Chok Man Chan v Chen

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FEDERAL COURT OF AUSTRALIA

Chok Man Chan v Chen [2013] FCA 1191

Citation: Chok Man Chan v Chen [2013] FCA 1191
Parties: ALICE CHOK MAN CHAN v YIN (IAN) CHEN and FOUR C GROUP PTY LIMITED (ACN 164 698 159)
File number: VID 1035 of 2013
Judge: DODDS-STREETON J
Date of judgment: 2 October 2013
Catchwords: INTERLOCUTORY INJUNCTION – liquidators sold business of Four C Realty Pty Ltd (in liq) (“Realty”) to applicant director – respondent director incorporated Four C Group Pty Ltd and sent emails to persons including customers of Realty, advising of new contact details as a result of the “new business development and the companies’ restructuring” – applicant alleged passing off, misleading conduct and false representations in contravention of ss 18, 29(1)(b) and (g) of the Australian Consumer Law – serious question to be tried – inconvenience or injury applicant likely to suffer if injunction refused outweighed injury respondents would suffer if injunction granted
Legislation: Competition and Consumer Act 2010 (Cth) schedule 2, ss 18, 29(1)(b) and (g)
Corporations Act 2001 (Cth) s 477(2B)
Cases cited: AstraZeneca Pty Ltd v GlaxoSmithKline Australian Pty Ltd [2006] FCAFC 22
Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57
ACCC v Dukemaster Pty Ltd [2009] FCA 682
ACCC v Telstra (2004) 208 ALR 459; [2004] FCA 987
Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618
Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45
Complete Technology Integrations Pty Ltd v Green Energy Management Solutions Pty Ltd [2011] FCA 1319
Hansen Beverage Co v Bickfords (Australia) Pty Ltd (2008) 251 ALR 1; [2008] FCAFC 181
Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 194 FCR 564; [2000] FCA 1572
Mars Australia Pty Ltd v Sweet Rewards Pty Ltd (2009) 81 IPR 354; [2009] FCAFC 174
Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1; [2003] FCA 289
National Exchange Pty Ltd v ASIC (2004) 49 ACSR 369
Nutrientwater Pty Ltd v Baco Pty Ltd (2010) 265 ALR 140; [2010] FCA 2
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Reckitt & Coleman Products Ltd v Borden Inc (1990) 17 IPR 1
Singtel Optus Pty Ltd v Telstra Corporation Ltd [2004] FCA 859
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
Tec & Tomas (Aust) Pty Ltd v Matsumiya Computer Co Pty Ltd (1984) 1 FCR 28; (1984) 53 ALR 167
TGI Friday’s Australia Pty Ltd v TGI Friday’s Inc (1999) 45 IPR 43
Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326; (1996) 34 IPR 176
Date of hearing: 2 October 2013
Date of publication of reasons: 13 November 2013
Date of last submissions: 2 October 2013
Place: Melbourne
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 50
Counsel for the Applicant: Mr P Wallis
Solicitor for the Applicant: Corrs Chambers Westgarth
Counsel for the Respondents: Mr T…
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Details
Case
[2013] FCA 1191
Decision Date

CaseChat Overview and Summary

The case of Chok Man Chan v Chen involved a dispute between two shareholders of a liquidated real estate company, Four C Realty Pty Ltd. The applicant, Chok Man Chan, had entered into a contract to purchase the company's business from its liquidators, but the first respondent, Yin (Ian) Chen, contested the enforceability of the contract and the need for court approval under the Corporations Act 2001. The dispute centred on the allegations that the first respondent had engaged in misleading or deceptive conduct, and passing off by sending emails to the company's customers under a new email address, purporting to represent Four C Group Pty Ltd, a company of which Four C Realty Pty Ltd was allegedly a member.

The central legal issues were whether the emails sent by the first respondent constituted misleading or deceptive conduct under the Australian Consumer Law (ACL), and whether they amounted to passing off. Additionally, it was questioned whether the liquidators required the court's approval to enter into the contract with the applicant under section 477(2B) of the Corporations Act.

The court found that there was a serious question to be tried regarding the misleading or deceptive conduct and passing off claims. The emails sent by the first respondent included references to "our group" and "restructuring", which could lead recipients to believe that he was representing a group of companies of which Four C Realty Pty Ltd was a member, despite the business being in liquidation. This misrepresentation could potentially deceive customers into believing that the company's business was still being conducted by the first respondent. The court concluded that the first respondent's freedom to compete was subject to the laws prohibiting misleading or deceptive conduct and passing off, and to the applicant's proprietary rights. Consequently, the court granted an interlocutory injunction restraining the first respondent from engaging in the allegedly misleading or deceptive conduct and passing off.

The court's decision underscores the importance of compliance with consumer protection laws and the protection of proprietary rights in business transactions, particularly in the context of corporate liquidations. The injunction serves to protect the applicant's business interests and prevents the first respondent from potentially misleading the company's customers and engaging in unfair competition.

