E.L. Management Services Pty Ltd v Morgan & Banks Pty Ltd

[1989] FCA 673

JUDGMENT No.

IN THE FEDERAL COURT OF AUSTRALIA)

)

NEW SOUTH WALES DISTRICT REGISTRY)

1

GENERAL DIVISION 1 NO. G

BETWEEN:	E.L. MANAGEMENT SERVICES
PTY. LTD.  . .
Applicant

.,

AND : 

MORGAN & BANKS PTY. LTD.
First Respondent

MORGAN & BANKS (VIC.)

PTY. LTD.	, .,
Second Respondent	,

CORAM:	GUMMOW J.
DATE :	27 NOVEMBER 1987 .

PLACE: SYDNEY

EX TEMPORE REASONS FOR JUDGMENT

HIS HONOUR:

These proceedings were instituted by Application filed on 13 November 1987. A Statement of Claim was filed on the same day. I have this afternoon granted leave with immediate effect to add a further respondent so that the applicant is E.L. Management Services Pty. Ltd. and the respondents are Morgan & Banks Pty. Ltd. and Morgan & Banks (Vic.) Pty. Ltd.

the dispute.

The Application and Statement of Claim identify the applicant as E.L. Management Services Pty. Ltd. "trading as Executive Leasing". The first respondent, as it now is, is identified as Morgan & Banks Pty. Ltd. "trading as Morgan & Banks Executive Leasing". These phrases in a technical sense are surplusage in the additions to the corporate styles of the parties but they serve to give an indication of the nature of

They also indicate that the dispute as to the term "Executive Leasing" is not one which involves the corporate name of either party but rather a trading name or description under which business activities are conducted by the corporate parties. . The circumstance that the term "Executive Leasing" is not part of the corporate names of the respondents, or indeed of that of the applicant, is a factor to be borne in mind when considering "the practical impact" of any interlocutory

injunctive relief: see the decision of the Full Court of this

Court in Carlton & United Breweries (NSW) Pty. Ltd. v Bond
Brewing NSW Ltd. (19 November 1987 at p.12 of the print).

In its Application the applicant seeks interlocutory injunctive relief on the. footing of passing-off and also contravention of ss.52 and 53 of the Trade Practices Act 1974 ("the TP Act") in combination with s.80 of the TP Act.

An example of the type of relief that is sought appears from paras. 1 and 2 of the Application in its original form before the amendments I have made this afternoon. These read as follows:

1.   An order that the respondent by itself, its servants and agents be restrained in trade or

commerce from using the words "Executive Leasing" in any advertisement or promotional material

including the use of such words as part of its
advertised corporate and/or trading name.

2.   An order that the respondent by itself its servants and agents be restrained from holding itself out as conducting the business of

(i)	does not contain the words "Executive Leasing" as part of the name of the respondent or
(ii)	if it does contain those words as part of the respondent the words are either crossed out or there appears in equal prominence in close proximity to those words the words "not associated with the business name 'Executive Leasing'" except where any such document which is sent to an existing client of the respondent is an invoice or any covering letter therewith;

(d)

Will not authorise any publication in any newspaper, magazine or other publication of the words "Executive Leasing" as part of the name of the respondent.

That undertaking was given on the footing that it did not prejudice the postion of the first respondent. It did, however, enable the matter to be prepared for an interlocutory hearing with fuller evidence than otherwise would have been available on 18 November.

The interlocutory hearing then commenced on Wednesday

25 November and continued yesterday, 26 November. A consider- able body of affidavit material has been filed on each side. Cross-examination took place of two of the deponents, Mr. Montgomery on behalf of the applicant, and Mr. Banks for the first respondent. That cross-examination was of a limited character. There was no cross-examination of the other deponents, over some thirty in number. This was, of course, an entirely proper method of proceeding. But it does serve to emphasize what it is important for the parties to understand, that is to say, the special nature of an interlocutory appication for injunctive relief of this kind.

