deceit is no longer available to maintain a cause of action for passing off and, in my view, although its contemporary relevance is very limited, it is still alive, though in relative obscurity. The reason for this is obvious namely that it is much harder to prove fraud on the part of the defendant than the likelihood that his conduct will deceive the public, an essentially objective question.
127. Evidence of fraud is still tendered in passing off cases because evidence that the defendant had a fraudulent intent may assist in establishing the requisite misrepresentation, as the court "will not be astute to find the defendant has failed in his nefarious design" Midland Counties Dairy Ltd v Midland Dairies Ltd (1948) 65 RPC 429 at 435 and see Slazenger and Sons v Feltham and Co (1889) 6 RPC 531 at 538; Claudius Ash Sons and Co Ltd v Invicta Manufacturing Co (1911) 28 RPC 597; (1912) 29 RPC 465 at 475; Wilson v Samuels (1913) 13 SR (NSW) 395 at 398; Australian Guarantee Corp Ltd v Sydney Guarantee Corp Ltd (1951) 51 SR (NSW) 166 at 170-171; Ronson Products Ltd v James Ronson Pty Ltd at 739; Cadbury Schweppes Pty Ltd v Pub Squash Co Pty Ltd; Regan v Grant (1982) 1 NAIPR 416 (H.C. of N.Z.); Komesaroff v Mickle [1987] VicRp 60; (1986) 7 IPR 295 and Irish Distillers Ltd v S Smith and Son Pty Ltd (1986) 7 IPR 509. But deliberate copying of the plaintiff's goods does not always evidence an intention to deceive; it may indicate nothing more than realisation that the plaintiff has a useful idea which the defendant can turn to his own advantage, though not intending to pass off his goods as those of the plaintiff. See for example the Pub Squash Case at 861; Fido Dido Inc v Venture Stores (Retailers) Pty Ltd (1988) ATPR 40-912; Just Jeans Pty Ltd v Westco Jeans (Aust) Pty Ltd (1988) 12 IPR 403 at 406, affirmed in (1988) 13 IPR 661.
128. The extent to which proof of fraud may assist in obtaining wider relief than would otherwise be available (whether by way of damages or account of profits for innocent passing off) is not a matter which I find it necessary to discuss because, in my opinion, the renascence of the cause of action based on deceit would not exclude the necessity to establish the existence of reputation of the plaintiff giving rise to a misrepresentation. The basis of the tort of passing off is misrepresentation, and in my opinion reputation must exist for a misrepresentation to occur.
129. In the present case, it is necessary that the appellant establish its reputation in Australia, in the sense which I have defined it, before it can succeed on passing off even if fraudulent conduct on the part of the respondent is proved.
130. As I mentioned earlier when discussing Turner, Isaacs J. observed at 364 that the law will protect a plaintiff who has an intention to commence business in Australia against injury which the defendant is preparing for him when he "digs a pit in a path along which he has reason to believe another man will shortly travel". Needham J. adopted much the same approach in Olin Chemicals, which I discussed earlier. But Turner is a case where the American company had formed a company in Australia with a name based on its own name, to assemble and sell cars and the Australian company had commenced to erect a factory in Australia, also the American company had widely advertised its intention to do these things here before the defendant committed the acts complained of. The plaintiff had a reputation in Australia before the litigation commenced. Olin is a case where the plaintiff had made sales of its product, although extremely limited, at the date of commencement of the proceedings. Neither of those cases is authority for the proposition that fraud is sufficient to maintain an action for passing off in the absence of proof of the plaintiff's reputation in Australia., Establishing Reputation in Australia
131. I said earlier that if a plaintiff establishes that it has a reputation in the jurisdiction then that would be sufficient to allow it to maintain an action in passing off. I have already discussed the various ways by which that reputation may be achieved, but it remains to define the extent or scope of reputation required. In my opinion the plaintiff must prove that there are within the jurisdiction in which the defendant is carrying on business a substantial number of persons who are aware of the plaintiff's product: see Saville Perfumery Limited v June Perfect Limited (1941) 58 RPC 147 per Viscount Maugham at 176; Taco Bell per Franki J. at 190; Norman Kark Publications Limited v Odhams Press Limited (1962) RPC 163 per Wilberforce J. at 168 and Budget Rent A Car System Pty Ltd. This was the test adopted by the primary Judge at 485-6 and in my opinion correctly. Further, it does not matter whether the persons within the relevant jurisdiction who are aware of the plaintiff's product, are resident or visitors from anywhere in the world.
132. The reason for the requirement of a substantial number of persons is in my opinion that the reputation of a plaintiff in the forum is the source of his potential business there; his goods are known to people there who are his potential customers. For him to have in a practical and business sense a sufficient reputation in the forum requires something more than a reputation among a small number of persons, although the size and extent of the class may vary according to the circumstances of the case. Also, the law seeks to promote local competition and innovation and does not extend its protection to persons whose goods are not sufficiently known in the forum.
133. The primary Judge found that the evidence adduced by the appellant of reputation in Australia took two forms: first, advertising in magazines and journals in the United States but reaching Australia; and, second, evidence from persons presently in Australia who were aware of the ConAgra Healthy Choice product.
134. As to the advertisements, his Honour found that it was agreed that the advertising in question was not directed to a non United States audience and that there were five magazines which had a small number of sales in Australia. He said that advertisements appeared as well in a number of well known international publications such as Time, Readers Digest, News Week, Life, National Geographic and Sports Illustrated but most, if not all such international magazines publish special editions for circulation in Australia with Australian advertising replacing that published in the United States. As the appellant's advertisements do not appear in the Australian editions, his Honour found, correctly in my opinion, that those international magazines may accordingly be ignored. There were five United States magazines sold in Australia which had advertisements for the appellant's frozen food products. The total sales in 1990 were 2,299 and in 1991 to the date of commencement of proceedings were 283. The sales of these five magazines in Australia are very small when compared with the sales figures of well known Australian magazines: for example, Australian Women's Weekly, 1,160,000 per month; Australian Woman's Day 984,500 per week; Australian New Idea 1,017,688 per week. In addition there was an article which appeared in an American trade journal, Food Business. It had been read by the marketing director and the product manager of the respondent in Australia, from which his Honour inferred that some persons in the trade in Australia would receive the journal and peruse the article.
135. The relevant magazines were not in evidence so, although examples of the advertising in them are in evidence, it is not known where the advertisements appear within each magazine so that it is not possible to assess its likely impact upon a reader. Nor is it known from the evidence where the magazines were sold (for example, at newsagents or airports) and whether the buyers of the magazines would be likely to purchase frozen foods in Australia.
136. In addition to the evidential problems already mentioned, the significance and effect of an advertisement which appears twice each year (as the five magazines appear to do) in a United States magazine advertising a frozen food product that is not available for sale in Australia and not of a kind that can be ordered from this country, would seem to me to be minimal, especially as it is not part of an advertising campaign in this country. Although the primary Judge did not make any specific findings as to the likely effect or impact of the advertisements in the United States magazines sold in Australia, his conclusion on the question of reputation of the appellant in Australia (that he was not satisfied that there existed here a sufficiently substantial number of persons who are aware of the appellant's product and for whom the name Healthy Choice would have acquired a secondary meaning, that is to say the meaning signifying the appellant's Healthy Choice product) indicates plainly enough that he was not satisfied that the advertisements in the magazine were likely to have reached or affected a sufficient number of people in this country.
137. Before turning to the second form of evidence, brief reference should be made to evidence led at the trial by the appellant of statistics showing the movement of people between Australia and the United States. The number of persons who departed Australia to go to the United States in the financial year 1989-90 was 534,010. Of that number only 2,223 were Australian residents departing permanently, 257,171 were short term visitors who were departing, 110 were long term visitors departing and 234,603 were Australian residents departing for a short term. Evidence was also given of the frequent airline traffic between Australia and the United States. His Honour was asked to infer that there was a substantial number of people who travelled between Australia and the United States and that those persons would have been exposed to advertising in the United States of the appellant's "Healthy Choice" product and would have seen the product itself on shelves in that country.
138. Evidence of this kind has considerable difficulty, it seems to me, as proof of reputation. It is not possible to assess how many travellers on short visits to the United States would have watched television either at all or at the times of the appellant's advertising, or would have visited shops or supermarkets, whether in the frozen food section or elsewhere. One does not know how many of the travellers would have been interested in the appellant's product itself, especially as it was not available for sale in Australia. Also the theme of the appellant's advertising stressing health was not unique to it because the evidence shows that competitive food products in the United States also used the advertising theme of "healthy product - low in fat, low in sodium, low in cholesterol".
139. With respect to travellers to Australia from the United States, whether as long or short term visitors, there was no evidence as to the extent to which such people were or were likely to be buyers of frozen food products including, in particular, dinners in the United States or likely to be aware of the appellant's Healthy Choice products. Nor was there evidence of whether such people were or were likely to be the purchasers of frozen dinners in Australia during their visit here. The most that one could conclude from this evidence, in my opinion, would be that some of the persons departing Australia for the United States or departing the United States for Australia, whether for short or long term visits, would be aware of the appellant's frozen food products, but whether it would be a small or large number of the travellers is virtually impossible to assess. While some assistance to the appellant's case is given by the evidence that the appellant's frozen food products were generally well known in the United States amongst a substantial percentage of the population (47%) and in particular among the buyers of frozen food dinners at the premium end of the market (about 68%), it seems to me, at the end of the day, that the statistics of travel of persons between the two countries is a rather flimsy twig on which to support evidence of reputation of a truly worthwhile kind.
140. His Honour also referred to the evidence of Mr Smith, a market researcher employed by the respondent on an ongoing basis to conduct continuous tracking market research in respect of its frozen dinner products. His Honour referred to this evidence in some detail at 484, criticised it on various grounds mentioned at 484 and 485 and concluded that the evidence adduced by the respondent on this branch of the case was not of much assistance in resolving the case. Although the respondent argued that his Honour erred in this finding with respect to Mr Smith's evidence, I am not persuaded that his Honour's finding was in error. Although it is of interest to note that of the persons who were interviewed in the relevant market research surveys in Australia some 4,000 persons who were "unprompted" had never used the words Healthy Choice as a brand recognised by them in respect of frozen dinners and of those who were "prompted" since April 1991, only 3 of 50 persons who were interviewed using the relevant random survey selection, recognised the McCain pack and none recognised the ConAgra pack.
141. As mentioned earlier, the second form of evidence that his Honour referred to was from persons in Australia who were aware of the appellant's Healthy Choice product. The appellant relied on affidavits from eleven persons, ten of whom had had some recent connection with the United States. The eleventh deponent was a trade witness for the appellant to whose evidence I shall turn later. His Honour said that the affidavits from the ten witnesses were read without objection, but the respondent informed us that all the affidavits were objected to on the basis of relevance and this indeed appears to be correct.
142. His Honour reviewed the evidence of these deponents. Mr Balson, an American citizen, had lived in the United States until August 1990 and was temporarily resident in Australia at the time of the trial. When shown the respondent's packaging he recognised the name but not the packaging and referred to advertising in American of the appellant's products. Mr Carrington, an investment banker in the United States, was in Australia at the time of swearing his affidavit for business purposes on a short visit. When shown a package of the respondent's Healthy Choice product he recognised it as the appellant's product. He recalled details of the appellant's advertising. Mr Michels, a United States citizen in Australia for a one year stay, recognised the name Healthy Choice though not the name McCain when shown the respondent's product and said that if he saw it in a store he would immediately think that it was the United States product and buy it. Mr Swendt, an American citizen now living in Australia who is a chef by occupation, had seen a product in the United States and was reminded of it by the words "low fat, low cholesterol, low sodium". Ms Barnes, an Australian citizen and a dietitian was aware of the name Healthy Choice from her visits to the United States and shopping there. Ms Tarlington, an Australian citizen who had lived in the United States for a period, remembered Healthy Choice frozen dinners although not the "McCain" name from her stay in the United States. Mr Ward, Ms Stanton (a dietitian) and Mrs Trude were Australian citizens who had lived in the United States for varying periods and then returned to Australia and each of whom recognised the product Healthy Choice from their experience in the United States. None of the Australian citizens mentioned having seen any advertising for the appellant's product notwithstanding that four of them had been in the United States for periods in excess of twelve months. One of the deponents did not recognise the package shown to him at all. There was no evidence that any of the deponents was likely to buy frozen food products in Australia. Ms Barnes and Ms Stanton, both Australian citizens who had visited the United States, were dietitians and thus had a clear business interest in new food products available in the United States. Although none of the deponents were cross examined, I agree with the submission of counsel for the respondent that no extrapolation of any value can be made from those deponents to the Australian population in general, using the expression "Australian population" in the sense of not just Australian citizens resident in Australia but persons who are in Australia from whichever country they may originate, either as likely buyers of frozen foods or as likely to be aware of the appellant's product in the United States.
