Kimberley Diamond Company Nl v Auridiam Ltd
[2002] WASC 183
•12 JULY 2002
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: KIMBERLEY DIAMOND COMPANY NL -v- AURIDIAM LTD & ANOR [2002] WASC 183
CORAM: MATHEWS AJ
HEARD: 4 JULY 2002
DELIVERED : 12 JULY 2002
FILE NO/S: CIV 1881 of 2002
BETWEEN: KIMBERLEY DIAMOND COMPANY NL (ACN 061 899 634)
Plaintiff
AND
AURIDIAM LTD (ACN 006 631 769)
First DefendantBLINA DIAMONDS LTD (ACN 086 471 007)
Second Defendant
Catchwords:
Application for interlocutory injunction - Name used to describe plaintiff's diamond project also used by defendants - Geographical place name - Whether a serious issue to be tried that use of the name was misleading or deceptive conduct - Balance of convenience against granting injunction
Legislation:
Trade Practices Act 1974 (Cth), s 52
Result:
Injunction refused
Category: B
Representation:
Counsel:
Plaintiff: Mr J C Curthoys
First Defendant : Mr D M Stone
Second Defendant : Mr D M Stone
Solicitors:
Plaintiff: Teller & Associates
First Defendant : Williams & Hughes
Second Defendant : Williams & Hughes
Case(s) referred to in judgment(s):
Barry v Lake Jindabyne Reservation Centre Pty Ltd (1985) 8 FCR 279
Burswood Management Ltd v Burswood Casino Motel/Hotel Pty Ltd (1985) 7 FCR 186
Hindmarsh Medical Clinic v Hindmarsh Family Practice Pty Ltd (1997) 38 IPR 616
Wallace v Baulkham Hills Smash Repairs Pty Ltd, unreported; SCt of NSW (Young J); 7 August 1995
Case(s) also cited:
Bridge Stockbrokers v Bridges (1984) 4 FCR 460
Bridges v Bridge Stockbrokers Ltd (1984) 4 FCR 21
Bullock & Ors v Federated Furnishing Trades Society of Australasia & Ors (No 1) (1985) 5 FCR 464
Campomar Sciedad, Limitada v Nike International [2000] HCA 12; 9 March 2000
Carr Boyd Minerals Ltd v Ashton Mining Ltd & Ors (1989) 15 ACLR 599
Faessler v Neale (Drummond J, 20 July 1994, unreported)
Garden Cottage Foods Ltd v Milk Marketing Board [1984] 1 AC 130
MATHEWS AJ: The plaintiff, Kimberley Diamond Company NL (Kimberley), is seeking an interlocutory injunction against both defendants, Auridiam Ltd (Auridiam) and Blina Diamonds Ltd (BDL) restraining them from using the names "Blina", "Blina project", "Blina Diamonds Ltd" and "Blina Diamonds". If granted, this injunction would require the second defendant to change its name to a name which does not include the word "Blina".
The defendants oppose the making of an interlocutory injunction. They submit that there is no serious issue to be tried in the principal proceedings. Even if there were, they say that the balance of convenience strongly favours maintaining the status quo and not granting an injunction.
The central issue in the case relates to the defendants' use of the name "Blina" both in the second defendant's name and in the promotional material which the defendants have released to the public.
The background of the dispute is as follows. Kimberley is a public company which is in the business of exploring for, mining and marketing diamonds. Its operations are concentrated in the Kimberley region of Western Australia where it holds exploration licences and a mining lease for diamonds. Kimberley's 2001 annual report, under the heading "Review of Operations", describes five exploration projects undertaken by the company in the Kimberley area. They are, in the sequence in which they appear in the report, the Ellendale project, the Blina project, the Ellendale South project, the Ellendale East project and the Calwynyardah project. Coincidentally, the Ellendale South project is a joint venture between Kimberley and Auridium.
According to the affidavit of Miles Alister Kennedy, Kimberley's executive chairman, the names "Blina", "Blina project" and "Blina Diamond project" have been used by Kimberley since 1993 in respect of its exploration project covering approximately 942 square kilometres in the West Kimberley region. The name "Blina" was chosen by Kimberley in 1993 because it was the name of the cattle station where the exploration for this project began. Over the years the Blina project has moved progressively away from the Blina cattle station, in a generally north‑easterly direction. The project constitutes a major part of Kimberley's activities. Over the last nine years, according to Mr Kennedy, Kimberley has invested $15.89 million in this project, being about 63 per cent of the company's total expenditure on diamond exploration activities.
