Taco Bell Pty Ltd & Anor v Taco Co of Austrlaia Inc & Ors [1982] FCA 170

Federal Court of Australia|1982-07-22|Before: Fitzgerald JJ, Franki J

to that of another restaurant was such conduct - whether

NEW SOUTH WALES DISTRICT REGISTRY) No. G199 of 1981

THE FEDERAL CO r BETWEEN: TACO COMPANY OF AUSTRALIA INC. TACO BELL Appellants AND: TACO BELL PTY. LINITED

JUDGES MAKING ORDERS: 'Pranki, Deane and Fitzgerald Jag.

The orders made by the learned trial Judge on 22 December 1981 and 31 December 1981 are terminated as from today.

Taco Company of Australia Inc. by itself, its servants

or agents, is restrained from operating any restaurants

in the Sydney metropolitan area under the name "Taco

Bell" or under any name similar thereto which 1s deceptive or misleading or which is likely to deceive or mislead.

Taco Company of Australia Inc. by itself, it servants, or agents, 18 restrained from passaing-off goods and services supplied in any restaurants in the Sydney metropolitan area not supplied by Taco Bell Pty. Limited as and for goods and services supplied by Taco Bell Pty. Limited.

1. The appellants pay the costs of the respondents . an the appeal.

The cross claim of the appellants is dismissed.
The first respondent has liberty to apply to the

trial Judge, or if he 1s not available, to any other Judge of this Court to deal with any question of damages and any reserved costs before the trial Judge not already the subject of an order.

NEW SOUTH WALES DISTRICT REGISTRY) WO. GLSS OF 1981

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND: TACO BELL PTY. LIMITED DENBRAD MANAGEMENT PTY. LIMITED ROBERT FRANCIS ERIC BAILLIE FRANCIS

This is an appeal by Taco Company of Australia Inc. and Taco Bell from a judgment of a single Judge of this court in proceedings which arose out of alleged contraventions of s.52 of

The proceedings were commenced by the first respondent, Taco Bell Pty. Limited, against the first appellant seeking,

inter alia, an injunction to restrain the first appellant Taco

Company of Australia Inc., from operating any restaurant in the Sydney metropolitan area under the name "Taco Bell", or any name deceptively or misleadingly similar thereto, or which was likely to deceive or mislead by reason of its similarity thereto, and an injunction restraining the first appellant from passing- off goods and services supplied in any restaurant in the Sydney metropolitan area not supplied by the first respondent as and for

goods and services supplied by the first respondent.

The learned trial judge set out the relevant primary facts very fully and I have drawn upon his judgment to a great extent in relation to those facts. The appellants attacked a number of inferences drawn by the trial judge but not his primary

The first appellant, relying upon s.52 of the Act, together with Taco Bell, a California company, which operated a chain of Mexican food restaurants in the United States of America, Canada and Guam, cross-claimed against the first respondent. Orders were sought, inter alia, restraining the first respondent from using the name "Taco Bell Pty. Ltd." or any name deceptively similar to the name "Taco Bell". An injunction was also sought restraining the first respondent from passing-off its business or goods or services as that or those of the cross-claimants or either of them. The appellants also joined

certain companies and individuals as cross-respondents.

The first appellant was incorporated in the State of Delaware in the United States of America in 1980 for the purpose of establishing and operating Taco Bell restaurants in Australia. It is a wholly owned subsidiary of another American company, Pepsico Inc. of the United States of America. The Californian company, Taco Bell, is also a wholly owned subsidiary of Pepsico

The first respondent has for several years conducted a Mexican food restaurant at Bondi under the name "Taco Bell's Casa". It was originally incorporated on 13 March 1973 under the Companies Act 1961 (N.S.W.) as "B. and B. Mexican Enterprises

On 7 December 1976 B. and B. Mexican Enterprises Pty. Limited changed its name to "Taco Bell Pty. Limited". On 8 February 1974 that company registered the name "Taco Bell" and

"Taco Casa" as business names under the Business Names Act 1962

(N.S.W.). At all material times since its incorporation the first respondent has conducted a Mexican food restaurant at Bondi. The original owner of the restaurant was an American, Bill Chillcoate, who opened it in September 1970. It seems that it was the first Mexican food restaurant opened in Sydney. It was first run under the name "Taco Bill's" and "Taco Bill's

Prior to June 1977 the shares in the first respondent were owned by James Bruce Baird and James David Baird. During their ownership the name of the restaurant was changed from "Taco

Bill's" and "Taco Bill's Casa" to "Taco Bell's Casa".