Orders

Orders of the court

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Background

Background to the litigation

The application was opposed. The affidavit of the first respondent. Yin (Ian) Chen, affirmed on 1 October 2013, was filed in opposition.FACTS AND EVIDENCE The company carried on business as a licensed real estate agent from premises at suites 1316 and 1317, 401 Docklands Drive, Docklands. It maintained the following “mission statement” on its website:Four C: Communication-Cooperation-Coordination-CareWith the simple philosophy of achieving success for all parties which involved in our business activities. A four way Win, Win, Win, Win is in the horizon with a Win (Investor) – Win (Customer) – Win (Developer) – Win (Four C) situation in every venture or project undertaken. On 25 July 2013, joint and several liquidators were appointed to the company. The liquidators sought expressions of interest in purchasing the company’s assets, including its business. Two opposing groups of shareholders associated with the applicant and the first respondent respectively emerged as potential purchasers of the business. On 13 August 2013, the applicant entered into a contract with the liquidators to purchase the company’s business. A dispute arose about the enforceability of the contract and whether the liquidators’ entry into it required the court’s approval under s 477(2B) of the Corporations Act 2001 (Cth) (“the Act”). On 13 September 2013 and 23 September 2013 respectively, Gordon J delivered judgments on those questions. Her Honour held there was a binding contract and that approval under s 477(2B) of the Act should be granted. On 26 September 2013 the applicant, the company and the liquidators executed an asset sale deed in relation to the sale of the business, which was acknowledged to record the terms of the contract. The deed included terms that the applicant would obtain all of the company’s right, title and interest to the assets, including the company’s real estate business, the company name of Four C Realty Pty Ltd (in English and Chinese), the company’s trade marks and copyright (including any rights subsisting in trade secrets, know how, methods, techniques, libraries, client lists, databases), the domain name (in English and Chinese) and any rights of the company to use email addresses with the suffix “@4hai.com.au” (in English and Chinese). The asset sale deed was completed on the afternoon of 26 September 2013.Affidavit of Matthew Critchley By his affidavit sworn on 27 September 2013, Mr Critchley deposed that he was informed by the applicant and her husband that on the morning of 27 September 2013, the first respondent sent an email to Leo Lei Shang of 360 Property Group Pty Ltd and Freddy Wang of Mirvac Group, both of which are major customers of the company. The email stated:Dear all, To satisfy the new business development and companies’ restructuring within our group, I’m pleased to let you know that my new email address ian.c@fcg.net.au will be effective from today, the previous address ian@4hai.com.au will be stopped shortly. Please update the contact details in your record accordingly.I thank you for your attention and cooperation, and sorry for any inconvenience caused by this change.Look forward to hearing from you through this new email.Kind regards,Ian ChenFour C Group Pty LtdTel: +613 96025560; Fax: +613 9602 5580; Email: ian.c@fcg.net.auMobile: +61 401 765 668Suite 1312, 401 Docklands Drive, Docklands VIC 3008Please consider the environment before printing the email.Communication | Cooperation | Coordination | CareFor more information, visit our website (currently under construction).

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The tort of passing off does not require proof of actual deception or any “actual, subjective intention to mislead” by the tortfeasor (Nutrientwater Pty Ltd v Baco Pty Ltd (2010) 265 ALR 140; [2010] FCA 2 (“Nutrientwater”) at [81]). Rather, as stated in Nutrientwater (at [81]):It is sufficient that there be a misrepresentation that is likely to lead the public to believe that the tortfeasor’s goods are those of the claimant … [which] is a question of fact the court must decide, having regard to the relevant circumstances.CONSIDERATION In the present case, the emails were sent by the first respondent to persons including customers of the company. They were signed by the first respondent (who is a director of the company), followed by the second respondent’s name “Four C Group Pty Ltd”, which differs from that of the company only by the substitution of “Group” for “Realty”. The emails reiterated the composite phrase in the company’s website mission statement and used an address which, save for a different suite number, was identical to that of the company. They referred to “the new business development and companies’ restructuring within our group”, requiring the first respondent to furnish a new email address to which further communications could be sent. It is arguable that the references to “our group” and “restructuring”, combined with the second respondent’s name, “Four C Group Pty Ltd”, may, in that context, have induced some recipients reasonably to apprehend that the first respondent was writing on behalf of a group of companies of which the company was a member. The emails did not indicate, even obliquely, that Four C Group Pty Ltd was not associated with the company or that the first respondent was no longer associated with the business it formerly conducted. In such circumstances there was, in my view, a serious question to be tried whether the emails falsely represented that the company was associated with Four C Group Pty Ltd and, despite some internal reorganisation, its business continued to be conducted by, and associated with, the first respondent, whose new contact details were a means of making contact with the business previously conducted by the company. The first respondent’s freedom to compete with the applicant in the real estate industry is necessarily subject to the laws prohibiting misleading or deceptive conduct and passing off and to the applicant’s proprietary rights (including any intellectual property, trade secrets, confidential information and customer lists assigned to her by the company). Accordingly, I concluded that there was a serious question to be tried as to whether the respondents had:(a)engaged in misleading or deceptive conduct in contravention of s 18 of the ACL;(b)made a false or misleading representation that services are of a particular standard, quality, value or grade in contravention of s 29(1)(b) of ACL;(c)made a false or misleading representation that services have sponsorship, approval or affiliation in contravention of s 29(1)(g) of the ACL; and/or(d)engaged in passing off.