BDL is, at least at present, an unlisted public company. It is a wholly owned subsidiary of Auridiam. It was incorporated in February 1999, initially under the name Deliverweb Ltd. On 16 March 2002 it changed its name to Blina Diamonds Ltd. According to the affidavit of Stephen Belben, a director of Auridiam, Mr Kennedy of Kimberley was told about the name change on 15 March 2002 by Mr Peter Rowe, the chairman of Auridiam. On 9 April 2002 Auridiam advised the Company Announcements Office of the ASX that it intended to separate all its diamond interests into the company Blina Diamonds Ltd. This company was to be floated with a proposed capital raising of $3,500,000.
On 22 May 2002 Kimberley's solicitors, Teller & Associates, wrote to the directors of BDL and Auridiam complaining about the change of name from Deliverweb to Blina Diamonds Ltd. The letter pointed out that Kimberley had used the Blina name consistently in respect of its diamond exploration business for over nine years. Auridiam on the other hand had never used the Blina name in respect of its activities. The letter claimed that the defendants' use of the Blina name was causing substantial confusion in the market place. It also constituted misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth). The letter required that undertakings be given that the defendants desist from using the word "Blina" and that the name of Blina Diamonds Ltd be changed to a name which did not include the name "Blina".
On 24 May 2002 the defendants' solicitors, Williams & Hughes, declined to give such an undertaking. They denied that the use of the name "Blina" constituted misleading and deceptive conduct and asserted that the name merely adopted the name of the area with which BDL's operations would be most closely associated.
By further letter dated 31 May 2002, Teller & Associates repeated the claim that Kimberley had required a substantial reputation in the "Blina" name in respect of its diamond exploration activities. The defendants were given until 5 pm on Wednesday, 5 June 2002 to give the undertakings sought in the letter of 22 May.
No further correspondence was in evidence before me, although I was told that the correspondence continued until 13 June 2002.
On 7 June 2002, BDL lodged its prospectus with ASIC and announced its offer to the ASX. The prospectus offered 14,000,000 shares at 25 cents each, with a priority offer to existing Auridiam shareholders.
On 26 June 2002, Kimberley commenced the present proceedings. On the same day it issued a summons for an interlocutory injunction and also filed a certificate of urgency.
The hearing of the interlocutory application took place on 4 July 2002. In the short time available, both parties had managed to assemble a formidable body of documentary material. The evidence and submissions went to the two issues which are relevant in applications of this nature, namely to whether there is a serious question to be tried and also to the balance of convenience. I shall discuss each of these issues briefly.
A Serious Question to be Tried?
Kimberley submits that the name "Blina" has become associated in the minds of the public with Kimberley's diamond exploration activities in the Kimberley region of Western Australia. This association has developed by reason of the extensive use, by Kimberley and others, of the word "Blina" when describing Kimberley's activities. In this regard, Mr Kennedy's affidavit annexed a large number of press cuttings and other publications between 1993 and 2002 in which the word "Blina" was used in describing Kimberley's diamond projects. Neither Auridiam nor BDL has ever been associated with Kimberley's business in respect of its Blina project.
Mr Kennedy in his affidavit said that following the issue of the ASX announcement, Kimberley received a number of inquiries from persons who appeared confused as to the relationship between BDL, Kimberley and the Blina project.
On the basis of this material, Mr Curthoys, who appeared for Kimberley before me, urged that the use by the defendants of the name "Blina", and particularly the second defendant's name as "Blina Diamonds Ltd", had the capacity to mislead the investing public into believing that there was an association between Kimberley and the second defendant.
Mr Stone, who appeared for the defendants, disputes that there is a serious issue to be tried in this case. Alternatively, if there is one, he submits that it is extremely weak and, given the other issues in the case, an interlocutory injunction should not be granted.
