Madison Constructions Pty Ltd v Empire Building Group (ACT) Pty Ltd
[2012] FCA 381
•23 March 2012
FEDERAL COURT OF AUSTRALIA
Madison Constructions Pty Ltd v Empire Building Group (ACT) Pty Ltd
[2012] FCA 381
Citation: Madison Constructions Pty Ltd v Empire Building Group (ACT) Pty Ltd [2012] FCA 381 Parties: MADISON CONSTRUCTIONS PTY LTD (ACN 090 649 844) v EMPIRE BUILDING GROUP (ACT) PTY LTD (ACN 129 149 079) File number: ACD 28 of 2012 Judge: RARES J Date of judgment: 23 March 2012 Catchwords: REAL PROPERTY – conditions required to be included in contract for sale of residential property by s 11(1) of Civil Law (Sale of Residential Property) Act 2003 (ACT) – right of purchaser to rescission or damages where contract contains an error in the description of the property – whether change of name or branding of development of home units could constitute an error in the description of the property pursuant to s 11(1)(h) – whether the description of the property in s 11(1)(h) identifies the land, property or title to the land sold
Held: the words “error in description” in s 11(1)(h) refers to the land, property or title to the land sold
Legislation: Civil Law (Sale of Residential Property) Act 2003 (ACT) s 11(1)(h), (i)
Competition and Consumer Act 2010 (Cth) Sch 2, Australian Consumer Law s 18Cases cited: Ackers v Austcorp International Ltd [2009] FCA 432 applied
Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 applied
Beecham Group v Bristol Laboratories Pty Limited (1968) 118 CLR 618 applied
BM Auto Sales Pty Limited v Budget Rent-A-Car System Pty Limited (1976) 12 ALR 363 applied
Cadbury-Schweppes Pty Ltd v Pub Squash Co. Pty Ltd [1980] 2 NSWLR 851 applied
Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 applied
Commercial Union Insurance Company of Australia Limited v Ferrcom Pty Limited (1991) 22 NSWLR 389 applied
Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 appliedENRC Marketing AG v OJSC “Magnitorgorsk Metallurgical Kombinat” [2011] FCA 1371 applied
Gough v South Sky Investments Pty Limited [2011] QSC 361 distinguished
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 applied
Reddaway v Banham [1896] AC 199 applied
Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd [2011] FCA 664 applied
Travinto Nominees Pty Limited v Vlattas (1973) 129 CLR 1 appliedDate of hearing: 23 March 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 57 Counsel for the Applicant: Mr B Connell Solicitor for the Applicant: Kamy Saeedi Lawyers Counsel for the Respondent: Dr G Dempsey Solicitor for the Respondent: Symons Phillips Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
ACD 28 of 2012
BETWEEN: MADISON CONSTRUCTIONS PTY LTD (ACN 090 649 844)
ApplicantAND: EMPIRE BUILDING GROUP (ACT) PTY LTD (ACN 129 149 079)
Respondent
JUDGE:
RARES J
DATE OF ORDER:
23 MARCH 2012
WHERE MADE:
SYDNEY
UPON the applicant, by its counsel, giving to the Court:
(a) the usual undertakings as to damages;(b)the undertaking of David O’Keeffe to the Court by his solicitor to be personally liable to pay any damages found due pursuant to the undertaking in (a) above
THE COURT ORDERS THAT:
1.Except in respect of contracts for sale of land that have been exchanged on or before 23 March 2012, until further order, the respondent, by itself, its servants and agents, be restrained from advertising, promoting or otherwise using the name “Madison Gardens” in connection with the marketing, construction and sale of its residential apartment development at Harrison in the Australian Capital Territory.
2. The applicant file and serve a statement of claim on or before 3 April 2012.
3. The matter be stood over for directions to a date to be fixed, before the docket judge.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
ACD 28 of 2012
BETWEEN: MADISON CONSTRUCTIONS PTY LTD (ACN 090 649 844)
ApplicantAND: EMPIRE BUILDING GROUP (ACT) PTY LTD (ACN 129 149 079)
Respondent
JUDGE:
RARES J
DATE:
23 MARCH 2012
PLACE:
SYDNEY
REASONS FOR JUDGMENT
(REVISED FROM THE TRANSCRIPT)
The parties to these proceedings are both transcript developers of residential property home units in the Australian Capital Territory. Madison Constructions Pty Ltd (Madison) was incorporated in 1999. Its principal, being its sole shareholder and director, David O’Keeffe, had operated construction businesses under the name “Madison Constructions” since 1992. He had and registered that as a business name in the Territory in 1993.