143. As to trade buyers his Honour said of the evidence of Mr Yung, a product manager of the appellant, that he had no reason to reject his evidence when Mr Yung said that he believed that trade buyers would have been aware of the appellant's product in the United States. His Honour concluded (at 485) that "Among the class of person, to whom the Trade Presenter was sent, it is clear that the ConAgra product had therefore a significant reputation." The respondent challenged this finding. Counsel for the respondent argued that it was based only on Mr Yung's belief and that no inference could properly be drawn from his belief as to the fact and that the only evidence of the fact was from the evidence of the trade witness, Mr Hannon, a witness called by the appellant. Mr Hannon was interviewed on behalf of the appellant but primarily about the Trade Presenter and, when asked in cross examination about the Healthy Choice product, it is plain from his evidence that his knowledge of it was solely from the Trade Presenter. In short, it could not be said of Mr Hannon's evidence that he was aware of the appellant's product other than in the context of the Trade Presenter. There is I think force in the submission of counsel for the respondent that, in the absence of other evidence, it was not possible to conclude that a reputation for the appellant's product among trade buyers was proved.
144. As to members of the public in Australia to whom the respondent's Healthy Choice product advertising was directed and who were the respective purchasers of frozen food dinners, his Honour concluded that the advertisements in journals selling in Australia did not, in his opinion, demonstrate a sufficient reputation here. On the contrary, his Honour said that the evidence suggested that such reputation as did exist was insignificant. His Honour went on to conclude that he could not be satisfied that there existed in Australia a sufficiently substantial number of persons who were aware of the appellant's product and for whom Healthy Choice would have acquired a secondary meaning in the sense of signifying the appellant's Healthy Choice product.
145. In my opinion his Honour was correct in concluding that the appellant failed to prove that there is a substantial proportion of persons in Australia who are aware of the appellant's product. Hence the attack made on his Honour's finding that it had not been established that the requisite reputation of the appellant existed in Australia must fail. It follows that the appellant cannot sustain its claim for passing off (except as to the Trade Presenter).
146. I turn to his Honour's finding that the respondent was guilty of fraud. Although, for the reasons earlier given by me, it is not necessary for this finding to be considered as the appellant has not established a reputation within Australia, it was the subject of extensive submissions before us so I shall deal with it.
147. The primary Judge found that the respondent was guilty of fraud and that, if the other elements of the tort of passing off had been made out, it must be held responsible for the consequences of its action (at 478). The fraud which his Honour found was what he described as fraud "in the relevant sense" (at 476) but he did not explain what he meant by that reference. However, later, having left the subject of fraud, his Honour found that given that the words Healthy Choice are used on the respondent's package in conjunction with the McCain trade mark and logo prominently displayed, it seemed to him quite clear that no one seeing the McCain product would believe that they were purchasing a product of the appellant (at 482), at least in the case where the running man logo no longer appears. But his Honour went on to find that the packages do suggest to a purchaser, or at least one familiar with the appellant's product, that there is a relationship of some kind between the appellant and the respondent or their respective products. He said that he was drawn to this conclusion in large part by the particular emphasis on low fat, low cholesterol, low sodium, the positioning of those words and in particular the use of the Americanism "sodium" for the common English word "salt", all in association with a green package on which the name Healthy Choice appears. He said that this connection would only be apparent to a person familiar with the appellant's product, so he then turned to the evidence of reputation in Australia (at 482).
148. His Honour made the following findings relevant to his conclusion of fraud:- . the respondent adopted the name Healthy Choice having regard to
the success of the marketing by the appellant of its procedd in
the United States (at 476) and that at no stage was any other name
given any serious consideration by it (at 477);
. his Honour recognised the distinction between the adoption of a
product on the one hand and the name and other aspects of
packaging on the other. He referred to it as an obvious
distinction but he then found (at 477):
"To embark upon the course of marketing a
healthy food product could involve no
infringement of ConAgra's rights. However, to
embark upon a course of deliberately
appropriating the name used by ConAgra (assuming
it to be a distinctive name) and aspects of its
packaging in such a way as could cause confusion
between the two products or cause consumers to
believe that the McCain product was in some way
connected with the ConAgra product is quite a
different thing".
. It was not only important to the respondent to appropriate the
name Healthy Choice but equally important to it to use the words
"low cholesterol, low fat, low sodium" separated by dots in the
same way on the respondent's pack as on the appellant's pack (a 477).
. The package design adopted by the respondent was also consciously
influenced by the appellant's Healthy Choice product (at 477).
149. It seems to me that the findings of his Honour mentioned above led his Honour to conclude that the respondent was guilty of fraud, not in the sense that it deliberately set out to induce the public in Australia to believe that if they purchased a McCain product they would be purchasing a ConAgra product, but that its intention was to suggest to purchasers or prospective purchasers that there is a relationship of some kind between the appellant and the respondent or their respective products. His Honour was also influenced by his finding that the Trade Presenter was cast in such terms that only two conclusions could be drawn from it: first, that the two products, that is the products of the appellant and the respondent, are the same or second, that the two products are associated (at 488). The respondent used the Trade Presenter to sell its products to stores and hence assist it in gaining a foothold in the marketplace in Australia.
150. The respondent criticised his Honour's findings with respect to fraud on a number of counts. It was submitted that fraud had not been pleaded by the appellant; but in my view this contention must fail. The statement of claim (paragraph 16) sufficiently raises the issue of fraud and it was not submitted to the primary Judge that a case of fraud had not been pleaded.
151. As appears earlier in my reasons, fraud is significant in two respects. First, fraud in the sense of a deliberate intent to steal a plaintiff's business, goodwill or reputation as in The Collins Company v Brown Case. Second, in the sense of "digging a commercial pit" in advance of the plaintiff who is proposing to commence business in the jurisdiction and thus cause injury or the probability of injury to the plaintiff. It is in this latter sense that one must read the observations of Isaacs J. in Turner at 364-365 and the judgment of Needham J. in Olin.
152. In my opinion, his Honour's findings of fact when considering the question of fraud have not been shown to be in error; but I must confess to having difficulty with the conclusion of his Honour that fraud "in the relevant sense" has been established. At the highest his Honour's findings mean that the respondent deliberately set out to copy or adopt the appellant's packaging and the name Healthy Choice to positively establish a relationship of some kind between the appellant and the respondent or their respective products, though this is not a finding specifically made by his Honour on the issue of fraud. More likely though is that his Honour's findings as to fraud mean that the respondent embarked upon a course of deliberately appropriating the name Healthy Choice, the use of the words "low cholesterol, low fat, low sodium" and aspects of the appellant's packaging in such a way that the respondents knew could cause confusion between the two products or could cause some consumers to believe that the McCain product was in some way connected with the ConAgra product.
153. Merely to imitate the name of another trader or his product or his get-up does not establish a case of fraud. That appears clearly from the Pub Squash Case. I have the distinct impression from my reading of the evidence in this case that what the respondent really set out to do was to apply to its own product and packaging so much of the name of the appellant's product Healthy Choice and get-up of its packaging as it could do, without contravening the law, not because it wanted to have its product confused with that of the appellant, but because it was most impressed by the striking success of the appellant's frozen food products in the United States and sought to adopt it for its own products in Australia as a good idea and one likely to succeed here. Nevertheless it seems the respondent wanted to sell its own product as a distinctive McCain product. However, his Honour had the benefit of seeing and hearing all the evidence including the witnesses who were critical on the question of fraud and his findings of fact should not, in my view, be disturbed. As reputation in Australia has not been established by the appellant, for the reasons I gave earlier, the finding of fraud does not ultimately avail the appellant. Do the respondent's packages suggest to a purchaser that there is a relationship of some kind between the appellant and the respondent or their respective products?
154. His Honour's finding that the packaging of the respondent suggests to a purchaser, or at least one familiar with the appellant's product, that there is a relationship of some kind between the appellant and the respondent or their respective products did not avail the appellant because of his Honour's finding that the appellant had not established a sufficient reputation in Australia. Whilst I agree with this latter conclusion I respectfully disagree with the former. It is true that the respondent uses on its packaging the name Healthy Choice, and the words "low cholesterol, low fat, low sodium" separated by dots in the same way on the respondent's pack as on the appellant's pack and similarly positioned, all in association with the green package. But the use of the McCain trade mark and logo and its prominent display on the respondent's package; the fact that the respondent, not just the appellant, is a large and well known producer of frozen food dinners sold as McCain products so that the McCain name is well known to consumers in this country do not, in my opinion, support the conclusion reached by his Honour. People looking at the respondent's packages would be likely to conclude that the McCain pack was a product of the respondent; they would not be likely to conclude that there is a relationship of the kind found by his Honour. These are essentially matters of impression; but on this point I respectfully differ from his Honour.
155. In my opinion, the failure of the appellant to establish a relevant reputation in Australia for the purposes of the law of passing off must cause it to fail also in its case of contravention of Part V of the Trade Practices Act as there is not a sufficiently substantial number of people in Australia aware of the appellant's product. The cases which have considered the question of the nature and extent of the class or classes of people likely to be misled or deceived for the purposes of Part V of the Trade Practices Act are not fully reconcilable with each other, though the differences between them are in most instances simply ones of expression. See the summary of some of the cases by Hill J. in Equity Access Pty Limited v Westpac Banking Corporation [1989] FCA 506; (1989) 16 IPR 431 (at 440-2). His Honour concluded (at 488) that the threshold under the Trade Practices Act may well be lower than it is for passing off, but that the appeal failed even by applying this lower threshold.
156. I do not find it necessary to decide whether there is a difference between the tort of passing off and contraventions of Part V of the Trade Practices Act in the nature or numeracy of the relevant persons likely to be misled or deceived because I agree with his Honour's finding that on the facts the appellant failed to pass even the lower threshold.
157. As to s. 53(c), his Honour's findings (at 489) have not been shown to be in error.
158. I would dismiss the appeal and the cross appeal and order the appellant to pay the costs of the respondent of the appeal and order the respondent to pay the costs of the appellant of the cross appeal.
I would dismiss the appeal and cross-appeal. The appellant should pay the respondent's costs of the appeal and the respondent should pay the appellant's costs of the cross appeal.
3. The facts upon which the appeal turns have been dealt with by Lockhart J. and I do not repeat them. I agree that the primary Judge's finding that the appellant did not establish that there was a substantial number of persons in Australia (being members of the class of potential purchasers of frozen food dinners) who were aware of the appellant's product, was not shaken on the appeal. The appellant complained of the way in which his Honour approached the question of reputation. Counsel contended that Hill J. treated the appellant's "separate" claims of reputation in the name "Healthy Choice" and in the get-up as both depending upon the creation of a secondary meaning for the phrase "Healthy Choice". But Hill J. dealt with reputation after he had decided that the respondent's packages (despite the prominent use of the name "McCain") suggested to a purchaser who was familiar with the appellant's product that there was a relationship of some kind between the appellant and the respondent or their respective products (see 101 ALR 461 at 482). His Honour reached that conclusion (with which I would agree) from the total impression conveyed by the two packages, taking the get-up and use of phrases (including "Healthy Choice") as a composite. Against that background, I cannot see any error in the approach then taken to the question of reputation.
4. It will be recalled that the "national launch" of the appellant's product in the United States occurred in January 1989 and that the present proceeding, essentially brought quia timet, was instituted 16 months later, in April 1991.
5. Putting to one side the necessity for a local trading goodwill, this is not a case of reliance upon a famous name or mark which over a substantial period has become well known in the forum. This was the position with "Selfridges" (Selfridges Limited v Selfridges (Australasia) Limited, Harvey C.J. in Eq., "Sydney Morning Herald", 6 April 1933); "General Motors" (Turner v General Motors (Australia) Proprietary Limited [1929] HCA 22; (1929) 42 CLR 352 at 363) and "C. and A." (C. and A. Modes v C. and A. (Waterford) Ltd (1978) FSR 126 at 137).
6. In cases where the courts have moved (whether on an interlocutory or final basis) to protect the potential exploitation, by the conduct of local trading, of an existing reputation in the forum, the plaintiff still has been required to make out (at the appropriate level for interlocutory or final relief) its case for the existence of that reputation. Examples are Sheraton Corporation of America v Sheraton Motels Ltd (1964) RPC 202 at 203; Globelegance B.V. v Sarkissian (1974) RPC 603 at 612; Metric Resources Corporation v Leasemetrix Ltd (1979)FSR 571 at 579; Home Box Office Inc. v Channel 5 Home Box Office Ltd (1982)FSR 449 at 456; Esanda Ltd v Esanda Finance Ltd (1984) 2 NZLR 748 at 752-753 and Orkin Exterminating Co. Inc. v Pestco Co. of Canada Ltd (1985) 19 DLR 4th 90 at 93-94. All of these judgments, save the last, were delivered upon applications for interlocutory relief. (See also B.M. Auto Sales Pty Ltd v Budget Rent a Car System Pty Ltd (1976) 51 ALJR 254 at 258.) Some caution is needed against treating findings as to reputation at the interlocutory level as if they were findings as to what would suffice to establish reputation at a trial.
7. Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd (1981) 1 NSWLR 196, where a mandatory interlocutory injunction was granted requiring a change of company name, may be thought to be a case near the line. The plaintiff had been incorporated in New Zealand on 10 November 1980 and the defendant was incorporated in New South Wales on 15 December 1980. Nevertheless, in considering that decision, it is important to bear in mind the following passage, supra at 198:
"The incorporation of the plaintiff was an
integral step in a then pending scheme for the
amalgamation of three companies, Challenge
Corporation Ltd, Fletcher Holdings Ltd and
Tasman Pulp and Paper Co Ltd, each of which
appears to have been a public company of some
long standing and of significant commercial
stature in New Zealand. The evidence thus far
presented suggests that, in addition to being
the holding company for one or more
subsidiaries, each of the three companies was
itself a trading company. Further, the evidence
thus far presented suggests that some at least,
of the three companies and their respective
subsidiaries were registered as foreign
companies, traded, and were well known, in
Australia, not only to persons concerned with
the goods or services which they provided but,
as well to persons in what might be called 'the
finance industry' and in 'the securities
industry'.
. . .
It should be added that the evidence thus far
tendered suggests that a number of substantial
insurance companies and other financial
institutions incorporated, registered and/or
carrying on business in Australia and, as well,
in New Zealand at all material times had
significant shareholdings in the capital of one
or more of Challenge Corporation Ltd, Fletcher
Holdings Ltd and Tasman Pulp and Paper Ltd."
8. The failure of the appellant's case as to reputation spells doom for the appellant, whatever the position as to fraud. I agree that in a case such as the present a failure to establish a reputation in the forum cannot be overcome by proof of fraud on the part of the defendant. The role of fraud in the modern passing-off action was debated before us and it is a topic to which I return later in these reasons. Another issue of law which arose on the appeal was the significance attached to the absence of local trade in the appellant's product.
9. Notwithstanding the failure of the appeal on the facts, the Court should express its conclusions upon these important issues in the law of passing-off, there being no binding Australian appellate authority.
10. Within the passing-off action, there is an accommodation and adjustment of three competing interests. First that of the plaintiff in protecting the commercial advantages flowing from his efforts and investment, secondly that of the defendant in being free to attract purchasers for his goods and services by what appears to him to be an effective means, and thirdly that of consumers in selecting between competing goods and services without the practice upon them of misrepresentations.
11. Attempts to produce a definition of the tort which is both succinct and comprehensive have had mixed success. In Erven Warnink Besloten Vennootschap v J. Townend and Sons (Hull) Ltd (1979) AC 731 at 742, Lord Diplock identified five essential characteristics of a passing-off action, and Lord Fraser of Tullybelton (1979) AC 731 at 755-756, also identified, but in somewhat different terms, five such characteristics. There followed in the English Court of Appeal differences of opinion as to whether these two sets of criteria were distinct, overlapping, or cumulative and whether, in any event, either was comprehensive: Anheuser-Busch Inc. v Budejovicky Budvar NP (1984)FSR 413 at 463, 472; Bristol Conservatories Ltd v Conservatories Custom Built Ltd (1989) RPC 455 at 465-467; Morcom "Developments In the Law of Passing-Off" (1991) 10 EIPR 380 at 382. As Ralph Gibson L.J. pointed out in the second of these cases (supra at 466) the probanda formulated by Lord Diplock and Lord Fraser would not, for example, allow for cases of "reverse" passing-off.
12. In Reckitt and Colman Products Ltd v Borden Inc. [1990] UKHL 12; (1990) RPC 341 at 406, Lord Oliver of Aylmerton formulated the essential elements in a passing-off action without referring specifically to earlier authority. Now, Nourse L.J. (in Consorzio del Prosciutto di Parma v Marks and Spencer plc (1991) RPC 351 at 368-369) has said that the formulations by Lord Diplock and Lord Fraser had not in his experience given the same degree of assistance in analysis and decision as "the classical trinity" of (1) reputation (2) misrepresentation and (3) damage. Nourse L.J. regards what was said in the Borden Case as signalling a "welcome return to the classical approach".
13. It is neither necessary nor appropriate for us to comment upon these vicissitudes of the recent English case law. But it is to be observed that the law of passing-off contains sufficient nooks and crannies to make it difficult to formulate any satisfactory definition in short form. However, "the classical trinity" does serve to emphasise three core concepts in this area of the law. This appeal is concerned with all of them, namely, the geographical requirements for a sufficient reputation, the nature of the interests damaged, and the significance of fraud in the making of the misrepresentation.
14. Over sixty years ago, in dealing with the development of the action for passing-off, Isaacs ACJ. said that the courts had "constantly endeavoured to keep pace with the progress of trade by adapting fundamental doctrines to advancing methods and changing circumstances": Angelides v James Stedman Hendersons Sweets Limited [1927] HCA 34; (1927) 40 CLR 43 at 59-60. On the present appeal, counsel for the appellant urged us to continue that process. Counsel for the respondent urged us to bear in mind the existence in Australia of statutory causes of action now provided by Part V of the Trade Practices Act 1974 and the need in developing the common law to avoid the indulgence of idiosyncratic notions of what is fair in the market place; cf. Moorgate Tobacco Co. Limited v Philip Morris Limited (No. 2) [1984] HCA 73; (1984) 156 CLR 414 at 445-446.
15. The primary Judge said (101 ALR at 474-475) that whilst the issue was one that could be resolved only by an appellate court, his view was that the time had come to recognise that, although the tort of passing-off is based on the existence of a business or trade, it does not matter whether that trade or business is in fact itself carried on in the jurisdiction, provided that there is in respect of it a reputation which does exist in the jurisdiction. Counsel for the appellant submitted that we should adopt that position; counsel for the respondent submitted to do so would be to fall into error.
16. His Honour also discussed (at 476-477) the present relevance of fraud for the action of passing-off. He held that the respondent had adopted the name "Healthy Choice" having regard to the success of the marketing by the appellant of its "Health Choice" product in the United States, and that the respondent had embarked upon a course of deliberately appropriating the name used by the appellant and aspects of the packaging of its goods, in such a way as, in Australia, could cause confusion between the two products or cause consumers to believe that the respondent's product was in some way connected with the product of the appellant. However, the primary Judge also said (at 476) that there was no modern formulation of the law of passing-off which distinguished between cases involving fraud, and cases which do not, other than to indicate that proof of fraud makes the plaintiff's case easier "in an evidentiary sense"; it will be apparent from what later appears in this judgment that I do not share that view.
17. The trial was conducted in New South Wales and the applicable law as to passing-off is that of this State: Judiciary Act 1903, s. 79. But there is no suggestion that the law is otherwise than uniform throughout Australia.
19. Commentators have pointed to common historical antecedents of the action for passing-off and the tort of deceit; see, in particular, Professor Morison's article "Unfair Competition and 'Passing-Off'" [1956] SydLawRw 2; (1956) 2 Syd. L. Rev. 50 at 53-54. Upon this too great a significance should not be placed. The point was made by Lord Parker of Waddington in A.G. Spalding and Bros v A.W. Gamage Ld (1915) 32 RPC 273 at 283-4, where his Lordship said:
"The plaintiff's remedy was said to have been in
the nature of an action for deceit, but it only
resembled the action for deceit in the fact that
the misrepresentation relied on must have been
fraudulently made. In all other respects it
differed from an action for deceit. For
example, the plaintiff was not the party
deceived, and even if it were necessary to prove
that someone had been deceived, nominal damage
could be obtained though no actual damage was
proved. Thus in Blofield v Payne (4 B and Ad
- the defendants had sold their own hones in
the plaintiff's wrappers as and for the
plaintiff's, but there was no evidence that any
purchasers had been actually deceived. Further,
though special damage was alleged in the
declaration, no actual damage was proved. On
motion for a non-suit it was held in the King's
Bench that the plaintiff was entitled to nominal
damages."
But affinity to the action for deceit does serve to emphasise that the action for passing-off protects the interests of customers as well as those of the plaintiff. As will appear, this is of some importance in dealing with the legal issues on this appeal. Further, there is continued significance in the connection between the presence of fraud on the part of the defendant and the range of remedies available to the plaintiff in a passing-off action.
20. In Kettles and Gas Appliances Ltd v Anthony Hordern and Sons Ltd [1934] NSWStRp 51; (1934) 35 SR (N.S.W.) 108 at 129, Long Innes J. said:
"There is, however, a clear distinction (see
Angelides v James Stedman Hendersons Sweets (40
CLR 43 at 60, 61)) between cases where the
plaintiff has a legal right which is enforceable
at his option either at law in an action of
deceit or in Equity in an action for fraudulent
passing off and cases of an innocent passing
off, where the plaintiff's only remedy is
equitable, and where in order to obtain any
relief he must come into Equity and invoke the
discretionary remedy, in which case he is
subject to the Equity maxim that he who comes
into equity must come with clean hands."
How did this situation come about? In answering this question, it is necessary to examine various 19th century decisions. In so doing, it is important to bear in mind that the lawyers who argued and decided those cases may have done so upon common, but unstated, legal assumptions, some of which have fallen away in the course of subsequent development of the law.
21. In actions at common law under the old system of pleading, the plaintiff's declaration alleged that he was accustomed to mark goods manufactured by him with the trade mark in question in order to denote that manufacture and to distinguish his goods from articles of the same description manufactured by other persons; the plaintiff further alleged that he enjoyed a great reputation with the public on account of the good quality of those goods, and that the defendant had acted, in the manner complained of, knowing the premises and fraudulently, against the will and without the licence and consent of the plaintiff. An example of such a declaration may be found in the report of Sykes v Sykes (1824) 3 B and C 541[1824] EngR 175; , 107 ER 834. The issue of fraudulent intention was, of course, for the jury upon which it rested to determine whether the intention so pleaded was proved upon the evidence before it; see the authorities collected in Sebastian, The Law of Trade Marks, 3rd Ed., 1890, 174-176.
22. In aid of his legal rights, the plaintiff might seek equitable relief, in particular, an injunction (interim or final) and an account of profits. The difficulty, particularly where interim relief was sought, was that a court of equity had no jurisdiction to usurp the function of the common law jury in determining whether the plaintiff had established the legal rights in aid of which equitable relief was sought. It was not until 1852 that the British Parliament provided (15 and 16 Vic., c. 86, s. 61) (Imp.) that the Court of Chancery was to have full power to determine any questions of law which in the judgment of that court were necessary to be decided before the decision of the equitable question at issue between the parties. In 1862 the substance of that provision was repeated at greater length in Sir John Rolt's Act (25 and 26 Vic., c. 42, s. 1) (Imp.).
23. The Chancery practice in the period before these reforms took hold appears from Croft v Day [1843] EngR 1231; (1843) 7 Beav 84, 49 ER 994; Rodgers v Nowill [1847] EngR 1003; (1847) 6 Hare 325, 67 ER 1191; and Farina v Silverlock (1856) 6 De G M and G 214[1856] EngR 756; , 43 ER 1214. In the first of these cases, Lord Langdale M.R. had before him a motion to restrain what was alleged to be an intentional fraud by the defendant in selling his goods with labels which were colourable variations only of those labels appearing upon the goods of the plaintiff. The Master of the Rolls granted the injunction sought saying (7 Beav. at 87, 49 ER at 996):
"There are cases like that of the London
Conveyance Company, in which the injunction is
granted at once; there are cases like that of
the Mexican Balm, in which the injunction is
refused until the Plaintiff has established his
right at law. In short, in such cases, there
must be a great variety of circumstances; and
the Court must deal with each case according to
the nature of its particular circumstances."
On the other hand, in Rodgers v Nowill supra a question arose as to the existence and composition of a partnership involving the defendants and Wigram V.C. held that the plaintiff's bill be retained in Chancery for a year, with liberty to the plaintiffs in the meantime to proceed at law touching the matters in question in the cause as they might be advised, and subject to such directions as might be given in Chancery as to the making of admissions so as to secure a fair trial of the questions at law. In the proceedings then brought at law, the declaration alleged, in the manner I have above described, that the defendants had acted knowingly and fraudulently. The cause was tried before a jury which found a verdict for the plaintiffs. The plaintiffs then returned to Chancery and obtained a final injunction.
24. In Farina v Silverlock supra, Lord Cranworth L.C. allowed an appeal from a perpetual injunction granted by Page Wood V.C. at the suit of the originator of Eau-de-Cologne against a defendant selling a rival product with labels only colourably different from those on the genuine product. The Lord Chancellor held that the case was not "ripe" for decision in Chancery, and dissolved the injunction but with liberty to the plaintiff to bring within 12 months any action at law as he might be advised.
