Dickson, Ronald James v Gallagher, Dennis

[1984] FCA 269

Re: RONALD JAMES DICKSON
And: DENNIS GALLAGHER & ANOR
No. G.217 of 1984
Consumer Protection
(1985) ATPR para 40 - 550

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Wilcox J.

CATCHWORDS

Consumer Protection - misrepresentation as to entitlement to carry on business and to supply particular goods and services - application for interlocutory injunction - whether respondent entitled under their contract with applicant to carry on business under a particular name - nature of contract - balance of convenience.

Trade Practices Act 1974 ss, 6, 52, 53

HEARING

SYDNEY

#DATE 27:7:1984

ORDER

Upon the Applicant by its counsel giving the usual undertaking as to damages I make the following orders:

1. Order until further order that the respondents and each of them by themselves their servants or agents shall not in trade and commerce advertise, promote, offer for sale or sell any goods, business, franchise or dealership or any other business known as or under the name "Mr Air Sweepers" or "Mister Air Sweeper" or any other name which is substantially identical with or deceptively similar to the said names to the extent that such conduct involves -

(a) the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast or

(b) trade or commerce

(i) among the States,

(ii) within a Territory, between a State and Territory or between two Territories or

(iii) the supply of goods or services to the Commonwealth or an authority or instrumentality of the Commonwealth.

1. Order until further order that the respondents and each of them by themselves their servants or agents shall not in trade and commerce engage in conduct which is likely to mislead consumers into the belief that the respondents have rights or are able to distribute machinery produced by or derived from Mr Air Sweepers Inc., to the extent that such conduct involves -

(a) the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast or

(b) trade or commerce

(i) among the States,

(ii) within a Territory, between a State and Territory or between two Territories or

(iii) the supply of goods or services to the Commonwealth or an authority or instrumentality of the Commonwealth.

1. Order until further order that the respondents and each of them by themselves their servants or agents shall not in connection with the supply or possible supply of goods or services represent that the goods or services have the sponsorship or approval of the applicant or Mr Air Sweepers Inc., or any of them to the extent that such conduct involves -

(a) the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast or

(b) trade or commerce -

(i) among the States,

(ii) within a Territory, between a State and Territory or between two Territories or

(iii) the supply of goods or services to the Commonwealth or an authority or instrumentality of the Commonwealth.

1. Order until further order that the respondents and each of them by themselves their servants or agents shall not in connection with the supply or possible supply of goods or services represent that they have the sponsorship or approval of the applicant or Mr Air Sweepers Inc., or an affiliation with the applicant or Mr Air Sweepers Inc., to the extent that such conduct involves -

(a) the use of postal, telegraphic or telephonic services or takes place in a radio or television broadcast or

(b) trade or commerce

(i) among the States,

(ii) within a Territory, between a State and Territory or between two Territories or

(iii) the supply of goods or services to the Commonwealth or an authority or instrumentality of the Commonwealth.

1. Order until further order that the respondents and each of them by themselves their servants or agents be restrained from passing off themselves or their goods or their services as the applicant, the applicant's goods or the applicant's services.

JUDGE1

This is an application for interlocutory injunctions in respect of alleged breaches of section 52 and section 53(c) and (d) of the Trade Practices Act to which had been added an allegation that the respondents have passed off themselves or their goods or their services as the applicant and the applicant's goods and services.

2. The central issue for consideration in determining whether or not a prima facie case is revealed on the evidence is the nature of the agreement which was entered into between the applicant on the one hand and the two respondents on the other in relation to the use by the respondents of the name, "Mister Air Sweepers", or alternatively, "Mr Air Sweepers" in the States of Victoria, South Australia and Tasmania.

3. The evidence establishes that prior to the end of the year 1982 the applicant had entered into an arrangement with American principals for the franchise in Australia of a product, being a machine for cleaning parks and other large areas, which was marketed in American under the name of "Mr Air Sweepers". It further appears that the applicant had prior to that time registered a business name in New South Wales under that name, advertised in the Sydney telephone directory under that name, and had made a sale of at least one machine in November 1982. I am satisfied that by the time that any discussions with the respondents commenced, the applicant had gone into business under the title "Mr Air Sweepers" and was doing some busines, although perhaps at that stage in a modest way.