The defendants' primary submission under this head is that "Blina" is the name of a geographical area. In the normal course of events, the use of a place name to describe a company's activities in that location will not give rise to a finding that the company has engaged in misleading or deceptive conduct, notwithstanding that there are existing businesses which use a similar description: Wallace v Baulkham Hills Smash Repairs Pty Ltd, unreported; SCt of NSW (Young J); 7 August 1995; Burswood Management Ltd v Burswood Casino Motel/Hotel Pty Ltd (1985) 7 FCR 186 at 192; Hindmarsh Medical Clinic v Hindmarsh Family Practice Pty Ltd (1997) 38 IPR 616; BC 970 2659; Barry v Lake Jindabyne Reservation Centre Pty Ltd (1985) 8 FCR 279.
In support of this proposition, Mr Stone pointed out that at Ellendale, not far from Blina, there are six companies conducting diamond exploration, including both Kimberley and BDL, as well as a company called Ellendale Resources N/L. At least some of these companies routinely describe their tenements in that area as their "Ellendale projects." It has not been suggested that this is in any way misleading of the public. Moreover BDL has announced publicly that it is associated with Auridiam, not with Kimberley. Its current prospectus also makes this clear. Mr Stone submits that the public will not be misled by BDL using, as part of its name, the name of the area where one of its principal activities will be located.
Mr Curthoys, in response, pointed out that Kimberley has continued to use the name "Blina" although its tenements have moved progressively away from the area which bears that name. In other words, the name has now developed a secondary meaning over and above its geographical connotation. The fundamental question, Mr Curthoys stressed, is whether members of the relevant public would be misled by the use of the name "Blina". The "relevant public" in this regard is the investing public and Kimberley's shareholders. He pointed out that Blina, as a place, is so obscure that, at best, only a very small proportion of these people would recognise "Blina" as a place name. The overwhelming majority of those who were familiar with the name would associate it, not with any geographical location, but with Kimberley's activities.
The evidence indicates that the name "Blina" originates with Blina Station in the West Kimberley, which has an area of about 400,000 acres. The name "Blina" also came to be associated with geographical features on or near the station. For example, there is a Blina swamp and one of the geological formations in the area is known as Blina shale. In the 1960s the fossil of a small dinosaur was found in Blina shale and has become known as the Blinasaurus. Oil exploration and drilling has also been undertaken in the area and the name "Blina" has become associated with some of these projects.
It is not necessary for present purposes to make a concluded finding as to whether there is a serious issue to be tried. I am inclined to think, for the reasons advanced by Mr Curthoys, that there is. But it cannot be regarded as a very strong case. As Mr Stone's submissions point out, many of the references to "Blina" in the publications annexed to Mr Kennedy's affidavit make it apparent that this is the name of a location rather than a distinctive name chosen by Kimberley to describe this part of its diamond exploration activities.
I turn now to the second matter for consideration, namely the balance of convenience.
The Balance of Convenience
It is well established that the two issues – whether there is a serious question to be tried, and the balance of convenience – are not to be considered in isolation from each other. The apparent strength of an applicant's case will be relevant in determining where the balance of convenience lies, so that an apparently strong claim might lead a court to grant an injunction although the balance of convenience is fairly even. Where the applicant's case is not, on its face, a strong one, then the balance of convenience must clearly favour the granting of an injunction before a court will grant that remedy.
In the present case, it seems to me that the balance of convenience is strongly against the making of an interlocutory injunction. BDL has, as mentioned, already lodged a prospectus making an initial public offer (IPO) of its shares. There is evidence before me that the grant of an injunction in the terms sought by Kimberley would necessarily cause the withdrawal of BDL's prospectus. This evidence comes both from Mr Belben and from an independent accountant, Mr Graham Keys. According to Mr Belben, BDL has already expended or committed over $250,000 to its IPO. This would be wasted if, as a consequence of the grant of an injunction, BDL were to withdraw its prospectus and the prospectus was not reissued. If the prospectus were reissued, then the wasted costs would be in the order of $103,000. To this must be added time costs which BDL has incurred in the preparation of the offer. Mr Belben estimated these to be in the order of $100,000.