Empire Building Group (ACT) Pty Ltd is in the early states of developing a residential home unit project branded with the name “Madison Gardens” at block 1 of section 139 at Harrison in the Territory. This development is occurring not far from where Madison constructed a home unit development in 2007 at Narrabundah, known as “Madison Square”. Over the years, Madison had also developed a number of home unit projects using the branding or name “The Gardens”.
Madison seeks interlocutory relief against Empire on the basis that Empire’s branding of its project as “Madison Gardens” is either passing off Madison’s goodwill and reputation as being associated with it or the use of the name “Madison Gardens” is misleading or deceptive or likely to mislead or deceive consumers about Madison’s association with Empire’s project.
BACKGROUND
Madison’s current business includes developing multistorey apartment buildings, residential estates comprising freestanding villas, courtyard homes and apartments. Madison, and its antecedents trading under the Madison Constructions name, have undertaken a total of over 30 significant construction projects in the Territory since 1992, including 20 since Madison’s incorporation in 1999. Madison has five wholly owned subsidiaries, one of which, Madison Gardens (ACT) Pty Limited, had been incorporated in 2004 for the purpose of carrying out a development called “The Gardens” in Holt in the Territory.
Madison is the owner of a number of registered trademarks of the words “The Gardens”, the words “Madison ... live more!” which are stylised in a distinctive logo form, the words “Experience the Madison way of living” and a square box incorporating what appears to be a large oak tree. Those trademarks are:
Madison currently uses this version of those trademarks as its branding or logos. The trademarks are registered in class 37 for the following services: building, repair and maintenance of houses, villas, townhouses, units, apartments, and casitas. Madison’s subsidiary, Madison Live More Pty Limited has registered the business name “Madison Live More”.
Madison has undertaken a number of developments throughout the Territory since about 1997 that incorporate, or consist solely of, the branding or name “The Gardens”. Some of these have had added the names of various plants, such as three 2005 developments, Magnolia “The Gardens”, Jarrah “The Gardens”, and Hakea “The Gardens”. In addition, in 2005 and 2006 Madison developed three other projects in North Watson, Fadden and Gowrie, each of which was branded “The Gardens”.
Significantly, in 2007 Madison successfully undertook a development at Narrabundah called “Madison Square”. Madison engaged LJ Hooker Project Marketing, part of the well-known real estate agency business, to market that development. As I will shortly explain, last year Empire engaged LJ Hooker Project Marketing to develop its marketing strategy for its current development, “Madison Gardens”. That branding has provoked the current dispute.
Madison has promoted its various projects, including its current project called “Number 28” in Braddon, using online websites, newspaper advertisements in the Canberra Times, television and radio advertising, marketing pamphlets and promotional brochures specific to particular developments. There are many examples of these in evidence. Most, and certainly the more recent ones, use the logo or trademarks of “Madison ... Live More!” and the tree mark to identify these as Madison’s projects.
Over the years, Madison has received a significant number of industry awards for the quality of its buildings and development work. A number of Madison’s recent projects display its branding on the outside of those projects that remain associated with their names. The Madison Square development has a large sign outside it that displays the trademarks of “Madison ... Live More!” and the tree logo immediately underneath the name “Madison Square @ Narrabundah”. Similarly, another of Madison’s recent developments, Allure Garden Apartments, displays both those logos on the outside of the buildings, as does its development undertaken in 2011 at Griffith called “Century Apartments”.
Empire engaged Michael D’Elboux to provide project management services for its proposed development at Harrison. Empire also engaged LJ Hooker Project Marketing to market the proposed development. In its proposal to Empire of 12 August 2011, LJ Hooker Project Marketing described the concept of its brief with respect to the branding of the development and its proposed marketing campaign. LJ Hooker said that it, in conjunction with Empire, it would “create a name, logo and marketing campaign which will give the development a sense of quality, trust and integrity.”
In the week of 12 September 2011, Mr D’Elboux attended several meetings with LJ Hooker Project Marketing. He said that during those meetings, Greg Henderson from LJ Hooker, “pitched the name ‘Madison Gardens’”. Mr Henderson said that the name “Madison Square” was not considered to be appropriate for the project, because LJ Hooker had previously used that name for a development in a nearby suburb. That was the “Madison Square” project to which I have referred above.
Mr D’Elboux said that the purpose of the meetings was to develop an appropriate strategy that would capture the market segment of buyers aged between 18 and 35 who would form the majority of first-home buyers, and effectively use what, he called, “the American culture that heavily dominates and influences that age bracket.” He said that the name “Madison Gardens” related to Madison Avenue in New York and was also associated with the sporting and entertainment venue, Madison Square Gardens, in that city.
