Hing Ling Yu and 8 Others v Henry Ph Leung - [2011] ATMO 22

TRADE MARKS ACT 1995

DECISION OF A DELEGATE OF THE REGISTRAR OF TRADE MARKS WITH REASONS

Re:Opposition by Hing Ling Yu and others to registration of trade mark application 1068827(35) – HOT DOLLAR - filed in the name of Henry Ph Leung

Delegate:

Debrett Lyons

Representation:

Opponent: Christian Dimitriadis of Counsel, instructed by Allens Arthur Robinson, Solicitors

Applicant: Angela Bowne SC of Counsel, instructed by Rutlands Law Firm

Decision:

2011 ATMO 22

s52 Opposition – ss 42(b), 43, 58 and 60 pressed. s 58 established since Applicant was not the owner of the trade mark. Registration refused. Res judicata considered.

Costs awarded against Applicant.

Introduction

In this matter, Henry Ph Leung (“the Applicant”) has applied under the Trade Marks Act 1995 (“the Act”) to register a trade mark, current details of which appear below:

Application No: 1068827

Filing Date: 9 August 2005

Services:Class 35: services relating to retail sale of variety goods, including gifts, toys, homewares, packaged food, clothing, household items, greeting cards, stationery, seasonal and decorative goods.

Trade Mark:

Endorsement: The registered proprietor acknowledges the non-exclusive rights of the following persons to use the trade mark HOT DOLLAR:* Hing Ling Yu and Wai Kwong Yu to use the trade mark HOT DOLLAR in the suburb of Eastwood; May Warehouse Variety Pty Ltd A.C.N. 086 003 965 to use the trade mark HOT DOLLAR in the suburb of Brookvale; Shi Hua Chen to use the trade mark HOT DOLLAR in the suburb of Lane Cove; Zong Sheng Chen to use the trade mark HOT DOLLAR in the suburb of Chullora; Jian Ping Zheng to use the trade mark HOT DOLLAR in the suburb of North Rocks; Robert Law to use the trade mark HOT DOLLAR in the suburb of Rhodes
(“the Application”)

The Application was examined and the trade mark was advertised as accepted for possible registration in the Australian Official Journal of Trade Marks on 8 December 2005.
On 8 March 2006 Hing Ling Yu, Wai Kwong Yu, Jian Ping Zheng, Hong Zhao, Robert Law, Shi Hua Chen, Wei Dong Gu, Zong Sheng Chen and Kwok On Tsang (“the Opponents”), served and filed Notice of Opposition (“the Notice”) to the registration of the trade mark.
The Notice lists grounds of opposition which are dependent on sections 42(b), 43, 58 and 60 of the Act.
After the service and filing of evidence by both sides the matter came before me, Debrett Lyons, a delegate of the Registrar of Trade Marks, on 16 November 2010 in Sydney for a hearing of the submissions of the parties.
At the hearing the Opponents[1] were represented by Christian Dimitriadis of Counsel, instructed by Allens Arthur Robinson, Solicitors. The Applicant was represented by Angela Bowne SC, instructed by Rutlands Law Firm. Counsel made both oral and written submissions[2].
[1] See paragraphs 18 et. seq. below.
[2] I have also taken account of the written submissions made by the Applicant’s attorneys in their letter to the Office dated 26 October 2009 under cover of which they filed their client’s evidence in answer.

Background to the dispute

It was common ground that the words HOT DOLLAR were first used in November 1996 by Jia Li He (“Mr. He” or “Ricky”) or a company controlled by him, Long Champ Enterprises Pty Ltd, in connection with a discount variety store operated in the Sydney suburb of North Rocks.
Before the filing date of the Application, Mr. He had entered into legal relations with the Opponents, or companies controlled by the Opponents, or predecessors in business to the Opponents, with the result that those parties had, before 9 August 2005, used the words HOT DOLLAR in the stylised form the subject of the Application, or in other forms which I will come to explain as being substantially identical thereto.
Again, before the filing date of the Application, but not before the dealings between Mr. He and the Opponents just described, nor before the Opponents’ use of the trade mark, Mr. He entered into two agreements with the Applicant and it is in consequence of the second of those agreements that the Applicant claims to be the owner of the trade mark.
The parties were involved in proceedings in the Supreme Court of New South Wales[3] (‘the Supreme Court proceedings’) in which the Applicant brought an action claiming that he was the owner of the name and trade mark HOT DOLLAR by virtue of his agreement with Mr. He and that the Opponents’ (there, the respondents’) conduct contravened the Fair Trading Act 1987 (NSW) and amounted to passing off.
[3] Supreme Court of NSW Proceeding No 1413 of 2006.
The Applicant’s claim in the Supreme Court proceedings was dismissed and the Opponents have now raised an estoppel argument in this forum to which I will turn shortly.
Whether in consequence of what was argued in the Supreme Court proceedings or not, the Applicant concedes here that his alleged ownership of the trade mark is subject to the rights Mr. He had granted to each opponent to use the trade mark in respect of particular stores in the Sydney suburbs specified in the endorsement to the Application set out in paragraph 1 above. That endorsement was entered on the trade mark register at the request of the Applicant.
The Applicant characterizes the rights granted by Mr. He to the Opponents in respect of the trade mark as being licenses.