25. These cases illustrate the point made by Way C.J. in Weingarten Bros v G. and R. Wills and Co. [1906] SALawRp 7; (1906) SALR 34 at 54, that in passing-off Chancery had a jurisdiction which was ancillary to the common law action in deceit.
26. Further illustrations of this branch of the jurisdiction are provided by the litigation brought in England by the Collins Company of Connecticut, whose business consisted principally in the manufacture of tools used at the diggings in Australia, Cuba and California. Various episodes in the litigation are reported: The Collins Company v Brown (1857) 3 K. and J. 423[1857] EngR 650; , 69 ER 1174; The Collins Company v Cohen (1857) 3 K. and J. 428[1857] EngR 660; , 69 ER 1177; The Collins Company v Reeves (1859) 28 LJ Ch (N.S.) 56. The several English defendants were manufacturing articles in England to which they applied the trade marks of the plaintiff or those trade marks with colourable variations, for export into the plaintiff's foreign markets.
27. In the first two of these cases, no point was taken that there should first be a trial at law. However, it was submitted for the defendants that the persons defrauded were not the British public, "only a cosmopolitan public", and that "if foreign Courts (do) not protect their own subjects, it (is) not for any Court in this country to interfere": 3 K and J 428 at 429, 69 ER at 1177. To that submission, Page Wood V.C. responded (3 K. and J. 431, 69 ER at 1178):
"The question is whether these Defendants have
acquired a right to do that which the bill
charges they are doing - a right to put the
names and address of the Plaintiffs, and the
trade mark of the Plaintiffs, on their goods,
for the purpose of selling them as being the
work and manufacture of the Plaintiffs. That is
the fraud that has been perpetrated; and it is a
fraud which, I apprehend, every civilised
community will arrest at the fountain head,
wherever it finds it commenced and about to be
perpetrated."
In the third of these cases, a decision of Stuart V.C., an interim injunction was granted and an order made that the injunction continue until further order provided that the bill would stand dismissed if the plaintiffs had not proceeded within 12 months to trial of their right at law. The Vice-Chancellor is reported as having said of the plaintiffs, supra at 60:
"Though they were aliens, they were entitled to
sue in this court against any fraudulent
invasion of their right, and that
notwithstanding the tools stamped with the
marks, the fraudulent use of which was
complained of, were not usually sold by them in
this country. Wood, VC had so decided in The
Collins Company v Brown."
28. In La Societe Anonyme des Anciens Eablissements Panhard et Levassor v Panhard Levassor Motor Company, Limited (1901) 2 Ch 513, the company and the seven shareholders, as Farwell J. put it, arguendo, either meant "to steal the plaintiffs' business or to prevent them having any in England". And his Lordship said, "they are wrong on either alternative". The plaintiffs were a well known firm of motor car manufacturers in Paris whose reputation had extended to England for several years; they did not sell directly in England, but their cars were bought and imported into that country by private individuals. In giving judgment, Farwell J. said, supra at 516:
"The question of the plaintiffs' right to an
injunction is covered by Collins Co. v Brown 3 K
and J 423; but, apart from that authority, I
should have thought it was plain that in a case
such as I have stated this Court would certainly
interfere to protect a foreign trader who has a
market in England, in the way I have specified,
from having the benefit of his name annexed by a
trader in England who assumes that name without
any sort of justification."
In the same vein are the observations by Isaacs J. in Turner v General Motors (Australia) Proprietary Limited [1929] HCA 22; (1929) 42 CLR 352 at 364-365 as to the protection to be given by the Court to a plaintiff, with an undoubted intention to commence business in the jurisdiction, against the injury which a defendant is preparing by digging a commercial pit in advance. See also Olin Chemicals Pty Ltd v Pace Chemical and Swimming Pool Equipment Pty Ltd (Supreme Court of New South Wales, 22/12/1978, Needham J., pp 10-12).
29. There is a strong line of cases in which the plaintiff, whilst not a foreigner in the sense of the earlier authorities and whilst conducting manufacturing operations in the forum, sold for export to other countries and did not sell into the domestic market. The result was that the reputation enjoyed by the goods of the plaintiff was to be found amongst consumers in other countries. Nevertheless, where the defendant was manufacturing in the forum rival goods for export to the same market, and doing so in fraud of the plaintiff's rights by applying to its goods the marks of the plaintiff or marks only colourably different thereto, the plaintiff obtained in the forum injunctive relief against the continuance of these activities.
30. Perhaps the most celebrated example is R. Johnston and Co. v Archibald Orr Ewing and Co. (1882) 7 App Cas 219, affg. (1879) 13 Ch D 434. There, the plaintiffs had for some years carried on business in the United Kingdom as dyers and merchants, their business chiefly consisting in the export of certain fabrics to the East Indies, the borders of the Red Sea and the East Coast of Africa. The plaintiffs sold their goods to merchants for export, and they also themselves consigned their goods to agents of their own in India and other countries. It was held that an injunction might be granted to restrain the export of goods by the defendant under a trade mark which might deceive the ultimate purchasers in a foreign country although it would not deceive persons in England or the dealers in the foreign market. Another example is provided by the decision of Romer J. in Wilkinson v Griffith Bros and Co. (1891) 8 RPC 370. Again, both parties were English manufacturers, and the reputation of the plaintiff came from the foreign market for its goods which were exported to India, in particular to Bombay. The wholesale merchants who dealt in the defendant's goods as intermediaries were not deceived, but many of them were content in Bombay to pass off the defendant's goods as those of the plaintiff. His Lordship found that the defendant had fraudulently intended this result to come about and granted relief.
31. More recently, in Franklin International Export Ltd v Wattie Exports Ltd (1988) 12 IPR 358, the New Zealand High Court dealt with an application (unsuccessful in the event) for interlocutory relief to restrain alleged passing-off where the New Zealand plaintiff had for ten years sold frozen vegetables in Kuwait under a particular name, and had discovered that the defendants (who were also New Zealand producers) had been selling their frozen vegetables in Kuwait using allegedly deceptively similar packaging.
32. The present significance of these cases is that those with whom the plaintiff enjoyed the reputation upon which the action is based are not to be found in the jurisdiction in which the action is brought, and that the fraudulent intentions of the defendant are seen as an important element in the case made out by the plaintiff. But the conduct of the defendant will lead to the deception of customers in the jurisdiction where the plaintiff's reputation exists. Thus, these cases are consistent with the propositions (i) that the presence of fraud cannot overcome the absence of reputation and (ii) the plaintiff must demonstrate a misrepresentation by the defendant to the public in a jurisdiction where the plaintiff enjoys a reputation that his goods or services are those of the plaintiff; cf Reckitt and Colman Products Limited v Borden Inc. [1990] UKHL 12; (1990) RPC 341 at 406, per Lord Oliver of Aylmerton. (Of course, if the activity complained of is wrongful in the foreign market, then there may be action brought in the forum, but on a different basis, namely that concerned with the actionability of foreign torts, pursuant to the rule in Phillips v Eyre; see John Walker and Sons Limited v Henry Ost and Company Limited (1970) RPC 489, where the law of Ecuador had to be considered by the English court, and James Burrough Distillers plc v Speymalt Whisky Distributors Ltd (1991) RPC 130, where Italian law was in question.)
33. So it was that in Weingarten Bros v G. and R. Wills and Co. supra at 54-55, Way C.J., in referring to the ancillary jurisdiction in equity to prevent fraudulent passing-off, (described by him as the third class of remedies), said:
"The cases relied on by the plaintiffs for
relief independently of local user come under
the third class of the remedies which I have
mentioned, and I agree that if they can be made
applicable to the plaintiff's case it is
unnecessary to show that they had vendible goods
upon the market. It is sufficient if their
business or business reputation is injured. The
cases cited were Collins Co. v Brown, Collins
Co. v Cohen, 3 K and J 423 and 428; Panhard v
Panhard (1901) 2 Ch 513. In neither of these
cases had the plaintiffs, who were both foreign
companies, any direct business in England.
In the Collins Company's cases their goods,
which were made in America, had a high
reputation there, and in Cuba and Australia; and
were being imitated, and forgeries of their
marks were being placed upon goods of an
inferior quality and lower price made in
England, and exported to the same countries as
the company's genuine goods. In the second case
the plaintiffs were motor car makers, and motors
purchased from them in France were often
imported into England. Mr Justice Farwell held
that the second company meant either to steal
the plaintiffs' business or to prevent them from
having any in England. In all three cases
express fraud was alleged and proved."
34. Way C.J. then went on to deal with a further category of case, that where the original jurisdiction of Chancery was invoked to restrain an invasion of property, in such cases it being unnecessary to show fraud.
35. The foundation case in this branch of the jurisdiction is usually taken as Millington v Fox, a decision of Lord Cottenham L.C., (1838) 3 My and Cr 338[1838] EngR 377; , 40 ER 956. In that case, two days after the filing of the bill, the plaintiffs had obtained an ex parte injunction without disclosing to the court that in correspondence the defendants had already agreed to give the plaintiffs everything they would be entitled to in the suit. It was agreed that the injunction should be made perpetual and the main debate was as to what was to be done with costs. In that setting it is not surprising that no issue arose as to the need to refer any issue for determination by trial at law. However, the Lord Chancellor said that the circumstance that there was no fraudulent intention in the use of the marks did not deprive the plaintiffs of their right to exclusive use of those names.
36. Then came Welch v Knott (1857) 4 K and J 747[1857] EngR 1008; , 70 ER 310, a decision of Page-Wood V.C. The plaintiffs carried on the trade of manufacturers and vendors of soda water and other aerated and mineral waters under the name "Jacob Schweppe and Co.". The Vice-Chancellor dissolved an ex parte injunction which had been obtained by the plaintiffs, but gave them liberty to bring an action at law. The plaintiff's leading counsel was Mr Cairns QC. In the course of his judgment, the Vice-Chancellor referred to Millington v Fox and said that it was not material to consider how far the doctrine there laid down was capable of being reconciled with cases at law in which the scienter has been held to be essential in order to enable the plaintiff to recover. His Honour said "in this court the rule is clear as laid down in Millington v Fox". These remarks were later referred to with approval by Lord Cairns L.C. in The "Singer" Machine Manufacturers v Wilson (1877) 3 App Cas 376 at 391-392, an appeal in a suit which had been instituted to restrain use by the respondents of the name "Singer" in connection with sewing machines.
37. Millington v Fox was further discussed in Edelsten v Edelsten (1863) 1 de G. and S. 185, 46 ER 72, another case in which Lord Cairns had appeared. The case was an unsuccessful petition of rehearing by Lord Westbury L.C. in respect of a decree made by the Vice-Chancellor. It had been held that fraud was clearly established on the part of the defendants. The Lord Chancellor, in dismissing the petition, said:
"The questions are whether the Plaintiff had
property in the trade mark claimed by him before
the adoption of it by the Defendants, and if so,
whether the mark of the Defendants is
substantially the same as the trade mark of the
Plaintiff, and therefore an invasion of his
property; and, thirdly, whether the Defendants
have used the Plaintiff's trade mark with
knowledge of the right of the Plaintiff.
The last question is material with reference to
the extent of the relief to be granted. For
although it is well founded in reason, and also
settled by decision, that if A has acquired
property in a trade mark, which is afterwards
adopted and used by B in ignorance of A's right,
A is entitled to an injunction; yet he is not
entitled to any account of profits or
compensation, except in respect of any user by B
after he became aware of the prior ownership.
At law the property remedy is by an action on
the case for deceit: and proof of fraud on the
part of the Defendant is the essence of the
action: but this Court will act on the principle
of protecting property alone, and it is not
necessary for the injunction to prove fraud in
the Defendant, or that the credit of the
Plaintiff is injured by the sale of an inferior
article. The injury done to the Plaintiff in
his trade by loss of custom is sufficient to
support his title to relief."
It remains the law that although an account of profits is an equitable remedy, it is for a plaintiff who seeks an account to establish that the profits were made by the defendant at a time when he knew he was transgressing the plaintiff's rights or, at least, when on notice of the plaintiff's claims against him: Colbeam Palmer Ltd v Stock Affiliates Pty Limited [1968] HCA 50; (1968) 122 CLR 25 at 34-35, per Windeyer J.; My Kinda Town Ltd v Soll (1982)FSR 147 at 148, per Slade J. In that sense, there has been established a correspondence between the pre-condition for the common law remedy of damages and the equitable remedy of an account of profits.
38. A defendant originally may have adopted a mark honestly and innocently, either in ignorance of the existence of the plaintiff's mark or in the belief that his mark was so different from that of the plaintiff as not to be calculated to mislead purchasers. But the authorities establish that in such a case, the continuing use of the mark after awareness that its use does cause the goods of the defendants to be mistaken for those of the plaintiff, is no less fraudulent in the eye of the court than user with an original fraudulent intent. In Mitchell v Henry (1880) 15 Ch D 181 at 191, James L.J. said:
"The Defendants must bear in mind that the
original honesty of intention does not protect
the continued user, if the user is found
practically to have the result of deceiving, or
is calculated to deceive purchasers, because it
is very easy for manufacturers to avoid any
possibility of misleading purchasers if they are
minded to avoid it."