Mr Curthoys challenged the proposition that the granting of an interlocutory injunction would cause the withdrawal of BDL's prospectus. He suggested that the changes to the prospectus would be so relatively minor as to require merely a supplementary prospectus, a document which could be prepared quickly and easily. However, there is no evidence to refute the proposition that BDL's prospectus would need to be withdrawn if the injunction were granted as sought by Kimberley. This proposition has been asserted by two witnesses. It could by no means be described as self‑evidently wrong. To the contrary, it would appear to me to be the very likely outcome of the granting of the injunction as presently sought. Moreover, the proceedings could have been commenced by Kimberley before this detriment would have been suffered. In this regard there has been considerable and unexplained delay on the part of Kimberley in commencing these proceedings. My description of the factual background of the case earlier in this judgment indicates the extent of that delay. It was on 15 March 2002 that Mr Rowe first told Mr Kennedy of the proposal to change the name of Deliverweb Ltd to Blina Diamonds Ltd. It was not until 22 May 2002 that Kimberley's lawyers wrote to the defendants seeking undertakings that the name "Blina" not be used by them. By that time, according to Mr Belben, $100,000 had already been expended or committed on the IPO. The preparation of the prospectus was well advanced and it was, for practical purposes, too late to change the IPO process. Moreover, even after it became clear that the defendants were not prepared to give the undertakings sought, there was a further delay before these proceedings were instituted, on 26 June 2002. In the meantime, on 7 June 2002, BDL's prospectus had been lodged with ASIC and this had been announced to the ASX.
The detriment flowing to the defendants from the granting of an injunction would therefore be very significant indeed. Even if BDL's prospectus was later reissued, the taint of litigation might well have an adverse effect on investor sentiment, as Mr Keys pointed out. His affidavit indicated that the resource market is likely to move in a downward direction in the near future.
By contrast, it is difficult to assess the detriment, if any, to Kimberley of failing to grant an injunction. Mr Kennedy, in his affidavit of 26 June, said that since the issue of the ASX announcement on 7 June, Kimberley's share price had dropped from 70 cents to 55 cents and was then currently running at 57 cents, a reduction of about $12 million in the plaintiff's market capitalisation. He expressed the belief that this was a direct result of the confusion caused by the defendants' use of the "Blina" name. However, as Mr Stone pointed out, the resource market is a volatile one. Mr Belben's affidavit annexed a graph showing Kimberley's closing price over a 12‑month period finishing in mid‑June 2002. During that time, Kimberley's share price ranged between 40 and 80 cents and has been subject to major fluctuations. There are, as Mr Belben pointed out, any number of reasons why a company's share price might fluctuate. Without more, it would be very difficult to attribute the recent drop in Kimberley's share price to the BDL float.
Mr Curthoys clearly recognised the difficulties faced by the plaintiff in the light of the defendants' evidence as to the withdrawal of BDL's prospectus in the event of an injunction being granted. In his submissions in reply (after a luncheon break in which he had presumably obtained further instructions), Mr Curthoys suggested that the balance of convenience of all parties could be met by the granting of an injunction the operation of which would be suspended until after the closing date of the IPO, which is 25 July 2002. The plaintiff's particular concern, he said, relates to the name of the second defendant, Blina Diamonds Ltd. Steps could be undertaken in the meantime to procure a change of name immediately after the closing of the IPO. In this regard, Mr Curthoys said that he was prepared to confine the relief claimed on an interlocutory basis so as to seek only that BDL change its name to one that does not include the word "Blina".
The course suggested by Mr Curthoys would meet some of the balance of convenience difficulties which confront the plaintiff. However, I do not consider that it meets the general exigencies of the situation. As Mr Stone pointed out, the earliest closing date under the prospectus is 25 July. However, this can be extended for up to four months from the issue of the prospectus, which in this case would take it to 7 October 2002. If, by that date, the minimum amount has not been raised, then the float will fail and that will be the end of the matter. These proceedings will, in all likelihood, become otiose. In the event that the float is successful, then it will give all parties an opportunity to have this matter dealt with on a final rather than an interlocutory basis. As I mentioned earlier, the parties were able, within a short time, to marshal a considerable amount of documentary material for the purpose of this interlocutory application. However, I am told that much more evidence will be adduced at a final hearing of the matter. Evidence on both sides will need to be tested by cross‑examination. This being the case, it would be inappropriate, in my view, to consider granting an interlocutory injunction the operation of which would be delayed until some time in the future. Indeed, the essence of an interlocutory injunction is that it is needed to protect the moving party's immediate interests pending a hearing of the matter. It is difficult to reconcile this rationale with the injunction now suggested by Mr Curthoys.
For all these reasons I decline to grant the interlocutory injunction sought by the plaintiff. I order the plaintiff to pay the defendants' costs of this application.
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