On 3 June 1977 the shares in the first respondent were purchased from the Bairds by Eric Francis and Co. Pty. Limited and Denbrad Management Pty. Limited, which were joined as cross- respondents by the first appellant. Eric Francis and Co. Pty. Limited is now the sole beneficial shareholder of the first respondent and its directors are Eric Francis and his son Robert

The restaurant at Bondi seats approximately 90 people and its gross sales have increased from approximately $170,000 in the year ended 30 June 1978 to approximately $306,000 in the year ended 30 June 1981. It is estimated that it provided between 48,000 and 49,000 meals in the year ended 30 June 1981. It caters mainly for customers who wish to be served by a waiter and dine on the premises, but it also offers take away food. Its meals are relatively inexpensive. The name "Taco Bell's Casa" is displayed on the awning and on the front window as well as on the menu and must be clearly visible to persons walking past. The learned trial judge was satisfied that the restaurant was known

In January 1981 the first appellant opened a Mexican food restaurant at Granville under the name "Casa Amiga" and on 3 September 1981 it opened another restaurant in George Street in the inner City of Sydney. At that tame there were about 15 Mexican food restaurants in the Sydney metropolitan area. Since 3 September 1981, but not before, each of the restaurants conducted by the first appellant has traded under the name "Taco Bell". In advertising and on signs relating to its business, it has used the letters "T.M." in association with the name "Taco Bell" and has stated "Taco Bell" 1s the trade mark of "Taco Bell,

The first respondent alleged, inter alia, that in using the name "Taco Bell" in its restaurants the first appellant was engaging in trade or commerce in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of

The first respondent also alleged that because of the same facts the first appellant was passing-off its goods and services supplied in its restaurants as the first respondent's goods and services. No question arose concerning this court's jurisdiction but, of course, its initial jurisdiction is under

Various types of conduct may contravene s.52 of the Act.

It is obviously misleading or deceptive to describe a brass chain

as a gold chain. All relevant persons must be assumed to know that gold is a metal separate and distinct from brass. In the case before us the question arises first, whether the use by the first appellant of the name "Taco Bell" for its two restaurants is misleading or deceptive or likely to mislead or deceive. It 1s obviously necessary to establish what, if anything, the words "Taco Bell" or "Taco Bell's Casa" mean to a relevant person when used by the first appellant in relation to a restaurant. It is necessary to examine any alleged deceptive conduct arising from the use of the words in the light of what those words mean to relevant persons when used in relevant situations. This involves two questions. First, who are the relevant persons and secondly, what, if anything, do the words mean to them. See generally

Snoid v. Handley (1981) 38 A.L.R. 383 and Weitmann v. Katies Ltd.

In a number of cases this court has considered the question of who are the relevant persons and it is now accepted that those persons must be a significant section of people who are likely to be exposed to the conduct of which complaint is made. (Snoid v. Handley, supra, at p.388). It is sufficient to say that all persons exposed to the conduct should be considered although conduct which is only likely to mislead or deceive an extraordinarly stupid person would not fall within s.52. I set

out what I said in Annand & Thompson Pty. Ltd. v. Trade Practices

"Broadly speaking it is fair to say that the question is to be tested by the effect on a person, not particularly intelligent or well informed, but perhaps of somewhat less than average intelligence and background knowledge, although the test is not the effect on a person who is, for example, quite unusually stupid. The question is not whether the purchaser was deceived but whether the conduct was misleading or deceptive."

The relevant persons here are those to whom the words "Taco Bell" had acquired a secondary meaning, namely, that the words indicated that a restaurant carried on under the name "Taco Bell" or "Taco Bell's Casa" was a restaurant operated by or in some relevant way associated with the first respondent and its restaurant. It is therefore necessary to examine the question whether the words "Taco Bell" in relation to a restaurant had acquired such a secondary meaning in the metropolitan area of

It was submitted by senior counsel for the appellants that the evidence of this secondary meaning, or reputation as it 1s often called, was quite unsatisfactory because of the very limited number of witnesses who had been called. The question whether conduct is misleading or deceptive or likely to mislead or deceive is one for the court. (See eg. Snoid_ v. Handley,

There was some evidence that people referred to the

first respondent's restaurant by name and indeed, evidence to

this effect appears to be hardly necessary. Restaurants are usually referred to by name. There was also evidence of almost

50,000 meals having been provided in the year ended 30 June 1981.