The Evidence

Much of the evidence relied upon is reproduced from the Supreme Court proceedings. It includes the pleadings, transcripts of submissions and oral evidence, and sworn evidence.
The evidence in support of the opposition comprises the statutory declaration of Deborah Renate Charlotte Jackson, a solicitor with Allens Arthur Robinson, made 24 April 2009, exhibited to which are the affidavits of the following persons filed during the Supreme Court proceedings:

§Jian Ping Zhen affirmed 29 December 2007;
§Jian Ping Zhen affirmed 30 January 2008;
§Hing Ling Yu affirmed 30 January 2008;
§Robert Law affirmed 30 January 2008;
§Hong Zhao affirmed 30 January 2008;
§Zong Sheng Chen affirmed 30 January 2008;
§Shi Hua Chen affirmed 30 January 2008; and
§Jeff Zhao affirmed 11 July 2008.

The Applicant’s evidence in answer consists of affidavits from the following persons:

§Jia Li He affirmed 18 July 2006 ;
§Jia Li He affirmed 1 April 2008;
§Gui Yu Huang affirmed 26 October 2007;
§Gui Yu Huang affirmed 8 April 2008;
§Henry Ph Leung affirmed 25 November 2007; and
§Henry Ph Leung affirmed 8 April 2008.

The Opponents’ evidence in reply comprises the Statutory Declaration of Jian Ping Zhen made 22 April 2010.

Preliminary issue: opponent Kwok On Tsang

Kwok On Tsang is one of the nine Opponents.
At the commencement of the hearing, Mr Dimitriadis put forward that although Kwok On Tsang was named as an opponent in the Notice, he took no further part in the opposition and no submissions were to be taken as having been made on his behalf.
Ms Bowne argued that Kwok On Tsang’s opposition must therefore fail and an award of costs should be made against him in the Applicant’s favour.
In these proceedings before the Registrar, the Opponents bear the onus of establishing on the balance of probabilities at least one ground of opposition stated in the Notice.[4]
[4] Pfizer Products Inc v Karam (2006) 70 IPR 599, per Gyles J at [6] to [26]; Chocolaterie Guylian N.V. v Registrar of Trade Marks (2009) 82 IPR 13 at [22] to [26].
I believe that Ms Bowne’s reasoning is based on principles from civil litigation which do not apply to the decision I must make. This is not a case where the Opponents have a cause of action which can be satisfied by declaratory relief or an award of damages and to which each opponent must prove its entitlement. Collectively, it is up to the Opponents to show that the trade mark should not be registered by reason of one or more of the grounds set out in Part 5 of the Act. If an opponent originally named in the Notice drops out of that process, the proceedings continue without him and the onus rests with his remaining co-opponents.
Nor is this a case where nine individual oppositions have been consolidated. The Opponents have relied on evidence in common in a single administrative proceeding.
Section 53 of the Act states:

Circumstances in which opposition may proceed in name of a person other than the person who filed the notice

If:
(a)after a person has filed a notice of opposition, the right or interest on which the person relied to file the notice of opposition becomes vested in another person; and
(b)the other person:
(i)notifies the Registrar in writing that the right or interest is vested in him or her; and
(ii)does not withdraw the opposition;

the opposition is to proceed as if the notice of opposition had been filed in that other person’s name.

I decide that Mr. Dimitriadis’s written submissions, which deal with this point and which were received by me just prior to the hearing, satisfy section 53(b)(ii).