Following these meetings, Mr D’Elboux prepared a report for the principal of Empire, Tomislav Simunic. In the report Mr D’Elboux informed Mr Simunic that he believed the name “Madison Square” would gain market acceptance and was supported by a designer who had completed design work for that concept. The design work featured a flower symbol dotting the “i” in the word “Madison” that appears in large type above a line underneath which appears the word “Gardens”, in smaller type as appears below:
It is not clear on the evidence precisely when Empire began marketing Madison Gardens. However, on 1 February 2012, David O’Keeffe became aware that Empire was undertaking the new residential apartment development with the name “Madison Gardens” through an email he had received while overseas from another person who forwarded a website link to Empire’s development. David O’Keeffe copied the email to his son, James O’Keeffe, who is employed as contracts administrator by Madison.
On 2 February 2012, Empire applied to register the trademark “Madison Gardens” in class 19 for “building materials (non-metallic), non metallic rigid pipes for building, asphalt, pitch and bitumen, non-metallic transportable buildings, monuments, not of metal”. On 3 February 2012, Madison’s solicitors wrote to Empire complaining of its alleged infringements of Madison’s trademark rights and Empire’s misleading and deceptive conduct involved in the associative use of the branding “Madison Gardens” for Empire’s new development. On 14 February 2012, Empire’s solicitors responded denying that there was any infringement of trademarks and refusing to provide undertakings to desist in the use of the trademarks and branding. The parties’ solicitors then engaged in correspondence making assertions and counter assertions on behalf of their clients. By 7 March, James O’Keeffe’s principal affidavit had been sworn and served on the solicitors for Empire in a further attempt to persuade them of the significance of Madison’s asserted rights to, and good will in, its own name and that name’s association with developments that incorporated the word “Gardens” in the Territory.
Mr D’Elboux gave evidence about a number of matters on the question of the balance of convenience. He said that it would cost approximately $30,000 to undertake a rebranding of Empire’s project. He estimated that rebranding would take about four weeks and that that would effectively halt the momentum of the project. He noted that 22 contracts for sale had been exchanged and that a further 36 contracts, to the value of over $5.5 million, had been issued to proposing purchasers with a view to proceeding to arranging exchanges. In addition, another 38 units in the Harrison project have not yet had contracts for sale issued to prospective purchasers.
Mr D’Elboux asserted that delay would cause substantial losses to Empire amounting to approximately $60,000 every four weeks in relation to holding costs alone. He asserted that the date of 30 April 2012 had some significance because a letter from an accountant acting for Empire suggested that on that day 90% of the balance of settlement funds totalling over $3.2 million for Empire’s purchase of the Harrison land were due. However, there was no direct evidence on when that settlement had to occur. One sample contract for sale of a unit in Empire’s development provided that the seller, being Empire, had a right to rescind the contract if it had not achieved the milestone of exchanging binding contracts for not less than 70% by number of all units in the development by 31 July 2012.
Relevantly, the contract was in the standard form of the ACT Law Society contract for the sale of land. The contract identified the land sold as consisting of a unit in block 1 of section 139 Harrison adding underneath that description “and known as unit A07, Madison Gardens, Harrison”. The seller was named as Empire. The contract gave the buyer the right to rescind if, among other things, any right or privilege created, entered into, or granted by the seller substantially and detrimentally affected the buyer’s use and enjoyment of the unit (cl 36.3). The seller also disclosed in cl 38.1 that the unit number allocated to the unit in the contract, plans, and specifications, was shown in draft and could differ from the final unit number. That clause provided that the buyer was not entitled to make any objection about any subsequent change in the unit’s numbering. Another clause provided that the buyer was not entitled to erect any visible signs on the building without the seller’s consent and that clause was for the seller’s sole benefit.
The buyer acknowledged that the seller had entered into a contract for sale dated 28 July 2011 with Land Development Agency for the purchase of a lease of the land at Harrison that would be granted substantially on the terms and conditions of a specimen attached to the contract, and that if that contract had not been completed by 30 June 2012, the seller could at any time rescind that contract (cl 52.1). Each of the attachments to the contract was preceded by a note describing it as “Madison Gardens”. The standard form clauses in the contract provided the buyer with rights to cancel the contract if there were any breach of a warranty prior to completion. Importantly, cl 6.4 excluded the buyer’s right to make a claim or objection, or to rescind or terminate the contract, in respect of a number of matters including any promise, representation, or statement about the contract, the property or the lease (to the seller) that was not made (expressly) in the contract or anything disclosed in the contract, with certain, presently irrelevant, exceptions (cll 6.4.4 and 6.4.8).
