Australian Co-operative Foods Ltd v Norco Co-operative Ltd - [1999] NSWSC 274

NEW SOUTH WALES SUPREME COURT

CITATION: AUSTRALIAN CO-OPERATIVE FOODS v NORCO [1999] NSWSC 274

CURRENT JURISDICTION: EQUITY

FILE NUMBER(S): 4662/98

HEARING DATE{S): 18-19 February 1999
1-2 March 1999

JUDGMENT DATE: 31/03/1999
PARTIES:

AUSTRALIAN CO-OPERATIVE FOODS LIMITED
v
NORCO CO-OPERATIVE LIMITED

JUDGMENT OF: Bryson J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:
PLAINTIFF: MR J IRELAND QC/MR S C BURLEY
DEFENDANT: MR J J GARNSEY QC/Ms A H BOWNE

SOLICITORS:
PLAINTIFF: ADDISONS
DEFENDANT: STONE & PARTNERS

CATCHWORDS:
CONTRACT
Construction
licence to use registered trade mark
discretion to grant or withhold approval of packaging
exercise of discretion
subject to implied term of honesty, reasonableness, good faith
decision to withhold approval to continue industry practice of co-branding
implied term not exceeded by decision.
ESTOPPEL
By convention
prior industry practice of co-branding of trade marks
claim that party estopped from refusing to grant approval under licence to continue to co-brand
change of circumstances in industry known to party
no estoppel.
ESTOPPEL
pre-contractual representation
context of representations
subsequent written licence agreement
agreement intended to govern all rights
exercise of discretion pursuant to agreement
refusal to grant approval to continue prior practice of co-branding
no estoppel.
TRADE MARKS
TMA 1995 s24 - trade mark becomes descriptive after registration
subs88 (2) (c) - mark likely to deceive or cause confusion
attacks on registered trade marks failed on the facts
s87 rectification of Register of Trade Marks.

ACTS CITED:
Trade Marks Act 1905, s 114
Trade Marks Act 1955, s 25 (1), s 26, s 28 (a), (d).,s 61, s 71 (1), s 94,
Trade Marks Act 1995, Division 2, Part 4, 5 , s 6, subs 7 (3), s 24, subs24 (1), (2), (3) and (4), s 25, s 41, s 57, subs 72 (1), subs 87 (1), (2), s 88, subs 88 (2) (a), (b), (c), (d), (e), s 89, subs 233 (1), s 234.
Trade Practices Act 1974

DECISION:
SEE PARAGRAPH 99

JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON J

WEDNESDAY 31 MARCH 1999.