Preliminary issue : res judicata / issue estoppel

As a threshold matter, the Opponents submit that the Application should be refused on the basis that the dismissal of the Applicant’s claim in the Supreme Court proceedings gives rise to an estoppel which is determinative of this opposition. Specifically, the Opponents submit that the dismissal of the Supreme Court proceedings involved a final judicial determination of the Applicant’s claim to be the owner of the HOT DOLLAR trade mark and so under the principle of res judicata I cannot, in this forum, reopen the question of ownership which has been decided against the Applicant. The necessary result, say the Opponents, is that (at least) the ground of opposition based on section 58 must be established.
That argument was put to the Registrar in a letter from the Opponents’ solicitors, Allens Arthur Robinson, dated 15 December 2008. On 10 February 2009, the Registrar advised the Opponents’ solicitors in writing that the argument would be considered by the delegate when coming to a decision on the opposition.
Res judicata is the general description in English law embracing the defences of (i) merger in judgment, (ii) cause of action estoppel and (iii) issue estoppel[5]. It serves the private interest and the public interest in the finality of litigation[6].
[5] See the detailed discussion of the origins of these defences by the Full Federal Court in E I Du Pont de Nemours & Co v Imperial Chemical Industries PLC [2007] FCAFC 163. See, also, the lecture given by Mr Justice K R Handley of the Court of Appeal of New South Wales to the UK Chancery Bar Association and the Institute of Advanced Legal Studies on 6 December 2001
( See, for example, Wong v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCAFC 242; (2004) 146 FCR 10, where the Full Court (Emmett, Conti and Selway JJ) said at [36].
An issue estoppel prevents an issue litigated for one cause of action being re-litigated for another. In Blair v Curran (1939) 62 CLR 464, Dixon J. explained the distinction between res judicata and issue estoppel in the following terms:
A judicial determination directly involving an issue of fact or of law disposes once for all of the issue, so that it cannot afterwards be raised between the same parties or the privies. The estoppel covers only those matters which the prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion, whether that conclusion is that a money sum be recovered or that the doing of an act be commanded or be restrained or that rights be declared. The distinction between res judicata and issue estoppel is that in the first the very right or cause of action claimed or put in suit has in the former proceedings passed into judgment, so that it is merged and has no longer an independent existence, while in the second, for the purpose of some other claim or cause of action, a state of fact or law is alleged or denied the existence of which is a matter necessarily decided by the prior judgment, decreed or ordered.[7]
[7] At pages 531-532. The difference between the two defences was also addressed by the majority of the High Court (Gibbs CJ, Mason and Aickin JJ) in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589 at 597.
It is clear from the facts which follow that we are here dealing with a claim to an issue estoppel. A party seeking to raise this defence must establish that the former decision was (i) final, (ii) on the merits, (iii) determined the same question as that raised in the later litigation, (iv) the issue ruled upon was indispensable or fundamental to the ultimate decision, and (v) the parties to be bound were in controversy on the issue in question[8]. I note, too, that the courts have as a rule been cautious to terminate a later action between the same parties based on these defences[9].
[8] See, for example, Willoughby v Clayton Utz [No 2] [2009] WASCA 29 at [14]; Stack v Brisbane City Council [2004] FCA 354 ; Administration of the Territory of Papua New Guinea v Guba [1973] HCA 59; Ramsay v Pigram [1968] HCA 34; and Taylor v Ansett Transport Industries Ltd (1987) 18 FCR 342.
[9] See, for example, General Steel Industries Inc v Commissioner for Railways (N.S.W.) [1964] HCA 69; [1964] 112 CLR 125, per Barwick CJ. at 128-129; see also Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 , per Dixon J. said at 91.
The evidence from Ms Jackson shows that in the Supreme Court proceeding the Applicant sought a declaration from the Court that he was the legal and beneficial owner of the name and trade mark HOT DOLLAR. That declaration was sought on the basis of the claim that, in consequence of the written agreement between Mr. He and the Applicant, all subsequent use of the trade mark was understood by the public as exclusively indicating the Applicant.
As already indicated, the grounds of opposition listed in the Notice are dependent on sections 42(b), 43, 58 and 60 of the Act. Findings by the Court of the type which would have supported the grant of that declaration[10] would have a potential influence on all four grounds of opposition, but would be fundamental to section 58.
[10] Note, however, what is said below at paragraph 39.
Nevertheless, the evidence shows that the Applicant sought to withdraw from the Supreme Court proceedings before a decision was reached. As a result, the claim was determined by an order for its dismissal.