Clause 16 entitled the buyer, subject to the Civil Law (Sale of Residential Property) Act 2003 (ACT), to compensation on completion and a reduction in price for an error of any kind or misdescription, if the buyer made a claim for compensation before completion, even if the buyer had not noticed or relied on anything in the contract containing or giving rise to that error or misdescription, unless the buyer was aware of the true position before the date of a contract. The counterpoise to this was in cl 17, as amended by the special conditions. That provided that the seller could rescind if any claim for compensation, other than for delay, was made for a total amount exceeding $1. I was not taken to any provision in the contract that made the naming of the development, a term or condition of the sale of the unit.
THE PARTIES’ CONTENTIONS
Madison’s interlocutory application seeks interim relief restraining Empire from advertising, promoting or otherwise using the name “Madison Gardens” in connection with the marketing, construction and sale of the Harrison development except so far as that has been used in exchanged contracts. Madison also seeks a further interlocutory injunction to restrain Empire from representing, in connection with the supply or possible supply of the grant of an interest in land or with its promotion, that Empire had any sponsorship or approval of Madison or was affiliated with Madison.
Empire resisted those claims for relief on a number of bases. It argued that its use of the branding “Madison Gardens” would not be capable of being seen as a passing off, or misleading of members of the public to whose notice it came, of an association of the project with Madison. It also argued that its use of the words “Madison Gardens” had not infringed any trademark owned by Madison. Empire pointed to the fact that Madison had led no specific evidence as to the effect of the use of the branding “Madison Gardens” on potential or actual purchasers of that development or generally. It argued that these two words were in common use and could not be appropriated by Madison to its own use. Empire contended that its use and branding of “Madison Gardens” appeared, and would be understood, to be quite distinct from Madison’s use of those words and branding. Empire also argued that Madison had not alleged that it had suffered, or would suffer, in the relatively near future any particular loss or damage in relation to its own completed or projected projects.
Empire argued that it would potentially suffer very significant financial loss were it required to rebrand the development. It drew attention to the significant potential for any injunction to imperil its own marketing campaign and the impact that any injunction might have on the 36 unexchanged, but issued, contracts for sale, which might need to be recast or made the subject of notification were an injunction granted. In particular, Empire argued that the effect of any injunction would be substantively final rather than interlocutory, since it would have to cease its current and planned marketing strategy and adopt a new one with new branding, so that even if it were successful at trial, it would never be able to undo the effect of the injunction.
Empire also submitted that its own marketing and the detailed promotional brochure prepared by LJ Hooker was provided to all purchasers and that this distinctly named Empire as the developer on its first page using branding quite different from that associated with Madison, including, on virtually every page, Empire’s own logo, that appeared as follows:
In addition, Empire relied on the Civil Law (Sale of Residential Property) Act and in particular, s 11(1)(h) and (i), which provide:
“(1)A contract for the sale of residential property must include conditions to the following effect:
...
(h)if, before completion of the contract, the buyer becomes aware of an error in the description of the property the buyer may—
(i)ask the seller to arrange for the error to be corrected before completion of the contract; and
(ii) if the error is not corrected before completion—
(A)for an error that is material—rescind the contract, or complete the contract and claim damages; and
(B)for an error that is not material—complete the contract and claim damages;
(i)the required documents mentioned in section 9 (1) (a) to (k) for the sale form part of the contract.”
Empire argued that a purchaser could claim that any change of name of its development was an error in the description of the property within s 11(1)(h).
CONSIDERATION
Empire’s last argument can be disposed of quickly. First, Empire could point to no document referred to in s 9(1) that formed part of, and so relevantly dealt with the name “Madison Gardens” in, the contract. Secondly, I reject its argument that the words “error in description” in s 11(1)(h) refer to the branding or name of the project as used underneath the identification of the land or property sold in the covering clause of the contract. Barwick CJ said in Travinto Nominees Pty Limited v Vlattas (1973) 129 CLR 1 at 12:
“… if the subject matter of the sale is an area of land, the conditions limiting or varying the implied obligations on the vendor as to the title to the land sold or as to delivery of vacant possession are not elements in the description of the thing sold. They are qualifications of the obligations of the vendor in relation to the conveyance or transfer of the title to the land or in relation to the requirement of vacant possession or as to both. A relevant example is the common condition of sale that the land is sold “subject to existing tenancies and occupancies”. In my opinion, this limitation of the vendor's obligation to transfer a fee simple in possession or to give vacant possession does not form part of the description of the thing sold where the subject matter of the sale is land. Nor, in my opinion, does such a clause convert the subject matter of the sale from land into a reversion or reversionary interest in land.” (emphasis added)
In my opinion, the description of the property to which section 11(1)(h) relates is a description of the title to the land, here, a unit in block 1, section 139, Harrison, that is the subject of the contract sale. That description may extend to the real property’s dimensions or physical location but this was not argued and need not be considered further.
