Amalgamated Mining Services Pty Ltd v Warman International Ltd

[1992] FCA 542

Re: ARCRIC INVESTMENTS PTY LTD
And: DUCTLINE PTY LTD
No. V G23 of 1992
FED No. 542
Trade Practices
(1992) 14 ATPR 41-180

COURT

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Northrop(1), Jenkinson(2) and Gray(3) JJ.

CATCHWORDS

Trade Practices - misleading and deceptive conduct - finding that conduct likely to mislead or deceive - whether evidence required that persons in the class of users of product had been actually misled or deceived - whether finding contrary to weight of evidence - whether declaration appropriate - form of declaration.

Trade Practices Act 1974 s.52.

McWilliam's Wines Pty. Ltd. v. McDonald's System of Australia Pty. Ltd. (1980) 49 FLR 455.

Global Sportsman Pty. Ltd. v. Mirror Newspapers Pty. Ltd. (1984) 2 FCR 82.

Abalos v. Australian Postal Commission (1991) 171 CLR 167.

HEARING

MELBOURNE

#DATE 31:7:1992

Counsel for the appellant: Dr J.F. Beechmore.

Solicitors for the appellant: Woodhams O'Keefe and Co.

Counsel for the respondent: S. Gebhardt.

Solicitors for the respondent: Noel Waters.

ORDER

THE COURT ORDERS THAT:

1. The appeal is dismissed.

2. The appellant pay the respondent's costs of the appeal.
Note: Settlement and entry of orders is dealt with by O.36 of the Federal Court Rules.

JUDGE1

The respondent to this appeal, Ductline Pty. Ltd. ("Ductline") sued the appellant, Arcric Investments Pty. Ltd. ("Arcric") in the Federal Court of Australia. Each party is a manufacturer of devices for use in evaporative air cooling machines. Each such device consists of a housing containing a small electric motor, which sits at the top of a three sided vertical support containing a shaft, which is connected with an impeller, set inside a moulded base, from which protrudes a short pipe. The device is placed inside the evaporative air cooler, with its base in a sump containing water. The electric motor rotates the shaft, which rotates the impeller, which forces water through the short pipe. This is connected to a hose and carries the water to the top of a screen, down which it percolates. An electrically driven fan blows air through the screen. The air is cooled by evaporation of the percolating water.

1. The statement of claim included claims for breach of copyright and passing off, as well as claims under sections 52, 53(c) and (d) and 55 of the Trade Practices Act 1974. In its application, Ductline claimed injunctions, damages, an account of profits and orders for delivery up for destruction of various articles. On the final day of the trial, the causes of action under the Copyright Act 1968 were abandoned. The learned trial Judge declined to deal with the claim for passing off, in the light of his findings with respect to s.52 of the Trade Practices Act 1974. His Honour found that Arcric, a trading corporation had, in trade or commerce, engaged in conduct that was likely to mislead or deceive, within the meaning of s.52, the class of consumers constituted by service personnel, by leading them to believe that Arcric's product was connected or associated with Ductline or its business. It should be noted that his Honour did not deal with the claims under other sections of the Trade Practices Act. Nor did he find that wholesalers of the kinds of items manufactured by Arcric and Ductline had been or were likely to be misled or deceived by any conduct of Arcric.

2. The question whether service personnel would be likely to be misled or deceived by Arcric's conduct depended upon the names given by the parties to their respective products. Ductline marketed its product under the name "Evapump". There was controversy as to the correct pronunciation of this name, but the learned trial Judge found that it was to be pronounced with the emphasis on "ap", as in "evaporative". From September 1990 until February 1991, Arcric, which trades under the name "John Richmond Manufacturing" or "J.R.M.", marketed its device under the name "Evap-pump". At some time prior to the end of the trial, Arcric either gave an undertaking, or expressed its intention, to refrain from using this name.

3. The learned trial Judge made a declaration that Arcric had, in the course of trade and commerce, engaged in conduct that was likely to mislead or deceive. His Honour reserved to Ductline liberty to apply in respect of the assessment of damages, and generally, in case any question should arise as to Arcric carrying out its stated intention of desisting from using the name "Evap-pump". He also ordered that Arcric pay Ductline's costs.