In the Sydney telephone directories afte, but not including the 1977 directory, the first respondent's restaurant has been referred to in both the ordinary and classified sections

From time to time the restaurant was mentioned in newspaper and magazine articles, for example, an article in the National Times of 21 September 1980 dealt with the restaurant in

There was evidence from about 10 persons who knew of the first respondent's restaurant that on seeing the first appellant's restaurant in George Street, or hearing about the first appellant's "Taco Bell" restaurants, each had concluded that they were connected by franchise with or conducted by the persons who conducted the first respondent's restaurant at Bondi. There was also evidence from the manager of the Bondi restaurant that on 27 August 1981 he had received a telephone call intended for the first appellant. The manager also gave evidence of enquiries he had made on two nights early in September 1981 about the residential address of patrons on those nights. Those enquiries showed that a significant percentage of those patrons

I am satisfied at the 3 September 1981 that, to a significant section of the community in the Sydney metropolitan area, the words "Taco Bell" or "Taco Bell's Casa" distinguished the restaurant of the first respondent. Having reached this conclusion I consider that the trial judge was correct in taking some steps to protect consumers from being misled or deceived or

being subject to conduct which was likely to mislead or deceive.

I will deal with the appellants' cross-claims later but, looking at the position broadly, if a significant number of relevant persons are likely to be misled or deceived by conduct engaged in by a trading corporation in trade or commerce the court must consider whether any orders which it is able to make in the exercise of its jurisdiction in the matter should be made

The appellants appeal is against the restrictions on the use by the first appellant of the name "Taco Bell" and against the refusal by the trial Judge of the cross claims. If unsuccessful in this contention the appellants sought, in the alternative, to have the restriction on the first appellants' use, of the name qualified so as to permit that use provided its business was distinguished from the business of the first respondent. The appellants' alternative claim included the grant of an injunction restraining the use by the first respondent of the name "Taco Bell" or "Taco Bell's Casa" without the first respondent's business being distinguished from the businesses of

The court is not able to prevent any person not before it from using the name "Taco Bell" in relation to a restaurant. In an appropriate case the court can prevent both appellants and respondents from using a name but this would be a rather extreme step to take in the absence of remarkable circumstances. The court could, of course, restrain both appellants and respondents from using the name "Taco Bell" in relation to restaurants without clearly distinguishing the business of a respondent from that of an appellant. However, the public will not use disclaimers no matter what the parties may be ordered to do by

"Taco" is a word of Spanish derivation and one of its meanings is "a snack" but it does not follow that it is so regarded in Sydney. The name "Taco Bell" is not a descriptive name and a person may be expected to identify a restaurant by a name which he regards as distinctive. The addition of the word

"Casa" does not seem to me to be of any material significance. Evidence was also before the court of alleged unsatisfactory conduct of the first appellant during a period when it was restrained by the learned trial judge on an anterlocutory basis from using the name "Taco Bell" in any advertising for any fast food business conducted by it unless there was included in the advertisement a clear representation to the effect the business of the first appellant and that of the

The appellants' restaurants conducted under the name "Taco Bell" were said to have such a distinctive "get-up" associated with them that persons familiar with the first respondent's restaurant would not be likely to be misled or deceived. However, a diner familiar with the first respondent's restaurant at Bondi might well be going to an address in the Western suburbs and hear that there was a "Taco Bell" restaurant at Granville and decide to visit it. It would not be any consolation to such a person, who had perhaps travelled some distance out of his way in order to visit such a restaurant, to find that it did not look quite like that which he had expected and to learn, as a result of inquiries, that it was not connected

with the first respondent's restaurant which he knew.

The appellants argued that s.52 was not contravened unless the relevant conduct continued, as it was put, up to and including the point of sale. This argument was also advanced in relation to the issue of passing-off and I will deal with it in

Whilst, in many instances, this Court has found that it is very helpful to have regard to law which has been worked out in relation to passing-off when considering the position under s.52 of the Act, there is no reason why this Court should import into the consideration of s.52 all the concepts which have been worked out in relation to passing-off. (See generally, Stephen

J. in Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd. (1978) 140 C.L.R. 216 at p.227.)

The true basis of a passing-off action is clearly shown in the following passage from Lord Fraser of Tullybelton's speech in Warnink v. Townend & Sons (Hull) Ltd. [1979] A.C. 731. At

"I note in passing that the justification for the passing off action to prevent such misrepresentation continuing is not to protect the public (who might suffer no prejudice from it, if they have never tasted genuine advocaat) but to protect the appellants' property in the goodwill".