Section 91 of the Civil Procedure Act 2005 (NSW) which applies to proceedings in the Supreme Court states that:
(1) Dismissal of:
(a) any proceedings, either generally or in relation to any cause of action, or
(b) the whole or any part of a claim for relief in any proceedings, does not, subject to the terms on which any order for dismissal was made, prevent the plaintiff from bringing fresh proceedings or claiming the same relief in fresh proceedings.
(2) Despite subsection (1), if, following a determination on the merits in any proceedings, the court dismisses the proceedings, or any claim for relief in the proceedings, the plaintiff is not entitled to claim any relief in respect of the same cause of action in any subsequent proceedings commenced in that or any other court.
Leaving to one side the issue that this opposition is not being heard in a court, a critical matter before me is whether, for the purposes of section 91(2), above, there has been a decision “on the merits”[11].
[11] First used in the case of Carl-Zeiss Stiftung v Rayner & Keeler Ltd [1967] 1 AC 853
A decision on the merits has been described as:
a decision which establishes certain facts as proved or not in dispute; states what are the relevant principles of law applicable to such facts; and expresses a conclusion with regard to the effect of applying those principles to the factual situation concerned[12].
[12] DSV Silo-und Verwaltungsgesellschaft Mbh v Owners of the Sennar (No 2) [1985] 1 WLR 490 at 499, per Lord Brandon.
The evidence includes transcripts of the Supreme Court proceedings and shows that on the fourth day of the trial and before any decision of the character just described, Counsel for the Applicant approached Mr. Justice Rein to pass on his instructions that “my client wishes to withdraw his case and accepts the orders that would follow, that the proceedings be dismissed with costs”. His Honour then made that order.
Traditionally, the courts exercise control over the discontinuance of proceedings to ensure fairness between the parties and in some circumstances upon the principle that once a proceeding has reached a certain stage the plaintiff should not be permitted to abandon the proceedings in order to avoid a contest except upon terms determined by the court. So, for example, in the New South Wales Court of Appeal case of Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508, it was said that:[13]
if a plaintiff withdraws from the trial and an order is made in its absence dismissing its claim then that order will, unless set aside or successfully appealed from, ground a later plea of res judicata in the event that a later attempt is made to litigate the same case.
[13] Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508 at 526-527 per Clarke JA, Samuels JA agreeing; see also at 517-521 per Kirby P to the same effect.
Linprint Pty Ltd v Hexham Textiles Pty Ltd has been commonly cited as authority for an estoppel where judgment is obtained by default on the basis of pleaded claims and then in later proceedings between the same litigants one party then seeks to contest the basis of the earlier claim. Whether or not the facts of Linprint Pty Ltd v Hexham Textiles Pty Ltd render it proper authority for that proposition is an open question, but in so far as what is quoted in paragraph 38 above is relevant to the issue before me, what I think should be underscored is that Their Justices were hypothesizing about the case where an order dismissing a claim is obtained in a party’s absence. That was not the case in the Supreme Court proceedings.
Moreover, any estoppel by judgment must be based strictly upon the precise claim on which the judgment was obtained. Not only was there no decision on the merits but, as Senior Counsel for the Opponents submitted during the Supreme Court proceedings:
… the declaration that is sought here is an absolute nonsense because even if one ignores what Gummow J says and looks back to the 1800s in relation to the position of an unregistered mark, to call oneself the legal owner of an unregistered mark is a nonsense. It was a species of property that was protectable in certain limited circumstances in a court of equity. It was equitable property. There is no legal ownership of an unregistered trademark, unless one is speaking in the context of a passing off action where the trademark forms part of the broader business and is part of the goodwill that provides a foundation for the passing off action.
Wrongly conceived or not, the question before the Supreme Court was whether the Applicant is the legal and beneficial owner of the name and trade mark HOT DOLLAR. The question in these opposition proceeding is whether the Applicant is entitled to be registered as owner of the mark. Not only are these questions different, but the onus of establishing each is different and there is Federal Court authority that where the onus differs, res judicata does not apply[14].
[14] See, for example, GS Technology Pty Ltd v Elster Metering Pty Ltd [2008] FCA 17 per Spender J.
I do not find that an estoppel arises to render it improper for me to assess for myself the issues determinative of whether the trade mark should be accepted or rejected under section 55 of the Act.