4662/98

AUSTRALIAN CO-OPERATIVE FOODS LIMITED v NORCO CO-OPERATIVE LIMITED

JUDGMENT

HIS HONOUR : The plaintiff (Dairy Farmers) sues for remedies to protect its registered trade marks and to enforce rights under a Trade Mark Agreement with the defendant (Norco). Both parties carry on business in the Dairy Industry, including processing milk products. The plaintiff is usually known in trade as “Dairy Farmers”. Both use “LITE WHITE” trademarks for white reduced fat modified milk. Dairy Farmers owns the trade marks and Norco uses them under licence from Dairy Farmers.
The proceedings relate to whether Norco is entitled to follow a practice referred to in these proceedings as co-branding, and display the name Norco and a mark distinctive of Norco on the packaging of Lite White products without Dairy Farmers’ approval and contrary to Dairy Farmers’ wishes. Dairy Farmers have approved packaging which refers to Norco’s name as processor in conjunction with acknowledgment of Dairy Farmers’ ownership of the trade marks and without any prominence. “Co-branding” is an expression new to me and first encountered as used by counsel in this case: I will continue its use for the present purposes, without wishing to add it to the lexicon of trade mark law.
LITE WHITE was registered in Part B of the Register of Trade Marks under the Trade Marks Act 1955 from 15 June 1988 No B488929 in respect of milk and milk products, goods included in Class No. 29. The following were conditions of registration:
“Registration of this trade mark shall give no right to the separate exclusive use of the words LITE and WHITE.
Accepted on the provision of evidence of use.
Registration of this mark extends throughout the states and territories of Australia excluding Western Australia and the Northern territory.”
When first registered the owner of the mark was New South Wales Dairy Corporation. The mark was transferred to Milk Marketing (NSW) Pty Ltd by a Deed of Assignment of 18 August 1989 recorded on 8 September 1992, and again assigned to NSW Milk Brands Pty Limited by Deed of Assignment dated 13 January 1998 and recorded on 13 May 1998. Then it was assigned to the plaintiff by a Sale Agreement dated 25 March 1998 and recorded on 19 May 1998.
An associated trade mark No. B623151 was later registered in respect of milk and milk products, goods included in Class No. 29, from 21 February 1994. This mark consisted of the words:
“Lite
White
Less fat, More taste!”
represented in a distinctive manner as set out in the Register. The associated trade mark was registered with the same conditions as Trade Mark B488929, and this additional condition:-
“Registration gives no right to the exclusive use of the words LESS FAT, MORE TASTE.”
The first registered proprietor was Milk Marketing (NSW) Pty Limited. The associated mark was also assigned to NSW Milk Brands Pty Limited by the Deed of Assignment of 13 January 1998 and again to the plaintiff by the Sale Agreement dated 25 March 1998.
On 1 January 1996, when the repeal of the Trade Marks Act 1955 took effect the Trade Marks became Registered Trade Marks for the purposes of the Trade Marks Act 1995, which does not maintain the distinction between Trade Marks in Part A and those in Part B.
For many decades the Dairy Industry in New South Wales was extensively regulated; deregulation occurred in stages, and the most recent and most significant took effect on 1 July 1998. Before then milk producers in New South Wales were not fully competitive with each other, and these Trade Marks were actually used by all milk processors within New South Wales. New South Wales Dairy Corporation and Milk Marketing (NSW) Pty Ltd were controlled by the Executive Government of the State and they functioned in relation to the Registered Trade Marks as government bodies and as part of the regulatory machinery, and they enabled processors to make arrangements among themselves for the registration and protection of the Trade Marks and for their use under licence by all New South Wales milk processors, as well as by some licensees outside the State. Agreements by the registered owner for use of the Trade Marks and requirements imposed on packaging and product standards were expressions of collective arrangements among all processors.
Milk Marketing (NSW) Pty Ltd made requirements for the nature and quality of the product produced under the Licence Agreements and had powers to police and inspect compliance by processors with standards. In reality its requirements were the result of agreement among the processors.
The shareholders in NSW Milk Brands Pty Limited were the milk processors. Assignment of the Registered Trade Marks to NSW Milk Brands Pty Limited was a step in preparation for the deregulation which was to occur on 1 July 1998, and NSW Milk Brands Pty Limited had the tasks of managing and protecting the use of the Registered Trade Marks during the preparatory period and of disposing of them.
Milk Marketing (NSW) Pty Ltd made a Trade Mark Licence Agreement dated 16 June 1995 with Norco by which Norco’s use of the Registered Trade Marks was licensed until 30 June 2003. This was part of a scheme of licence agreements which gave similar rights to all milk processors in New South Wales and continued the substance of arrangements which had existed earlier. The Licence Agreement of 1995 related to use in a defined territory (clause 1.1 Definitions):-
“…the geographic area in which the User supplied any Milk as at 1 January 1995, or such other area as is agreed between the parties following implementation of the Distribution Sector Rationalization Scheme .”
and clause 4 generally limited distribution to the territory (although there were exceptions). Norco’s territory covered a large tract in the north of the State, centred around Lismore.
The Licence Agreement of 1995 contained provisions which show that it was contemplated that the successors of each party would be bound; (see clause 1.2 (3)) although the user was not entitled to assign; (see clause 12.2 and 16 (b)).
The place of the Licence Agreement of 1995 in the scheme of industry regulation and limited co-operation among milk processors is illustrated by the territorial provisions of the Licence Agreement, and also and most clearly by the provision relating to royalties in clause 2.3; the amount of royalties was to be determined by the proprietor in a way which was revenue neutral to the proprietor. This provision appears to be echoed in clause 5 (b) of the Sale Agreement under which:-
“The Purchaser undertakes to:
…
(b) ensure all revenue from royalties earned after 2 July 1998 is used exclusively for funding promotion activities (including administrative costs) in relation to the Assets;”
NSW Milk Brands Pty Limited disposed of the Registered Trade Marks by conducting an auction on 25 March 1998 at which it was open to New South Wales milk processors to make bids. The plaintiff was successful at $2,000,000.00 and entered into the Trade Mark Sale Agreement dated 25 March 1998. The Sale Agreement provided for NSW Milk Brands Pty Limited to conduct marketing until 2 July 1998, under a Marketing Agreement which Dairy Farmers entered into, although completion was to take place (as it did) soon after the Sale Agreement was made. Part D of the Sale Agreement listed a number of Licence Agreements, and included the Licence Agreement of 1995 with Norco of 16 June 1995 in the list of eight Licence Agreements with the eight milk processors which operated in New South Wales. (There were also Licence Agreements with other processors who operated in the Australian Capital Territory, Victoria and New Zealand.) Clause 5 (c) was as follows:-
“The Purchaser undertakes to;
…
(c) ensure that the sale of any Asset is subject to the Licence Agreements in respect of that Asset.”
The terms of the Sale Agreement seem to establish (not altogether clearly) and the terms of correspondence in evidence and the manner in which the proceedings were conducted also show that Dairy Farmers accept that, with modifications relating to provisions which it did not wish to enforce because of the Trade Practices Act 1974, it was bound by the Trade Mark Licence Agreement with Norco of 16 June 1995, to which it was not a party and which it did not ever novate, unless and until it entered into another Licence Agreement with Norco.
The parties made a new Trade Mark Licence Agreement, formed on 24 September 1998, and from the time it came into effect it took the place of the Licence Agreement of 1995. The course of negotiations which led to that Agreement is relevant because the operation of the New Licence Agreement on the parties’ rights is alleged by Norco to be influenced by an estoppel.
By letter of 3 June 1998 from Mr Aroney, Dairy Farmers’ Market Development Manager, to Mr McKenzie, Norco’s General Manager, (A 64) Dairy Farmers told Norco:-