Stephen J., when considering the relationship between

s.52 and passing-off 1n Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd., supra, at

pp-226-227 said: "Section 52 of our Act is on the contrary

It is now clearly established that essential to passing- off is injury, or potential injury, to goodwill and damage, or the likelihood of damage, to the plaintiff. I will deal more fully later with this question. It 1s not necessary to consider whether the presence of these factors may strengthen the position of an applicant for relief based on s.52 but it is clear that the basic purpose of s.52 is that of consumer protection and therefore questions of goodwill or damage to an applicant are, in my opinion, unlikely to be of critical importance in deciding whether an action to restrain conduct, which would be in

The appellants argue that, if any order is made against them, it should be a qualified order along the lines of the order which I have discussed and that such a qualified order should also be made against the respondents. This argument was based on an allegation that the appellants, or one or other of them, had a concurrent reputation in the use of the words "Taco Bell" in relation to restaurants. For the reasons which I have already stated I consider that any injunction associated with a disclaimer or qualification would not be adequate to protect the public from conduct likely to deceive or mislead. It is therefore strictly unnecessary to deal with the appellants' argument in relation to concurrent reputation but because it was

the subject of lengthy submissions I will say something about it.

Although the appellants, in reply, submitted that the conduct of the parties was not relevant, an argument was advanced by the appellants that the relevant misleading conduct was that of the first respondent when it changed its name in 1976. In my opinion at that time, and also when the name of the restaurant was changed to "Taco Bell's Casa", there was no reason to assume that either of the appellants would ever commence business in

Australia, or that these changes of name were in any way contrary

The restaurants which the first appellant opened in 1981 in George Street and at Granville were said to be operated under

licence from the second appellant "Taco Bell". It appears that

. this last mentioned company operates and grants franchises for the operation of a large chain of Mexican food restaurants under the name "Taco Bell" in the United States, Canada and Guam. It is the intention of the first appellant to open and operate under the name "Taco Bell", restaurants in the Sydney metropolitan area if not restrained. Restaurants in the Eastern suburbs would be included and alternatively franchises would be granted to operate

Evidence was given for the appellants that in 1962 a Mr. Glen Bell had opened a Mexican food restaurant in California under the name "Taco Bell" and that he subsequently opened and operated restaurants in the same style and under the same name and granted licences or franchises to operate similar restaurants. The second appellant is the assignee of the rights of the founder Mr. Glenn Bell to the name "Taco Beli". There were 325 of these restaurants in 1975 and at the time of the hearing before the learned trial judge there was evidence that 1,366 of these restaurants operated under the name "Taco Beli" in 40 States of the United States, Canada and Guam. There was also evidence that these restaurants had a distinct appearance of which the restaurant at Granville was typical. The restaurants operated under the name "Taco Bell" in the United States were carried on according to a standard system. This included the same menu and the food being prepared to the same recipe and presented in the same way. Liquor was not sold on the premises and it was company policy not to allow the consumption of

Mr. R. Francis gave evidence that he had always been of the view that, if the Bondi restaurant was successful, he would open other restaurants which might well include one in the inner city. He had arranged for inquiries to be made for suitable premises in various areas in the Sydney metropolitan area and in August 1981 he commenced negotiations to purchase a restaurant in Pittwater Road, Manly, in the name of a company in whose shares the first respondent is part owner. There was evidence that contracts had been exchanged in October 1981 and that it was the intention of the purchasing company to operate a Mexican food restaurant similar to the one at Bondi under the name "Taco

Mr. R. Francis also said that, at the time his family purchased the shares in the first respondent in 1977, he had never heard of the name "Taco Bell" in any other context and that he first heard of the name in connection with restaurants in

Prior to 3 September 1981 no restaurant or other business under the name "Taco Bell" had been carried on in Australia apart from that of the first respondent. There was evidence that in August 1979 Mr. R. Francis had been approached

by a representative of a corporation associated with the

appellants enquiring whether he was interested in selling the

The second appellant, Taco Bell, is registered in the United States as proprietor of the trade mark "Taco Bell" in various manifestations but 1t has no registration at present in Australia although applications are pending. The appellants called a body of evidence before the trial judge in an endeavour to establish that it had a concurrent reputation in Australia at the relevant time. This evidence showed that in the metropolitan area of Sydney there was a number of persons who had become aware