Submissions and Reasoning

At the hearing, Mr. Dimitriadis pressed all grounds of Opposition listed in the Notice however it was clear that his central plank of attack rested on section 58 of the Act.
Section 58 states:

Applicant not owner of trade mark

The registration of a trade mark may be opposed on the ground that the applicant is not the owner of the trade mark.

The case law developed under section 58 requires the Opponents (in order to establish their opposition) to show that a person or persons other than the Applicant first used the opposed trade mark in Australia for services adjudged to be “the same kind of thing” as those covered by the Application before the 9 August 2005 filing date of the Application, or before the Applicant’s first use of the opposed trade mark for those services, whichever is the earlier[15].
[15] Re Hicks’ Trade Mark (1897) 22 VLR 636.
When comparing trade marks for the purposes of section 58, the establishment of nothing less than a substantial identity will suffice[16], albeit that the courts have been prepared to heavily discount added matter in a trade mark which is purely descriptive[17].
[16] Carnival Cruise Lines v Sitmar Cruises Ltd (1994) 31 IPR 375.
[17] PB Foods Limited v Malanda Dairyfoods Limited [1998] ATMO 66.
The Opponents argue that either they or their predecessors have used the trade mark in a form which is either identical to, or substantially identical with, the stylised form of the trade mark shown in the Application in relation to retailing and related services before 9 August 2005.
It is further submitted that the Opponents’ use of the trade mark predates any assignment of rights from Mr. He to the Applicant and so the Applicant could not be the owner of the trade mark for the purposes of section 58 at the time the Application was filed.
As I read the Applicant’s submissions, he admits that the compared trade marks are substantially identical and that the services in respect of which the competing marks were used are the “the same kind of thing”.
In case there is any doubt about what the Applicant has said, let me say that the evidence shows that all use of the words HOT DOLLAR has been in relation to the same kind of retailing businesses. Additionally, the words HOT DOLLAR have been used by the Opponents either as plain words, or in the stylized font shown in the Application, or in one or other of those ways with the additional of a Sydney suburb name. In my assessment, the form of the words HOT DOLLAR used by the Opponents is either identical, or substantially identical, to that shown in the Application.
Nevertheless, in terms of section 58, the Applicant contends that the Opponents have not established prior use of the trade mark by them (or any other person) which defeats the Applicant’s entitlement. The Applicant argues (i) that there is no evidence of an assignment of trade mark rights by Mr. He to anyone other than the Applicant, and (ii) before the date of the filing of the Application any use of the trade mark by persons other than the Applicant was to the benefit of Mr. He.
In the case of Eos Australia Pty Ltd v Expo Tomei Pty Ltd (1998) 42 IPR 277, Branson J wrote:
The Act does not displace the common law concerning trade marks, it merely supplements it. The test of ownership of an unregistered trade mark is a common law test. A person who publicly uses a trade mark acquires at common law, as an adjunct to the goodwill of his or her business, the right to preclude others from using that mark; and the first person who uses a trade mark within a country becomes the proprietor of the mark there: Settef SpA v Riv-Oland Marble Co (Vic) Pty Ltd (1987) 10 IPR 402 at 413.
Clearly, the Applicant was not the first party to use the trade mark in Australia. That was Mr. He. About that there was no disagreement. Nor was there disagreement that Mr. He was the first owner of the trade mark. However, the right to ownership of a trade mark in the context of this opposition is to be determined having regard to the position as it was at the date the Application was filed.
Mr Dimitriadis argued that by the time the agreement purporting to assign the trade mark from Mr. He to the Applicant was made, business was already being conducted under the mark at stores by persons other than Mr. He or the Applicant and so, by the time of the second agreement with the Applicant, Mr. He no longer retained an exclusive right to use the trade mark.
Ms Bowne replied that:
This is not a matter of competing claims [to ownership]. The applicant concedes the right of the Opponents to use the mark in relation to their existing businesses. But none of the opponents can claim to be the owner of the mark. Nor can they claim ownership jointly. Mr He was clearly the author and first user. He did not grant any rights to any opponent that would enable that opponent to claim more than a licence to use the mark in respect of the business the opponent operates.    There is no evidence that he surrendered ownership of the mark to anyone other than the applicant.
…   …
The highest the opponents can put their case is that they have a non-exclusive use of the mark in relation to the suburb in which the business was operated at the time that they purchased it.
The arguments having been laid out in that way, it is necessary to turn to the evidence.
The agreements between Mr. He and the Applicant to which I have referred took the form of two deeds.

(a) The first deed between Mr. “Ricky” He and the Applicant

The 26 September 2002 Deed of Agreement is between Mr. He, the Applicant and a company, Hot Dollar (Charlestown) Pty Limited, of which the Applicant was the managing director (the “2002 Deed”)[18].
[18] Exhibit JLH-5 to Mr He’s affidavit affirmed 18 July 2006
The 2002 Deed recites that Mr. He had since 16 July 2001 operated a discount variety business under the name HOT DOLLAR in Charlestown Square Shopping Centre and that Mr. He had negotiated the sale of the business conducted there and the use of the HOT DOLLAR name to the Applicant and the Applicant’s company.
Mr. He warranted that he was the sole and absolute owner and user of the business name HOT DOLLAR and had absolute authority to grant all rights as absolute owner “on the usage of the said ‘Hot Dollar’ name”[19].
[19] Clause 4.1.3
Mr. He granted the Applicant and his company the right to continue to use the business name HOT DOLLAR and to register the business name “Charlestown Hot Dollar” and any variation or combination of the words HOT DOLLAR, including “Hornsby Hot Dollar”[20].
[20] Clause 4.1.4
Further, Mr. He granted the Applicant and his company the right to operate “any other business using the name ‘Hot Dollar’ or combination of ‘Hot Dollar’ with any other words, alphabets, or numbers or figures in any location in the Commonwealth of Australia”[21].
[21] Clause 4.1.5
The 2002 Deed states that Mr. He will “not dispose or alienate any of his rights to the name ‘Hot Dollar’ to any other third party until and unless such third party enters into a written covenant taking subject to the rights granted to [the Applicant and his company]”[22].
[22] Clause 4.1.13

