South Sky Investments Pty Ltd v Prins & Anor [2010] QSC 438

PROCEDURE - SUPREME COURT PROCEDURE - QUEENSLAND - PROCEDURE UNDER UNIFORM CIVIL PROCEDURE RULES AND PREDECESSORS - SUMMARY JUDGMENT - where the plaintiff contracted to sell to the defendants two apartments in a building then proposed to be constructed - where the plaintiff informed prospective purchasers that if apartment owners wished to let their apartments they could do so through the on-site letting agent, through an off-site letting agent or privately, without using an agent - where a company associated with the plaintiff has applied for the registration of various trade marks, including the name of the building - where the plaintiff concedes that at all relevant times that company intended to apply for trade marks in connection with the development - where the plaintiff did not disclose that intention to prospective purchasers - where the defendants wished to let their apartments privately but claim that the registration of these trade marks would prevent them effectively marketing their apartments online which would make them uncompetitive with the on-site letting agent - where the plaintiff called for settlement but the defendants refused to settle - whether the plaintiff is entitled to summary judgment for specific performance of the contracts.

Body Corporate and Community Management Act 1997 (Qld) s 213

Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Qld) s 3

Trade Marks Act 1995 (Cth) s 120

Trade Practices Act 1974 (Cth) ss 52, 87

Aldi Stores Ltd Partnership v Frito-Lay Trading Co GMBH [2001] FCA 1874; (2001) 54 IPR 344

Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31

Donne Place Pty Ltd v Conan Pty Ltd [2005] QCA 481

Johnson & Johnson Australia Pty Ltd v Sterling Pharmaceuticals Pty Ltd (1991) 30 FCR 326

Kimberley NZI Finance Ltd v Torero Pty Ltd [1989] ATPR (Digest) 53

Mantra Group Pty Ltd v Tailly Pty Ltd (No 2) [2010] FCA 291; (2010) 267 ALR 347

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 84 ALJR 644

Shell Co of Australia Ltd v Esso Standard Oil (Aust) Ltd [1963] HCA 66; (1963) 109 CLR 407

Sports Break Travel Pty Ltd v P&O Holidays Ltd [2000] FCA 924; (2000) 50 IPR 51

[1] Under contracts made in 2006, the plaintiff contracted to sell to the defendants two apartments in a building then proposed to be constructed at Broadbeach called The Oracle. The agreed price for one apartment was $1.425 million and for the other, $1.195 million. The contracts were to be completed 14 days from notice of the establishment of the relevant community titles scheme.

[2] That notice was given on 5 October 2010 and the plaintiff called for settlement on 19 October 2010. The defendants refused to settle and the plaintiff issued these proceeds claiming specific performance of each contract, in which it now applies for summary judgment.

[3] The making of each contract is not in doubt. The defendants say that they are not obliged to complete upon a number of legal bases, most of which do not appear from their Defence. No point is taken about that however. The argument for the defendants, who are not legally represented, focuses upon the actual or proposed registration of certain trade marks, which are to be used by a letting agency which will operate from within what is now The Oracle resort. The registration was or is to be effected by an associated company of the plaintiff. The defendants say that they intended to let these apartments, not through the on-site agency but instead by their own marketing. They say that the effect of the registration of these trade marks would be to make them uncompetitive with the on-site agency. Consequently, they say that they should have been told by the plaintiff of the proposal, which existed at the time the contracts of sale were made, to register these trade marks. Their principal argument is that they were thereby misled or deceived in contravention of s 52 of the Trade Practices Act 1974 (Cth).

[4] In 2006 prospective purchasers, such as the defendants, were provided with certain documents about the then proposed development, including two disclosure statements in relation to each apartment. There was a so-called Developer Product Disclosure Statement, which was given for the stated purpose of informing buyers "about the opportunity to make their Apartments available to the Operator for letting purposes". The Operator was there defined to be the person or entity which was to be the on-site building manager and letting agent under the so-called Oracle MR Scheme. The statement informed buyers that they were not obliged to appoint the Operator to let their apartments, but might do so at any time. This statement was required because of the provisions of the Corporations Act in relation to managed investment schemes. The other statement was provided in purported compliance with s 213 of the Body Corporate and Community Management Act 1997 (Qld) ("the BCCMA").

[5] The Product Disclosure Statement informed buyers that the body corporate for the community title scheme for these apartments would enter into an agreement with the Operator by which it would maintain the common property and would be entitled to conduct on-site letting activities, which it might do itself or through a manager engaged by it. It informed buyers that the Operator would issue its own product disclosure statement in relation to the Oracle MR Scheme, which it would operate. Clause 6 provided that if apartment owners wished to participate in the Oracle MR Scheme and to let their apartments, they might:

"(a) appoint the Operator as agent to make the Apartment available for letting to Guests;

(b) appoint an off-site agent to make the Apartment available for letting to Guests; or

(c) let the Apartment privately, without using an agent."