“We propose to offer licensees two options in relation to Lite White and Shape. Firstly, licensees will have the choice of formalising the changes to the license agreements agreed to by NSW Milk Brands Pty Limited…”
(The changes referred to related to waivers of clauses which did not conform to the Trade Practices Act 1974.)
“As an alternative Dairy Farmers proposes to offer licensees the option of licensing two new trade marks, Dairy Farmers Lite White and Dairy Farmers Shape, using Dairy Farmers packaging on substantially better terms than the above license agreements. In summary the license agreements for these marks will include the following terms:
·Royalties set at 50% of the current royalty rate
·License agreements based on current Lite White and Shape licenses but simplified
·Licence period of two years to 30 June 2000.
A sample agreement including the above terms is attached for your perusal.
Dairy Farmers seeks your advice as to which license arrangements your organisation will enter into by 30 June 1998. We can then forward the appropriate agreements for your brands for execution.”
On 15 June 1998 Ms Maida Beale, a Marketing Manager of Dairy Farmers, wrote to Norco’s General Manager, Mr McKenzie, referred to the communication of 3 June 1998 and said:-
“I would like to follow up on his communication and outline a number of marketing details for the Shape and Lite White brands.
Packaging Changes
Firstly, the packaging graphics for Lite White and Shape will be revised. Copies of the new design are attached for your reference - two versions, one with and one without the Dairy Farmers logo. Companies wishing to retain the existing license agreements will need to use the generic Lite White and Shape packaging only - the option to include your logo will not be permitted…”
Ms Beale went on to refer to a television advertising campaign which was proposed.
(In my view it is doubtful whether Milk Marketing (NSW) Pty Ltd or Dairy Farmers as its successor was entitled under the Licence Agreement of 1995 to require Norco to use revised packaging graphics; it may be that Norco was entitled to continue to use packaging for which it held written approval until it wished to make some change; see clause 8.4; but this is not completely clear; see clause 8.2.)
On 6 July 1998 Mr Marchant on behalf of Norco wrote to Mr Aroney and stated:-
“…we are considering our options regarding the Licence Agreements. At the same time we are reviewing our existing packaging stocks for these product lines and will look to formalise our response once this is known…”
On 10 July 1998 Mr Aroney of Dairy Farmers again wrote to Mr McKenzie of Norco and said:-
“As referred to in my previous letter, I enclose the revised license agreements for the industry brands licensed to your co-operative. Could you please arrange signature of the agreements by the appropriate officer. You will note that there are two originals of each agreement. Please retain one original for your files and return the other to me at your earliest convenience.”
Mr Aroney went on to deal with requirements for adapting the new artwork to Norco’s use; in these adaptations there was no inclusion of any Norco Trade Mark or any reference to Norco except in an acknowledgment of ownership of the trade mark for goods produced under licence by Norco. Mr Aroney said:-
“Whilst we have created the artwork for the brands, under the agreement we still need to formally sign off on the artwork to be used with your customised details included. Accordingly, when complete, could you please send us a copy of the customised work so I can formalise approval.”
Mr Aroney also dealt with requirements for schedules of royalty returns and the incomplete Royalty Schedule in the revised licence agreements which he forwarded. He said:-
“You will note that the Royalty Schedule attached to the agreements requires a rate for royalties to be inserted. This figure relies on the CPI figure. The CPI figure for the year to 30 June 1998 is not published until the end of this month. Once this figure is known, the rate and a revised schedule will be sent out.”
In late July and in August 1998 correspondence passed between Tetra Pak Pty Ltd which was to produce milk cartons for Norco, and Norco relating to the design of one-litre packaging which included Norco’s name and a Norco trade mark as well as the Lite White marks. In a message of 14 August 1998 Liz Wilson of Dairy Farmers appears to have approved of this design but she concluded:-
“Please amend the artwork and forward to both Norco and myself for approval. Thanks.”
On 12 August 1998 Mr Aroney proposed that Dairy Farmers would agree to co-branding “Lite White” product as part of a discussion in which he also proposed that Norco would agree that it would adopt packaging for another product called “Shape” without a Norco logo.
Mr Aroney told Mr Marchant that Dairy Farmers was reconsidering its position about co-branding “Lite White” on 8 September in a telephone conversation.
There were negotiations, including conversations between Mr McKenzie and Dairy Farmers’ Chairman Mr A R Tooth, for merging the businesses of the two companies in July and August. Those negotiations came to a head in a letter of offer from Dairy Farmers to Norco of 27 July 1998 and a reply of 25 August 1998 conveying the terms of a board resolution to reject the offer. The offer was further considered by members of Norco at a general meeting later but was again rejected. Norco has since entered into a joint venture arrangement with Parmalat, an Italian organisation, and a merger with Dairy Farmers is unlikely. During negotiations for the merger indications were given on behalf of Dairy Farmers of readiness to consider or allow co-branding, but these were never expressed finally. Mr Aroney told Mr McKenzie in Denmark on 21 September 1998 that Dairy Farmers had decided not to allow Norco to use its logo on the “Lite White” packaging.
On 22 September 1998 Mr Aroney wrote to Norco for the attention of Mr Marchant and said:-
“I confirm that in spite of our initial verbal indications that we would permit the use of the Norco logo on the Lite White packaging, we have now formed the view that this would not be in the best interests of the Lite White brand. Accordingly, pursuant to Clause 8.4 of the license agreement, we will not be approving any packaging that does not comply with the new standard artwork previously circulated.”
He also said:-
“…I have also noted that Norco has not signed and returned its former industry brand license agreements. If Norco is not interested in continuing to licence these brands, I would appreciate receiving formal written notification of this as soon as possible. If not, could you please follow up and have the agreements referred to above signed and returned immediately.”
In effect this letter confirmed what Mr Aroney told Mr McKenzie in Denmark on 21 September.
The two forms of agreement which Mr Aroney forwarded on 10 July 1998 were signed on behalf of Dairy Farmers under Power of Attorney by Mr A R Tooth; Mr Tooth’s signature was witnessed by Mr Aroney and bore date 9 July 1998. In the office of Norco the forms of agreement were signed by Mr McKenzie on behalf of Norco and witnessed by the Company Secretary; the signature bears date 28 August 1998. However no signed copy was sent back to Dairy Farmers in August; and the method of formation of agreement clearly indicated by the letter of 10 July and again referred to in the letter of 22 September was by signature and return of an original. Mr McKenzie or his secretary on his behalf returned the signed copy to Dairy Farmers with a With Compliments slip; its date of receipt was stamped 24 September 1998 and that in my finding was the time of formation of the agreement. This is the New Licence Agreement. The delay in returning the document is not well explained but it was probably related, at least in part, to the merger negotiations.
On 30 September 1998 Norco obtained approval from Dairy Farmers, attested by a signature of Ms Liz Wilson on an example, of packaging for one-litre quantities of Lite White in a form which did not include a Norco Trade Mark, but gave Norco’s name as the party producing the product under licence. The following day 1 October Ms Wilson approved production by Tetra Pak and use by Norco of a week’s supply of the old cartons, as the new cartons were expected to be ready on 9 October.
At present the only approval which Dairy Farmers has given relating to one-litre cartons for use by Norco is approval of a design which does not include a Norco Trade Mark or co-branding; with the minor exception, long since exhausted, of the short term arrangement for the beginning of October. However Norco has continued to use packaging with its own trade mark for two-litre containers and Dairy Farmers has not given any approval for any designs of two-litre containers.