Empire referred to a decision of Applegarth J in Gough v South Sky Investments Pty Limited [2011] QSC 361. There, under a Queensland contract of sale for an off-the-plan purchase of a unit in a development to be known as “The Oracle”, the contract was titled “Contract for Sale: The Oracle” and location plans formed part of it. A disclosure document described the residential component to be known as “The Oracle”. That disclosure document was argued to be part of the conditions of the contract by virtue of a provision in Queensland legislation to which I was not taken. Apparently during the course of the development of the project, the name and nature of the development altered from “The Oracle” to “Peppers Broadbeach” and from a residential tower to a hotel or resort. Applegarth J considered that the documents that constituted the contract in that case promised to sell a lot in a residential tower to be known as “The Oracle”.
In my opinion, that case is distinct from the present. First, it was not suggested that s 11(1)(h) of the Civil Law (Sale of Residential Property) Act was equivalent to the Queensland legislation considered by Applegarth J. Secondly, the nature of the complaint which his Honour identified was twofold: (1) a radical change in the use of the property from a residential tower to hotel or resort, and (2), an associated name change of the development. Thirdly, the subject matter of these proceedings is different. If Empire’s conduct has been to engage in misleading or deceptive conduct with respect to its association with Madison or to have passed off its development as a development of Madison, then as a consequence, Empire will have entered into contracts by reason of that conduct. If so, any material adverse effect suffered by Empire would occur because its purchasers relied on Empire’s conduct that contravened either its legal or equitable obligations.
The test for the grant of interlocutory relief is not in dispute. First, Madison must make out a prima facie case in the sense that if the evidence remains as it is there is a probability that at the trial of the action it will be found entitled to relief. And, secondly, the Court is concerned to inquire whether the inconvenience or injury which Madison would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which Empire would suffer if the injunction were granted: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at 81-84 [65]-[72] per Gummow and Hayne JJ with whose identification of the organising principles Gleeson CJ and Crennan J agreed at 68 [19]. As Gummow and Hayne JJ went on to point out, the strength of the probability of the prima facie case needs to depend on the nature of the rights Madison asserts and the practical consequences likely to flow from the order it seeks. Here, a matter of importance in identifying the sufficiency of any prima facie case is that an adverse finding to Empire would mean that it could be exposed to contractual consequences at the suit of its purchasers under the exchange contracts of sale.
In BM Auto Sales Pty Limited v Budget Rent-A-Car System Pty Limited (1976) 12 ALR 363 at 371 Gibbs J, with whom Barwick CJ and Murphy J agreed, held that a person, who persisted in the use of another’s name with full knowledge that that name had become distinctive of the other’s business and that the use of the name was calculated to deceive, could be restrained by an injunction from passing-off. His Honour also said (12 ALR at 369):
“… it 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.” (emphasis added)
In making the following findings, of course, I have had to act on the evidence, limited as it is, and prepared in less than the luxury of full consideration. In the present case there is significant evidence, albeit on an interlocutory basis, that Madison has for many years built up a reputation and goodwill in its name as a builder and that the word “Madison” is publicly associated with residential apartment developments that it has either constructed or developed.
Importantly, the very strategy identified in LJ Hooker’s proposal to Empire was to create a logo and marketing campaign that would give the Harrison development “a sense of quality, trust and integrity”. I am comfortably satisfied, on a prima facie basis, that LJ Hooker was well aware of the reputation for quality, trust and integrity that appears to have built up by the substantial number of developments that Madison has undertaken in the Territory and the numerous building excellence awards that have been made to it. As Mr D’Elboux remarked, LJ Hooker was aware of Madison’s development branded “Madison Square” in a nearby suburb from its own activity in marketing it. I am satisfied, on a prima facie basis, that the adoption of the word “Madison” in the name of Empire’s development was done consciously because LJ Hooker was aware of Madison’s existence as a builder that already had an established reputation of the kind LJ Hooker wished to associate with the branding for Empire’s new project.
