Tenth (10th) Cantanae Pty Ltd & Ors v Shoshana Pty Ltd & Anor [1987] FCA 667

Federal Court of Australia|1987-11-25|Before: Burchett J, Pincus J, Evatt CJ, Myers J, Gummow JJ, Wilcox J

introduction of the Judicature system, which to them apparently

But it should be remembered that as regards pecuniary

remedies, neither law nor equity allowed an account or damages

because an injunction lay for such conduct; something of a non

In Henderson v Radio Corporation Pty. Ltd. (1960) 60

SR (NSW) 576, a case decided before the Judicature system was

introduced into New South Wales, Manning J. (at 596) stated that if any doubts existed as to the need to prove fraud to recover damages, they were "certainly laid to rest in 1877" by

some remarks of Lord Cairns L.C. in The 'Singer' Machine

Manufacturers v Wilson (1877) 3 App Cas 376 at 391.

The Lord Chancellor there said "in the most distinct manner that, in my opinion, fraud is not necessary to he averred or proved in order to obtain protection for a trade mark..." However, those remarks must be read in context. The appeal arose out of the dismissal by Sir George Jessel M.R. of the plaintiff's suit to restrain alleged passing-off. The House of Lords allowed the appeal on the footing that the plaintiff might have succeeded in obtaining injunctive relief without showing fraud. It is plain from what was said by Lord Cairns L.C. (at 392), Lord O'Hagan (at 345-396) and Lord Blackburn (at 400) that they well recognised that different

principles applied to actions to recover damages at law. In

'my view, the distinction between the legal and equitable wrongs

together described as "passing-off" has not evaporated by some unexplained operation of the Judicature system. It would have been an odd result if the equitable remedy (account) required persistence after notice, whilst the legal remedy (damages) was, by force of the Judicature legislation, (which provides for equitable supremacy in cases of conflict) made

Whilst fraud was the gist of the action for damages,

the plaintiff seeking injunctive relief had a different task,

as explained by Evatt Cu and Myers J in Henderson's Case (supra at 594). The passage in question 'is as follows:

Passing-off is a wrong and is actionable at law. In such an action damage is presumed on proof of passing off and therefore a nominal sum by way of damages follows as a matter of course. General damages may, however, only be awarded if there is evidence of damage. Instead of proceeding at law a plaintiff may sue in equity for an injunction, as may be done in respect of other wrongful acts of a different nature. If he sues in equity, he takes advantage of the equitable principle that the court will interfere by injunction to restrain irreparable injury to property . . . and therefore he must go further than he need at law. He must show irreparable injury, that is that he has suffered injury which cannot be properly compensated by damages, or that he will probably suffer such injury.

If a plaintiff in equity succeeds in having the defendant enjoined, he may also have an account of profits or an inquiry as to damages. Formerly, he could only have had an account, because that was equity's only remedy, but since Lord Cairns' Act, he may have damages. If he

elects to take an inquiry as to damages, he takes a common law remedy and his damages will be ascertained in the same way as they would have been ascertained at law.

It may be noted that in England judicial opinion on the question of Liability in damages for "innocent" passing-off has fluctuated, notably in Draper v Trist (1939) 56 RPC 429 at 434, 441, 443~444, where differing views were expressed, and in

Marengo v Daily Sketch and Sunday Graphic Ltd. (1948) 65 RPC

242 at 247, 251, 252 and Wilts United Dairies Ltd. v Thomas

Robinson Sons and Co. Ltd. [1957] RPC 220 at 229, where the

It would be an error to conclude that the consequence of treating fraud still as the basis for relief in passing-off

is always to impose an additional burden to plaintiffs.