39. The principle was expressed as follows by Lord du Parcq in Marengo v Daily Sketch and Sunday Graphic Ld (1948) 65 RPC 242 at 253-254:
"The honest man who finds that, through mere
ignorance or inadvertence, he has done
innocently that which, if done with wrongful
intent, would have given a right of action for
damages, will be anxious, when the facts are
made clear to him, to take such steps as will
prevent any mis-understanding in the future. If
the Court of Equity is convinced that there has
been such an innocent misrepresentation, and an
honest defendant, not being himself so
convinced, has refused to take proper steps of
his own motion, the Court, acting upon the
defendant's conscience, will compel him by
injunction to act as an honest man ought to act
when he has learned all the facts and has
considered them impartially.
See also Ronson Products Ltd v James Ronson Pty Ltd (No. 2) (1957) VR 731 at 738.
40. It has been said that this concept of fraud as constituted by persistence after notice is not necessarily such as would support an action of deceit: Turner v General Motors (Australia) Proprietary Limited [1929] HCA 22; (1929) 42 CLR 352 at 362; B.M. Auto Sales Pty Ltd v Budget Rent A Car System Pty Ltd (1977) 51 ALJR 254 at 258. It may be that even after notice of the plaintiff's rights the defendant does not intend to deceive purchasers of his goods by representing those goods to be the goods of the plaintiff. Nevertheless, if the defendant shuts his eyes as to the reasonable consequences, upon facts known to him, of what he is doing, then there would be grounds upon which a jury might make a finding of fraud in the full sense: Hendriks v Montagu (1881) 17 Ch D 638 at 651-652; The English and Scottish Mercantile Investment Company Limited v Brunton (1892) 2 QB 700 at 707-708; Edward Young and Coy Ld v Stanley Silverwood Holt (1948) 65 RPC 25 at 30; 10th Cantanae Pty Ltd v Shoshana Pty Ltd (1987) 79 ALR 299 at 322; Star Micronics Pty Ltd v Five Star Computers Pty Ltd (Davies J., 26/11/91, unrep.).
41. Hence, the force of the statement in "Ashburner's Principles of Equity", 2nd Ed., 1933, p 378, that, although a trade mark has some characteristics of a proprietary right, the better opinion is that the jurisdiction of the court to interfere by injunction, in passing-off cases, is based upon the prevention of fraud.
42. I have referred to the evolution in the 19th century of the doctrine that in a passing-off case equity would intervene by injunction in aid of the plaintiff's proprietary rights. At that time and thereafter, it was generally accepted that where legal (as distinct from equitable) rights were at stake, "the foundation of the jurisdiction to grant an injunction is the existence of some civil right of a proprietary nature proper to be protected": Cameron v Hogan [1934] HCA 24; (1934) 51 CLR 358 at 377. Accordingly, there were some torts, the apprehended commission or repetition of which would not be restrained by injunction. The lack of a proprietary right in one's personal reputation as a citizen, was one reason why an injunction ordinarily would not go to restrain commission or repetition of libel or slander. See also Earl Cowley v Countess Cowley (1901) AC 450 at 460; Belisle Du Boulay v Jules R n Herm n gilde Du Boulay (1869) LR 2 PC 430 at 441-442. So it is not surprising that as regards the passing-off action which at law was a variant of a claim in deceit, Chancery strove to put its intervention on a proprietary basis. As Windeyer J. pointed out, there was an element of circularity in the reasoning employed in the cases: Colbeam Palmer Ltd v Stock Affiliates Pty Limited, supra at 34; see also Cohen, "Transcendental Nonsense and the Functional Approach", (1935) 35 Col L Rev 809 at 814-817.
43. What also is curious is that in a case of tort, relief might be given in equity, not confined to quia timet relief, in cases where there might be thought to be and to remain an incomplete action at law by reason of the absence of fraud. That, in its turn, may be the explanation for the subsequent treatment of persistence after notice as sufficient to constitute fraud. The result would be that however neutral in character the initial conduct of the defendant, persistence after notice of the plaintiff's rights entitled the court to treat him thereafter as fraudulent.
44. The result of these developments in the law is that in a passing-off suit a successful plaintiff may elect for his pecuniary remedy between an account of profits and an inquiry as to damages; if the defendant embarked upon his activities fraudulently, these remedies run from that time. But in any event, even if the defendant was at that stage innocent, pecuniary remedies will be available for the period of the defendant's persistence after notice of the plaintiff's rights, in the manner described in the authorities.
45. This has the consequence that in circumstances where damages would be available for contravention of s. 52 of the Trade Practices Act 1974, nevertheless in passing-off no pecuniary remedy may be available. Section 82 of the statute operates to give a remedy in damages for what in substance may be an innocent and non-negligent misrepresentation. As Gibbs C.J. pointed out in Parkdale Custom Built Furniture Proprietary Limited v Puxu Proprietary Limited [1982] HCA 44; (1982) 149 CLR 191 at 197, the statutory liability is unrelated to fault. An appreciation of this may underlie some essays into restrictive interpretations of s. 52. In any event, the more limited liability in passing-off should not be a cause of concern.
46. What then is the present significance of fraud in the passing-off action? There are various categories of case in which it will be significant if the defendant has embarked upon his activities fraudulently in the sense of the old common law cases. These categories are in addition to the class of case where there is some evidentiary assistance to be derived from those circumstances.
47. First, the absence or presence of fraud in the common law sense will be determinative of the plaintiff's equitable rights in cases where a charge of unclean hands is made out against the plaintiff; this is because whilst the plaintiff's unclean hands ordinarily would disentitle him to relief in equity, the existence of the fraud on the part of the defendant would give the plaintiff a right to damages at law. In that action the equitable defence would be of no effect. The plaintiff may then have an injunction to avoid the necessity of repeated actions at law, notwithstanding the plaintiff's unclean hands. That is what is established in Kettles and Gas Appliances Ltd v Anthony Hordern and Sons Ltd [1934] NSWStRp 51; (1935) 35 SR (N.S.W.) 108, with reference to the analysis of Ford v Foster (1872) LR 7 Ch App 611, by Isaacs A.C.J. in Angelides v James Stedman Hendersons Sweets Limited, supra at 65-66.
48. Secondly, whilst there is some authority for the view that there is no passing off where the defendant does no more than carry on business under his own name, such user must be bona fide; Clayton v Vincent's Products Ltd [1934] NSWStRp 23; (1934) 34 SR (N.S.W.) 214; Parker Knoll Limited v Knoll International Limited (1962) RPC 265; Parker and Son (Reading) Limited v Parker (1965) RPC 323.
49. Thirdly, in my view, in the ordinary passing-off case (where the whole of the dispute is centred in the one jurisdiction) the failure of the plaintiff to show the existence of his reputation cannot be overcome merely by proof of a fraudulent design on the part of the defendant. The authorities bearing upon the question are collected in Telmak Teleproducts (Australia) Pty Ltd v Coles Myer Ltd (1988) 84 ALR 437 at 444-445. However, fraudulent conduct is important in the line of cases which I have described where the plaintiff and the defendant export their goods for sale in a foreign market and the plaintiff has no reputation with consumers in the jurisdiction in which the action is brought, although he does have a reputation in the foreign market where the goods of the defendant are sold.
50. The present case is concerned with a variant of this third situation. The complaint of the appellant is not that the respondent is manufacturing in Australia goods for export to the appellant's markets in the United States where the appellant has conducted activities on a large scale, but that the respondent seeks to pre-empt the entry of the appellant into the Australian market. In such a case is it necessary that the appellant establish a case of the existence in Australia of a reputation among consumers, or is it sufficient that the respondent is acting in the manner described by "digging a pit" in the path of the entry by the appellant into the Australian market? In my view, the appellant cannot succeed in such a case, even if fraud be shown, unless the plaintiff can show a reputation in that market. Only if this be so will the activities of the defendant convey a misrepresentation to the public and the misrepresentation is the gist of the action.
51. Before returning to this issue, it is appropriate first to consider whether, in any event, the existence of such a reputation would be sufficient, or whether the appellant would also have to show (as it cannot do on the facts) the existence of a reputation attached to the present conduct of a business in Australia.
52. The answer to that question requires some further consideration of the development of the notion of the proprietary right which is said to be protected by the passing-off action.
53. Having found that equity intervened in passing-off cases to protect proprietary rights, it remained for the courts further to describe, if not define, the constituents of those rights. Unless copyright subsisted in the trade mark in question, it would be anomalous to describe the plaintiff as having proprietary rights in the name or mark per se. The point was dealt with authoritatively by Lord Parker in A.G. Spalding and Bros v A.W. Gamage Ld (1915) 32 RPC 273 at 283-284. His Lordship noted that in equity liability might arise whether or not the defendant had acted fraudulently although the innocence of the defendant might be a reason for limiting the account of profits to the period subsequent to the date at which he became aware of the true facts. Lord Parker said that the view taken by the common law courts was somewhat different.
54. What is of significance for present purposes is the statement by Lord Parker in Spalding's Case at 284 that if the nature of the right, the invasion of which is the subject of passing-off actions, is a right of property, what is referred to is "property in the business or goodwill likely to be injured by the misrepresentation". In Norman Kark Publications Ltd v Odhams Press Ltd (1962) RPC 163 at 167, Wilberforce J. said:
"The basis of the action, as shown in Spalding v
Gamage (1915), 32 RPC 273, is a proprietary
right, not so much in the name itself, but in
the goodwill established through use of the name
in connection with the plaintiff's goods. I
draw, of course, from Lord Parker of
Waddington's well-known opinion in that case.
The plaintiff must show that the name has become
distinctive of his goods, and that a reputation
has attached to them under the name in question,
and that use by the defendant of the name is
likely to cause confusion resulting in damage to
the goodwill of the plaintiff."
The notion of a trade mark, in the common law sense, is now wide enough to encompass slogans and visual images which radio and television or other means of advertising leads the market to associate with the goods or business of the plaintiff. The Privy Council so declared in Cadbury Schweppes Pty Ltd v Pub Squash Co. Pty Ltd (1981) RPC 429 at 490.
55. What has given rise to difficulty in some of the recent decisions is the notion that the plaintiff is entitled to have protection only for a business reputation acquired in the forum, and that this only can be generated by some sort of business activity by the plaintiff in the forum.
56. In Pinto v Badman (1891) RPC 181 at 194, Lord Esher M.R. described the legal profession as having been surprised by Lord Westbury's assertion in cases such as Edelsten v Edelsten supra that there might be property in a trade mark; the Master of the Rolls pointed out that the question then arose as to how that property could be dealt with and whether it was assignable property. The position was reached that the common law mark might not be assigned independently of the business with which it was associated: Hospital Products Limited v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 144-145 per Dawson J. Further, in Commissioner of Taxes (Queensland) v Ford Motor Company of Australia Proprietary Limited [1942] HCA 16; (1942) 66 CLR 261, it was held that, for the purposes of the Queensland Revenue Law relating to allowances in respect of "goodwill", a foreign company which did not at any time carry on business in Australia had no "goodwill" in relation to certain trade marks which it might transfer to the taxpayer. However, as Mason J. pointed out in Hospital Products Limited v United States Surgical Corporation, supra at 100-101, the circumstance that goodwill cannot be assigned independently of the business with which it is associated does not deny the existence of a local product of goodwill enjoyed in the jurisdiction by the foreign manufacturer of the goods in question.
57. The term "goodwill" assumes a significance in various areas of the law and for various purposes. It is notoriously difficult to define: Hepples v Commissioner of Taxation [1991] HCA 39; (1991) 102 ALR 497 at 516. But the concept certainly extends beyond the likelihood of customers returning to the same business. In Re Jacobson, deceased [1970] VicRp 23; (1970) VR 180, the court was required to construe the expression "the goodwill of my business" as it appeared in the will of the testator who had conducted a business as a bottle merchant. In Ranoa Pty Ltd v B.P. Oil Distribution Ltd (1989) 91 ALR 251, the meaning of "goodwill", as between landlord and tenant, arose in the consideration of the regulatory regime imposed by the Petroleum Retail Marketing Franchise Act 1980. I have already referred to one authority concerned with the revenue law. Another is the decision of Rich J. in Federal Commissioner of Taxation v Williamson [1943] HCA 24; (1943) 67 CLR 561, which was concerned with the question of whether a payment for goodwill, upon the sale of a chemist business, was a premium within the meaning of the Income Tax Assessment Act 1936, s. 88. The decision which is most often referred to in treatments of the expression "goodwill" is that of the House of Lords in The Commissioners of Inland Revenue v Muller and Co.'s Margarine Limited (1901) AC 217. Their Lordships were concerned to construe the expression "property locally situate out of the United Kingdom" as it appeared in the Stamp Act 1891 (U.K.). They held that an agreement in writing to sell the premises of a wholesale margarine manufacturing business carried on in Germany, together with the goodwill of that business, fell within an exception to liability for stamp duty because not only the premises but also the goodwill was property locally situate out of the United Kingdom, within the meaning of the legislation.