4. It appears to be common ground that there were discussions between the applicant on the one hand and the respondents on the other late in 1982 and early in 1983. In paragraph 5 of his affidavit the second respondent has set out the various items which were agreed between the parties and I do not understand those items to be disputed, at least for the purposes of these proceedings. However, there is one significant difference between the parties and that relates to the duration of the agreement. In paragraph 5, Mr Warr makes no mention of any cut off date. On the other hand the applicant has annexed to his affidavit a copy of a letter dated 22 February 1983 written by himself to Mr Warr for the purpose of confirming recent conversations concerning the distribution rights of a Mr Air Sweeper machine. The letter goes on:

"It is agreed, that Cleaning Trade Supplies will supply Cleaning Trade Supplies

(Southern) exclusively, with this machine, for the States of Victoria, South Australia and Tasmania, for a period of six months, commencing 1 January 1983, to 30 June 1983, inclusively.

"However, it is anticipated, that this arrangement will be reviewed at the end of this period."

1. I should explain that Cleaning Trade Supplies is a busines name used by the applicant and Cleaning Trade Supplies (Southern) is a busines name used by the respondents. There was no reply to the letter of 22 February 1983 and there has been no denial that such a letter was sent. In those circumstances it appears to me that I should take the view at least at this interlocutory stage that the letter accurately sets out the terms of the agreement. This is not inconsistent with acceptance that the details of the arrangement were as deposed to by Mr Warr because the letter of 22 February does not purport to set out details. I think it is highly unlikely that Mr Warr and his partner would have left unanswered a letter which stipulated for only a limited period, if in fact this was contrary to the arrangement which they had orally negotiated shortly before.

2. I therefore approach the matter upon the basis that this letter accurately set out the substance of the agreement. Notwithstanding that, Miss Bergin on behalf of the respondents contends that the letter was capable of a construction consistent with continuing rights after the expiration of a six months period. Her argument is that the six months period should be treated as relating only to the period of exclusivity, leaving open an entitlement to continue to use the name, Mr Air Sweeper, after the expiration of six months. She said there is no evidence of any termination of the entitlement at the end of six months.

3. I cannot interpret the letter in that way. It seems to me quite clear in its intent. The respondents were to be given a particular right for a period of six months; that particular right can be described as an exclusive right to trade in Mr Air Sweeper machines in three states. The letter contemplated discussions for review of the agreement at the end of the period but it does not seem to my mind to impart any obligation on either party to continue at the end of that time.

4. The evidence does not indicate that there was any subsequent agreement to extend the contract. On the contrary, there is evidence to suggest an acceptance that the arrangement would not continue beyond the end of June because the respondents were no longer interested in the machine but preferred to concentrate on their other business interests, particular computer programmes.

5. There is some support for that view of the facts in Mr Warr's affidavit where he says in paragraph 5, speaking of himself and his partner the first respondent:
   
   

"We were prepared to determine our agreement with the applicant at the end of June 1983."

1. It appears that one only machine was purchased by the respondents, namely, early in 1983, but there is some dispute between the parties as to the circumstances of that sale. It is allegd by the respondents that they were caused to believe they would have an Australian-made machine whereas in fact they were sold an imported machine. I do not think it is necessary to go into that issue for the present purposes.

2. It is, I think, not without significance that that same machine is apparently still owned by the respondents and this is a further pointer against any notion that there has been a continuing busines carried on by them after the end of June. Furthermore, it appears to be clear that there were discussions between the aplicant on the one hand and a company called Ranger Truck Rentals and Leasing Pty Limited early in June 1983 for the granting to Ranger of national distribution rights. In his affidavit the applicant puts this into the context of virtually contemporaneous discussions with the respondents whereby they indicated they were not interested in continuing.

3. Rangers are based in Melbourne and it seems to me likely that the situation is as deposed to by the applicant and that Rangers would have been highly unlikely to have become interested if they were debarred from the markets in Victoria, South Australia or Tasmania, or even if they were in a position of having to meet competition from an already established Melbourne distributor entitled to continue.

4. The only inference I can draw from the evidence is that it was understood by all three parties, that is the applicant, the respondents and Rangers, in June 1983 that the respondents would cease their activity and clear the way for Rangers to be given national distribution rights.

5. Two significant events have occurred since the end of June 1983. One of these is that in about September 1983 the respondents registered the name Mr Air Sweeper in Victoria. This had the effect of preventing Rangers from registering the name as they would have wished.