Mr McKenzie wrote to Mr Aroney on 30 September 1998. He referred to Mr Marchant’s letter of 22 September and to the discussions in Denmark and said:-
“Norco cannot accept your position on this and will continue to market Lite White and Shape endorsed by Norco, as per the agreement reached under the original franchise documents signed between Norco and the milk authority.
Clause 8.4 in no way provides you with any authority to issue such instructions.
On a separate and unrelated matter, I notice that both Shape and Lite White are being promoted under the Dairy Farmers brand. This is clearly outside of the intention of the royalty payment, and as such, I will be instructing our people to withhold any payment of royalties and that all royalties will be put into a trust fund until such time as it is clarified as to the purpose and role of this fund in respect of Lite White and shape to ensure that funds are directed to the investment in Shape and Lite White and not in any way to endorse the Dairy farmer brand.
Arthur, it is extremely disappointing that you have taken this action given the agreement that you and I reached on the issue. One would like to think that agreements reached are kept, but clearly in your case, you do not see fit to do so.”
On 22 October 1998 (A133) Dairy Farmers stated its position in a considered way; Norco did not accept this and after further correspondence including correspondence between solicitors the litigation was commenced on 16 November 1998. It was heard with expedition.
The position adopted by Norco in its letter of 30 September and since, although very firmly stated between the parties at some places, was not adopted uniformly; Norco asked for and obtained Dairy Farmers’ approval for one-litre packaging without co-branding, and used such packaging for some months. Dairy Farmers’ only approval for co-branding was in its terms clearly limited to operate for about a week and no more.
In the form of agreement which Mr Aroney sent Mr McKenzie on 10 July 1998 (A90) Schedule 2 which relates to the royalty began with paragraph A in these terms:-
“A.The Royalty payable by the User during the first year of the
Term until 1 July 1998 must be calculated at the rate of 3.466 cents per litre of the Product sold by the User (the ‘Base Rate’). After 1 July 1998, the Base Rate will be [insert figure] cents per litre.”
Mr Aroney said in his letter:-
“You will note that the Royalty Schedule attached to the agreements requires a rate for royalties to be inserted. This figure relies on the CPI figure. The CPI figure for the year to 30 June 1998 is not published until the end of this month. Once this figure is known, the rate and a revised schedule will be sent out.”
However as far as appears from evidence, no further communication was made of the rate or of a revised schedule, and the document which was signed and sent back is still in the form originally forwarded with the passage “[insert figure],” so it does not state the base rate after 1 July 1998. The New Licence Agreement was admitted on the pleadings and no attempt was made to contend that it was not an effectual agreement, for this reason or for any reason. There could be no doubt about how the initial royalty amount is to be ascertained; it is to be clearly understood from Dairy Farmers’ letters of 3 June and 10 July that the figure is to be ascertained as 50% of what the royalty would have been in July 1998 under the escalation provisions of the 1995 Trade Mark Licence Agreement.
The New Licence Agreement contains clause 22 - Entire Agreement And Modification - including the following:
“22.1 Entire Agreement
This Agreement contains the entire agreement of the parties with respect to its subject matter. It sets out the only conduct relied on by the parties and supersedes all earlier conduct by the parties with respect to its subject matter.”
In my opinion Clause 22.1 has the effect that on 24 September 1998 the parties agreed that the Licence Agreement of 1995 was no longer to have any effect on their rights or on the relationship between them. The evidence of Mr McKenzie showed that he understood that this was so.
In its Amended Defence filed on 19 February 1999 Norco alleges that estoppels prevent Dairy Farmers from asserting that the New Licence Agreement and in particular clause 8.4 preclude Norco from co-branding. The contentions relating to estoppel were pleaded in answer to Dairy Farmers’ claims to be entitled to restrain distribution of product in packaging of which Dairy Farmers has not approved, and from using promotional material, packaging advertising and stationery of which Dairy Farmers has not approved. The Amended Defence refers to a number of matters in support of the alleged estoppel, as follows:-
- the practice in the Dairy Industry since 1988 of co-branding:
- permission granted by Milk Marketing (NSW) Pty Ltd, in the
forms of approvals of co-branded packaging, for the practice;

- knowledge from participation in the industry of co-branding

by Norco:
- statements on behalf of Dairy Farmers about 12 August 1998
and during the period of negotiation to the effect that Norco could continue co-brandings.