The reaction of LJ Hooker in the September 2011 marketing meetings in which the concept of the name “Madison Gardens” was developed, betrayed a consciousness that there would be confusion if the name “Madison Square” were used. That was because of the existence of the eponymous development nearby with which LJ Hooker previously had been closely associated. Moreover, it is significant that none of Empire’s witnesses, including Mr Simunic, suggested that he had no knowledge of Madison’s business. Where a party leads evidence from a witness who could have given, but does not give, direct evidence on a matter, the Court should not draw inferences favourable to that party concerning the omitted matter. The most natural inference is that the party calling the witness feared to lead evidence-in-chief on the topic and that such evidence-in-chief would have exposed facts unfavourable to that party: see the discussion in Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466 at 525-526 [230] per Weinberg, Bennett JJ and myself, and Commercial Union Insurance Company of Australia Limited v Ferrcom Pty Limited (1991) 22 NSWLR 389 at 418E-G per Handley JA and the cases there cited.
Here, both parties were competitors or involved, at least, in the same industry within the relatively small market in the Territory. Empire’s marketing agent had used the name “Madison Square” nearby and led no evidence from the witnesses it called dealing with Empire’s awareness of Madison’s existence, reputation or goodwill. I am comfortably satisfied on a prima facie basis that the Empire was aware of Madison’s earlier reputation with respect to building projects of the kind Empire was proposing to develop when it adopted the name “Madison Gardens”.
Even if I were found at trial to have been wrong in that finding, I am satisfied, on a prima facie basis, that following the receipt of the letter from Madison’s solicitors of 3 February 2012 Empire has persisted in using a name incorporating “Madison” with full knowledge that it had become distinctive of Madison’s business, goodwill and reputation. That is evidenced by its continued opposition to the present interlocutory application. Empire’s solicitors were served on 7 March 2012 with the principal affidavit of James O’Keeffe on which Madison relied. That contained a great deal of historical evidence establishing Madison’s reputation and name. Accordingly, Empire has been aware for some time of the evidentiary foundation for Madison’s claims of its existing reputation and the potential for confusion or misleading the public.
In the context of a claim for passing off, Lord Herschell explained the principle applicable as the fundamental rule that one man has no right to put off his goods for sale as the goods of a rival trader. And he cannot be allowed to use names, marks, letters or other indicia by which he may induce purchasers to believe that the goods which he is selling are the manufacture of another person: Reddaway v Banham [1896] AC 199 at 209; Cadbury-Schweppes Pty Ltd v Pub Squash Co. Pty Ltd [1980] 2 NSWLR 851 at 857C-D; [1981] 1 WLR 193 at 199E-G per Lord Scarman. The same, of course, applies to services and the sale of land.
In the modern age, consumers, including purchasers of serious items or investments such as real estate, are susceptible to influences from a range of sources. The law requires that where representations are made to the public it is necessary to identify the ordinary or reasonable members of the class who would be likely to see the advertisements or the use of branding in order to assess whether, at the end of a final hearing, a Court would be likely to find that any such representation or impression was conveyed to that class of ordinary, reasonable viewers or potential purchasers and whether the class would have been mislead by the representation: Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 at 85 [102] per Gleeson CJ, Gaudon, McHugh, Gummow, Kirby, Hayne and Callinan JJ. Their Honours pointed out that consumers can be expected to include a wide range of persons. But they said that an objective attribution of certain characteristics had to be made so as to isolate the ordinary or reasonable members of the class and in that respect, the legislation did not impose burdens that operated for the benefit of persons who failed to take reasonable care of their own interests.
In Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 210 to 211, Mason J observed that it was unlikely that an ordinary purchaser would notice very slight differences in the appearance of two items of furniture, there in question. However, he held that nevertheless such a prospective purchaser reasonably could be expected to attempt to ascertain the brand name of the particular type of furniture on offer. In Samsung Electronics Australia Pty Ltd v LG Electronics Australia Pty Ltd [2011] FCA 664 at [28]-[32] I discussed the characteristics of the ordinary and reasonable class of consumers of televisions who were within contemplation of protection by the norm of conduct established by s 18 of the Australian Consumer Law in Sch 2 of the Competition and Consumer Act 2010 (Cth).
In the present case, those persons are prospective purchasers in a transaction of a very serious kind, being a residential home unit. One can expect such persons to take reasonable care for their own position in such cases. But I do not think that that necessarily goes to the point of ascertaining whether the particular vendor company of home units in a development is, or is not, a subsidiary or member of a group of companies who might conceivably be associated with a particular name or branding. Many ordinary, reasonable people and many members of the community, are aware, as would their legal advisors be, that developers operate through subsidiaries. Where the branding itself is calculated to provide an association with a development to give “a sense of quality, trust and integrity” through the use of a name, logo and marketing campaign, one can expect that those who develop such a campaign, such as LJ Hooker, have a fairly keen appreciation of how to hit their targets.