(b) The second deed between Mr. “Ricky” He and the Applicant

The 13 June 2003 Deed of Agreement is between Mr. He, his company Long Champ Enterprises Pty Ltd, the Applicant and his company, Hot Dollar Australia (Cronulla) Pty Ltd (the “2003 Deed”)[23].
[23] Exhibit JLH-6 to Mr He’s affidavit affirmed 18 July 2006.
By the 2003 Deed, Mr. He’s company, Long Champ Enterprises Pty Ltd, sold the variety store business that was run at 65-69 Cronulla Street, Cronulla to the Applicant’s company, Hot Dollar Australia (Cronulla) Pty Ltd, which sale included “the acquisition of the absolute right to the use of any trade or business names used for or in connection with the business”.
The 2003 Deed does not make clear what name had been used in relation to the Cronulla business. Part 6 of the 2003 Deed is however set out in full below:
6.0 HOT DOLLAR
6.1Long Champ acknowledges that all and any intellectual property in the name “Hot Dollar” and any marks signs and loges [sic] associated with or used in connection with “Hot Dollar” was hitherto vested in Ricky and Ricky has relinquished rights over Hot Dollar in relation to the sale of the Hot Dollar business in Charlestown, Hornsby and Carlingford and Castle Hill Henry Leung.
6.2In consideration of the present acquisition of the business, Ricky forever gives up all his right to Hot Dollar and all marks signs and logos to Hot Dollar and Ricky shall not henceforth operate or seek to establish or operate any business whatsoever using the name Hot Dollar or a variation of the name Hot Dollar or incorporating any words of ‘Hot’ and ‘Dollar’ in any combination or form, and this covenant does not apply to any Hot Dollar businesses still owned or operated by Ricky and or Long Champ provided that where Ricky and Long Champ have any of such businesses and dispose of such business Ricky and Long Champ must seek the permission of Henry to the use by any third party of the name Hot Dollar and Henry shall be entitled absolutely in his sole discretion as to granting or not granting or attaching any conditions whatsoever to the use of the name and all signs marks and logos associated with Hot Dollar.
Whatever might be said of the extent of the rights granted by the 2002 Deed, it is relatively clear that it licenses the use of the HOT DOLLAR name to the Applicant. Ms. Bowne did not try to claim more. On the other hand, the Applicant considers that the 2003 Deed assigned the trade mark to him.
The 2003 Deed is in effect two agreements – one for the sale of the business in Cronulla, the other a purported transfer of rights in the HOT DOLLAR name and trade mark.
In the recent case of Hills Industries Limited v Bitek Pty Ltd [2011] FCA 94 (15 February 2011), Lander J. set out the accepted learning that:
At common law a trade mark was assignable only if it went with the goodwill of the business in which the trade mark was used: Pinto v Badman (1891) 8 RPC 181 at 194. However, legislative reform has led to the enactment of s 106 of the Act which provides that a registered trade mark or a trade mark whose registration is being sought may be assigned or transmitted with or without the goodwill of the business concerned in the relevant goods and/or services.
This is underscored in section 6 of the Act which defines:
predecessor in title, in relation to a person who claims to be the owner of a trade mark, means:
(a)if the trade mark was assigned or transmitted to one or more than one other person before it was assigned or transmitted to the first‑mentioned person—that other person or any one of those other persons; or
(b)if paragraph (a) does not apply—the person who assigned the trade mark, or from whom the trade mark was transmitted, to the first‑mentioned person.
Note: In the case of a trade mark that is neither registered nor the subject of an application for registration, the trade mark may be assigned or transmitted in Australia only in conjunction with the goodwill of a business concerned with the trade mark. If the trade mark is registered or the subject of an application for registration, section 106 provides that the trade mark may be assigned or transmitted with or without the goodwill of the business