The position pleaded reflects the position taken in the letter of 30 September 1998 and in later correspondence, although not always on uniform grounds. The position was supported in evidence by Mr McKenzie and by his predecessor Mr Hoskins, who retired on 2 January 1998.
Mr McKenzie said (in oral evidence t 30) to the effect that he regarded discussions between Mr Tooth and himself as forming a basis of Norco having a continuing entitlement to co-brand for “Lite White” and “Shape”. He said that these discussions took place as part of the merger proposals up to the time when Norco’s board rejected the proposal in July, and Mr McKenzie regarded them as a contractual commitment in place; he said he believed this absolutely. In my finding this was not a reasonable belief because the assurances attributed to Mr Tooth were in the context of merger proposals which came to nothing; such assurances might well have made good sense if there had been a merger, but obviously fell away and could not be relied on when Norco rejected the merger. In any event there could be no reason to suppose that they continued to govern the parties’ relationship when they later made a written agreement.
These discussions, like Mr Aroney’s proposal of 12 August clearly were no more than negotiations, and positions taken in them could not be understood to have contractual effect or binding effect; and they could not be understood to override the express provisions of a written agreement which was then proposed and which Norco later accepted.
In any event, before Norco accepted the written agreement, all indications in negotiations of readiness to approve co-branding had been withdrawn, and Norco was confronted with a clear choice between relying on its rights under the Licence Agreement of 1995, and entering into the New Licence Agreement with all its benefits and burdens, including the smaller royalty and the need to obtain approval of packaging.
The practice of co-branding white reduced fat modified milk by Norco existed from the time when use of the Lite White Trade Mark began about 1988, with the permission of all Dairy Farmers’ predecessors. Although there may have been an exception of minor importance, the practice was almost universal among milk processors in New South Wales throughout that period until Dairy Farmers bought the Trade Marks and sought to change the practice. The practice would be difficult to understand in an industry which was unregulated and fully competitive, and is comprehensible only when regard is had to the circumstances in which New South Wales Dairy Corporation and Milk Marketing (NSW) Pty Ltd owned the Trade Marks, did not themselves process or market Lite White and functioned as government bodies exercising their rights as owners of the Trade Marks in the interests of New South Wales milk processors generally.
Those processors enjoyed the substance of an interest although they did not have a legal interest in the Trade Marks, and all were advantaged by co-branding. Deregulation of the industry, the advent of full competition among processors and the removal of organising government activity and ownership of Trade Marks by a company which did not have the ordinary commercial motivations to exploit them, and the conduct of an auction at which a large sum of money was paid for the Trade Marks by one milk processor and not by the others marked in a very distinct way the end of all practices and conventions associated with a regulated industry, and transition to a quite different scheme of things in which it is to be expected that ownership of a trade mark will be a vehicle for the pursuit of commercial interest, qualified only by the provisions of the Sales Agreement which had the effect that existing approvals for co-branding could be relied on in the exercise of rights granted under the Licence Agreement of 1995. If any alteration in packaging was to be made it was necessary to obtain Dairy Farmers’ approval, and if a New Licence Agreement was made it was necessary that that approval should be obtained under the new agreement.
Approval granted by Dairy Farmers’ predecessor under another agreement which no longer had effect could have no standing under the New Licence Agreement, and Dairy Farmers’ approval under clause 8.4 of the New Licence Agreement would be necessary for any use by Norco. As Norco was fully involved in the events of deregulation, auction and negotiation of the New Licence Agreement it would not have been reasonable for Norco to suppose that any previous practices, however conventional they had become in a regulated industry, would continue, or that it would be obligatory for Dairy Farmers to conform to them.
While it is correct that there were indications in conversations during the period of negotiations that Dairy Farmers would or might approve of co-branding, these were wavering and were not uniform, there was no basis in the evidence for a view that Norco regarded them as substituting for the terms of the New Licence Agreement or relied on them, and it would not be reasonable, having regard to the circumstances in which they were made, for Norco to rely on them in making the New Licence Agreement. For the most part, the indications were given in the context of negotiations for a merger, and before Norco accepted the New Licence Agreement by sending it back a clear indication had been given in Denmark and again in the letter of 22 September 1998 (A109) that Dairy Farmers would not approve the use of the Norco logo on the Lite White packaging.
In my view there was no good basis for the position which Norco adopted in its letter of 30 September 1998 (A112), or for the assertions that Mr Aroney had not kept an agreement which he had reached, or for later similar positions taken on behalf of Norco. In my finding there has been no breach of any engagement or undertaking however informal on the part of Dairy Farmers in taking its present position.
Norco’s counsel made submissions in which it was contended that the practice of co-branding which was engaged in by almost all processors in NSW from 1988 onwards and at most times, and by Dairy Farmers among them, in a regulated system in which the operations of Milk Marketing was financed by royalties paid by the processors, gave rise to a convention that co-branding was authorised and would continue, from which Milk Marketing and Dairy Farmers are now unable to depart. As the practice of co-branding was carried out with the approval of the registered owner, and as approvals were sought from time to time for packaging and were given, including in the case of Norco and at the time that Dairy Farmers acquired the trade marks, express approval given under the Licence Agreement of 1995, is in my opinion not necessary but quite incorrect to attribute the practice of co-branding to a convention which was seen as binding. The practice is quite sufficiently explained by its being authorised by the trade mark owners from time to time in the exercise of their contractual rights, and the absence of any withholding of authorisation is fully explained by the then organisation of the industry and the influence which processors had over the affairs of Milk Marketing NSW Pty Ltd. It is superfluous and incorrect to interpret parties’ conduct as evidence of the existence of a convention when they acted under express contractual rights.
In relation to what then were Dairy Farmers’ rights, there were excessive aspects of some matters stated in the letter of 3 June 1998. Dairy Farmers was not, in my opinion, entitled to impose a change in packaging or to prevent processors from continuing to use packaging including co-branding under the Licence Agreement of 1995 and in accordance with approvals which they had obtained earlier. However Dairy Farmers was able to offer processors an opportunity to make new arrangements at half their existing rate of royalty, and to create a need to obtain approval for packaging with the new arrangements, so a very large part of what that letter proposed could be justified. Neither that letter nor any step in the later negotiations however is a source of the parties’ rights at present; these arise under the New Licence Agreement.
There was no reason why an approval granted before formation of the New Licence Agreement by Milk Marketing (NSW) Pty Ltd under an agreement which no longer had effect would be “Prior written approval of the proprietor” under clause 8.4 of the New Licence Agreement.
On the facts in evidence as I understand them there is no basis for concluding that any estoppel exists which prevents Dairy Farmers from relying on or exercising its various rights conferred by clause 8 to control among other things packaging used by Norco, or in particular from enforcing clause 8.4 by preventing Norco from distributing any packaging material without Dairy Farmers’ prior written approval.
Even if there were a factual basis for an estoppel, whether viewed as an estoppel by convention or a promissory estoppel relating to the manner in which rights under clause 8.4 would be exercised, the estoppel could not be enforced because the New Licence Agreement is as its terms show intended to be a comprehensive written expression of the parties’ agreement, so that its provisions cannot be qualified by evidence of the terms of the parties’ negotiations. The estoppels here contended for would be inconsistent with the express terms of clause 8.4 in that they would qualify the power which it confers, and they would be directly contrary to the terms of clause 22.
In these respects I follow the views of McLelland J in Johnson Matthey v A C Rochester Overseas Corporation (1990) 23 NSWLR 190. I regard McLelland J’s views as well founded on the principle of giving effect to the formal, final and considered expression of the parties’ contractual intention; the fact that they chose writing to express that intention shows the relative weight they attributed to earlier arrangements and understandings. The view expressed by McHugh JA (dissenting) in State Rail Authority (NSW) v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 and acted on by Rolfe J in Whittet v State Bank of NSW (1991) 24 NSWLR 146 does not, in my respectful opinion, accord appropriate weight to indications of finality and completeness which the parties give when they adopt formal written expression. The judgment of McLelland J was followed by Miles CJ in Skywest Aviation Pty Ltd v Commonwealth of Australia (1995)126 FLR 61 (see pages 102-106). I respectfully differ from the view of Rolfe J in Whittet and follow the views expressed by McLelland J in Johnson Matthey. I regard McLelland J’s view as well founded in principle and I do not regard the decision of the Court of Appeal in State Rail Authority of NSW v Heath Outdoor Pty Ltd as having established the views expressed by McHugh JA at 193. My adherence to this view has been reinforced with the passage of time and accumulation of experience of this and many other forensic endeavours to set up estoppels out of the circumstances or terms of pre-contractual exchanges; the evidence offered is often extensive, discursive and inconclusive and, where it is of any value at all, clearly of less value than the considered written expression. Poorly based and incompletely considered forensic attempts to set up pre-contractual estoppels are unfortunately common, and in most cases they are quite unuseful and very wasteful of resources.
In view of the facts of this case, its disposition does not turn on the view which I have recorded. It could not be said that (echoing McHugh JA’s reference in Heath Outdoor at 193 to the decisive consideration) Dairy Farmers induced Norco to give Dairy Farmers its rights over packaging in clause 8.4 by assuring Norco that those rights would only be used in a way which permitted co-branding; the negotiations on that subject were plainly not intended to establish the position finally and did not expressly deal with clause 8.4, they were not clear and they were expressly withdrawn before the contract was formed, and replaced with a firm statement that co-branding would not be permitted. There is no room for an estoppel based either on any express assurances or on more general considerations in the way in which affairs had been conducted in the industry, in a state of affairs which had been brought to a definitive close with deregulation and the purchase of the trade mark rights for a large sum.
Norco also raised similar assertions of an estoppel in its Reply to the Amended Defence and the Amended Cross-claim.
In my judgment, Norco has not established any of the estoppels for which it contends.
Norco’s counsel contended that limitations arise by implication on the discretionary power to give or withhold approval of packaging conferred by clause 8.4 of the New Licence Agreement. Allegations of implied terms appear at a number of places in the pleadings; Amended Defence and Cross-claim paragraph 13 (c) alleges an implied term of the Licence Agreement of 1995 that Norco was entitled to supply “Lite-White” in co-branded packaging, paragraph 20 (b) alleges that it was an implied term of the New Licence Agreement that Norco was entitled to distribute milk in co-branded packaging; with consequential claims for remedies in the Cross-claim. In the Reply to Amended Defence and Amended Cross-claim it is alleged in paragraph 3.7, among many matters which are said to disentitle Dairy Farmers to rely on an exercise of discretion under s 89 of the Trade Marks Act 1995, that the New Licence Agreement contained a number of terms and obligations including (3.7.2) that Dairy Farmers could not unreasonably withhold approval of packaging, (3.7.3.) that Dairy Farmers was obliged to exercise its discretion reasonably in good faith and to achieve or facilitate the operational purpose of the licence agreement, (3.7.4) an obligation to co-operate to enable performance by each party of obligations, (3.7.5) an obligation not to affect prejudicially or diminish the value of the licence and (3.7.6) an obligation not to make it difficult or impossible to enjoy and exploit the licence.
The New Licence Agreement is a licence; it creates a commercial opportunity for Norco and does not oblige Norco to exploit it to any extent or to pay a minimum royalty. The whole of clause 8 appears to me to be significant and it is in these terms:-
“8.STANDARDS AND SPECIFICATIONS
8.1 Product Specification
The proprietor must from time to time provide to the User details of the specification for the Product and the User must at all times comply with the specification.
8.2Conformity to Standards
The nature and quality of the Product produced by the User and all packaging, stationery, advertising and promotional materials relating to the Product must conform to standards set by the Proprietor.
8.3Samples of Promotional Material
The User must, at its own expense, submit to the Proprietor samples of all packaging, promotional material, advertising and stationery in or on which any of the Trade Marks are used.
8.4Written Approval
The User must not distribute any packaging, promotional material, advertising or stationery on which any of the Trade Marks are used without prior written approval of the Proprietor. The granting or withholding of any such approval is at the sole discretion of the Proprietor, and the Proprietor must notify the User of its approval or otherwise within 14 days of receipt of such samples.
8.5Advertising and Promotional Material
The Proprietor acknowledges that the User must retain all of its right, title and interest in any copyright or design works in or attaching to any packaging, advertising or promotional material submitted by the User to the Proprietor in accordance with clause 8.3, and the User licences the Proprietor and any other party nominated by the Proprietor to use such copyright or design works on a royalty-free basis.
8.6 Control and Inspection
The User must establish and utilise such inspection and testing facilities as the Proprietor deems reasonably necessary to ensure that the Products sold or offered for sale by the User must comply with specifications laid down, directions given and information supplied by the Proprietor to the User from time to time.
8.7Assistance to Proprietor
The User must assist the Proprietor in the control of the nature and quality of the Products and permit the Proprietor and its servants and agents reasonable inspection of the Products and all printed matter on which the Trade Marks are used by the User. For this purpose the User must permit the Proprietor or its authorised representative to enter the premises of the User at all reasonable times for the purpose of inspecting the Products and the methods of processing, testing, packaging, storage and distribution of the Products and will, if called upon by the Proprietor to do so, submit samples of the Products and their packaging and information as to the manner or use of the Trade Marks for inspection by the Proprietor.”