In Ackers v Austcorp International Ltd [2009] FCA 432 at [152]-[155], I discussed the use by a holding company in trade or commerce of its generic name “Austcorp” in promoting developments conducted by its subsidiaries. The issue in that case was whether Austcorp was liable for representations made using the group’s brand name “Austcorp” even though the particular development was undertaken by a subsidiary. I said ([2009] FCA 432 at [152]):
“Austcorp conducted itself in trade and commerce as a promoter of the resort. It did so in clear language using its exact name. It also associated itself by the use of the logo on the promotional material. The logo was not used in a legal document by lawyers. It was used in trade or commerce by Austcorp to convey its association with the project, whatever may have been the legal formalities and structures in which subsidiaries of Austcorp may have participated. The message which Austcorp wished to pass to the public was, that it, as the ultimate owner of the brand, was responsible for the development. It cannot accept the credit and refuse to take responsibility under the Trade Practices Act for its conduct:”
I am satisfied that Madison has made out a prima facie case that it has used its name “Madison” and the words “the Gardens” as badges of origin of its own work in the residential home unit building market in the Territory. Of course, Madison has not used the collocation “Madison Gardens”. However, I am not satisfied that Madison has demonstrated sufficiently that any infringement of any of its trademarks has occurred. But the evidence for present purposes satisfies me that, first, in the mind of the public in Canberra there is a clear association between the words “Madison” and “the Gardens” or the truncated “Gardens” and developments of the kind which Empire’s “Madison Gardens” is intended to be, and secondly, Empire’s use of that collocation or description or branding is calculated, in the sense of being likely, to deceive members of the consuming public into believing that an association exists between Madison and “Madison Gardens”: BM Auto Sales 12 ALR at 369.
Empire has made an appropriation of Madison’s goodwill or engaged in misleading and deceptive conduct by the use of Madison’s name to convey Madison’s branding or an association between Madison and the “Madison Gardens” project. The ordinary reasonable member of the relevant class would have no need to look beyond the branding, selected as it had been to convey what LJ Hooker described as “the sense of quality, trust and integrity” in the project, or go behind that to inquire whether Empire was a member of Madison’s group of companies. Moreover, even were that not so, the use of the brand or corporate name “Madison” in association with this particular development, given the history and the reason the word “Madison” was selected as part of the project’s name, satisfies me on a prima facie level, that its use would be calculated to deceive members of the relevant class into believing that Madison itself was associated with Empire’s project.
On the other hand, it has to be recognised that the logo and branding used for “Madison Gardens”, apart from the words “Madison Gardens”, are distinct from the logos and representation of the name “Madison” in Madison’s own promotional and branding material. That is why I think that no injunction should issue in respect of the trademark allegations put by Madison. I have given anxious consideration to whether this factor should also influence the assessment of the strength of the prima facie case for an association between Madison and the “Madison Gardens” project being capable of being formed in the minds of the relevant class of potential purchasers, either for the purposes of an action of passing off or a breach of the norm of conduct in s 18.
I think ordinary, reasonable consumers are aware that from time to time logos change but nonetheless the brand names previously associated with them continue to be used, albeit subsequently associated with a new logo or rebranding of the product or service that is being offered. One possibility is that the ordinary, reasonable intending purchaser might inquire as to any perceived difference between Madison’s logos and the logo for “Madison Gardens”. However, I consider that the choice by LJ Hooker and Empire of the name “Madison” in association with “Gardens” tips the balance in favour of the establishment of a sufficient prima facie case. As I have said previously, LJ Hooker without doubt knew of Madison’s existence, business and reputation and had marketed one of Madison’s projects, Madison Square itself.
In my opinion, Empire’s selection of the name and branding that occurred before the development and design of the “Madison Gardens” name and logo was calculated to use the reputation of Madison in an associative way and to either pass off “Madison Gardens” as a project associated with Madison or to engage in conduct that would mislead or deceive an ordinary, reasonable member of the relevant class into thinking that.
BALANCE OF CONVENIENCE
The balance of convenience must now be addressed, having regard to the potential damage that can be done to each of Madison or Empire, depending on whether an injunction is granted or not.