58. What is of present significance for this appeal is that in considering the constituent elements of the action for passing-off and the concept of injury or apprehended injury to a right in the nature of property, caution is necessary against importing into this field observations made elsewhere as to the nature of "goodwill". The result of undiscriminating adoption of those remarks may be the subversion of the basic nature of the passing-off action.
59. It is perhaps significant that in the law of registered trade marks, a mark may be refused registration, as being likely to deceive or cause confusion, having regard to the knowledge obtained by the relevant section of the Australian public, and that this knowledge is not confined to that obtained from experience in an Australian market for the goods or services in question: The Kendall Company v Mulsyn Paint and Chemicals [1963] HCA 1; (1962) 109 CLR 300 at 305; see also Radio Corporation Proprietary Limited v Disney [1937] HCA 38; (1937) 57 CLR 448.
60. In the 9th edition of "Kerly's Law of Trade Marks and Trade Names", edited by Mr Blanco White QC and published in 1966, it was stated, 719, that:
"(I)f in fact the plaintiff has the necessary
reputation in this country, it does not matter
whether it was acquired by user here or in any
other way."
Stated in this way, the principle was in accordance with case law in this country. I have referred to the statement by Way C.J. in Weingarten Bros v G. and R. Wills and Co. [1906] SALawRp 7; (1906) SALR 34 at 54, where his Honour said that it was not always necessary for the plaintiff to have vendible goods upon the local market, and that it was sufficient if the business reputation of the plaintiff would be injured. Further, in Ramsay v Nicol [1939] VicLawRp 48; (1939) VLR 330 at 342, O'Bryan A.J. said:
"Plaintiff's counsel further contended that the
only business or goods which were protected were
businesses carried on within the jurisdiction or
goods which have a market in the jurisdiction.
In my opinion, that is not the true test, but
the test to be applied in such a case is: Has
the person acquired a reputation under that name
in the jurisdiction, is that reputation
subsisting at the relevant time, will the use of
the same or a similar name by the other person
in all the circumstances be calculated to
deceive the public into thinking that that other
person is the former, and is there a real
likelihood of such deception in all the
circumstances causing damage to the former? If
all those circumstances subsist, then, in my
opinion, it is immaterial that the plaintiff is,
for the time being, not within the jurisdiction,
or has no business being conducted at the
relevant time within the jurisdiction (as in the
case of La Societe Anonyme des Anciens
tablissements Panhard et Lavassor v Panhard
Lavassor Motor Co. Ltd (1901) 2 Ch 513), or has
for some time been outside the jurisdiction (as
in Poiret v Jules Poiret Ltd and A.F. Nash
His Honour was dealing with a claim by a party who had acquired a reputation in Victoria as a magician and illusionist under an assumed name, but, at the time of the acts complained of, was carrying on no business on his own account in that State.
61. This decision, and that of Hudson J. in Ballarat Products Ltd v Farmers Smallgoods Co. Pty Ltd [1957] VicRp 12; (1957) VR 104, are authority for the proposition that an action for passing-off may lie despite the cessation of business operations from which the reputation has been derived, provided the reputation still subsisted and perhaps, that the plaintiff still intended to resume trading operations. Accordingly, in Australia, there was a body of authority which indicated that a passing-off action might lie even though the plaintiff was not presently engaged in business operations in the jurisdiction. See also Westinghouse Electric Corporation v Thermopart Pty Ltd (1968) WAR 39 at 49-50.
62. It should also be borne in mind that the authorities establish that a plaintiff may have a sufficient economic interest in the use of his trade mark outside the field of his own exploitation of it to justify interference by the Court. Thus, the plaintiff may complain not of the risk of diversion of sales, the parties not being in direct competition, but that the goodwill of the plaintiff suffers from an injurious association with the goods or services of the defendant. Three examples will suffice. Harrods Limited v R. Harrod Limited (1924) 41 RPC 74 concerned a complaint by the London department store that its name was being used for a moneylending business; Totalizator Agency Board v Turf News Pty Ltd [1967] VicRp 68; (1967) VR 605 concerned a complaint as to a false connection between a government established betting service and a tipster's newspaper. In Annabel's (Berkeley Square) Ltd v G. Schock (1972) RPC 838, the famous London nightclub complained of the use of its name for what the defendant, perhaps euphemistically, described as an "escort service".
63. An earlier example is provided by The Eastman Photographic Materials Company, Ld v The John Griffiths Cycle Corporation, Ld (1898) 15 RPC 105 where Romer J. held it would injure the plaintiff, which had used "Kodak" for its cameras, if the defendant were not restrained from using "Kodak" to identify their bicycles. This case has been used in the United States as a foundation for the trade mark "dilution" doctrine; see Hogan v Pacific Dunlop Ltd (1988) 83 ALR 403 at 428-429. Indeed, the "franchising" cases display characteristics in common with those of the above authorities; see Shanahan, "'Image Filching' in Australia: The Legal Provenance and Aftermath of the 'Crocodile Dundee' Decisions" (1991) 81 TMR 351 at 355-357.
64. It was of cases such as those I have described that in Yale Electric Corporation v Robertson 26 F 2d 972 (1928), Learned Hand J. said, at 974:
"If another uses (the plaintiff's mark), he
borrows the owner's reputation, whose quality no
longer lies within his own control. This is an
injury, even though the borrower does not
tarnish it, or divert any sales by its use; for
a reputation, like a face, is the symbol of its
possessor and creator, and another can use it
only as a mask. And so it has come to be
recognized that, unless the borrower's use is so
foreign to the owner's as to insure against any
identification of the two, it is unlawful."
65. However, in B.M. Auto Sales Pty Ltd v Budget Rent A Car System Pty Ltd (1976) 51 ALJR 254 at 258, Gibbs C.J., with whose judgment the other members of the High Court agreed, referred to Alain Bernadin et Compagnie v Pavilion Properties Ltd (1967) RPC 581 ("the Crazy Horse Case") as having held that in order for a plaintiff to succeed in maintaining in the English courts an action for passing-off, the plaintiff must have acquired a business reputation in the United Kingdom which was entitled to be protected, that this could only be acquired by some sort of user in the United Kingdom, and that some knowledge of the name of the plaintiff, without any business activities of the plaintiff in the United Kingdom, would not be sufficient. His Honour left open the question whether this should be the law in Australia.
66. It should be noted that the Crazy Horse Case was a decision dismissing an application for an interlocutory injunction. Pennycuick J. said (at 584) that the factors which make out an action in passing-off are normally considered under two heads, reputation and likelihood of confusion, and that the case for the plaintiff ran into very great difficulty on the first question, namely reputation. However, his Lordship also said that the foundation for the action of passing-off was "the protection of goodwill" and referred to the discussion in the House of Lords in The Commissioners of Inland Revenue v Muller and Co.'s Margarine Ltd, supra at 223-224, 235, as indicative of what was required of a passing-off action. It will be recalled that the House of Lords held that stamp duty was not payable because the goodwill sold by the instrument in question was situated not in the United Kingdom but out of the United Kingdom with the tangible assets situated in Germany. Thus, it will be seen that the reasoning of Pennycuick J. moved from consideration of "reputation" to "goodwill" as expounded in the earlier decision which, of course, had nothing to do with passing-off or the interests protected by that action.
67. Although this decision has been followed in some subsequent English decisions, in others it has been criticised or followed without enthusiasm. In Baskin-Robbins Icecream Co. v Gutman (1976) FSR 545, Graham J. had expressed the view that goodwill should not automatically be limited to the boundaries of the particular country where the business in question is established, it being a question of fact in each case. In Maxim's Ltd v Dye (1978) 2 All ER 55, the same Judge enjoined the conduct by the defendant of a restaurant in Norwich under the name "Maxim's" on the footing that the English public understood the name "Maxim's" to refer to the restaurant of the plaintiff in Paris. His Lordship declined to follow the Crazy Horse Case on the footing that a plaintiff could establish goodwill in England in respect of a foreign business which the courts would protect without it having to be shown that the plaintiff had carried on business in England. Megarry V.C. took a similar view in Metric Resources Corporation v Leasemetrix Ltd (1979) FSR 571 at 577, saying:
". . . I do not at present see why the filching
of a reputation acquired in England should not
be regarded as an injury to a business carried
on in France, and in France alone. In H.P.
Bulmer Ltd v J. Bollinger S.A. (1978) RPC 79 at
p 95, Buckley L.J. referred to Lord
Macnaghten's definition of goodwill as being the
attractive force which brings in custom, and
suggested that that force, which may be due to
many and diverse circumstances, could be said
'to embrace every circumstance which contributes
to the success and value of the business to
which it relates'. If a business is carried on
in one country alone, a reputation which extends
beyond the borders of that country and brings
purchasers into that country certainly seems to
be contributory to the success and value of the
business."
Further, in Globelegance B.V. v Sarkissian (1974) RPC 603, Templeman J. granted an interlocutory injunction to restrain the defendant from passing off his business and goods as those of a Roman fashion house, by the use of the name "Valentino". His Lordship said, at 615:
"One knows that in practice the trade in high
fashion is becoming more and more international,
and it does seem to me, in general, that it
would be a very great pity if the straight
jacket of the Crazy Horse decision was found to
constrain me from preventing Valentino from
keeping the name which he has so well
publicised."
68. On the other hand, in The Athletes Foot Marketing Associates Inc. v Cobra Sports Ltd (1980) RPC 343 (an unsuccessful application for an interlocutory injunction), Walton J., at 357, expressed the law as being relatively clear and to the following effect:
"That is to say, it does not matter that the
plaintiffs are not at present actually carrying
on business in this country, provided they have
customers here. Equally, it is of no moment, if
they have no customers here, that they have a
reputation in the general sense of the word in
this country."
69. Finally, in Anheuser-Busch Inc. v Budejovicky Budvar N.P. (1984)FSR 413 at 465, ("the Budweiser Case"), the English Court of Appeal approved what had been said by Walton J. in the earlier case. Further, at 470, Oliver L.J. said:
"Mr Kentridge argues that once a goodwill exists
it is for the owner of the goodwill to choose
when and how he will go into the market with his
product. But this, with respect, begs the
question, because it assumes the existence of
the goodwill apart from the market, and that, as
it seems to me, is to confuse goodwill, which
cannot exist in a vacuum, from mere reputation
which may, no doubt, and frequently does, exist
without any supporting local business, but which
does not by itself constitute a property which
the law protects."
70. The question for the Court is whether in this divided state of English authority we should adopt the approach that was accepted by the English Court of Appeal in the Budweiser Case, at the expense of the earlier Australian authorities.
71. What is the position in other jurisdictions? C. and A. Modes v C. and A. Waterford Ltd (1978)FSR 126 is a decision of the High Court of Ireland. The plaintiff had 65 shops in the United Kingdom, including one in Belfast, which received much custom from residents of the Irish Republic visiting Belfast on shopping excursions. The plaintiff had no shop in the Republic. In dismissing an appeal by the defendants, Henchy J. said, at 138-139:
"Can it be said in these circumstances that,
because the plaintiffs have no direct retailing
outlet in the Republic, they have no protectable
goodwill in the Republic? In my opinion, the
answer is 'No'. Goodwill does not necessarily
stop at a frontier. Whether in a particular
area a plaintiff has a goodwill which is liable
to be damaged by the unlawful competition
resulting from passing off is a question of fact
and of degree. What has to be established for
the success of a plaintiff's claim in an action
such as this is that by his business
activities - be they by direct selling within
the State or otherwise - he has generated within
the State a property right in a goodwill which
will be violated by the passing-off. It is true
that there is authority for the proposition that
a plaintiff's reputation which owes nothing to
user in this State is not sufficient to support
a passing-off action (Alain Bernadin et Cie v
Pavilion Properties Ltd (1967) RPC 581). But,
as is stated in Kerly's Law of Trade Marks and
Trade Names (10th ed, p 386), it is difficult
to see any rational basis for this distinction.
If there are in this State sufficient customers
of a plaintiff's business to justify his claim
to have a vested right to retain and expand that
custom, then there is ample authority in
principle and in the decided cases for the
conclusion that, no matter where the plaintiff's
business is based, he is entitled to be
protected against it being taken away or
dissipated by someone whose deceptive conduct is
calculated to create a confusion of identity in
the minds of existing or potential customers."
However, the existence, on the facts of this case, of the body of customers who travelled outside the jurisdiction to do business with the plaintiff, puts this decision in a somewhat special position.
