Dentsu Inc v Dentsu Advertising Pty Ltd

[1990] FCA 80

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JUDGMENT No. .---..E-

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION

BETWEEN:

DENTSU INC

First Applicant

DENTSU AUSTRALIA LIMITED

Second Applicant

AND :

DENTSU ADVERTISING PTY

LIMITED

First Respondent

JOHN HANS PFEIFER

Second Respondent

JOHN BARRY DEANS

Third Respondent

CORAM: Einfeld J
DATE : 16 February 1990

PLACE: Brisbane

EX-TEMPORE JUDGMENT

The first applicant is a company incorporated in Japan operating a substantial international advertising agency. Relevantly for the present proceedings at least, it first entered the Australian

i	corporate and advertising scene in December 1988 when it acquired a majority shareholding in Fortune Communications Holdings Limited (Fortune). This company wholly owned an advertising company, SSB Australia Pty Limited, and a media consultancy, Advertising Investment Services Pty Limited (AIS Media), both of which were at the time significant enterprises in the Australian a R: tiisc??
industry. This takeover was well publicised at the d me.

-- 0	15	AUSTRALIA	FEB 1990
PRINCIPAL REGISTRY

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November 1989 the name of Fortune was changed so that the secondv applicant was born as a company registered in New South Wales. The name had been reserved in New South Wales for this purpose since 10 April 1989.

In October 1989 applications were made to reserve the same name in the other mainland states and the ACT. The evidence is that the second applicant's name cannot be registered in Victoria without the first respondent's consent under seal and that the respondents have refused to do so. In Queensland it is registrable only provisionally - meaning apparently that both names can be used.

On 10 January 1984, the second respondent, who is a working director of a Queensland advertising agency, registered in Queensland the business name DENTSU ADVERTISING. He apparently renewed or continued this registration subsequently until 1989 (except between 22 September 1986 and 1 August 1988). Together with the third respondent who was similarly eaployed, the second respondent bought a shelf company which by change of name on 3 March 1989 became the first respondent. Neither of the second or third respondent by the business name nor the first respondent has

ever traded. Both do not intend to do so before this action is
likely to be heard and determined. All parties seek an early

hearing. It cannot therefore be relevantly found within section 80 (1) of the Trade Practices Act that any one of the respondents "has engaged or is *proposing to engage" in conduct contravening the Act pending the hearing.

The applicants have commenced proceedings in this Court under the Trade Practices Act and alleging passing off. There are allegations of misleading and deceptive conduct, conspiracy to prevent the first applicant from exploiting its reputation in Australia, and other matters. The relief sought includes injunctions o,f both the restraining and mandatory varieties and damages.

The matter comes before the Court now by way of motion by the applicants for interlocutory injunctions. In substance the applicants seek orders that, pending trial, the first respondent not trade by its own or any similar name and that the second and third respondents take action to change the name of the first respondent. Ancillary orders are also sought. In correspondence between the parties' solicitors, the form of the restrictions sought on the respondents are somewhat differently expressed than in tho application. This correspondence includes open offers by both sides for a consent adjournment of this hearing. In the event, not a great deal of credit, and even less evidentiary force, for either side emerges from this correspondence.

The applicants' evidence is that when the first applicant acquired	the shares in Fortune, a number of its advertising executives
joined the first respondent to develop what are called "business relationships with Japanese companies operating in all States of Australia". Presumably what was meant is that these executives either joined Fortune at that time, and remained with Fortune until it became the second applicant eleven months later, or that they only joined the second applicant when it came into existence'
In either event, they can only have been making efforts to develop these relationships in the last three months. This includes the summer holiday period when little new business is done in Australia. The applicants say that unless the second respondent's name can be registered in Queensland and Victorla what they describe as their "Japanese executives" are unable to carry on the second applicant's business in other States. They say that the second applicant intends to develop what it calls "Japanese business contacts" in Queensland and Victoria as soon as it gains registration there.
There is no evidence as to what if any relationships and contacts have been developed in this period anywhere in Australia, even in New South Wales, where there is no registration problem nor as to any actual or potential hampering of these efforts that has occurred because of the existence of the first respondent. A letterhead, with compliments slip, envelope and 3 business c~rds
have been evidenced containing a Sydney address and Sydney telephone and fax numbers, but no evidence that the company has a real staff and budget and that it has been developing or
South Wales let alone in Victoria or Queensland. Although the 3 attempting to develop any relationships or contacts, even in New
business cards contain what I presume is the name of each executive in Japanese characters, only one appears to be what could be reasonably described at this stage as a "Japanese executive". Another one also holds office as the Chief Executive of AIS Media, which has apparently been operating in Australia for some time.