Rather, 1t may provide a remedy where none is available to

One example of relief on the basis of fraud but not goodwill is as follows. Various decisions have proceeded on the footing that where the court intervenes to protect the

goodwill of the plaintiff, it does so to protect property rights situated in the forum, with the result that if the

plaintiff's goodwill is "international" but not "local" because the plaintiff has no place of business in the forum, no case is made out; this has been held to be so even though local customers of the defendant believe they are dealing with the Plaintiff or purchasing the plaintiff's goods or services: The

Athletes Foot Marketing Associates Inc. v Cobra Sports Ltd. {[1980] RPC 343. The apparent stringency of such a rule has

been alleviated in some decisions by treating as sufficient to

establish local goodwill, both sales by local distributors of products made abroad by the plaintiff (Hospital Products Ltd v

United States Surgical Corporation (1984) 156 CLR 41 at 100 -

101, 144 - 145), and other business activities falling short of

actual establishment of a local place of business (Fletcher

Challenge Ltd. v Fletcher Challenge Pty. Ltd. [1981] 1 NSWLR

196, Taco Bell Pty Ltd. v Taco Company of Australia Inc. (1981) 40 ALR 153 at 167 (affd. (1982) 42 ALR 177)).

The decision of Way C.J. in Weingarten Bros. v G. & R.

Wills & Co. {1906] SALR 34 at 53-55, shows that where fraud has been established against the defendant, the plaintiff may

succeed without showing a local goodwill arising from the

conduct of a local business. In this way the "pirate", who sets out to attract to his business local persons who know of the fame of the "international" business of the plaintiff, may be brought to account. Where there are several persons joined as defendants in respect of a joint piratical enterprise, the tort of conspiracy may provide an additional ground for relief:

Fletcher Challenge Ltd. v Fletcher Challenge Pty. Ltd. [1981] 1 NSWLR 196 at 206-207. In either case there is a liability for

damages, and injunctive relief also is available, not in aid of the "local" goodwill of the plaintiff, but to restrain commission or repetition of tortious acts and to avoid the multiplicity of actions for damages: Angelides v James Stedman Hendersons Sweets Ltd. (1927) 40 CLR 43 at 65-66. That case also provides another example of a remedy against a fraudulent defendant being available in equity where a different result would obtain in equity against an "innocent" defendant: see

What then is meant by "fraud" in relation to alleged passing-of£? As Lord Blackburn indicated in The "Singer" Machine Manufacturers v Wilson (1877) 3 App. Cas. 376 at 399-400, the question really is one of what evidence must be adduced by the plaintiff such that in an action at law the judge would be bound to leave it to the jury to say whether the defendant did try to sell his own goods as and for those of the plaintiff. The authorities establish that there is evidence from which a finding of fraud might be made where, after notice of the rights asserted by the plaintiff, the defendant

persisted in the conduct complained of: Hendriks v Montagu

(1881) 17 Ch.D 638 at 645-646, The Bodega Company (Ltd.) v Owens (1889) 7 RPC 31 at 36, Reddaway v Banham (1896) 13 RPC

218 at 223 arguendo. Thus even if he commenced his activities

in ignorance of the plaintiff£'s claims, a defendant may be held to be fraudulent if he continues after the plaintiff's claim is brought to his attention; and he cannot complain if the court

holds the claims asserted against him were well based and that

he had infringed the plaintiff's cights; cf. United States

Surgical Corp. v Hospital Products International Pty. Ltd.

{1983] 2 NSWLR 157 at 251-259 (reversed on other grounds,

(1984) 156 CLR 41). In such a case a jury might properly infer that that defendant had wilfully shut his eyes to the

misleading nature of his trade: The English and Scottish

Mercantile Investment Co. v Brunton [1892] 2 QB 700 at 707-708.

The result would be that the successful plaintiff would have an

election between damages and an account of profits, in respect

(1929) 42 CLR 352 at 362, Isaacs J. put the view that fraud constituted by persistence after notice would "not necessarily" be such as would support an agtion in deceit. However, as I have indicated, it is not easy to see the reason for the

qualification; see also B.M. Auto Sales Pty. Ltd. v Budget Rent A Car System Pty. Ltd. (1976) 51 ALJR 254 at 258.