There was affidavit evidence filed by the first appellant from 57 persons in the metropolitan area of Sydney. None of these deponents set out his or her occupation. All of them had become aware of what they described as "Taco Bell" when they were in the United States of America. In general, these deponents did not allege any understanding about the words "Taco Bell" in relation to restaurants in Sydney. Almost all said that, to them, the distinguishing feature of the "Taco Bell" restaurants they had known in America was the unique style of architecture. Many also referred to a bell being incorporated in

the exterior design of the restaurant and to certain other

Several deponents said that he or she knew of Taco Bell Restaurants as a chain of Mexican fast food restaurants. No deponents expressed any view of the geographical location to

which they referred. Most said they had never heard of "Taco

Bell's Casa" at Bondi. About a dozen went out of their way to say that they did not, or would not, regard this Bondi restaurant of the first respondent as being associated with the restaurants which they had known in America. Examples of these depondents are K. Straw, D.E. Myers, V. Lenehen, F.A. Straley, M.B. Harris, S. Mason, N. M. Casey, M. L. Hanrahan and M. La Fave. These affidavits gave me the impression that the deponents' main contention was that they would not think the first respondent's restaurant at Bondi was in any way associated with the restaurants each had known in the United States of America. The deponents were not cross-examined. It was conceded by senior counsel for the appellants that there was no direct evidence that anyone had been misled into thinking that the first respondent's restaurant at Bondi was associated with the restaurants he had

A letter from the solicitors for the first appellant to the solicitors for the respondent of 4 September 1981 contained

"The cumulative effect of all these factors is to ensure that there will be no associations in the minds of the public between the TACO BELL'S CASA restaurants at Bondi, and the TACO BELL restaurants in George Street, City and Granville."

While the question of the likelihood of a person being misled or deceived is always a matter for the court the

denial of deception by deponents whose affidavits were filed by

the appellants must be given considerable weight. Perhaps it is understandable that so many expressed the view that they would not be deceived if one bears in mind that their only knowledge of restaurants associated with the appellants was overseas in the

Senior counsel for the respondents pointed out that "Taco Bell" is a registered business name of the first respondent

and that under s.9 of the Business Names Act 1962 (N.S.W.),

except with the consent of the Minister, a business name shall not be registered, if it is, in the opinion of the Commissioner, undesirable or is a name, or a name of a kind, that the Minister has dzrected the Commissioner not to accept for registration. It was agreed that the Minister had made a direction not to accept for registration any business name that is a name that is likely to be confused with the name of a company registered under the Act. It seems to follow from this that the court, at least, should be disinclined to make any order which was based upon the propriety of either of the appellants trading under the business name "Taco Beli". I would reject the appeal against orders made

The learned trial judge made an order restraining the first appellant for passing-off goods and services. Were it not for the fact that an appeal has been brought from this order and

that the matter has been extensively argued I would be inclined

s to adopt the view that there is little, if anything, which would be restrained under the order in respect of passing-off which

would not be restrained by the order under s.52 of the Act.

It is appropriate to commence the consideration of the appeal in relation to passing-off by an examination of the

judgment of the House of Lords in Warnink v. Townend & Sons

(Hull) Ltd., supra. Whatever may have been the position prior to that case the minimum requirements to establish passing-off were clearly set out in the various speeches in that case. Viscount Dilhorne, Lord Salmon and Lord Scarman said no more than that they agreed with the draft speeches of Lord Diplock and Lord Fraser of Tullybelton. Lord Diplock at p.742 said that it was possible to identify five characteristics which must be present in order to create a valid cause of action for passing-off. They

"(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 2s 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 the trader by whom the action is brought or (in a quia timet action ) will probably do so."

"Tt ais essential for the plaintiff ina 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 1s 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. Provided these conditions are satisfied, as they are in the present case, I consider that the plaintiff is entitled to protect himself by a passing off action." (Emphasis added).

From these speeches 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

Lord Fraser at p.752 also cited a passage from Lord

Diplock in Star Industrial Co. Ltd. v. Yap Kwee Kor [1976] F.S.R.

256 at p.269. The passage cited included the following:

"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 1s 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 the country perishes with it although the business may continue to be carried on in other countries."

I propose to consider first the cross-claims of the

appellants in which they allege passing-off by the respondents.

In the case before this court it is clear that at the

relevant date - (see Cadbury-Schweppes Pty. Ltd. v. Pub Squash

Co. Pty. Ltd. [1981] 1 W.L.R. 193 at p.204) neither appellant had carried on business in Australia nor had it used the mark "Taco Bell" or the name "Taco Bell" in relation to restaurants or goods or services supplied in any restaurants in the Sydney metropolitan area. The evidence certainly shows that a number of people in the relevant area knew of restaurants operated in America by the second appellant or operated under franchises granted by the second appellant. There is, however, absolutely no evidence that either appellant had, to use the words of Lord Fraser, sold in the Sydney metropolitan area "a class of goods to which the particular trade name applies", or to use the words of Lord Diplock, there was no evidence that the respondents or any of them made a misrepresentation "calculated to injure the pusiness or goodwill" of either appellant. The plain fact is that neither appellant had any relevant goodwill or business in

It 1s appropriate to cite the following passage from the

speech of Lord Fraser of Tullybelton in Warnink's Case, supra, at

p-755 where his Lordship is considering the requirement that the secondary meaning of a word relied upon is distinctive. His

"In my opinion its meaning in countries other than England is immaterial because what the court is concerned to do is to protect the plaintiffs' property in the goodwill attaching to the name in England and it has nothing to do with the reputation or meaning of the name elsewhere."