Madison has an established brand and reputation for high quality building work associated with its prominent use of its name in the Territory that has extended back, so far as the corporate entity is concerned, to 1999. Empire has never used the branding or names “Madison” or “Madison Gardens” or “Gardens” before. There is no suggestion in the evidence that it is impossible for Empire to rebrand the project. At the moment, on the contractual evidence, Empire is a point where it is not yet bound to complete, and is in a position, if some significant consequence flows from having to rebrand, that it can avoid liability to its purchasers entirely by cancelling their contracts if it does not reach sales of 70% of the units in the development. There is no evidence of Empire’s contractual liability to the vendor of block 1, section 139 Harrison or of the conditions of that contract. Thus, I am not in a position to know what, if any, damage Empire will suffer, or whether that contract itself is conditional, having regard to the terms of Empire’s own contracts with its purchasers.
The present position is distinguishable from that which impressed Kitto, Taylor, Menzies and Owen JJ in Beecham Group v Bristol Laboratories Pty Limited (1968) 118 CLR 618 at 626, where their Honours were dealing with a claim for the infringement of an established patent. They applied the principle that, where the defendant’s trade was a new one and the plaintiff’s an established one, ordinarily the new trader will be enjoined. Here it is not argued that it would be impossible for Empire to rebrand or to rearrange matters by changing the name of the project. It is possible that such a consequence may be off-putting to some potential purchasers. However, first, that consequence can be recorded so far as any sales are lost and investigated, and be made the subject of a hearing for damages in the event that Madison ultimately fails at trial. Secondly, if such an event occurred but Madison succeeded at trial, the consequence would have flowed from Empire’s conduct that will by then have been established, on a final basis, to be a breach of its legal obligations.
Empire offered an undertaking in open Court, in effect, to display prominently on each page and in equal size on all documents, websites, and the like, a disclaimer that says that “Madison Gardens” is in no way associated with Madison Construction Pty Limited or its group, that it will never use the trade names or mark “Madison” or “Garden” except in the current development, and it also would give an apology to Madison on a without-admissions basis. That offer was made on the basis that, if accepted, it would resolve the proceedings, but it was not made unconditionally. Madison rejected that offer.
In my opinion, the consequences of allowing Empire to continue to use Madison’s name are such that I consider the balance of convenience to favour the grant of interlocutory relief. If Empire succeeds, at a final hearing, it will be able to demonstrate there what damage it will have suffered including the costs of rebranding, any associated delay in the project, and the reputational damage done by the grant of the relief. On the other hand, if an injunction were not granted and Empire’s project were allowed to be developed carrying Madison’s brand name, two different reputations may be created, one of which Empire would be entitled to enjoy, but if anything went wrong, would redound, potentially, on Madison. Although the matter is a difficult one to weigh in the balance, at the end of the day I am satisfied that I should grant interlocutory relief to prevent the use of the name “Madison” in this particular project.
SECURITY FOR THE UNDERTAKING AS TO DAMAGES
Empire has pointed out that there is no very precise evidence as to the individual financial position of Madison as opposed to that of the group of companies of which it is a member. Nor is there any evidence of the way in which Madison and its group’s internal trading operations are structured, including whether or not they are conducted through a trading trust, or whether developments are conducted by various of the subsidiary companies.
David O’Keeffe has offered to undertake personally to the Court to stand liable upon Madisons’ undertaking as to damages, and to arrange for the sum of $50,000 to be paid in the Court as security for that undertaking as to damages. Madison offered these as means of supporting the worth of the undertaking as to damages, after Empire argued that there was no evidence of its financial position. Madison argued, however, that no such support of its undertaking should be required as a condition of its obtaining injunctive relief.
I do not agree. I am of opinion that given the potential for serious financial consequences harmful to Empire from the grant of interlocutory relief, it is appropriate to accept an undertaking from Mr O’Keeffe that he will stand behind the payment of any damages the subject of the undertaking. While I am mindful that the interlocutory nature of the proceedings and the speed at which the interlocutory application has been conducted has prevented full information on both sides being provided, such is the nature of interlocutory injunction hearings. It is preferable in this case, where significant financial consequences could flow from it being found at trial that an interlocutory injunction should not have been granted, that Mr O’Keeffe should give such undertaking as a condition of the granted interlocutory relief: ENRC Marketing AG v OJSC “Magnitorgorsk Metallurgical Kombinat” [2011] FCA 1371 at [12]-[13] per myself and the cases there cited.
CONCLUSION
I will grant an interlocutory injunction that Empire be restrained from advertising, promoting, or otherwise using the name “Madison Gardens” in connection with the marketing, construction, and sale of its residential apartment development at Harrison, on condition that Mr O’Keeffe gives the undertaking he has proferred.
I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate:
Dated: 17 April 2012
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