Since the trade mark in dispute was neither registered nor applied for by Mr. He at the date of the 2003 Deed, there is a critical question concerning the transfer of the goodwill.
The 2003 Deed mentions goodwill once in the recitals and once in the operative provisions, both times simply in relation to the apportionment of the sale price for the purchase of the business, which is itself defined as the enterprise carried on at the Cronulla store.
In contrast, clause 6 of the 2003 Deed, by virtue of which the Applicant claims ownership of the trade mark, makes no mention of goodwill.
Ms Bowne submitted that:
The effect of clause 6.2 is to give the applicant control over future use of the mark, subject of course to the existing licences to the opponents. The applicant was thenceforth the only person who could open new stores under or by reference to the Hot Dollar mark and had control over whether any purchasers of Mr He’s businesses could use the mark.
To my mind, it is questionable whether clause 6 of the 2003 Deed acts to transfer rights at all. It is not phrased as a grant in favour of the Applicant, but rather as a series of covenants and concessions by Mr. He. Even if it might be read as somehow transferring trade mark rights to the Applicant, there is not the required transfer of the goodwill of the business concerned with the trade mark.
There is no severability clause in the 2003 Deed. Even if I read down the 2003 Deed to a sale of business agreement, all that could be said is that there is a transfer of the goodwill connected with the Cronulla business. The document does not make clear the trading name of that business prior to the sale or whether the trade mark HOT DOLLAR had ever been used in relation to it. The Applicant’s company, Hot Dollar Australia (Cronulla) Pty Ltd, was according to the recitals, only “procured” by the Applicant to purchase the business. To the extent that the 2003 Deed might be treated simply as a sale of the Cronulla business, there is no mention at all of any transfer of trade mark rights in HOT DOLLAR or any other sign. Clause 4.3 states that “Ricky and Long Champ warrant further in favour of Hot Dollar Cronulla and Henry that Long Champ has the absolute right to the use of any mark, sign or logo or business name associated with the business” however no such indicia are listed and there are no schedules to the document.
Even if it might be shown or inferred from extrinsic evidence that the Cronulla business was conducted under the HOT DOLLAR trade mark before the 2003 Deed, there is nothing in that Deed to amount to an assignment, conditional or otherwise, of rights in the trade mark from Mr. He to the Applicant. The highest it might be put is an exclusive license to use the trade mark at that location[24].
[24] Note, for example, clause 4.3.4 which is a warranty that “the acquisition by Hot Dollar Cronulla includes the acquisition of the absolute right to the use of any trade or business name used in connection with the business”.
My conclusion therefore must be that there has been no valid assignment of trade mark rights, howsoever they might have been limited territorially or otherwise, from Mr. He to the Applicant.
In drawing that conclusion I am mindful that section 106[25] has given rise to debate[26] as to whether the Act reverses the accepted common law position, however I am unpersuaded by arguments in that direction which have not so far gained strong ground and which, in my opinion, run counter to other parts of the Act.
[25] Assignment etc. of trade mark
[26] See, for example, SPI Spirits (Cyprus) Ltd v. Diageo Australia Pty Ltd (No. 6) [2008] FCA 710.
For these reasons, the Applicant cannot be the owner of the trade mark and so the Opponents’ have established their ground of opposition under section 58 of the Act.
In the event that issue might be taken with this reasoning and conclusion, I am of the opinion that the same result follows if I had found it necessary to look in detail at the other agreements made by Mr. He which predated the 2003 Deed. For the sake of completeness, I will outline in brief why I believe that is so.