The Court here is concerned first with the question as to whether the applicant makes out a prima facie case within the meaning of that term as expounded in the Full Court of this Court in Epitoma Pty. Ltd. v AMIEU (1984) 3 FCR 55, and as more recently explained by Mr. Justice French In OD Transport Pty. Ltd v The Western Australian Government Railways Commlsslon (1986) 71 ALR 190.

The second question before the Court concerns the
balance of convenience. This is not therefore an attempt to

forecast or anticipate the final outcome. It is not a

. preliminary trial. The question rather concerns the best method of keeping things statuo quo until the final

decision.

At the trial there would have been further interlocutory processes as is apparent from the directions given this afternoon, including discovery and interrogatories. There may well be further witnesses and cross-examination of

have already been cross-examined in a limited fashion.	those witnesses, and further cross-examination of those who
I turn then to consider the salient facts as they now appear. The applicant has its head office at 40 Yeo Street, Neutral Bay in Sydney. It also has a Victorian office at Wellington Road, East Melbourne with representative offices in Hong Kong and Djakarta.
The evidence indicates that the applicant is presently proprietor of the term "Executive Leasing" as a business name

i	in the States of Australia. It appears that Mr. Montgomery
perceived at some time in the 1970's that there was a need in industry and commerce for persons with the appropriate educational qualifications and experience at executive level who were suitable to fill in on a short-term footing or for specialist assignments under contract.
His evidence is that in or about 1976 he thought of the name "Executive Leasing" for such a business and investigated existing management consultancies, employment agencies and similar organisations. He observed, he says, that from this research there.was no organisation at that time offering the full range of services he had in mind.
The company for which he was then working did in fact arrange for the placing of accountants on this footing but was not more widely engaged in the field. There was another company, Cruickshank Management Resources Pty. Ltd., and there is an affidavit by the managing director of that company, Mr. Peter Davenport.
Cruickshank Management Resources Pty. Ltd. registered business. Mr. Davenport says that he became aware of Executive the name "Adhoc Executive Talent Bank" in 1973 to describe its
Leasing and its business in or about 1977 through contact in the marketplace. Mr. Davenport also says that as far as he is aware, his company has never used the term Executive Leasing in its advertising and that it prefers to emphasize its own name or style, the "Adhoc Executive Talent Bank".
However, it also appears from the evidence that some accommodation has been reached between the applicant and the managlng director of the Opal Consulting Group, whereby there will be a curtailed use of the words Executive Leasing in consecutive combination in connection with the business of the Opal Consulting Group.
I return to the situation some ten years ago when Mr. Montgomery was setting up his business. In March 1976, he registered the business name Executive Leasing under the New South Wales business names legislation and took various steps to commence business. In October 1978, the applicant was incorporated and purchased the business and undertaking previously conducted by Mr..Montgomery under the name Executive Leasing. The applicant has continued to operate that business srnce that time.
In June 1980, it opened a Victorian office and that office in 1984 shifted to its present address. It appears that at the commencement of the Executive Leasing business the concern was with the provision of the accountancy services, but that the business has since extended generally into the industrial and commercial fields of endeavour. Mr. Montgomery
gave evidence that the applicant has approximately 1000
personnel registered with it on what he calls the company's "data base" as available for short and medium term contracts.
The evidence, and I refer in particular to the identity of various deponents of affidavits, shows that the corporate clientele of the applicant has grown substantially and that it includes a number of Australian financial institutions, statutory corporations and major industrial companies both national and multi-national.
Since the commencement of the Executive Leasing business in 1976, there has been a number of advertising and other promotional activities. These have included a number of advertisements in the Financial Review which are in evidence. In some of them, and sometimes within the one publication, the words "Executive Leasing" are used in a sense which would identify the party conducting a particular business operation and also purely to describe the type of character of the business activity. This latter use of the expression has been described as "the concept". Nevertheless, the evidence as it stands to date, and I refer in particular to the affidavits
filed for the applicant from deponents other than Mr. Montgomery and his solicitor, does show that prima facie there 1s a reasonably significant number or substantial number of what one might call lessees or prospective lessees of executives from the applicant who might well be misled into the belief that use by the respondents of the term Executive Leasing as part of their corporate styles or in relation to
their coroporate styles would indicate a connection in a responsible and commercial manner between the two businesses,
that of the applicant and that of the respondents.
The nature of the commercial relationship which is wrongly assumed, or of which there is a threat of wrongful assumption, is not one which on the evidence as it stands to date is precisely formulated. However, the evidence does indicate that by "connection" the witnesses are looking to the sort of relationship that could arise through a takeover, a joint venture or other such arrangement between commercial parties.
I reach this conclusion on a prima facie footing on a basis that is adverse to the applicant, that is to say that the expression "Executive Leasing" is not a fancy name but rather to be seen as a combination of ordinary descriptive words. As to this, I should refer to what was said in the High Court by Gibbs J, as he then was, in BM Auto Sales Pty. Ltd. v Budget Rent-A-Car System Pty. Ltd. (1976) 12 ALR 363 at 369. His Honour there said that:

[Ilt is clear law that a name composed of descriptive words may become distinctive of the business.of a particular person, and if a plaintiff shows that the name in fact distinguishes his business and that the use of the name by the defendant is calculated to deceive persons into supposing that the business carried on by the defendant is that of the plaintiff, and is likely to cause damage to the plaintiff's business, he will be entitled to relief: see cases cited in Halsburyls Laws of England, 3rd ed., vol. 38, par. 1025, and An elides v James Stedman

Henderson's Sweets h 2 7 1 Lt 40 CLR 43.

That passage was uttered in the context of a passing-off case. However, it was applied in respect of a claim of contravention

Abundant Earth Pty. Ltd. v R. & C. Products Pty. Ltd. (1985) 59	of 5.52 of the TP Act by the Full Court of this Court in
ALR 211 at 217.
I have stated the above with an appreciation both that there is some evidence which does suggest that to some persons the words "Executive Leasing" are primarily descriptive purely of the nature of particular business operations rather than the identity of the operator of any business, and that there is also some evidence which indicates that the expression is suggestive of a standard or quality of property or of property whlch is suitable or attractive for leasing or other financial arrangements with executives. Nevertheless, the present issue is whether there is a serious question to be tried as to whether or not a reasonably significant number or substantial number of persons who deal with the respondents or who are potential clients, who would be likely to be misled or deceived by the use of the expression "Executive Leasing", whether in conjunction wlth the corporate name of either respondent or as the predominant element in the corporate name of either respondent.
The applicant in order to succeed has to point no more than to this likelihood in the sense of a serious question of the existence of this reasonably significant number or substantial number of persons. It does not have to print to any likely universal response amongst the relevant section of the public. I refer to what is said as to passing-off on this point in Saville Perfumery Ltd. v June Perfect Ltd. (1941) 58 RPC 147 at 175-176 and in Norman Kark Publications Ltd. v Odhams Press Ltd. [l9621 RPC 163 at 168. In relation to the
with respect to the alleged contravention of 5.52, I refer to same issue or very similar issue that arises under the TP Act
Weitmann v Katies Ltd. (1977) 29 FLR 336 at 343 and to the decisions of the Full Court of this Court in Snoid v Handley (1981) 54 FLR 202 at 208 and Brock v Terrace Times Pty. Ltd. (1981) 56 FLR 464 at 466-467.

I turn now to consider the position of the

respondents. Commencing with the issue of 9 October 1987, there has been a number of advertisements Inserted in the Financial Review on behalf of the first respondent. The advertisement of 9 October ws followed by one of 16 October, 23 October and 26 October. A further advertisement followed on

30 October but that was in a somewhat different form. The

first four advertisements featured prominently the words "Morgan and Banks Executive Leasing" in a device or logo and as part of that device or logo also included the words in smaller print "Pty. Ltd." There is, as I have indicated, no such company. In the fifth advertisement, that appearing on 30 October 1987, the abbreviation "Pty. Ltd." did not appear.