4. Arcric appealed against his Honour's judgment and order, by leave granted by his Honour. By its notice of appeal, Arcric sought a declaration that it had, in the course of trade, not engaged in conduct that was likely to mislead or deceive, and an order that Ductline pay its costs. During the course of argument on the appeal, counsel for Arcric asked for orders that the appeal be allowed, the orders appealed from be set aside and in lieu thereof there be an order that the application be dismissed with costs. Arcric also sought an order that Ductline pay its costs of the appeal.

5. The first complaint which Arcric made in the appeal was based on the fact that Ductline did not call at the trial any evidence of service personnel as to "actual confusion" on their part. It was said that his Honour should have drawn the inference that evidence of service personnel would not have been favourable to Ductline's case, that no evidence of confusion existed and that no confusion amongst the class of persons alleged to be confused existed or was likely to exist. The references in the notice of appeal to "confusion" revealed a lack of understanding of the issues on which the judgment of the learned trial Judge was based. The fact that consumers or users of a particular class might be confused as to whether there exists a business connection between two products does not establish that the producer of one of those products is engaging in conduct that is likely to mislead or deceive that class of consumer or user, for the purposes of s.52. See McWilliam's Wines Pty. Ltd. v. McDonald's System of Australia Pty. Ltd. (1980) 49 FLR 455, at pp 459-460 per Smithers J. and 476 per Fisher J. It was never suggested that this was a case in which a particular person would be confronted by an example of the product of each party, and would be unable to determine which was the product of one party. Rather, the kind of conduct likely to mislead and deceive to which the learned trial Judge adverted was that which would arise when a service person asked a wholesaler for an Evapump, intending to purchase Ductline's product, and was induced to purchase an Evap-pump.

6. The authorities make it clear that evidence of actual misleading or deception is unnecessary in order to prove the occurrence of conduct likely to mislead or deceive, within the meaning of s.52. See McWilliam's Wines, at pp 460-461 per Smithers J. and 477 per Fisher J. and Global Sportsman Pty. Ltd. v. Mirror Newspapers Pty. Ltd. (1984) 2 FCR 82, at p 87. In the circumstances of the present case, the task of the learned trial Judge was to determine objectively whether the name which Arcric attached to its product was so similar to the name which Ductline attached to its product that service personnel might purchase the former, believing that they were purchasing the latter. Evidence of actual purchases of this kind would be of little assistance; they would inevitably be capable of being characterised as isolated incidents. Similarly, had Arcric led evidence from service personnel that they were perfectly able to distinguish one product from another when purchasing (which evidence it did not lead), those service personnel could be characterised as knowledgeable or well informed and their evidence would be of little effect. This Court could certainly not lay down any principle that it is essential for a claimant under s.52, in respect of conduct likely to mislead or deceive, to bring forward evidence of actual misleading or deception.

7. The other point on which Arcric relied on appeal was the proposition that, on the evidence, the learned trial Judge should have found that the term "evap pump" had become a generic noun, used in the trade of manufacturing, distributing and servicing evaporative air coolers, to refer to all evaporative cooler pumps. The learned trial Judge found to the contrary; he preferred the evidence led on behalf of Ductline to that led on behalf of Arcric on this issue. Counsel for Arcric contended that this finding should be overturned, on the ground that it was contrary to the overwhelming weight of evidence.

8. The only witness called on behalf of Ductline who gave evidence on this point was one of its directors, who was also the managing director of the Australian subsidiary of the German company which manufactures the electric motors used in Ductline's product. He claimed to be well acquainted with the relevant trade, and denied the suggestion that "evap pump" was a generic term. The evidence that the term was generic came primarily from the managing director of Arcric, John Andrew Richmond. He stated that the term "evap pump" had been used for twenty years or longer, to describe the evaporative cooler pumps of various manufacturers. Indeed, he described "evap pump" as a "household expression for an evaporative cooler pump". It was said that this evidence was supported by the evidence of other witnesses. One of these witnesses, the supply manager for a wholesaler of parts in the refrigeration and air conditioning industry, indicated that there were several terms, namely "evap pump, evaporative cooler pump, swampy pump, all those different terms". He did say that "evap pump" was most commonly used in the business in which he was involved and used in enquiries of him within that business. Another witness, the proprietor of a small electrical service business, said, "it wasn't as if somebody every time said the same thing, but evap pump was a regular term which was used...". That witness called the Ductline product an "evap pump", "so anything else to me that did the same job while I was working on it was an evap pump too". The Victorian sales manager for a competitor of both Ductline and Arcric described as "the industry accepted word" either "evap pump" or "evap motor". The evidence of the marketing manager for Arcric supported Arcric's case that "evap pump" was a generic term.