"An apartment owner cannot participate in the Oracle MR Scheme if he or she has also appointed an off-site agent, or he or she lets out the Apartment privately. Once an Apartment Owner terminates an off-site agent's appointment, he or she can apply to participate in the Oracle MR Scheme."

[6] Clause 7 of the Product Disclosure Statement then set out the suggested benefits of participation in the Oracle MR Scheme. It is unnecessary to set out all of them here. Most concerned the suggested advantage of having relevant services, such as the cleaning of apartments, managed from within the building itself. But as to marketing apartments for rental, there were these suggested benefits:

"(g) wholesale accommodation operators requiring accommodation for on-sale to retail customers often prefer to deal with on-site building managers rather than off-side letting agents. This is because of the convenience to wholesale operators of dealing with just a few on-site building managers rather than many individual agents;

(h) Guests wanting to let apartments in particular resorts or buildings frequently make inquiries with on-site building managers rather than approaching off-site letting agents."

Notably there was no suggested benefit from the prospect of the use of any registered trade mark, or more generally, from the use of any name or sign which might be exploited by the on-site building manager, but not by owners who let their apartments through another agent or without an agent. Clause 16(b)(iv) stated:

"The demand for rooms may be influenced by the contacts that the Operator has in the industry and the Operator's experience in operating similar properties. An Operator that is unknown in the accommodation industry may have more difficulty attracting Guests."

Again, there was no indication of any likely advantage insofar as a trade mark was concerned. Nor was there anything else in this document which indicated such an advantage or which said anything about trade marks.

[7] The statement in purported compliance with the BCCMA annexed a copy of the proposed Caretaking and Letting Agreement. This was a proposed contract between the body corporate and the caretaker, under which it would be entitled to carry on from its own unit and other designated areas within the development a business of letting lots in the scheme and the provision of associated services. It was in terms which would permit the agent to provide letting services for such owners of lots in the scheme as required those services, with owners not being obliged to use that agent. Another term of this draft agreement acknowledged the prospect that the caretaker/agent might be the plaintiff or a related person. This statement, and documents annexed to it, identified the relevant regulation module as the Body Corporate and Community Management (Accommodation Module) Regulation 2008 (Qld). Accordingly, the lots in the scheme had to be predominantly "accommodation lots", which was defined by s 3(3) of that Regulation as a lot that was either available for letting for residential accommodation or part of a hotel (or both). There was nothing within the BCCMA disclosure statement, or in any other material provided by the plaintiff to the defendants, which referred to trade marks.

[8] The subject contracts of sale were made respectively on 12 July 2006 and 26 October 2006. From about November 2009, Niecon Developments Pty Ltd lodged various applications for various trade marks associated with the development. The plaintiff's evidence concedes that at all relevant times this company intended to apply for trade marks in connection with the development. For the purposes of this application at least, it should be inferred that the plaintiff, as a company within the same group, knew of that intention when it entered into the subject contracts. It is conceded that the defendants were not informed of that intention.

[9] In particular, Niecon Developments has applied, or by assignment has become the applicant, for trade marks comprising the words "The Oracle", "The Oracle Broadbeach", "The Oracle Blvd" and "Oracle Travel". The marks, save for "Oracle Travel", are applied for in relation to services which, broadly speaking, include the letting and management of apartments including the marketing of that accommodation. The application for the mark "Oracle Travel", which was made originally by an unrelated entity but which was assigned in favour of Niecon Developments, seeks registration in respect of a number of goods or services concerned with the business of travel, including "reservation services for travellers' accommodation including hotel and motel reservation services; arrangement, booking and reservation of accommodation; provision of temporary accommodation; accommodation finding services for travellers; travel agencies services for arranging, booking and reserving accommodation".

[10] According to an affidavit by the defendant Mr Prins, he has been informed by "many trade mark solicitors" and believes that registration of the trade marks for the words "Oracle" or "The Oracle", would "effectively prevent anyone else from using the word alone, or in combination with other words for activities covered by the relevant class".[1] He believes that if successful in its applications for registration, Niecon Developments will grant a licence for the use of the trade marks to the on-site letting agent which will provide it with such an advantage against others offering to let apartments in this building that it will be impossible for them to successfully compete.