The learned trial judge dealt with the question of passing-off with great care and in considerable depth and I do not disagree with his conclusions. There are a great number of authorities to which the learned trial judge referred, dealing with the problem of passing-off where a question has arisen of the extent, if at all, to which a plaintiff's business had been

considered a similar question to that before us in The Athletes Foot Marketing Associates Inc. v. Cobra Sports Ltd. [1980] R.P.c. 343. Walton J. analysed the earlier cases in detail and

summarized his view in the following passage at p.350:

++. it would appear to me that, 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 (obviously, for present purposes, England and Wales) 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."

The learned trial Judge said that he agreed, in general terms, with the conclusion which Walton J. had reached and I am

The Privy Council in Cadbury-Schweppes Pty. Ltd. v.

Pub Squash Co. Pty. Ltd., supra, referred at pp.198-199 to the

speeches of Lord Diplock and Lord Fraser of Tullybelton in

Warnink's Case and said that they were of general application.

T am satisfied that at the relevant date neither appellant had any relevant goodwill in the name "Taco Bell" in the Sydney metropolitan area and therefore any claim for passing-off must fail even if limited to a claim restraining passing-off a business or goods or services without clearly distinguishing that business or those goods or services from the business or goods or services of either appellant. I also note that the initial proceedings were against the first appellant and the reputation the appellants sought to establish could only be

that of the second appellant, Taco Bell, which carried on or

24, granted franchises in respect of the restaurants in the United States of America. It follows that I would reject the appeal so

far as it relates to the cross claims for passing-off.

I proceed next to deal with the appeal in relation to the order restraining passing-off which the learned trial judge made against the first appellant. I have already set out the requirements for success in a passing-off action. It is clear that the first respondent was the owner of goodwill in the name "Taco Bell's Casa" and "Taco Bell" in the Sydney metropolitan area and that, if either appellant commenced a restaurant business under the name "Taco Bell", the first respondent was really likely to suffer substantial damage to its property in that goodwiil. Considerable attention was directed by senior counsel for the appellants to an argument that the misrepresentation occasioned by the conduct of which complaint was made must continue up to the point of sale. He argued that, once a prospective customer reached a restaurant of the character which was aileged to distinguish a restaurant conducted by either appellant, the customer would undoubtedly notice the difference

between the restaurants and would not proceed to make a purchase.

No clear authority was referred to in support of this

argument but some regard was paid to what was said by Lord

Scarman in Cadbury-Schweppes Pty. Ltd. v. Pub Squash Co. Ltd.

(supra), at p.205. There their Lordships referred to the learned

trial judge having said he would accept that, on occasions, there

was confusion at the point of sale but that there was plenty of evidence on which he could find that the confusion was almost always corrected before the moment of sale. This passage appears to be directed to the question of whether the "get-up" of the two cans of soft drinks were sufficiently different. However, I do not regard this passage, whatever may be its relevance in relation to the sale of two cans of soft drink, as being directed to the question of whether relevant persons are likely to be deceived where a restaurant is operated under a name deceptively

The argument that the necessary reputation in the words "Taco Beli" had not been established by the first respondent was also pursued in relation to passing-off. Whilst it may be that to succeed in an action for passing-off, the secondary meaning which must be established may be somewhat more difficult to establish for an applicant than under s. 52 of the Act, I

consider that it has been sufficiently established in this case.

The requirement of misrepresentation which is constituted by the use of a word which has a secondary meaning is illustrated by a passage from the speech of Viscount Simonds in

the House of Lords in T. Oertli A.G. V. E.J. Bowman (London) Ltd.

"It is a condition precedent to the success of such an action, where the alleged representation consists of the use of a name in connection with the goods, that that name

should have become distinctive of the Plaintiff's goods, not necessarily meaning thereby that his name should be known (see William Edge & Sons, Ld v. William Niccolls & Sons, Ld [1911] A.c. 693, 28 R.P.C. 582), but at least meaning that they should be regarded

as coming from a particular source known or unknown."

Senior counsel for the appellants referred us to W.A.

Gilbey Ltd. v. Continental Liqueurs Pty. Ltd. (1960) 103 C.L.R.

