Re Conagra Inc v Mccain Foods

Re Conagra Inc v Mccain Foods - [1992] FCA 159 - FCA 1992 case summary — Zoe

[61]

"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)"

[97]

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.

[105]

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:

[110]

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.

[119]

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.

[123]

"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."

[130]

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).

[132]

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.

[142]

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):

[219]

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.

[384]

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).

At a glance

Court

Decision date

Before

Source

Judgment (402 paragraphs)

Re Conagra Inc v Mccain Foods (Aust) Pty Ltd [1992] FCA 159; (1992) 23 IPR 193, (1992) Aipc 90-892 (Extract) (1992) 106 ALR 465 (1992) 33 FCR 302 (14 April 1992)

Parties

Legislation Cited (6)

Cases Cited (43)