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~lthough in these proceedings it was more called in aid by the applicants, the respondents produced a market research report which revealed a very small amount of consciousness in the Queensland and Victorian commercial communities with significant advertising budgets even of the existence of the applicants let alone of any likelihood that the applicantst services were in any actual or likely demand or that they had any significant reputation in the field.

More importantly, the survey reveals that very few of the companies, if any, were what might at this stage be described as "Japanese companies" or "Japanese business contacts" with whom the second applicant says it wishes to develop business relationships.

At this stage, the report has not been subjected to close analysis nor has its author been cross examined. However, if this survey reveals anything at a11 for present purposes, it seems to me at this point to establish that neither the applicants nor the first respondent have any real exposure or visibility or reputation to speak of in the world of Australian advertising, and that either

At this stage of the case, however, I feel that this evidence,	or both have a big task ahead to obtain a significant market share.
whatever its intrinsic worth, is wholly or largely irrelevant because of the applicants' present intention to limit themselves to Japanese enterprises. The evidence does not reveal that either the second or third respondent could lay claim to any particular
expertise in dealing with such enterprises, or that they have any' present intention ever to operate in this area. The evidence reveals nothing to stop the second applicant from fully operating in Queensland for the time being, and of "making contacts" and "developing relationships" with Japanese businesses in Victoria. There is not the slightest evidence of any possibility that if it does so, there will be any confusion with the first respondent before the hearing of this action. Nor has even an attempt been made to establish by evidence that the respondents could, even if they wanted to, set up and operate the type of business contemplated by the applicants.

It is doubtful that the mere incorporation of a company can produce a breach of s.52 of the Trade Practices Act or constitute a passing off : see Wilcox J in Aerospatiale Societe Nationale Industrielle v Aerospatiale Helicopters Pty Ltd and Others [l9861 11 FCR 37 with whose observations on this subject I respectfully agree. It is fairly obvious that both the second applicant and the first respondent will not be able to operate in the same industry at the same time. However, on the view of the facts I have presently formed, it is not necessary to proceed to a finding

on the current evidence that the present activities of the	respondents constitute an arguable case, on the grounds detailed
in the statement of claim, for a mandatory injunction. It is true that Wilcox J in Aerospatiale and Powell J in Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd and Others [l9811 1 NSWLR 196 granted interlocutory mandatory injunctions, on undertakings which have been offered here by the applicants. However, these were cases where none of the factual circumstances here seem to have

- existed. With every respect to their Honours, I can see very little in the undertakings which add much to the issues to be determined in cases of this nature. Even if I find or assume that such a case does exist, it seems to me clear that the balance of

i	convenience and discretionary factors arising from the facts which
I
I have outlined require that such an injunction be refused. There might be a quite different conclusion at the trial by which time the further development of the applicants' efforts to establish their business may mean that any possible proposed activities of the respondents will be more likely to risk the contravention of the Act and constitute the passing off that the registration of the first respondent's name in 1989 was presumably calculated to achieve. On the other hand, an arguable case for a restraining injunction does exist, albeit only barely on the evidence thus far produced. As I understand the evidence and submissions, the respondents do not seriously contest that such an injunction would merely recognise the factual situation on the ground for the time being.
I direct that the parties bring in short minutes of an appropriate
form of one or more restraining injunctions premised upon the
parties present to me in Sydney short minutes of an appropriate that the hearing of the action be expedited and direct that the applicants offering the usual undertaking as to damages. I order timetable to prepare for the hearing and an agreed venue at 9.30 am on Thursday February 22.

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1 r e se rve l i b e r t y t o apply on 4 8 hours n o t i c e t o my Assoc ia te i n I .

Sydney o r t o a Judge o f t h e Court i n Brisbane i f agreed between

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t h e p a r t i e s . I w i l l hear t h e p a r t i e s on c o s t s .

A f t e r submissions:

I

I r e se rve t h e q u e s t i o n of c o s t s t o t h e hea r ing .

i certify that this and the -u-vefl

preceding pages are a true copy of the

Reasons for Judgment herein of his Honour

Justice Einfeld

Assocl?te -, ,?

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