[11] Mr Prins descends to some detail, to endeavour to make good that claim, by reference to internet advertising. His evidence is that registration of these trade marks would make it effectively impossible for any competitor, such as the defendants if they were compelled to complete these purchases, to use the word "Oracle" as part of a domain name which links to a website using that word to advertise apartments in this building. Further, he claims that he would be unable to use the building's name, The Oracle, in title tags and metatag description tags. He says that the use of the name in these ways is critical for attracting prospective customers to his website, who might use a search term such as "Oracle Apartments". This affects the so-called ranking of results on an internet search, because he says that if he were unable to use the name of the building in these ways, his site would not appear on the first page of results on a Google search. He says this would make him uncompetitive with the on-site manager whose site would appear on that page because most customers would not look beyond it.

[12] Because this is an application for summary judgment, I should proceed upon the basis that his claims as to the electronic impact of not using the relevant words in these ways within his site are well-founded. There are then essentially two questions. The first is whether the scope of the rights provided by the registration of these trade marks, if effected, would be so extensive as to prevent him from using electronically the words in those ways. Secondly, there is a question of whether that impact, if it is established, is something the likelihood of which should have been disclosed to the defendants when they contracted with the plaintiff.

[13] As to the first of those questions, the defendants' argument heavily relies upon a recent judgment in the Federal Court in Mantra Group Pty Ltd v Tailly Pty Ltd (No 2).[2] The claimants there were the managers and exclusive on-site letting agents for apartments in a building in Surfers Paradise called "Circle on Cavill". They also held registered trade marks, including a word mark for the words "Circle on Cavill". They brought proceedings for infringement of those trade marks against parties which provided letting services on behalf of some apartment owners in that building, in competition with the applicants. It was held that the respondents had infringed the registered marks by certain uses of the subject words. The relief obtained by the applicants included orders that certain domain names, which were "Circle on Cavill" and any other domain name which was substantially identical with or deceptively similar to the marks, be transferred by the respondents to the applicants. The respondents were permanently restrained from using that name as a trade mark in the advertising, promotion or supply of accommodation, "including as part of a domain name, metatag, search engine keyword or business name".[3]

[14] One of the principal issues in that case was whether the respondents' use of the words "Circle on Cavill" had been a use "as a trade mark", having regard to s 120(1) of the Trade Marks Act 1995 (Cth) which provides:

"A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered."

To a substantial extent, the claimants proved that element. But that was a factual matter, necessarily decided by reference to the particular circumstances of that case.

[15] If the defendants here mean to say that any use of the expression "The Oracle", in the promotion of their apartments if they must purchase them, would be an infringement of these marks, if registered, they are misstating the effect of that judgment. So far as the Trade Marks Act is concerned, the defendants would be able to use the name of this building (Oracle) or any similar name to identify and describe the apartments being offered for rental, as long as they did not use the words as a trade mark, ie use them to distinguish their business services from others offering apartments in this building. Reeves J put the question in the context of the facts of that case as being whether the use of the words "Circle on Cavill" amounted to a distinguishing use of those words to indicate to the public that the respondent was "the true origin of the accommodation services at the Circle on Cavill complex".[4] His judgment illustrates the point made by Kitto J in Shell Co of Australia Ltd v Esso Standard Oil (Aust) Ltd[5] that "the context is all important, because not every use of a mark which is identical with or deceptively similar to a registered trade mark infringes the right of property which the proprietor of the mark possesses in virtue of the registration". The judgment in Mantra Group Pty Ltd v Tailly Pty Ltd does not compel a conclusion here that the registration of these trade marks, if effected, would have an impact to the extent suggested by the defendants.

[16] Nevertheless, on the state of the present evidence, it cannot be concluded now, in the plaintiff's favour, that the registration of the trade marks could have no substantial impact upon competitors of the on-site manager, such as the defendants if they are ordered to complete their contracts. There are two propositions in respect of trade mark infringements which are relevant at this point. The first is that although the use of a trade mark as a trade mark is often distinguished from a use which is merely descriptive of the product or service, a use might constitute an infringement, by its being used as a trade mark, although the mark also serves at the same time a descriptive function.[6] Secondly, a party might infringe a trade mark although not intending to use the mark as a trade mark.[7] The path for the intended user of the relevant words, in order to avoid an infringement, might not be so clearly marked that the user would not be forced to err on the side of caution to avoid an infringing use. Thus for the present, the claims by the defendants that they would be significantly affected in their use of the name of the building, specifically within their internet marketing, cannot be readily dismissed. Instead, all of this requires a factual inquiry at a trial. In particular, there are necessary inquiries as to what form of internet material is necessary to effectively compete with the on-site operator and as to what use of the relevant words might be necessary to that end. There would then be questions as to whether such material, at least arguably, would constitute an infringement. Even a serious prospect of infringement might be a sufficient deterrent to the use of the subject words that it would present a substantial impediment to persons such as the defendants in competing with the on-site operator.