My conclusion is that a successful plaintiff in a passing-off suit has an election for his pecuniary remedy

between an account of profits and an inquiry as to damages,

each remedy being limited to the period of the defendant's persistence after notice in the manner I have described, If the conduct of the defendant from an earlier period is the subject of a finding of fraud then these remedies run from the commencement of that period. In this way the distinct origins

of these two remedies nevertheless lead to an harmonious

Such a result is also consistent with the evident purpose of s.68 of the Trade Marks Act 1955. This operates in situations where the proprietor of a registered trade mark by use of the mark passes his goods off as those of the plaintiff; the goodwill is in the common law mark, not the registered mark, and the statutory rights do not defeat the claim for passing~off: Shanahan "Australian Trade Mark Law and Practice" p 322. However, in such cases, s.68 of the Trade Marks Act provides that damages will not be awarded against the defendant registered proprietor for passing-off if he satisfies the Court that (a) at the time he commenced to use the trade mark he was 'unaware and had no reasonable means of ascertaining that the trade mark of the plaintiff was in use; and (b) when he became aware of the existence and nature of the plaintiff's trade mark he forthwith ceased to use the trade mark in relation to the

goods or services in relation to which it was used by the

Of course, the result of the foregoing is that an "innocent" passing-off attracts injunctive relief but no

pecuniary remedies. But this is by no means an unattractive

position for the law of torts to adopt, given the absence of a duty of care between trade rivals (Erven Warnink BV v J.

Townend and Sons (Hull) Ltd. [1979] AC 731 at 740-3, Moorgate

Tobacco Co. Ltd. v Philip Morris Ltd. (No. 2] (1984) 156 CER

414 at 443-6) and the absence of fraud (cf. Parkdale Custom

Built Furniture Pty. Ltd. v Puxu Pty. Ltd. (1982) 149 CLR 191

I have already set out the facts dealing with the appearance of the seven advertisements between 5 May 1983 and 30 June 1983 and with the appearance of advertisements in this sequence after the initial complaint by Sue Smith in her letter of 30 May 1983. In my view, there is ample ground to support his Honour's conclusion, which in any event was not challenged, that the present case is one of persistence in passing-off

Accordingly, in my view, the appeal fails insofar as it contests the liability of the appellants for passing-off. There was no appeal against the measure of damages awarded. There was a cross-appeal in which it was asserted that the damages were inadequate. I will deal with the cross-appeal

His Honour found that the publication of the advertisements contravened s.52 of the TP Act and also that there had been contraventions of s.53 (c) and s.53 (d) of the TP Act because the advertisement represented that the Blaupunkt video had the sponsorship and approval of Sue Smith which it did not have, and that the first appellant had her sponsorship

I have already dealt with those arguments concerning the impact of the advertisement that were common to all the claims made in the case. The appellants also developed an argument specifically directed to s.52. It was that those persons who were deceived or who were likely to be deceived by the advertisement as a sponsorship by Sue Smith, the television personality, would be led into error by an erroneous preconception on their part. The erroneous preconception was said to lie in the assumption that the mere use of the name Sue Smith carried with it only two possibilities. These were either that she had endorsed the product or that someone else had misappropriated her name for such endorsement and without her consent. The appellants submitted that what was ignored, and what was the source of the erroneous preconception, was the other possibility, viz. that the advertiser was merely using a common name, not the name of the well known television

In MeWilliam's Wines Pty Ltd. v McDonald's System of

Australia Pty. Ltd. (1980) 49 FLR 455, the respondent failed on

appeal in its attempt to restrain the appellant wine producer

from marketing its wine as "Big Mac"; it failed on the footing that if the public believed that the "Big Mac" wine was a product of the respondent "fast-food" retailer, the cause of error was an erroneous preconception. The erroneous preconception was held {at 466-467, 478-479) to lie in the belief that the "fast food" retailer had extended the range of its activities into wine production. Likewise, in Lego

Australia Pty Ltd v Paul's (Merchants) Pty. Ltd. (1982) 60 FLR

465, the applicant producer of plastic toy building blocks under the name "Lego" failed in an attempt to restrain the marketing of "Lego" plastic hoses. Again, it was held (at 474) that persons deceived by the conduct of the respondent would be giving effect to an erroneous misconception as to the

extent of the business operations of the applicant.