9. In rejecting this evidence, the learned trial Judge did not refer specifically to all of these witnesses. He did say that the evidence called by Ductline outweighed that called on behalf of Arcric. In the circumstances, there is nothing to show that his Honour misused, or failed to take advantage of, his opportunity to assess the credibility of the various witnesses by reference to their demeanour. See Abalos v. Australian Postal Commission (1991) 171 CLR 167, at p 178, per McHugh J., citing Lord Sumner in S.S. Hontestroom v. S.S. Sagaporack (1927) AC 37, at p 47. There is no ground on which this Court can say that the weight of the evidence was contrary to that found by his Honour.

10. Indeed, as his Honour pointed out, the proposition that "evap pump" was a generic term in the trade was inconsistent with promotional material of various manufacturers which was in evidence. Despite the fact that abbreviations, not readily capable of being understood by those without knowledge of the trade, appeared in this promotional material, nothing like the term "evap pump" appeared in any such material, except that of Ductline and that of Arcric. As his Honour also pointed out, Arcric's initial flyer was headed "J.R.M. Evap-pump" and bore the words "evaporative cooler pumps" immediately underneath. If the term "evap pump" had a truly generic meaning, the addition of the words "evaporative cooler pumps" would have been unnecessary. His Honour declined to accept Mr Richmond's explanation of this addition, which Mr Richmond said was for the benefit of people less experienced in the industry. Counsel for Arcric drew attention on appeal to passages in Mr Richmond's evidence, contending that Mr Richmond had given other, more convincing, explanations for the inclusion of the words "evaporative cooler pumps". Apart from reiterating the proposition that "evap pump" was a generic term, these explanations involved the proposition that the words "evaporative cooler pump" would not fit easily across the page beside the initials "J.R.M.". It is not surprising that that explanation would have seemed unconvincing to his Honour, especially as the very words are found on the next line of the flyer. It is worth noting also that a series of drawings done by Mr Richmond, when he was designing Arcric's product, all bore the label "J.R.M. Evap. Cooler Pump". This form of labelling was inconsistent with the proposition that "evap pump" was a generic term. No explanation was offered for the presence of the hyphen in "Evap-pump", as used by Arcric. On the evidence, it was certainly open to the learned trial Judge to find that "evap pump" was not a generic term adopted by Arcric as such, but that Arcric used "Evap-pump" as a name, and that it was so similar to Ductline's "Evapump" as to be likely to mislead or deceive.

11. This appeal should therefore be dismissed. One matter which causes concern is the form of order made by the learned trial Judge. In most cases involving s.52, a declaration that a person has engaged in conduct in contravention of the section will be unnecessary. In a case such as this, in which the assessment of damages was postponed, a declaration might be of some assistance to a judge dealing with the assessment of damages, who may not be the judge who tried the issue of whether there was conduct in contravention of s.52. If a declaration is to be made, it should be made in terms specific to the conduct which is held to be in contravention of the section. In the present case, it seems unnecessary to allow the appeal just for the purpose of substituting a clearer form of declaration for the declaration which the learned trial Judge made. It may be that this Court would have a different view as to the precise description of the conduct that was likely to mislead or deceive from that held by the learned trial Judge. Given that the finding is one as to the likelihood of misleading or deception, and not one as to actual misleading or deception, it would not seem that Ductline would have a significant case for claiming damages in any event. It is therefore unlikely that the form of the declaration made will cause great difficulty.

12. For the above reasons, this Court should dismiss the appeal and order that Arcric pay Ductline's costs of the appeal.