[17] The further question would then be whether the defendants, as prospective buyers of these apartments, should have been informed by the plaintiff that another entity, and more particularly a related company, proposed to apply for registration of such trade marks. For present purposes it is sufficient to discuss this issue by reference to s 52 of the Trade Practices Act 1974 (Cth). The defendants have not pleaded their case with any clarity or in compliance with the relevant procedural rules. But in essence their argument is that by not disclosing this proposal for registration of the trade marks, the plaintiff engaged in conduct that was misleading or deceptive or which was likely to mislead or deceive. In essence, the conduct complained of here is the plaintiff's silence, in the context of what was said to prospective buyers.

[18] In Kimberley NZI Finance Ltd v Torero Pty Ltd,[8] French J (as he then was) said that "unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist".[9] And recently in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd,[10] French CJ and Kiefel J said:

"[22] However, as a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence. ...

[23] Reasonable expectation analysis is unnecessary in the case of a false representation where the undisclosed fact is the falsity of the representation. A party to precontractual negotiations who provides to another party a document containing a false representation which is not disclaimed will, in all probability, have engaged in misleading or deceptive conduct. When a document contains a statement that is true, non-disclosure of an important qualifying fact will be misleading or deceptive if the recipient would be misled, absent such disclosure, into believing that the statement was complete. In some cases it might not be necessary to invoke non-disclosure at all where a statement which is literally true, but incomplete in some material respect, conveys a false representation that it is complete."

[19] For the plaintiff it is submitted that in this context, a contract for the sale of land, "the rule of caveat emptor ... normally applies" and that "[t]he contracts themselves mark out the extent to which this position has been modified as between the parties" for which they cite Donne Place Pty Ltd v Conan Pty Ltd.[11] Nevertheless, there is a factual question of what, if anything, the defendants could have reasonably expected would be said about the proposed trade marks, in the context of what they were told about the advantages of using the on-site manager.

[20] The issue already discussed, being the extent of the impact of the registration of these trade marks upon a competing letting business for apartments in this building, is one which substantially affects whether disclosure of the proposed trade marks should have been made. If the likely competitive impact would be negligible, the case for disclosure would not be apparent. If the impact of registration would be as far reaching as Mr Prins suggests, then a case of a contravention of s 52 would be strongly arguable. The truth may lie somewhere between those points. Ultimately the question of whether there was a contravention of s 52 cannot be decided now, because it does not depend simply upon a determination of what was or was not represented within the material which the plaintiff provided to the defendants before making these contracts. Rather, it also depends upon the outcome of a factual inquiry about the impact or otherwise upon a competing business of the registration of these trade marks.

[21] Accordingly, I am not satisfied that the defendants have no real prospect of defending this claim, at least upon the basis of a breach of s 52, which might warrant relief under s 87 under which they would be relieved from performance of the contracts. Nor am I satisfied that there is no need for a trial of the claim. The application for summary judgment will be dismissed.

[22] But the defendants must properly plead their case. The Defence filed on 29 October 2010 does not plead a contravention of s 52 nor does it contain a counterclaim for relief under s 87. And in very many ways which it is unnecessary to detail here, it is pleaded in embarrassing and irrelevant terms. The defendants will be ordered to file and serve an amended defence and counterclaim within three weeks of this judgment. I will hear the parties as to costs and other orders.

[1] Affidavit of Hendrik Prins filed 29 October 2010, para 44.

[2] [2010] FCA 291; (2010) 267 ALR 347.

[4] Mantra Group Pty Ltd v Tailly Pty Ltd [2010] FCA 291; (2010) 267 ALR 347 at [62], [67].

[5] [1963] HCA 66; (1963) 109 CLR 407 at 422.

[6] Johnson & Johnson Australia Pty Ltd v Sterling Pharmaceuticals Pty Ltd (1991) 30 FCR 326 at 347-349 (Gummow J).

[7] Sports Break Travel Pty Ltd v P&O Holidays Ltd [2000] FCA 924; (2000) 50 IPR 51 at [14]; Aldi Stores Ltd Partnership v Frito-Lay Trading Co GMBH [2001] FCA 1874; (2001) 54 IPR 344 at [78].

[8] [1989] ATPR (Digest) 53,193 at 53,195.

[9] Cited with approval by Gummow J in Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31 at 41 and applied in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 84 ALJR 644 at [18] (French CJ and Kiefel J).

[10] [2010] HCA 31; (2010) 84 ALJR 644.

[11] [2005] QCA 481 at [35].