(c) The agreements between Mr. He and the Opponents

One example is the agreement between Mr. He and Jian Ping Zhen concerning the North Rocks store which Mr. He started in 1996. Mr. He sold the business to Mr. Zhen in November 1997. There was no written agreement. Mr. He’s evidence is that he was merely licensing Mr. Zhen to use the trade mark at the North Rocks shop. Mr Zhen, on the other hand, gave affidavit evidence that he understand ownership of the HOT DOLLAR name became his.
Mr. He established the HOT DOLLAR shop at Eastwood in November 1997 and sold it to husband and wife team, Hing Ling Yu and Wai Kwong Yu, in July 2003. In her affidavit, Mrs Yu says that she understood that “ownership of the name and sign ‘Hot Dollar’ was automatically transferred to my husband and me as part of the goodwill of the business”. A written agreement signed the following year does not make the position any clearer. Ms. Bowne’s comment is that “the failure of the contract to deal with the use of the name or mark is illuminating. At most, there was an implied licence to use the name in relation to that business.”
Other opponents give much the same evidence. Mr. He started the Warringah Mall shop in 2001, sold it to Jeff Zhao, who in turn sold it to Henry Zhao in 2002. Once more, there is no written agreement but Mr. Zhao’s understanding was that the name HOT DOLLAR was transferred as part of the goodwill. Mr. He started the Chullora business in December 1998 and sold it to Zong Sheng Chen in March 2000. There is no written agreement and Mr. Chen gave evidence that Mr. He had told him he could still use the sign.
In so far as Mr. He’s actions can point to a business plan, the pattern is that he would start a shop under the HOT DOLLAR name and soon thereafter sell it as a going concern, repeating the same steps at various Sydney suburbs with growing Chinese communities. Evidence given in the Supreme Court proceedings refers to dialogues between the Opponents and Mr. He whereby at various points he was asked whether he had any new businesses for sale or new franchise opportunities.
It may well have been Mr. He’s strategy in each case to sell the business but license the trade mark, and it may be the Opponents who believed they purchased the trade mark show their naivety of this type of business, but these are matters of speculation. What is clear is that most of the agreements were not in writing, the terms of agreement would not meet the regular controls of a franchisor, and in general there are no clear statements about use and ownership of the trade mark.
Ms. Bowne made the following written submissions, to which I have added my own emphasis in bold:
[The Applicant]…accepts that the opponents have certain rights to use the mark in respect of their shops in their respective suburbs and sought the endorsement to clarify and define his rights and the opponents’ rights. However, the rights granted to the opponents were extremely limited. There is no evidence of anything more than a bare licence, with no quality control, for use of the mark in relation to specified businesses.
It will be remembered that the Applicant’s arguments against section 58 were (i) that there is no evidence of an assignment of trade mark rights by Mr. He to anyone other than the Applicant, and (ii) before the date of the filing of the Application any use of the trade mark by persons other than the Applicant was to the benefit of Mr. He.
Section 7(3) of the Act states that:
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.
Section 8(2) defines an “authorised use” as use of a trade mark to the extent that the user uses the trade mark under the control of the owner of the trade mark. In Pioneer Kabushiki Kaisha v Registrar of Trade Marks (1977) 137 CLR 670 at 683, Aickin J observed that:
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 from attack 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.

Conclusions

In the result, my decision rests on the logic that if the transfer of rights under the 2003 Deed was the assignment of an unregistered trade mark without goodwill, then the assignment is invalid and the Applicant took nothing and so could not be the owner of the trade mark at the filing date. The alternative conclusion is that, as the Opponents argue, Mr. He had through one or more of his agreements with some or all of the Opponents and before the 2003 Deed, divested himself of the exclusive right to the trade mark and so following the principle in Re Hicks’ Trade Mark (1897) 22 VLR 636 the Applicant could not at the filing date claim to be able to use the trade mark to the exclusion of all others. In the further alternative, adopting the Applicant’s argument that the 2003 Deed gave the Applicant ownership of the trade mark subject to the limited rights of others, then both the evidence and Ms. Bowne’s own assessment of the evidence, render the trade mark deceptive and invalid in consequence of lack of control of its use such that at the filing date the Applicant could no more claim to be the owner of the trade mark than the Opponents.
I find that the Opponents have established their case under section 58 of the Act. Accordingly, there is no need to consider the other grounds pressed by Mr. Dimitriadis.

Decision

Section 55 of the Act relevantly provides:
Decision
55. Unless the proceedings are discontinued or dismissed, the Registrar must, at the end, decide:
(a) to refuse to register the trade mark; or
(b) to register the trade mark (with or without conditions or limitations) in respect of the goods and/or services then specified in the application;
having regard to the extent (if any) to which any ground on which the application was opposed has been established.
Note: For limitations see section 6.
I refuse to register application 1068827.

Costs

Having established its opposition, the Opponent is entitled to its costs which I award against the Applicant calculated in accordance with the official scale. Despite the nine Opponents, there was one Notice and the matter proceeded on evidence common to all Opponents. Because of that, I see no reason that each opponent should be able to claim costs separately.
As previously stated, Kwok On Tsang was not represented at the hearing. To what extent he should benefit from the decision on costs is best left to his former attorneys. I direct that the Applicant make payment to the nominated trust account of Allens Arthur Robinson, Solicitors, in the understanding that it is they who will make proper apportionment as between the interested Opponents.

Debrett Lyons

Hearing Officer

Trade Marks Hearings

18 March 2011

The doctrines of res judicata and issue estoppel are founded on the broad rules of public policy expressed in the maxims nemo debet bis vexari pro una et eadem causa (‘a person ought not to be vexed twice for one and the same cause’) and interest reipublicae ut sit finis litium (‘it is in the interests of the State that there be an end to litigation’).

(1) A registered trade mark, or a trade mark whose registration is being sought, may be assigned or transmitted in accordance with this section.

(2) The assignment or transmission may be partial, that is, it may apply to some only of the goods and/or services in respect of which registration is sought or the trade mark is registered, but it may not be partial in relation to the use of a trade mark in a particular area.

(3) The assignment or transmission may be with or without the goodwill of the business concerned in the relevant goods and/or services.