In both these cases, it is significant that there was no claim for passing-off and they were fought as alleged contraventions of ss.52 and 53 of the TP Act. It may be noted

that in litigation involving similar products in the United

Kingdom, the Lego company succeeded in passing-off: Lego System AS v Lego M Lemelstrich Ltd. [1983] FSR 155. No

doubt the evidence in the English litigation was different from that in the Australian litigation. Nevertheless, these cases do serve to illustrate a significant difference between the operation of s.52 and passing-off. It is, as I have indicated, not necessarily a defence to a claim for passing-off that the defendant does not occupy a "common field of activity" with the plaintiff. The question is whether the reputation and

goodwill of the plaintiff extends beyond fields of immediate

endeavour and entitles it to protection against misappropriation by defendants who seek to dig a pit in advance

of any future entry of the plaintiff into the field in

The decisions turning upon "erroneous preconception" may involve the proposition that the cause of the error claimed to give rise to contravention of s.52 was a helief on the part of consumers for which the defendant was not responsible. It would, in my view, be unwise to erect these decisions into some principle or dogma of general application in construing s.52. In particular, even where a consumer nourishes an erroneous preconception as to the range of the business activities of the applicant, the consumer will act to his or her detriment only because the conduct of the respondent bears upon or exploits that preconception. It has never been the law that in order for conduct to contravene s.52, it

must be the sole cause of the consumer being mislead or

deceived: Milner v Delita Pty. Ltd. (1984) 61 ALR 557 at 572.

In any event, in the present case, his Honour held that the deception of consumers was struck by the advertisement upon a correct public understanding that television personalities use the image conveyed by their well known and admired personalities for commercial gain and that they do so by endorsement of products. Accordingly, whatever be the true scope of any doctrine of "erroneous preconception", his Honour held, in my view correctly, that it had no application to this

case. If there was a preconception, it was a correct one.

I turn now to s.53 (c) and s.53 (d) of the TP Act. His Honour held that the advertisement represented that the Blaupunkt video had the sponsorship and approval of Sue Smith, which it did not have (s.53 (c)) and that the first appellant had her sponsorship and approval which it did not have (s.53 (d)). In Weitmann v Katies Ltd. (1977) 29 FLR 336 at 344, Franki J treated the term "sponsorship" in 5.53 as envisaging, in connection with trade names, "something more along the lines of a certification mark" (Trade Marks Act 1955, Part XI), that is to say a use of the name to certify quality, accuracy or other characteristic of goods or services. In McDonald's System of Australia Pty. Ltd. v McWilliams Wines Pty. Ltd. (1979) 28 ALR at 248, Franki J gave a similar interpretation of "approval" in s.53. This may be placing too narrow a meaning upon these terms, attached as they are to the verb "represent". Nevertheless, claims made pursuant to s.53 and s.82 involve establishing, albeit in civil proceedings, the commission of a

series of misdemeanours. I heed the caution by Sheppard J in

Apple Computer Inc. v Computer Edge Pty. Ltd. (1984) 53 ALR 225

at 279. In my view, in the circumstances of this case, his Honour was in error in holding that the respondents had made out their claims based on s.53. However, that does not affect

the award of damages under s.82, based, as it was primarily and

Cross Appeal It is settled, as his Honour illustrated with

reference to a number of decided cases, that loss or damage in

respect of a contravention of s.52 may be recovered under s.82 without proof of fraud. It follows that damages were recoverable in respect of the publication of all seven of the advertisements. On the appeal, there was no dispute between the parties that his Honour approached the question correctly by asking what would have been the appropriate fee or royalty