When clause 8.4 is viewed in this setting, and in the setting of the whole agreement, it must in my opinion be understood that there are reasonable limits to the purposes for which the discretion to grant or withhold approval may be exercised. The discretionary power and all the provisions relating to standards and specifications are ancillary to the purposes of the agreement, which include that the licence should be granted and enjoyed by Norco, and that the manner in which the licence is exercised and the rights are enjoyed should be subject to restrictions so as to maintain the interests of Dairy Farmers in its trade marks. Nothing is added to the meaning of the words which confer a discretion by the word “sole” which does no more than emphasise that the discretion is that of Dairy Farmers and of no other; the word does not have the force of qualifying the grant of the discretion by some expression such as “absolute” or “unfettered” (and those words, if used, are not entirely inconsistent with the existence of some limitation; see note at (1999) 73 ALJ 175.) The discretion is no more nor less examinable for being a sole discretion.
In the light of the history of co-branding and the marketing of “Lite White”, Norco’s wish to continue co-branding was unremarkable and exposed the interests of the registered owner of the marks to no potential disadvantage to which it had not long been exposed. Acceptance by Dairy Farmers of the continuation of this practice would have been unremarkable and perhaps it would be the outcome many objective observers would expect to emerge. However it is in no way the only reasonable outcome of an address to the discretion which could be reached. A wish to put an end to co-branding is well within the range of reasonable outcomes of the exercise of the discretion; Dairy Farmers bought the trade marks recently for a significant sum of money and in competition with other participants in the industry including Norco; the new licence was granted in a deliberate departure from and revocation of the earlier arrangements; it was granted for a few years only at the end of which licence arrangements would not impede the exercise by Dairy Farmers of its rights as registered proprietor. It would be reasonable for Dairy Farmers to look to the association between its trade marks and itself both in the present and at a future time after expiry of licence agreements, and to have regard to its own interests by seeking to end the association in the minds of customers between its trade marks and one of its commercial competitors. There is nothing in the New Licence Agreement which in any way requires Dairy Farmers to disregard its own present and future interests except the grant of the licence itself, and there is no express or implied term authorising co-branding or any other means for Norco to give prominence to its association with the goods. The packaging approvals granted permit a truthful statement to appear on the packaging of the association between Norco and the goods.
In my view a discretionary decision against co-branding was well within the range of the discretion conferred on Dairy Farmers by clause 8.4 and the circumstances do not indicate that the exercise of the discretion was affected by any extraneous purpose, want of honesty or of good faith or of reasonableness, or by any conflict with any implied contractual doctrine protecting Norco in the enjoyment and exercise of the rights conferred.
Judicial consideration of limits in the nature of requirements of good faith or reasonable conduct on the exercise of contractual powers has been very extensive. Although it cannot be said that a general obligation of good faith in the execution of contracts has been established, opinion in the Court of Appeal of New South Wales has shown openness to the implication of a duty of good faith both in performing obligations and in exercising rights; see the judgment of Sheller JA in Alcatel Australia Limited v Scarcella & Ors (1998) 44 NSWLR 349 and his Honour’s review of “implied terms”. The nature of a contractual power and the circumstances in which it is to be exercised can support such an implication, particularly when such a power if unlimited could operate to enable a party to defeat the contract altogether or impose unreasonable burdens on the other. The implication is appropriate if the contract and the power do not represent what it could reasonably be supposed that the parties intended unless there is some implied limitation requiring reasonableness, honesty or good faith in its exercise. These will often require the implication of some limitation, even if no more than a requirement of honesty, if they are to represent anything which it could reasonably be supposed that the parties intended. Powers, options and elections which are conferred on a party so as to enable it to decide whether to take an advantage for itself must be recognised and distinguished from powers conferred on a party as means of establishing or deciding, so as to affect the interests of all parties, some matter which must be decided if the contract is to be executed effectively.
The implication of an obligation to make a decision in good faith may not be available or the obligation may be qualified where the contract gives the party an opportunity to make a decision for the purpose of enabling the party to take an advantage, or to take it in a particular form or at a particular time. By and large contracts exist so that advantages may be taken, and a contractual decision may be means for taking it. Where there is an implied obligation of good faith or reasonableness, what the obligation requires is different to altruism and different to acting without regard to one’s own interests.
Attempts to give expression to the limit on the discretion cannot use precise language; I would formulate it in terms of its being necessary to exercise the discretion honestly, reasonably, in good faith, without depriving either party of the benefit of the agreement and for the purposes of clause 8.4 and of the contract as a whole, but these expressions have little value in guiding decisions, which must be based on an appraisal of what is put forward on the facts in evidence as showing that the discretion has not been duly exercised. The difficulty of delineation of what in substance is required by an implied limitation does not detract from the need for it; if anything the difficulty supports the need for implication and tends to explain why the limitation was not expressed. The discretionary power of Dairy Farmers to approve packaging conferred by clause 8.4 is in my opinion a power which must be exercised in good faith for the purpose of carrying out the New Licence Agreement. Clause 8.4 like the rest of clause 8 is ancillary to the conferral of the licence: for the New Licence Agreement to be carried out in an effectual manner Norco must have packaging. Clause 8.4 cannot have been intended to be the means for Dairy Farmers to take some market advantage for its own products, for example by withholding consent to all packaging so that Norco’s licence would be ineffective, or by requiring Norco to use unpleasant colours, discouraging text or offensive images. Business efficacy for the grant of a licence requires the implication of limits on the manner in which Dairy Farmers may exercise its power of approval.
The fact that approval is withheld for a reason or granted subject to a condition which restricts something that Norco wishes to do is not necessarily an indication that the discretion has been exceeded, as the interests of Dairy Farmers may also be protected, and the range of available discretionary considerations which can reasonably be considered and acted on and the range of possible outcomes are very wide. To my mind a decision not to permit co-branding is well within the range of reasonable outcomes of consideration by Dairy Farmers within the overall purposes of the New Licence Agreement of what packaging it should approve. Dairy Farmers could well take the view that appropriate regard to its own interests in its Registered Trade Marks requires that packaging emphasising an association of the product with Norco should not be approved; a decision the other way would also be reasonable, and past experience illustrates this. Dairy Farmers owns the trade marks, has paid a significant sum for them, has only granted a licence for a limited term, and is entitled to contemplate a future when there may be no licence agreements and Dairy Farmers may be the only user of its marks. Norco has no contractual entitlement or assurance of continued co-branding under the New Licence Agreement. Within the terms of Dairy Farmers’ approval the connection of the goods with Norco is stated accurately and without emphasis on the packaging, the association of the goods in the course of trade with Dairy Farmers as owner of the trade marks is real although not strong, the packaging is not deceptive and those who read it will know the truth. In my opinion Dairy Farmers’ approval of Norco’s packaging including its withholding approval of co-branding has not been in breach of its implied obligation.
Among the claims in Norco’s Cross-claim is claim 1:-
“An order that the Register of Trade Marks be rectified by cancelling or removing the registrations…” (of the Lite White marks).
This claim invokes the power in subs 87 (1) of the Trade Marks Act 1995 which is in these words:-
“If section 24 or 25 applies in relation to a registered trade mark, a prescribed court may, on the application of an aggrieved person, but subject to subsection (2) and section 89, order that the Register be rectified by:
(a)cancelling the registration of the trade mark;
or
(b)removing or amending any entry in the
Register relating to the trade mark;
having regard to the effect of section 24 or 25 (as the case may be) on the right of the registered owner of the trade mark to use the trade mark, or any sign that is part of the trade mark, in relation to particular goods or services.