406 on the question of the evidence which was necessary to establish reputation in a case where there was some knowledge of the word under which the product was sold being known to persons who had become familiar with that name overseas. The case before us is different. It is concerned with the reputation of a

The extent of the reputation which it is necessary to establish is illustrated by the following passage from the speech of Viscount Maugham, with whom Lord Russell of Killowen and Lord

Romer agreed, in Saville Perfumery Ld. v. June Perfect Ld.

"No doubt the plaintiff has to prove that toa substantial proportion of persons who are purchasers or probable purchasers of goods of the kind in question the name, mark or other symbol of origin, indicates the goods of the plaintiff; but it is a mistake to think that all or almost all such purchasers must entertain that view."

It may be that the secondary meaning need not be established to the same extent when the question is one of a trade name under which a business is carried on and not a trade mark used in relation to goods. Lord Simonds in Office Cleaning

Services, Ld. Vv. Westminster Windsor and General Cleaners, Ld.

"It 1s not a condition of success in the supposed action that the Plaintiffs should establish that the words in dispute had acquired a secondary meaning.

The real question is the simple and familiar one. Have the Appellants proved that the use by the Respondents of the trading style 'Office Cleaning Association' is calculated to lead to the belief that their business is the business of the Appellants? It is in these

words 'calculated to lead to the belief' that the issue lies".

Lord Goddard, Lord Wright and Lord Porter agreed with Lord Simonds' opinion. In the case before us it 1s not necessary to examine this case in detail because I am satisfied that the first respondent has established that the words "Taco Bell's Casa" and "Taco Bell" have acquired the relevant secondary meaning and that the use of the name "Taco Bell" by either appellant would constitute passing-off. The question of likelihood of deception is again one for the Court. See, for

example, Colgate- Palmolive Ltd. v. Pattron [1978] R.P.C. 635 per

In my opinion the appeal should be dismissed and the

appellants should be ordered to pay the respondents' costs of the

It appears desirable to recast the orders made by the

The orders made by the learned trial Judge on 22 December 1981 and 31 December 1981 are terminated as from today.

Taco Company of Australia Inc. by itself. its servants or agents, is restrained from operating any restaurants aun the Sydney metropolitan area wider rhe same "Tacu Bell" or under any name similar thereto which is deceptive or misleading or which is i1kely to deceive or mislead.

Taco Company of Australia Ine. by itself, its servants or agents, 1s restrained from passing-off goods and services supplied in any restaurant in the Sydney metropolitan area not supplied by Taco Bell Pty. Limited as and for goods and services supplied by Taco Bell Pty.

The appellants pay the costs of the respondents in the

"are. € 29. 6. The cross claim of the appellants is dismissed. Te The first respondent has liberty to apply to the trial

Judge, or if he is not available, to any other Judge of this Court to deal with any question of damages and any reserved costs before the trial Judge not already the

env "aha thas end tio twente seses

ooRdung _ages are a truc copy oY 4

) NEW SOUTH WALES DISTRICT REGISTRY ) NO. G199 of 1981

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

AND: TACO BELL PTY. LIMITED DENBRAD MANAGEMENT PTY. LIMITED ROBERT FRANCIS ERIC BAILLIE FRANCIS

Respondents CORAM: Franki, Deane and Fitzgerald JJ. 22 July, 1982 . REASONS FOR JUDGMENT DEANE AND FITZGERALD Jd: In the United States of

America, there is a large chain of "fast food" restaurants

which sell Mexican-style food and which are named "Taco

-2- Bell". In the Sydney beachside suburb of Bondi, there is an unpretentious restaurant which specializes in Mexican-style food. It 1s known as "Taco Bell's". The United States chain has spread to a number of other countries and has reached Australia. In 1981, two restaurants associated with it were opened in Sydney. The result was that from 3 September, 1981, there were three Sydney restaurants specializing in

Mexican-style food named either "Taco Bell" or "Taco Bell's".

On 4 September, 1981, Taco Bell Pty. Limited instituted proceedings in the Federal Court against Taco Company of Australia Inc.. Taco Bell Pty. Limited ("the Bondi company") carries on the Bondi restaurant. Taco Company of Australia Inc. ("the U.S. company") operates the two Sydney members of the Taco Bell chain. The proceedings were for alleged contravention of the Trade Practices Act, 1974 ("the Act") and passing-off. The U.S. company cross-claimed, again for contravention of the Act and passing-off, against the Bondi company. An associated company of the U.S. company, called Taco Bell, was added as cross-claimant and the shareholders and directors of the Bondi company were added as cross-respondents. Each of the U.S. company and Taco Bell ("the appellants") 1s a corporation incorporated in the United States of America and is a subsidiary of Pepsico Inc., which conducts the "Pizza