for an endorsement of these advertisements with the consent of

By the time these advertisements appeared, the second respondent had been contractually free to conclude sponsorship agreements. She was to do so in 1985. By the agreement, she undertook to appear in certain productions for the promotion and advertising of various hair related products bearing the brand name "Pears". The consideration for this was $50,000 and the contract was extended for a further twelve month period for consideration of another $50,000. There was evidence from Mr Bedford, whose agency represents Miss Smith in these matters, that in 1983 his firm would probably have been asking for somewhere around $5,000 for an advertisement in a magazine but that the amount would have depended upon the national or local range of publication of the magazine. Mr Bedford also gave evidence that if the seven advertisements in question here had, in 1983, been put to him as an advertising campaign he would have tried to negotiate

probably somewhere between $20,000 to $25,000 as a particular

In reaching his conclusion on the question of damages, his Honour said that he was careful not to overlook that an authorised use of the name Sue Smith would have had at least as serious an effect upon her ability to endorse other products as the unauthorised use proved in this case. His Honour

I also bear in mind the nature of the unauthorised use of the name Sue Smith, the extent of it, and the probability on the evidence that any commercial arrangement actually negotiated with anyone would have authorised use varying substantially from the unauthorised use which was in fact made. Taking these matters into account, and in the light of the evidence, I think damages should be assessed at the sum of $15,000...

In my view, his Honour's decision was plainly correct as

regards the quantum of damages under s.82 of the TP Act.

The position is not as simple with damages for passing-off, bearing in mind that the liability there is based upon persistence after notice and that notice was first given only by medium of the letter of 30 May 1983, that is to say after some of the seven advertisements in question had already been published. Nevertheless, the damages for passing-off in a case such as this essentially are concerned with the misappropriation of the capacity of the second respondent to earn money by sponsoring products of the description of those advertised. That capacity is misappropriated and damage is inflicted upon the second respondent by the conduct of the

appellants, as much by the publication of advertisements in

June after knowledge of her rights, as by the earlier publications. In other words, so far as passing-off is concerned, I would not diminish the quantum of damages awarded by some sum representing a proportion of the advertisements published before 30 May. In the circumstances, in my view,

It follows that, in my view, both the appeal and the

I certify that this and the preceding forty (40) pages are a true copy of the Reasons for Judgment of his Honour Mr. Justice

Ltd. [1981] ATPR 43,133. Tolley v J.S. Fry & Sons Ltd. [1931] AC 333 might not be decided the same way in Australia today.

Marketing Development Pty. Ltd. v Australian Interstate Marketing Pty. Ltd. [1972] VR 219 at 221-222.

Ballarat Products v Farmers Smallgoods Co. Pty. Ltd. [1957] VR 104 at 108, illustrate, the plaintiff's right to protection by

Ltd. [1959] RPC 1 at 4 per Viscount Simonds. There is thus no "monopoly" in the sense of rights conferred by statute for a

The injury of which the plaintiff complains in many passing-off suits will be loss of sales by diversion or apprehended diversion of business. But, as Dixon J. pointed out in Turner v General Motors (Australia) Pty. Ltd. (1929) 42 CLR 352 at 368, the court intervenes to protect the business reputation of the plaintiff from misappropriation and that protection is not confined to cases where loss simply consists in diversion of trade. In the year before, Learned Hand J. had spoken to like effect: Yale Electric Corp. v Robertson 26 F. 2d 972 at 974 (1928). This certainly means that there may be such misappropriation where the defendant's goods or services are shabby or second-rate, albeit not in direct competition with those of the plaintiff: Totalizator Agency Board v Turf News Pty. Ltd. [1967] VR 605. But the principle also applies where, regardless of any question of inferior quality, the defendant wrongfully deprives the plaintiff of a right to bestow for value his recommendation of the goods or services of a third

Ltd. v The Pub Squash Co. Ltd. [1981] RPC 429 at 489. It held

639 at 646), Way C.J. (in Weingarten Bros. v G. & R. Wills & Co. [1906] SALR 34 at 54-55) and Ashburner ("Equity" 2nd Ed.

At a glance

Court

Decision date

Before

Source

Judgment (116 paragraphs)

Cases Cited (43)

Cited By (1)