Subsection 87 (2) and s 89 set out grounds on which the Court may decide not to act under subs 87 (1). They can be set to one side unless there are grounds for action under subs 87 (1).
Subsection 24 (1) is in these terms:-
“This section applies if a registered trade mark consists of, or contains, a sign that, after the date of registration of the trade mark, becomes generally accepted within the relevant trade as the sign that describes or is the name of an article, substance or service.”
Subsections 24 (2), (3) and (4) contain provisions limiting the rights of the registered owner, but they need not be further considered because the Cross-claim directs attention to s 24 not for its effect of disabling enforcement by the registered owner but for its effect as enabling the Court to rectify the register under subs 87 (1). “Sign” in subs 24 (1) is a defined expression - s 6 and extends to both the Lite White marks. Section 25 relates to formerly patented substances or services and is not relevant.
In substance the case on the Cross-claim was that the words “Lite White” became generally accepted within the trade in dairy products as the words that describe or are the name of white reduced fat modified milk.
The words “Lite White” state, with an immediately recognisable orthographical departure, two highly obvious and significant characteristics of the product, and they are not inherently adapted to distinguish product as having a connection in the course of trade with a particular person. The marks were registered in Part B of the register under the Trade Marks Act 1955 and plainly were not registrable in Part A having regard to s 94 of that Act. It does not seem possible that the words “Lite White” were distinctive of goods with which the first registered owners were or might be connected in the course of trade at the time when they were registered. It is surprising that two such ordinary words referring to such obvious characteristics of the product should have been the subject of registration and legal monopoly, but it should be inferred that they were registered because the view was taken that they were capable of becoming distinctive within subs 25 (1) within the concept of distinctiveness established by s 26 of that Act. The marks became registered trade marks for the purposes of the Trade Marks Act 1995 by the force of subs 233 (1) when the Act of 1995 came into effect on 1 January 1996.
The new register does not continue any division between what were formerly marks in Part A and marks in Part B. Although under the Act of 1955 there were significant differences in the effects of registration and susceptibility to attack those distinctions are not drawn in the Act of 1995, except that for marks formerly in Part A s 234 continues the conclusiveness of registration after seven years formerly extended by s 61. Otherwise the tests for rectification of the new register are the same for trade marks formerly in Part B as for trade marks formerly in Part A.
Protection against removal extended to the Lite White marks has been, to some degree, promoted by the legislative changes. As well as being susceptible to action under subs 87 (1) by reference to s 24, registered trade marks are susceptible of amendment or cancellation under s 88 on grounds stated in subs 88 (2). The susceptibility of trade marks formerly registered in Part B to action under s 88 is limited because Ground 88 (2) (a) - “any of the grounds on which the registration of the trade mark could have been opposed under Division 2 of Part 5” is unavailable; registration of a Part B trade mark could in no case have been opposed under Division 2 of Part 5 because they all achieved automatic registration under s 233 of the Act of 1995 without there being any opportunity for opposition. (The reference to Division 2 of Part 5 takes the reader by way of s 57 - registration may be opposed on the same grounds as for rejection - to the elaborate process of consideration in Division 2 of Part 4, particularly to s 41).
Grounds 88 (2) (b), (d) and (e) are also inapplicable. However in my opinion Ground 88 (2) (c) is applicable. Its terms are as follows:
“(2)An application may be made on any of the following
grounds, and on no other grounds:
………
(c)because of the circumstances applying at the time when
the application for rectification is filed, the use of the trade mark is likely to deceive or cause confusion for a reason other than one for which:
(i)the application for the registration of the
trade mark could have been rejected under section 43 or 44; or
(ii)the registration of the trade mark could have
been opposed under section 60;”
For a trade mark which was formerly in Part B there could be no reasons which fall within sub-para (i) or para (ii), so Ground (c) is available if the use of the trade mark is likely to deceive or cause confusion for any reason.
I have inferred, as a matter of probability, that the trade marks achieved registration in Part B on the footing that they were capable of becoming distinctive of goods with which the first registered owner might be connected in the course of trade. The analysis I have made of the grounds in subs 88 (2) shows that the marks cannot now be removed on any ground such as that they did not in fact become distinctive or for that matter that they are not capable of becoming distinctive. They can be removed on the ground in subs 24 (1) invoked by subs 87 (1), to the effect that after the date of registration the sign became generally accepted as descriptive. Subsection 24 (1) does not speak in terms of distinctiveness and must be understood and applied according to its own terminology. The Cross-claimant has the burden of proving for each mark that a process happened in which the mark became generally accepted as descriptive, that is to say that there was a change in general acceptance of its function, and also has the burden of proving that this process happened after the date of registration. (The curiosity is that it would seem that if the sign always was descriptive, and that it never became distinctive or even that it was incapable of becoming distinctive, it cannot now be removed).
The date of registration relates back to the filing date of the application for registration, having to regard to the definition of “date of registration” in s 6 and to the provisions of subs 72 (1), the terms of which are equally applicable to an application under the Act of 1955 as to one under the Act of 1995.
In support of its position on the facts counsel for Norco submitted that “Lite White” is and always was descriptive of white reduced fat modified milk. Counsel also referred to the following matters which are established by evidence, in substance without any dispute.
Norco obtained approval from Milk Marketing (NSW) Pty Ltd to use co-branded packaging in 1988 and continued to use it throughout the period in question with approvals for co-branded packaging from registered owners from time to time. Other milk processors used the trade marks with co-branding, with approval of the registered owners from time to time of their packaging, for substantially the whole period. Apparently from soon after the time when Norco began to do so and certainly from 1991 onwards all milk processors in New South Wales used such co-branded packaging for substantially all the time, although there may have been an insignificant exception for a relatively short period. (The exception is that there was a time after National Foods took over United Dairies and until September 1996 when National Foods did not co-brand Lite White). Other processors which did not operate within New South Wales also used the trade marks with the approval of the registered owners from time to time and with co-branding.
The cross-claimant’s counsel also relied on evidence that officers of Norco expected that co-branding would continue after the changes of 1998 and asserted that others so expected; however I do not regard that as relevant. The best example of such an assertion is the evidence of Mr McKenzie to the effect that (t 29):-
“It was always agreed in the industry that we would be able to continue to endorse the product by utilising our brand.”
I do not regard that assertion as establishing the matter asserted, but if it did it would not be relevant.
The Cross-claimant’s counsel asserted that by 1998 each of the milk processors had gained reputation and good-will in the marks in the geographic regions in which they operated, and that building up that reputation was assisted by the promotion carried out by Milk Marketing (NSW) Pty Ltd for some years with the proceeds of licensing paid to it by milk processors. Counsel contended that it should be found that as a consequence Lite White was recognised as a product of the individual milk processor whose logo was displayed on the carton.
On the basis of the material in evidence I am not able to find the issue posed by subs 24 (1) in favour of the Cross-claimant. The use of the trade marks with co-branding and the behaviour of milk processors in acting together within the regulated industry in ways which brought it about that all were licensed to use the trade marks with co-branding appears to me to demonstrate the contrary proposition, that is that all treated the trade marks as protected by law, and that all carried on their use and co-branding under licence agreements and arrangements for the approval of their packaging. I infer that it was commercially rational to do so rather than to disregard or attack the position of the registered owners of the marks. To my mind the facts demonstrate that there was not a process in which the marks became generally accepted as descriptive, but the marks continued to be regarded and treated as defensible registered trade marks the use of which was worth having, worth protecting by licence agreements and worth paying money for.