The proceedings were heard at first instance by Ellicott J. who found in favour of the Bondi company on its action. His Honour granted injunctive relief, made an order that the U.S. company pay the Bondi company's costs and reserved liberty to the Bondi company to apply for damages. The effect of the injunctive relief granted was that the U.S. company was restrained from operating any restaurant in the Sydney metropolitan area under the name "Taco Bell" or under any name similar thereto which is deceptive or misleading or which is likely to deceive or mislead, and from passing-off goods and services supplied in any restaurant in the Sydney metropolitan area not supplied by the Bondi company as and for goods and services supplied by the Bondi company. No order was made in respect of the cross-claim which, however,

The orders sought on this appeal by the appellants are that the claims of the Bondi company be dismissed and that the relief claimed by the appellants in their ecross~claim be granted. No notice of cross-appeal was given by the Bondi company in respect of the refusal of the learned

primary judge to grant certain other relief which it had

In 1962, a Mr. Glen Bell opened a Mexican food restaurant in California under the name "Taco Bell". The word "taco" is of Spanish derivation and one of its meanings is a "snack". It is used to denote a crisp folded corn wafer filled with other food, typically, cooked ground beef, fresh

Mr. Bell subsequently opened more restaurants operated in the same style and under the same name and granted licences or franchises to others to do likewise. The second appellant, Taco Bell, is the assignee from Mr. Bell of his rights in the name "Taco Bell". It is registered in the United States as the proprietor of the trademark "Taco Bell" in various manifestations. It has also applied for

registration of the trademark "Taco Bell" in Australia and

There are at present some 1366 restaurants operated under the name "Taco Bell" in 40 States of the United States, in Canada and in Guam. The number of restaurants increased from 325 in 1969 to 1100 in 1979. In 1970 there were 232 operating in California and 157 in other States of the United States. In 1980 there were 345 operating in California and 925 in other States. The number of restaurants operated by Taco Bell itself presently exceeds those operated by others

under franchise from it. The whole chain employs over 10,000

architecture. They customarily feature a distinctive bell tower and bell. Further, the restaurants' operations are standardised. All aspects of establishing, operating and

promoting "Taco Bell" restaurants are specified in a number of manuals and handbooks and in memoranda regularly circulated by the central management of the chain in the United States. Matters dealt with include customer service, food preparation, menu preparation, packaging, service procedures, daily restaurant operations, business records, restaurant security and control, accounting, safety and cleaning and maintenance. The menu is the same. The food is prepared to the same recipe and is presented in the same way. There is no table service and bookings are not accepted. Customers order their food at the counter, receive it

wrapped, and either take it away or eat it at tables

provided. Liquor is not sold on the premises and the consumption of alcohol is not permitted. There is an emphasis on hygiene, cleanliness and tidiness. The restaurants are brightly lit. All staff wear uniforms. The

general colour scheme of yellow, orange and brown is followed in packaging, signs and uniforms. The restaurants compete directly with other chains selling what 1s often referred to

1970, by another American, one Bill Chillcoate. It was initially named "Taco Bill's" or "Taco Bill's Casa". The word "casa" 1s also of Spanish derivation and means "house".

The Bondi restaurant was, in 1973, acquired by the Bondi company which had been incorporated in that year under the name "B. & B. Mexican Enterprises Pty. Ltd". The shares in it were then owned by James Bruce Baird and James David Baird. On 31 January, 1974 and 8 February, 1974 respectively, the Bondi company registered the names "Taco Casa" and "Taco Bell" as business names under the Business Names Act, 1962 (N.S.W.). On 7 December, 1976 the Bondi company's name was changed to Taco Bell Pty. Limited. Whilst the Bairds owned the shares, the name of the Bondi restaurant was changed to "Taco Bell's Casa". On 3 June, 1977, the shares were purchased from the Bairds by two companies, one of which 1s now the sole beneficial shareholder. Mr. Eric Francis and his son Mr. Robert Francis became directors. They did not know of the name "Taco Bell" an any context other than as the name of their restaurant until July, 1978

when one of them saw a newspaper article referring to the

Even if those who originally caused the Bondi company to adopt the name "Taco Bell" were aware when they did so that that was the name of a chain of Mexican food restaurants in the United States, there was no evidence that they were aware of the chain's reputation in Australia. When those presently controlling the Bondi company became aware of the American "Taco Bell" chain, they did not attempt to take advantage of the chain's reputation. The restaurant at Bondi has never been conducted with a view to attracting persons

At a glance

Court

Decision date

Before

Source

Judgment (357 paragraphs)