72. In Dominion Rent A Car Ltd v Budget Rent A Car Systems (1970) Ltd [1987] NZCA 13; (1987) 2 NZLR 395 at 405-406, Cooke P. said that the treatment of the tort of passing-off as dependent on damage to business goodwill led to problems where the business for which protection is claimed is carried on outside the jurisdiction. His Honour continued:
"No doubt these stem partly from a sense that
unless a trader has already entered or at least
is clearly about to enter the local market and
thus contributes to the local economy or is
about to do so, the local law should not allow
him to stifle local enterprise. Whatever the
underlying reasons may be, some form of business
connection with the jurisdiction is generally
thought to be necessary to enable a successful
suit."
73. On the other hand, in their article "Protection of Trademark Rights Acquired by International Reputation Without Use or Registration", (1981) 71 TMR 1 at 2, Thomas Hoffman and Susan Brownstone said:
"Trademark protection based upon reputation
alone is in the interest of fairness to the
trademark owner. It prohibits others from
pirating well-known marks which have benefitted
from the creative efforts and financial
nurturing of the trademark owner. Encouragement
of international trade and the peaceful
interaction between countries is a further
benefit. Finally, protection serves the
interests of consumers for it protects them
against deception in the marketplace. More and
more countries are recognizing the benefits of
discouraging the growth of a local industry that
relies upon the misappropriation of trademarks."
74. In my view, where the plaintiff, by reason of business operations conducted outside the jurisdiction, has acquired a reputation with a substantial number of persons who would be potential customers were it to commence business within the jurisdiction, the plaintiff has in a real sense a commercial position or advantage which it may turn to account. Its position may be compared with that of a plaintiff who formerly conducted business within the jurisdiction and has retained a reputation among its erstwhile customers, and with that of a plaintiff with a reputation which arises from its trade in the jurisdiction, but extends to goods or services which are not presently marketed by him. If the defendant moves to annex to itself the benefit of such a reputation by attracting custom under false colours, then the defendant diminishes the business advantage of the plaintiff flowing to it from the existence of his reputation. This is so whether the plaintiff is a party which may expand into a new field of business or resume a former business conducted in the jurisdiction, or a party which may enter the jurisdiction to establish a business for the first time. The immediacy and intensity of the intention of the plaintiff to commence or resume business is, in my view, a question going not so much to the invasion of the plaintiff's rights as to the imminence of a threat sufficient to justify an injunction. The bad faith of the defendant will not be sufficient to confer rights upon a plaintiff where the necessary reputation in the jurisdiction is lacking. Further, in my view, in these cases the presence of bad faith on the part of the defendant is not an additional requirement which is to be satisfied by the plaintiff; fraud in the sense of persistence after notice of the plaintiff's rights will suffice.
75. In Ballarat Products Ltd v Farmers Smallgoods Co. Pty Ltd [1957] VicRp 12; (1957) VR 104 at 108, Hudson J. said:
"On behalf of the defendant it was contended
that, as no business is being carried on by the
plaintiff, there can be no goodwill of which the
name can form part. I cannot accept this
proposition. In my opinion goodwill may
continue to exist despite the cessation of the
business operations that have given rise to it.
If a trader by his personality, skill or method
of trading has acquired a reputation in a
particular class of business and thereby
established an extensive connexion in that
business, to say that upon his ceasing to trade
his reputation will immediately disappear is
contrary to fact. It remains as something of
value which he can turn to account whenever he
chooses."
76. To the same effect, but the setting of a claim based upon foreign reputation, is the decision of the Ontario Court of Appeal in Orkin Exterminating Co. Inc. v Pestco Co of Canada Ltd (1985) 19 DLR (4th) 90 (noted (1986) 76 TMR 173; (1986) 2 IPJ 375).
77. The plaintiff was an American company which had begun its operations in Georgia in 1901 and had built up one of the largest pest control businesses in the world. It did not carry on business in Ontario or elsewhere in Canada, but had a reputation there. This was held to be sufficient to support an action for passing-off against a Canadian company which began using the plaintiff's name in the business it conducted in metropolitan Toronto. The judgment of the Court of Appeal was delivered by Morden J.A. The decision has since been applied, at the interlocutory level, in HIT Factory Inc. v HIT Factory Inc. (1986) 12 CPR (3d) 287.
78. Morden J.A. made the following points which are of significance on the present appeal. First, he referred to Harrods Limited v R. Harrods Limited supra and Yale Electric Corporation v Robertson supra, together with Stork Restaurant Inc. v Sahati 166 F 2d 348 (1948) in relation to the proposition (at 101):
"(A) plaintiff does not have to be in direct
competition with the defendant to suffer injury
from the use of its trade name by the defendant.
If the plaintiff's trade name has a reputation
in the defendant's jurisdiction, such that the
public associates it with services provided by
the plaintiff, then the defendant's use of it
means that the plaintiff has lost control over
the impact of its trade name in the defendant's
jurisdiction. The practical consequence of this
is that the plaintiff is then vulnerable to
losing the Ontario customers it now has as well
as prospective Ontario customers, with respect
to services provided in the United States.
Also, it can result in Orkin being prevented
from using its trade name in Ontario when it
expands its business into Ontario."
Secondly, at 103-104, his Lordship referred to the significance attached in some of the English decisions to very slight business activities in the jurisdiction as "purely symbolic" rather than illustrative of the true principle, namely that the plaintiff was entitled to retain the possibility of exploiting its goodwill in England. Thirdly, he did not see it as imposing an unreasonable restraint on the defendant to enjoin it from using the name of the plaintiff, saying at 105:
"The public are entitled to be protected from
such deliberate deception and Orkin, which has
laboured long and hard and made substantial
expenditures to create the reputation which it
now has, which reputation has spread to Ontario,
is entitled to the protection of its name for
misappropriation. The spectre of Orkin having a
monopoly in Ontario in its name and distinctive
logo, even though it is not now carrying on
business here, is considerably less troubling
than the deceptive use of its name and symbol by
another."
Fourthly, in response to the submission by the defendant that the circumstance that it had embarked upon deliberate deception was irrelevant, Morden J.A. said (at 106-107) that whilst the defendant's bad faith alone did not confer a cause of action on a foreign plaintiff, it was a relevant factor to take into account in framing the law so as to adjust the competing interests, the interests of a dishonest defendant being entitled to less weight than those of one which had acted bona fide.
79. Finally, with reference to the meaning attached to the term "goodwill" in such English cases as the Budweiser case, his Lordship observed (at 107-108) that this meaning appeared to be based on definitions assigned to "goodwill" in a tax case, namely Muller's Case, and continued:
"Virtually no words have a single fixed meaning,
particularly goodwill, and, with respect, I do
not think that the meaning appropriate in the
Muller case is necessarily appropriate in a
passing-off case which involves issues of remote
territorial use. In this kind of case I think
the main consideration should be the likelihood
of confusion with consequential injury to the
plaintiff. Generally, where there is such
confusion there is goodwill deserving of
protection."
80. I would, with respect, accept all that was said for the Ontario Court of Appeal in those five propositions, save only that I would regard the dishonesty of the defendant as going more to the remedy than the right of the plaintiff.
81. What is said in the Canadian decision is consistent with an Australian decision, Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd (1981) 1 NSWLR 196. Powell J. (at 205) stated the relevant question as being "does the plaintiff have the necessary reputation?", rather than "does the plaintiff itself carry on business here?".
82. Where the intention of the defendant is to cause harm to the plaintiff by pre-empting the plaintiff's exploitation in the jurisdiction of its goodwill there, then, in my view, the charge of fraud is made out. In an otherwise appropriate case, damages may be awarded in addition to equitable relief. This is so even if, as in the present case, there may be insufficient grounds for holding that the defendant also had the objective of building up its goodwill in the jurisdiction by misleading the customers who dealt with it into believing they were getting the goods of the plaintiff.
83. In the present case, the primary Judge (101 ALR at 487) held that it was likely, in the sense of more probable than not, that the appellant would commence, at some time in the future, the manufacture and marketing in Australia of its "Healthy Choice" product; should it do so, then it was clear that the appellant would suffer damage by there being on the market another product with the name "Healthy Choice", and the probability of that damage was sufficient to found a passing-off action, subject to the need to show a sufficient reputation in the jurisdiction.
84. However, whilst I would not disturb the finding of the primary Judge as to fraud, I should add that, like Lockhart J., my impression from the evidence is that there is much to be said for the view that the respondent acted as it did, not to filch the appellant's market or prospective market in Australia, but because it was impressed by the success of the appellant's product in the United States and thought that a similar product was likely to succeed here. That would not amount to fraud in the required sense. Deliberate copying does not necessarily indicate fraud. A notable example is provided by Cadbury-Schweppes Pty Ltd v The Pub Squash Co. Ltd (1981) RPC 429 at 493-494. See also, in the field of registered trade marks Aston v Harlee Manufacturing Company [1960] HCA 47; (1960) 103 CLR 391 at 400-402; Moorgate Tobacco Company Limited v Philip Morris Limited [1980] HCA 32; (1980) 145 CLR 457 at 477.
85. I agree with what has been said by Lockhart J. as to the issues arising under this legislation.
In 1991 an Australian manufacturer of frozen foods (McCain) sold certain of its products under the name Healthy Choice used by a manufacturer of similar products in the United States (Conagra) and in packaging resembling that used by Conagra. Conagra sued McCain in this Court claiming damages and injunctive relief for alleged passing off and misleading or deceptive conduct. That action having failed insofar as it related to the name and packaging of the McCain product, Conagra now appeals. The appeal raised the question whether the tort of passing off requires proof of relevant commercial activity within the jurisdiction by the party claiming relief. The extent to which the reputation within Australia of an applicant's product marketed in a foreign country can support an action in the absence of such commercial activity and the role of fraudulent intention was debated. Issues concerning the part played by product reputation in claims under s.52 of the Trade Practices Act 1974 were also raised.
2. The facts are set out in the judgment of Lockhart J. which I have had the opportunity of reading in draft and I need not review them in detail here. In substance, the learned trial judge found that:
1. Conagra manufactures and sells in the USA frozen dinners under the title "Healthy Choice". The product is sold under licence in New Zealand and other Pacific markets, but not in Australia. Conagra intends to introduce the product into Australia later this year.
2. McCain adopted the name "Healthy Choice" for its product having regard to the success of the marketing of Conagra's products under that name in the United States.
3. The package design adopted by McCain was consciously influenced by that of the Conagra product.
4. From the outset McCain was aware that it had adopted the name of Conagra's product and aspects of its packaging.
5. No one seeing the McCain product would believe that they were looking at Conagra product.
6. McCain's packaging suggests to a person familiar with the Conagra product, that there is a relationship of some kind between Conagra and McCain or their respective products.
7. There are to be found in Australia some number of persons either originally from the United States or residents of Australia who have visited the United States who would know of or recognise the Conagra product. The number of persons in Australia aware of the Conagra product is "potentially large".
8. The evidence did not establish on the balance of probability that there is in Australia a sufficiently large number of persons who are aware of the Conagra product and for whom the name Healthy Choice would have acquired a secondary meaning, that is to say, a meaning signifying the Conagra Healthy Choice product.
3. In the course of a comprehensive examination of case law, his Honour concluded:
1. It was necessary in order for Conagra to succeed in
its action that it prove a reputation for its product
in Australia. This was conceded by Conagra.
2. The time has come to recognise that although the tort
of passing off is based upon a business or trade, it
does not matter whether that business or trade is
carried on in the jurisdiction in which the action is
brought provided that there is a reputation in the
jurisdiction in respect of it.
3. The existing state of the authorities however
constrains a judge at first instance to hold that the
tort of passing off requires the existence of business
activity in Australia (albeit slight activity will
suffice) and that as Conagra has no business in
Australia it must fail in the passing off action.
4. Although the latter conclusion was sufficient to dispose of the case, his Honour's findings of fact also went to the question whether McCain's conduct constituted misrepresentation and whether it was fraudulent in a sense relevant to the tort of passing off. His Honour was not satisfied that there existed at the relevant time a reputation in Australia in respect of the Conagra Healthy Choice product and this is reflected in the finding noted above that there was not a sufficiently substantial number of persons in Australia aware of the Conagra product and for whom the name Healthy Choice would have acquired a secondary meaning signifying the Conagra Healthy Choice product. It followed, therefore, that the name and getup on the McCain product did not convey any misrepresentation.
5. While concluding that evidence of local business activity was necessary to establish a cause of action in passing off, his Honour was sympathetic to the approach taken by Gummow J. in 10th Cantanae Pty Ltd v. Shoshana Pty Ltd (1987) 79 ALR 299 at 321-2 and Telmak Teleproducts (Australia) Pty Ltd v. Coles Myer Ltd (1988) 84 ALR 437 at 446. The reasons for judgment in those cases suggest that proof of fraud may support an action for passing off based on local reputation derived from international rather than local business activity. Against the event of an appeal in which the question might be further agitated, his Honour considered the question whether fraud had been proven. He took the view that fraud in the context of passing off did not require proof of all the elements necessary to support an action for deceit. It could be constituted by "persistence after notice", Turner v. General Motors (Australia) Pty Ltd [1929] HCA 22; (1929) 42 CLR 352 at 362 (Isaacs J.). On the basis of his finding that McCain was aware from the outset that it had adopted the name of Conagra's product and aspects of its packaging, his Honour concluded shortly that the company was engaging in fraudulent conduct in the sense used by Isaacs J. Whether or not the company believed that it was legally entitled to adopt the name and getup that it did was, in his Honour's view, irrelevant to the finding of fraud.