The alteration and the description of the advertiser appears to have followed upon a letter from the solicitor for the applicant to the solicitor for the respondents on 29 October, that is to say the day before the fifth advertisement, in which the need for this revision was pointed out.

The origins of the business of the respondents appear from the evidence on their behalf by Mr. Banks. Mr. Banks was also, as I have indicated, shortly cross-examined by opposing counsel.

It appears that in 1980, Mr. Banks joined a company named Slade Consulting Group and remained with it until 1985.

His period of service was partly in Brisbane and partly in Sydney, the latter two and three quarter years having been served in Sydney.

The first respondent commenced business in January 1985 in Sydney offering two services, permanent recruitment and executive selection. An example of its advertising before the outbreak of the present dispute appears on p.21 of the issue of

the ~inancial Review for 18 September 1987, berng exhibit 14. At this time, the first respondent also provided the temporary services of accountants. In October 1985, the first respondent, in Mr. Bank's terms, "merged with" a New Zealand company based in Auckland. After the merger, that company changed its name to Morgan & Banks Ltd. and offered the same services as the first respondent.

Offices were opened in Wellington in January 1986 and then in Australia. The Brisbane office was opened in July 1986, Perth in February 1987 and Parramatta in October 1987. A Melbourne offlce was opened in January 1987 and it appears that the Victorian activities of the second respondent are conducted from that office.

In October 1985, .the New Zealand company, Morgan & Banks Ltd., began hiring executives on a temporary basis under the name Morgan & Banks Executive Leasing Ltd. This was a subsidiary of Morgan & Banks Ltd. The business in New Zealand has prospered. In July 1987, the directors of the first respondent decided to introduce "executive leasing" (as that expression was used descriptively) to complement the existing services offered in Australia. Mr. Banks has deposed, and he adhered to this in cross-examination, that when the name

country, he was not aware that there was any company trading as	"Morgan & Banks Executive Leasing" was selected for use in this
Executive Leasing, or called Executive Leasing. He was, however, aware that there was a company named E.L. Management Services Pty. Ltd. which offered some services similar to those of his companies.

The first advertisement in the Financial Review appeared, as I have said, on 9 October 1987. There had previously been some promotional activities with a view to the launch of the new area of enterprise. There is in evidence a transcript of the proceedings on a Melbourne radio station on Wednesday 7 October in the forenoon. The programme was called the Michael Schildberger Show and the transcript is exhibit 13. The programme commenced with Hr. Schildberger indicating that he had received a public relations document from a publication relations organisation named Hill & Knowlton who were representing what he called "Horgan & Banks Ltd." Mr. Schildberger said that company was in the management consulting business and was introducing a new service to Australia called "executive leasing" which was a type of operation they had been successfully conducting in New Zealand.

Hr. Kevin Chappell, who was described as a director of Morgan & Banks Ltd., was in the studio and was interviewed by Mr. Schildberger. In the course of the interview, the compere said to him:

"But now there are companies here who are doing that? Aren't there, I mean, for example, Cruikshanks have been doing it for

about 10 years, Slades have been doing it for about 2 years? Drakes have been doing	it for about 3 years and in fact there is a
company listed in the book actually called Executive Leasing."

Mr. Chappell replied by saying that the first thing was that the concept "did emanate from New Zealand" and so "what was here previously of course was unknown to us at the time''. Mr. Schildberger responded by saying that Mr. Chappell also said in this document that he carried out considerable research in Australia. Hr. Chappell responded by saying:

"Yes, that was after the service was

lnltiated in New Zealand but I think

. . . perhaps if I can, sort of, walk

through the areas we are involved in, and I think then it will perhaps explain it through, because a name is a name. I think anyone can call themselves anything but the service that they offer is really what it is all about. So I appreciate that there is another company called Executive Leasing in Australia, but we believe from the people we have spoken to, the companies we have spoken to, and . . . just in looking at the blurb that is in the marketplace, that we offer quite a distinctly different service."