All the evidence put forward relates to use by milk processors and the perception from the point of view of milk processors, and none related to the perception by any other participants in the trade, of customers or of retailers, of the meaning of the words Lite White and whether they were descriptive. There was no indication of a change in acceptation such as subs 24 (1) requires.
As s 24 does not apply in relation to either mark there should be no rectification under s 87.
The Cross-claimant’s reliance on s 88 and its contentions in support of a finding on Ground 88 (2) (c) were based on the same body of evidence. It was contended that the Lite White marks are not capable of distinguishing Dairy Farmers’ goods and that the use of these ordinary English words as a trade mark is likely to deceive or cause confusion. In the context of the system of licensing and approval of packaging, and of the packaging which in all instances of the use of packaging in New South Wales of which evidence speaks contained accurate statements of the source of the goods and identified the processor as well as the registered owner, there is in my finding no likelihood of deception or confusion. The circumstances applying at the present time include approval by Dairy Farmers of packaging which will identify Norco in a clear way to those who take the trouble to read the packaging, and indeed in every way except by displaying Norco’s own trade mark or logo. Dairy Farmers does not require the packaging to display any information which is deceptive or confusing. The situation might be different if Dairy Farmers’ control over packaging were abused, but it has not been.
Sections 88 and 89 of the Trade Marks Act 1995 have the effect that there is now no difficulty corresponding to the interaction of paragraphs (a) and (d) of s 28 of the Trade Marks Act 1955, which was the subject of differing views in judgments in the High Court in the Moove Case - NSW Dairy Corporation v Murray Goulburn Co-operative Company Limited (1991) 171 CLR 363. The facts of the present case as I have found them do not raise consideration of s 89.
The question raised by Ground 88 (2) (c) whether because of the circumstances applying when the Cross-claim was filed and the proceedings were heard (and they were only separated by a few days) the use of the trade mark is likely to deceive or cause confusion for any reason is a question of fact. It is difficult to conjecture what evidence could deal in detail with that likelihood. In this case there was no such evidence and the Court is left, as is usual when such issues are raised, to its knowledge of the trade marks and of the English language, and to general considerations based on the knowledge which the Court shares with the community at large about the workings of trade, the minds of customers and the influences on them.
Dealing with s 114 of the Trade Marks Act 1905 (where the words used were “likely to deceive”) Kitto J in Southern Cross Refrigerating Company v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 at 595 said:-
(ii) It is not necessary, in order to find that a trade mark offends against the section, to prove that there is an actual probability of deception leading to a passing-off. While a mere possibility of confusion is not enough—for there must be a real, tangible danger of its occurring (Reckitt & Colman (Australia) Ltd. v. Boden (1945) 70 CLR 84, at pp. 94, 95; Sym Choon & Co. Ltd. v. Gordon Choons Nuts Ltd. (1949) 80 CLR 65, at p. 79—it is sufficient if the result of the user of the mark will be that a number of persons will be caused to wonder whether it might not be the case that the two products come from the same source. It is enough if the ordinary person entertains a reasonable doubt. (iii) In considering the probability of deception, all the surrounding circumstances have to be taken into consideration. (This includes the circumstances in which the marks will be used, the circumstances in which the goods will be bought and sold, and the character of the probable purchasers of the goods: Jafferjee v. Scarlett (1937) 57 CLR 115, at p. 120.)”
In the Moove Case - Murray Goulburn Co-operative Co. Limited v NSW Dairy Corporation & Anor (1990) 16 IPR 289 in the Full Court of the Federal Court their Honours said at 296:-
“The decision whether the use of the trade mark is likely to deceive or cause confusion is in the end a question of impression and common sense: the Australian Berlei Case (1973) 129 CLR 353 at 357. See also “Bali” Trade Marks [1969] RPC 472 per Lord Upjohn at 497. Although it is a matter to be decided by the trial judge, it is a ‘jury question’ on which, in a case like this, the judge is entitled to give effect to his own opinion as to the likelihood of deception and confusion and in doing so is not confined to the evidence of the witnesses called at trial ‘G E’ Trade Mark [1973] RPC 297 at 321-2.”
In the passage which their Honours cited in the Australian Berlei Case at 357 Barwick CJ said:-
“However, not only is the likelihood or unlikelihood of deception or confusion a question of fact but it is very much a matter of impression.”
The evidence shows that purchasers of milk products bearing the Lite White brands have had the opportunity to know those brands and to know that they are registered trade marks for some years, about eleven years for the first mark, and have had the opportunity to know that the marks indicate a connection in the course of trade with the registered owner; different registered owners from time to time. There has been a connection in the course of trade with the registered owners from time to time, as they have had contractual entitlements to control the formulation of the product and the manner of use of trade marks under their licensing agreements, and the contractual entitlement to control use of the trade marks by granting or withholding licensing; no less an entitlement for never having been withheld from a New South Wales milk producer. Statements on the packaging have been available for those disposed to read closely to understand that there is both a registered trade mark owner and a milk processor behind the product, and the past practice of co-branding could only emphasise that there was both a Lite White trade mark with a registered owner, and also a milk processor. It is only on the supposition that language is meaningless to customers and the statements on each package identifying both trade mark owner and milk processor have no effect that it could be concluded that the practice of co-branding has created an association between the Light White brands and the reputation of a co-branding milk processor. I would not reason thus or infer that deception or confusion have existed, or would be created by removing the co-branding and leaving the identifying statements.
My finding is that the use of the trade marks is not likely to deceive or cause confusion in terms of Ground 88 (2) (c).
The Cross-claim also claims a number of declaratory and consequential orders which my holdings thus far establish should not be made.
If it were otherwise appropriate to find that use by licensed milk processors in New South Wales of the Lite White trade marks had created an association between the registered trade marks and the milk processors such that discontinuing co-branding would be likely to deceive or cause confusion, the question would present itself whether the cross-claimant is entitled to rely on such use by itself or other licensed milk processors having regard to the provisions of subs 7 (3) of the Trade Marks Act 1995 which provides:-
“An authorised use of a trade mark by a person (see section 8) is taken, for the purposes of this Act, to be a use of the trade mark by the owner of the trade mark.”
The workings of subs 71 (1) of the Trade Marks Act 1955 were illustrated by the following observation of Aickin J in Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670 at 683 where his Honour after referring to case law on licensing and registered user agreements said:-
“These cases demonstrate that the essential requirement for the maintenance of the validity of a trade mark is that it must indicate a connexion in the course of trade with the registered proprietor, even though the connexion may be slight, such as selection or quality control or control of the user in the sense in which a parent company controls a subsidiary. Use by either the registered proprietor or a licensee ( whether registered or otherwise) will protect the mark on the ground of non-user, but it is essential both that the user maintains the connexion of the registered proprietor with the goods and that the use of the mark does not become otherwise deceptive. Conversely registration of a registered user will not save the mark if there ceases to be relevant connexion in the course of trade with the proprietor or the mark otherwise becomes deceptive.”
It will be seen that Aickin J did not treat use by a licensee as a means by which use of the mark could become deceptive. I have found that the use of the trade marks is not likely to deceive or cause confusion, but if there were such a finding based on use by licensees including the cross-claimant I would think that the cross-claimant would be disentitled to rely on that use.
In my judgment the plaintiff should have the remedies claimed and the Cross-claim should be dismissed.
The Statement of Claim continues claims 3, 4, 7, 8, 9 and 10 in the Summons. At the hearing the plaintiff did not seek damages or interest.
I will make orders as in the claims 3 and 4 in the Summons.
The orders are:-
1. Order that the defendant its servants and agents be restrained
from distributing any packaging, promotional material, advertising or stationery which bears registered trade mark B 488929 (LITE WHITE) or registered trade mark B 623151 (LITE WHITE and device) without the prior written approval of the plaintiff.
2. Order that the defendant account to the plaintiff for all
quantities of white reduced fat modified milk sold under the said trade marks pursuant to the terms of the Trade Mark Agreement made between the parties on 24 September 1998.
3. Order that the defendant pay the plaintiff’s costs of the
proceedings.
4. Order that the Cross-claim be dismissed with costs.
I hereby certify that paragraphs 1-99 are the reasons for judgment of the Honourable Justice John Bryson.
Dated 31 March 1999. (H D LEWIS)
Associate.

LAST UPDATED: 08/04/1999