6. In relation to the claim of misleading or deceptive conduct in contravention of the Trade Practices Act 1974, his Honour was prepared to accept that the extent of reputation necessary to support that cause of action might not be as great as the reputation required to establish the cause of action in passing off. Nevertheless, he did not think that Conagra had satisfied the onus of proof of showing that the number of persons for whom the name "Healthy Choice" and the package design would have the necessary secondary meaning was other than insignificant. Thus to the extent that Conagra's claim of misleading or deceptive conduct depended upon the use of the name and getup it failed. It succeeded in one other respect relating to a trade presenter document used by McCain but that aspect of his Honour's judgment is not in issue here.
7. The cross-appeal having been abandoned, there was no challenge to his Honour's conclusions adverse to McCain.
8. His Honour's finding that the absence of business activity in Australia on the part of Conagra was critical to its cause of action was challenged in the first ground of appeal (para 2 of the notice). In the light of findings as to recognition and awareness of Conagra's product in Australia and fraud on the part of McCain, his Honour is said to have erred in failing to hold that McCain's conduct amounted to passing off (para 3). And having found fraud his Honour should have held that the reputation of Conagra's products in Australia was sufficient for the conduct of McCain to constitute passing off (para 4). Further, it was said, he erred in failing to find that the reputation of Conagra's Healthy Choice products in Australia was significant (para 5) and given the finding that there was a potentially large number of persons in Australia aware of Conagra's products, his Honour erred in failing to hold that McCain's conduct was likely to mislead and deceive a "not insignificant number of relevant persons" so as to constitute contraventions of ss.52 and 53(c) of the Trade Practices Act 1974 (para6). In determining whether the reputation was significant, his Honour was said to have erred in failing first to determine the section of the public or class of persons by reference to which that significance was to be measured (para 7). His Honour should have attributed significance to the number of persons from the United States who came to Australia and persons from Australia who visited the United States with whom Healthy Choice products had a reputation (para 8). There was also complaint about his Honour's alleged failure to distinguish between Conagra's reputation in the name Healthy Choice and its reputation in the packaging and getup of those products. This related both to the passing off and s.52 claims (paras. 9 and 10). And there was error, it was said, in the requirement that relevant persons should not only have known of Conagra's Healthy Choice products but that the words had acquired a secondary and distinctive meaning (para 11).
9. I have had the advantage of reading the judgments of Lockhart and Gummow JJ. and subject to some observations I wish to make on the question of reputation, I agree with their reasons and regard them as consistent with the general propositions that:
1. The cause of action in passing off in
relation to goods or services does not
require proof that the applicant for
relief has engaged in business activity in
relation to those goods or services within
Australia.
2. It is essential to the cause of action in
passing off that the applicant's goods or
services have a reputation with a
substantial number of persons who would be
potential customers were those goods or
services to be marketed within the
jurisdiction.
3. The belief by a trader that the name
and/or getup of the trader's goods or
services is likely to cause members of the
public to associate them with the goods or
services of another may be evidence that
the name or getup is likely to have that
effect. According to the circumstances,
persistence in the use of a name and/or
getup after notice of similarity may
indicate such a belief and an intention to
benefit by the similarity. Such a belief
or intention does not logically supply the
requirement that the use of the name or
getup complained of be deceptive.
4. The requirement in passing off that a name
or getup be deceptive in the sense of
conveying a misrepresentation is met when
there is an awareness among members of the
public of those features of the prior
product. Such awareness usually precedes
the introduction of the parasitic product,
although that may not always be the case.
For example a new product might be
released upon the market with the false
proclamation of an association with a
product established in some foreign
country which has no existing reputation
in Australia. This was the nature of the
representation which his Honour found to
be embodied in the trade presenter by
which McCains introduced its product to
the trade in Australia.
10. Accepting that business activity within the jurisdiction is not a prerequisite for the success of a claim in passing off and that with or without evidence of fraud, consumer awareness of the applicant's product, otherwise known as its reputation, is necessary, it is the question of reputation which is central in this case to both the Trade Practices Act claim and the claim in passing off.
11. It was the claim in passing off which dominated his Honour's reasons for judgment and this was a reflection of the way in which Conagra presented its case. But as Deane and Fitzgerald JJ said in Taco Company of Australia Inc. v. Taco Bell Pty Ltd [1982] FCA 136; (1982) 42 ALR 177, the cause of action in passing off may provide no basis for wider or more effective relief than a claim for contravention of s.52. Their Honours were considering a situation in which a primary claim was brought under s.52 and the secondary or associated claim in passing off. The learned trial judge in this case acknowledged that observation but pointed out that in the case before him the passing off claim was that primarily relied upon. Why that should have been so is not clear. The cause of action based upon s.52 and those provisions of the Trade Practices Act providing for awards of damages and injunctive relief do not involve consideration of the respondent's mental state nor argument (except for its evidentiary implication) about local business activity. Whether the name and/or getup of a product is misleading or deceptive in the sense contemplated by s.52 depends in this case upon the issues of reputation and similarity. Deceptive similarity having been found, the question is whether there was a relevant public who, being already aware of the existence and name and/or getup of the Conagra product, could be deceived by the McCain product.
12. His Honour made two important findings of fact on the issue of reputation, both of which are embodied in the one passage at p 57 of his judgment:
"...while there is no doubt that there are persons in
Australia aware of the ConAgra product and while the
evidence establishes that there is a potentially large
number of such persons, I am unable to be satisfied on
the balance of probabilities that there does exist in
Australia a sufficiently substantial number of persons
who are aware of the ConAgra product and for whom the
name Healthy Choice would have acquired a secondary
meaning, that is to say, the meaning signifying the
ConAgra Healthy Choice product."
These findings must be read in the light of the evidence relating to reputation which was reviewed in the judgment. His Honour referred to advertisements for the Conagra product which appeared in some American magazines with limited circulation in Australia. The magazines and their Australian sales were set out in a table at p 49 of the judgment as follows:
Magazine Date of Advertisement Australian Sales
Bon Appetit August 1990 174
February 1991 174
Better Homes
and Gardens August 1990 896
November 1990 896
Redbook February 1991 84
Midwest Living December 1990 25
April 1991 25
Working Woman September 1990 154
November 1990 154
13. An article about the Conagra product appeared on 22 October 1990 in an American trade journal called "Food Business" and his Honour inferred that some persons in the trade in Australia would have received the journal and read the article. There was testimony from persons presently living in Australia who are aware of the Conagra product and his Honour referred to that testimony. These were American visitors to this country and Australians who had visited America. Evidence of a more general nature related to the movement of persons between America and Australia and included reference to surveys which showed that 67% of persons tested in the United States were aware of the Conagra product. Test evidence adduced by McCain to show an absence of awareness of the Conagra product among persons living in Sydney and Melbourne was not given any weight. In the event his Honour found that there was in Australia "some number of persons" being either originally from the United States or returned visitors who would have seen the Conagra product or advertisements for it. For these persons "the name Healthy Choice may well have acquired a secondary meaning at the time (McCain) launched its Healthy Choice product on to the Australian market".
14. There was specific reference in the judgment to evidence given by Mr Steven Yung, a Product Manager for McCain who was involved in the preparation of the trade presenter with a view to introducing the Healthy Choice product to trade buyers. Mr Yung was asked in cross- examination if he believed that the buyers would know of the US Healthy Choice product. He replied:
"I believe they would of (sic) but I can't comment that
that's, you know, for certain."
"Mr Yung believed (and I have no reason to reject his
evidence) that trade buyers would have been aware of
the ConAgra product in the United States. Among that
class of person, to whom the trade presenter was sent,
it is clear that the ConAgra products had therefore a
significant reputation."
15. Against the background of these findings, his Honour adopted the test to be found in Saville Perfumery Ld v. June Perfect Ld (1941) 58 RPC 147 at 176 and Norman Kark Publications Ltd v. Odhams Press Ltd (1962) 79 RPC 163 at 168, which requires in passing off, proof of the relevant product's reputation among "a substantial number of persons". He made the evaluative judgment in the passage cited earlier, that he was not satisfied that there does exist in Australia a sufficiently substantial number of persons who are aware of the Conagra product and for whom the name Healthy Choice would have acquired a secondary meaning. The reference to a "potentially large number of such persons" must, in the context in which it appears, be taken as describing a class which theoretically could be large but was not found to be so. It cannot be said in my opinion, that his Honour erred on the extent of the reputation of the Conagra product in Australia. It was not suggested that he applied the wrong test in requiring evidence to satisfy him that there is a substantial number of persons who are aware of that product. The term "substantial" is evaluative and relative to such factors as the size and distribution of the population of prospective consumers. Having regard to the facts which he found, his Honour did not err in failing to be satisfied as a matter of evaluation that the reputation of the Conagra product was substantial.
16. On the Trade Practices Act claim, his Honour adopted what may be in some circumstances a different test for the extent of Conagra's product reputation necessary to show misleading or deceptive conduct on the part of McCain. Provided Conagra could show on the balance of probabilities that "a not insignificant number" of persons knew of the Conagra product, then it should be entitled to succeed. His Honour said:
"If the number of persons with the necessary knowledge
is insignificant, then a fortiori the conduct
complained of will not be able to be characterised as
conduct that is misleading or deceptive. Once it
passes, however, the threshold of insignificance, then
there is much to be said for the view that the conduct
in question has become misleading."
But accepting the possibility that the threshold of requisite reputation under the Act is lower than that required to support a claim in passing off, he did not think that Conagra had satisfied the onus of showing that the number of persons for whom the name Healthy Choice and the package design would have the necessary secondary meaning was other than insignificant.
17. The nature of the question to be asked about McCain's conduct for the purposes of s.52 Trade Practices Act 1974 is to be borne in mind in considering the correctness of the approach taken by his Honour. The question is one of characterisation of the conduct, not of the reactions of consumers or others to that conduct. So where some express representation is made and that representation is demonstrably false, it is not usually necessary to go beyond that finding in order to conclude that it is misleading or deceptive. The case of an obvious puff might be taken as an exception. Where conduct depends upon context or surrounding circumstances to convey a particular meaning, then those factors must be taken into account but only as a way of characterising the conduct. Where the name and getup of a product are in issue, the question for the purposes of s.52 is whether they are misleading or deceptive in the circumstances. The fact that some members of the relevant public may be aware of a similar product in another country does not affect the characterisation of the conduct if that number is small. The word "insignificant" was used by his Honour to identify the threshold of public awareness below which such conduct is not misleading for the purposes of the section. That word is normative but not for that reason inappropriate. Attention must be paid to the policy of the relevant provision which, as the heading to Pt.V and many of its provisions indicate, is one of consumer protection. If the similarity complained of is commercially irrelevant having regard to the number of people who know of it, then it can be concluded that the use of the name and/or getup complained of is not misleading or deceptive. That is essentially the kind of evaluation which underpinned his Honour's finding in this case and on the primary facts that he found I am not persuaded that he erred in his approach.
18. For these reasons I agree that the appeal should be dismissed.
Re Conagra Inc
Mccain Foods
(1992) 106 ALR 465
(1992) 33 FCR 302
(1981) 1 NSWLR 196
(1942) 66 CLR 261
(1982) 42 ALR 177
(1984) 3 IPR 619
(1985) 6 IPR 59
(1988) 12 IPR 85
(1988) 12 IPR 403
(1988) 13 IPR 661
(1989) 16 IPR 431
(1976) 51 ALJR 254
(1927) 40 CLR 43
(1988) 12 IPR 358
(1968) 122 CLR 25
(1977) 51 ALJR 254
(1987) 79 ALR 299
(1934) 51 CLR 358
(1982) 149 CLR 191
(1991) 102 ALR 497
(1989) 91 ALR 251
(1943) 67 CLR 561
(1991) 101 ALR 461
(1980) 32 ALR 387
(1984) 156 CLR 414
(1987) 10 IPR 289
(1984) 156 CLR 41
(1987) 73 ALR 504
(1985) 5 IPR 140
(1988) 84 ALR 437
(1989) 89 ALR 48
(1986) 7 IPR 509
(1992) 23 IPR 193
(1984) 4 IPR 260
(1987) 9 IPR 367
(1929) 42 CLR 352
(1986) 7 IPR 295
(1976) 12 ALR 363
(1962) 109 CLR 300
(1937) 57 CLR 448
(1988) 83 ALR 403
(1960) 103 CLR 391
(1980) 145 CLR 457