6. The second event is that on 4 February 1984 there was published in the Melbourne Age an advertisement under the heading Mr Air Sweeper Victorian Operation offering "a rare business opportunity for a person with limited initial finance". The advertisement referred to "our American designed and world patented machine".

7. Mr Wheelhouse on behalf of the applicant argues that there are two relevant misrepresentations in the advertisement. The first of these is a representation that the respondents had a subsisting business available for sale. He says that the advertisement was clear, an offer to sell a business, not a single machine, and I agree with that interpretation of the advertisement.

8. Secondly, he says that the reference to the American designed and world patented machine would not in context be read as a reference to a single unit available for sale as such but rather a type of machine which is available through the authors of the advertisement, and this again is a representation of a continuing business operation.

9. I agree with that interpretation of the advertisement and I think that it is a clear representation that there was a continuing business with access to a particular type of machine from undisclosed principals which was being put upon the market. Such a representation is of course consistent with maintenance of the registration fo the business name.

10. Mr Wheelhouse seeks orders under the Trade Practices Act despite the fact the respondents are not corporations. He relies upon section 6(2)(h), read with section 6(3) of the Trade Practices Act. He points to the fact that the advertisement envisaged that interested persons would reply by using the postal services. He argues that this is a relevant breach of sections 52 and 53 because of the extensions given by sections 6(2)(h) and 6(3)(a). It seems to me this argument is correct, and indeed Miss Bergin did not contend to the contrary.

11. It is true to say that there is not a lot of material to justify the inference of any future breach of the Trade Practices Act. There is certainly no present overt threat. However, I think I am entitled to take into account in evaluating the possibility of a future breach that the respondents, despite requests from the applicant, had persisted in maintaining their registration of the business name, and indeed it is that persistence which has apparently led to the making of the Application and the application for interlocutory relief.

12. The position seems to be that the Corporate Affairs Commissioner in Victoria is concerned about the fact that Ranger is using the name Mr Air Sweeper despite the fact that that business name was registered by the respondents. It is that practical problem which has led to this application. Miss Bergin says, and I think justifiably, that the applicant has been tardy in seeking relief. There was a period of five months between the time of the advertisement in The Age and the filing of the Application in this court. I take that into account, but I also take into account that during that time the applicant was seeking to resolve the matter and it was only the inability of the applicant to obtain an agreement by the respondents to withdraw the registration which has caused this Application to be made.

13. It seems to be quite clear that the critical event was the letter from the Commissioner of Corporate Affairs dated 14 June 1984 which made it essential for some action to be taken rather than to allow the matter to drag on any futher. Miss Bergin has also submitted that the balance of convenience favours her clients. She says there is nothing to prevent the respondents being ordered to keep accounts of any profits they make. I agree with that, but there is also nothing to indicate that the respondents are making any profits.

14. It seems to me that the applicant's major complaint is not that somebody is making profits which he ought to have and which in the fulness of time could be made the subject of an order for payment to him pursuant to account. Rather, his complaint is that the maintenance of the claim by the respondents to the use of the business name is having the practical effect of frustrating the implementation of his arrangements with Ranger and, according to the applicant, this imperils the Ranger arrangement entirely. I think that this is not something to be discounted, given the fact that Ranger is based in Melbourne. One could well understand that the company might decide that it is not interested in the national rights if it had problems in its own State. If the Ranger arrangement goes off, it is probable that the applicant would sustain significant losses which it might be impossible to quantify.

15. I take the view that the balance of convenience favours the granting of an injunction. In this regard I take into account the fact that by letter dated 15 November 1983 the solicitors for the respondent made an offer to the applicant for their clients to "terminate their arrangement with you upon receipt of $7500 together with an agreement by you to take over the air sweeper machine presently owned by our clients." There has been some dispute between the parties as to the true value of the air sweeper machine, but I think it would be comparatively easy for a court to put a value on that machine, aided by proper evidence, and to add $7500 or some assessed lesser amount as being the damage which the respondents have suffered, if they are frustrated from enjoying the rights which at a final hearing they may be found to have.

16. In terms of quantification of damage, I have no doubt that the balance of convenience favours the grant of an injunction so as to avoid the damage which would be sustained by the applicants if the Ranger arrangement fell through. I am satisfied it is a case for an interlocutory injunction. On the applicants, by their counsel, giving the usual undertakings as to damages, I am prepared to make orders in accordance with paragraphs 1, 2, 3, 4 and 5 of the application to operate any further order.