The discussion then proceeded until it was joined by a Mr. Innes from Cruikshanks and then by Mr. Bill Beaton on behalf of the applicant.

The evidence also discloses that the respondents or their New Zealand parent or affiliated company have in

>

preparation a prospectus for issue in Australia. The draft prospectus is in evidence as exhibit 12. In the draft prospectus is stated:

"Strategy over the next five years is to become dominant market leader in the provision of a specialised range of human resources of executive recruitment services to both the private and public sectors in Australia and New Zealand. Consistent with this strategy, the floating of Morgan & Banks will create continued opportunities for expansion of not only existing

but also the expansion of our operations activities within Australia and New Zealand, internationally."

I turn now to consider the balance of convenience in the light of the positions of the parties. what I have said to date on the question of prima facie case has dealt simultaneously as it were with the relief claimed both for the contravention of the TP Act and for the passing-off. However, now, as I think senior counsel both agreed, the unity of approach must somewhat diverge. This is because the primary task with the passing-off is to consider the strength of the case as to the goodwill of the applicant and the potential injury to that, together with the potential disruption of the business affairs of the respondents by the grant of interlocutory restraint. On the other hand, with contravention of s.52 of the TP Act, one is paying particular regard to the interests of those with whom the respondents trade or are likely to trade.

It is also important to consider the period within which any interlocutory restraint would operate. In this regard, I refer again to the decision of the Full Court in Carlton & United Breweries (NSW) v Bond Brewing NSW Ltd., 19

November 1987. I have given directions that should have the matter ready for final hearing within less than six months. I also bear in mind the consequences for the respondents if they are prevented during the period of an interlocutory restraint from using the expression "executive leasing" to identify what I might call a division of the respondentsr operations.

.

However, in the end, I have come to the conclusion

that the applicant should have interlocutory relief based on

ss. 52 and 80 of the Trade Practices Act, and also in the	accrued jurisdiction in respect of passing-off. I have not
dealt with the claim based on contravention of s.53 of the TP Act. This appeared to occupy an inferior position in the applicant's case and its solution there would be adequately safeguarded by the releif I have in mind based on the other claims.
As to the use of a limited or qualrlfying injunction, I refer to Brock v Terrace Times Pty. Ltd. (1982) 56 FLR 464 at 470, and Peter Isaacson Publications v Nationwide News Pty. Ltd. (1984) 56 ALR 595 at 606-608. In my view, the present case is one where interlocutory injunctive relief should not be absolute in terms, but be qualified in the way suggested in those authorities. Accordingly, I have reduced to writing and I hand to counsel draft orders that I propose to make. [His Honour, after hearing counsel, then made certain orders of the
nature indicated above.] Order (1) thereof was as follows:

(1) Upon the applicant by its counsel giving to the Court the usual undertaking as to damages, that until further order the respondents and each of them by themselves, their servants and agents and the servants and agents of each of them be restrained, in trade or commerce, from using the term "Executive Leasing" or any expression substantially identical with or deceptively similar to the term "Executive Leasing"

(i	as part of the corporate title or trading name or style of the respondents or
either of them, or

(ii)   as a trading name or style of the respondents or either of them, or

(iii)   as the name or style of a branch, section or division of the business of the respondents or either of them,

without in any such case clearly distinguishing the business of the respondents or either of them (as the case may be) from the business of the applicant conducted under the name or style "Executive Leasing".

I certify that this and the preceding 16 pages are a

true copy of the Reasons for Judgment of his Honour

Mr. Justice Gummow.

Counsel for the	Mr. G.K. Downes with
Applicant:	Mr. M.D. Young and Mr. R.A. Campbell
Solicitors for	Messrs. Gould & Shaw
Applicant:
Counsel for the	Mr. D.E Grieve QC with
Respondents:	Mr. D.K. Catterns and Mr. N.C. Hutley
Solicitors for the	Messrs. Gadens
Respondents:
Dates of hearing:	25 and 26 November 1987
Date of Judgment	27 November 1987