Madison Constructions Pty Ltd v Empire Building Group (ACT) Pty Ltd

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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 18
Cases 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 applied

ENRC 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 applied

Date 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)
Applicant
AND:

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:

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Details
Case
[2012] FCA 381
Decision Date

CaseChat Overview and Summary

Madison Constructions Pty Ltd sought interlocutory relief against Empire Building Group (ACT) Pty Ltd, alleging that Empire’s branding of its project as “Madison Gardens” either constituted passing off Madison’s goodwill and reputation or was misleading or deceptive, or likely to mislead or deceive consumers about Madison’s association with Empire’s project. Madison argued that Empire’s use of the name “Madison Gardens” was an error in the description of the property, which could result in rescission or damages under s 11(1)(h) of the Civil Law (Sale of Residential Property) Act 2003 (ACT). Empire contended that a change of name or branding of a development did not constitute an error in the description of the property under s 11(1)(h).

The court needed to determine whether the words “error in description” in s 11(1)(h) referred to the branding or name of the project or the land, property, or title to the land sold. The court examined relevant legal principles and precedents to assess Empire’s argument that the description of the property under s 11(1)(h) should encompass the branding or name of the project. The court concluded that the description of the property under s 11(1)(h) referred to the title to the land sold, and not to the branding or name of the project.

Based on its findings, the court granted an interlocutory injunction restraining Empire from using the name “Madison Gardens” in connection with the marketing, construction, and sale of its residential apartment development at Harrison, on the condition that Mr O’Keeffe provided an undertaking to cover any potential damages.

The court’s decision clarified that the description of the property under s 11(1)(h) refers to the title to the land sold, and not to the branding or name of the project. This decision provided guidance on the interpretation of s 11(1)(h) and the scope of potential errors in the description of the property that could result in rescission or damages. The court also granted interlocutory relief to Madison, restraining Empire from using the name “Madison Gardens” in connection with its residential apartment development, subject to the condition that Mr O’Keeffe provided an undertaking to cover any potential damages.

Orders

Orders of the court

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.

Background

Background to the litigation

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.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

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.

Ratio Decidendi

Legal Principle Established

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.