Perfection Fresh Aust Pty Ltd v Top Class Fruit Supply Pty Ltd

[2002] FCA 1636

FEDERAL COURT OF AUSTRALIA

Perfection Fresh Aust Pty Ltd v Top Class Fruit Supply Pty Ltd
[2002] FCA 1636

TRADE MARKS – application for interlocutory injunction pending final hearing – whether expression “grape tomatoes” had been used by applicant as a trade mark or as a description – whether serious question to be tried – balance of convenience – delay in commencement of proceeding – factors taken together and considered as a whole leading to a refusal of interlocutory relief.

PERFECTION FRESH AUSTRALIA PTY LIMITED (ACN 001 652 544) v
TOP CLASS FRUIT SUPPLY PTY LIMITED (ACN 059 184 511) & ANOR

N 1361 OF 2002

LINDGREN J
24 DECEMBER 2002
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1361 OF 2002

BETWEEN:

PERFECTION FRESH AUSTRALIA PTY LIMITED
(ACN 001 652 544)
APPLICANT

AND:

TOP CLASS FRUIT SUPPLY PTY LIMITED
(ACN 059 184 511)
FIRST RESPONDENT

TONY CHIEFARI
SECOND RESPONDENT

JUDGE:

LINDGREN J

DATE OF ORDER:

24 DECEMBER 2002

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Upon the respondents’ undertaking to the applicant and to the Court, until further order, to make, to keep, and, subject to any confidentiality order that may be made, to produce for inspection by or on behalf of the applicant upon reasonable request by it, records of all purchases and sales of tomatoes by reference to any name being or including the words “grape tomatoes” or “grape tomato”, including date, price, quantity and identity of seller or buyer, the interlocutory relief sought in the application be refused. 

2.Until further order, any inspection referred to in Order 1 be by the applicant’s counsel and external solicitors.

3.        The costs of the application for interlocutory relief be reserved.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1361 OF 2002

BETWEEN:

PERFECTION FRESH AUSTRALIA PTY LIMITED
(ACN 001 652 544)
APPLICANT

AND:

TOP CLASS FRUIT SUPPLY PTY LIMITED
(ACN 059 184 511)
FIRST RESPONDENT

TONY CHIEFARI
SECOND RESPONDENT

JUDGE:	LINDGREN J
DATE:	24 DECEMBER 2002
PLACE:	SYDNEY

REASONS FOR JUDGMENT

INTRODUCTION

1. The application which commenced this proceeding was filed on 16 December 2002. It included an application for interlocutory relief. The final relief sought was an injunction restraining the respondents from promoting, distributing, offering for sale or selling any tomatoes under or by reference to the name “grape tomato”, “grape tomatoes” or “sweet kiss grape tomato”, damages pursuant to s 82 of the Trade Practices Act 1974 (Cth), and further or other orders pursuant to s 87 of that Act. The interlocutory relief sought was an injunction in terms of the final injunction but only until further order of the Court.

2. The proceeding has been fixed for final hearing on 7, 8 and 9 April 2003 and the only issue for decision now is what régime should be in place from now down to the delivery of the judgment following that final hearing.

3. I will be making no findings of fact and reaching no final conclusion as to the law.  It is of the nature of an interlocutory application that all is contingent.

4. The relevant principles are easy to state and are uncontroversial.  I must be satisfied that there is a serious question to be tried, that is, a serious question as to whether the applicant will obtain final injunctive relief.  As well, I am to take into account the balance of convenience.  The “serious question” and “balance of convenience” considerations are interrelated.  They can be combined into the single test:  what interlocutory régime pending the final determination of the proceeding best serves the interests of justice?

   EVIDENCE

5. The evidence in the matter is found, in the main, in affidavits of Michael Dominic Simonetta (“Mr Simonetta”), the chief executive officer and a director of the applicant (“Perfection Fresh”), sworn 16, 19 and 20 December 2002, and in affidavits of the second respondent, Tony Chiefari (“Mr Chiefari”), the sole director of the first respondent (“Top Class”), sworn 19 December 2002, and Khajaque Kortian of Sprusons: Solicitors, Top Class’s solicitors, sworn 19 December 2002.  Other affidavits were also read.

6. Perfection Fresh is a private company owned by the Simonetta family and is one of the largest wholesalers of fresh produce to the Australian market, supplying large food retailers, processors and distributors.  It specialises in lettuce, broccoli, mangoes, tomatoes and melons.  Perfection Fresh was formed in 1978 by Tony Simonetta and his cousin Joseph Prestia.  By the mid-1980s the company had become one of the largest wholesalers of fruit and vegetables in New South Wales.  Members of the Simonetta family in addition to Mr Simonetta work in the company’s business. 

7. Perfection Fresh sells, inter alia, various tomato varieties such as cherry tomatoes, roma tomatoes, teardrop tomatoes, hydroponic tomatoes and glasshouse tomatoes.  Perfection Fresh has over 300 suppliers around Australia who supply between 3 million and 3.5 million units of produce per annum and it has a national distribution system which transports product from suppliers to the company’s storage facilities in Sydney, Melbourne, Perth and Brisbane.

8. In or about early 1999 Mr Simonetta read several articles originating from the United States of America regarding baby roma tomatoes that were sold under the name “grape tomatoes”.  While in the United States on a business trip during 1999 he visited various retailers to ascertain the manner in which this product was packaged and marketed, and, of course, its taste.  In about September 1999 Mr Simonetta formed the view that there was room for a new tomato product in the Australian market.  He made another trip to the United States in or about October 2000 to ascertain the exact type of seed used to produce the grape tomatoes sold there.   The variety of tomato was, according to Mr Simonetta’s affidavit, the “santa” variety (a baby roma tomato), and Mr Simonetta discovered that similar baby roma tomatoes were sold in Europe as “plum” tomatoes.

9. On his return from the trip to the United States in 1999 Mr Simonetta contacted Stephen Roberts of Rijk Zwaan Australia Pty Limited (“Rijk Zwaan”) about the idea of developing a new tomato product.  Mr Simonetta concluded an arrangement with Rijk Zwaan under which it was to provide seed for the development of the tomato product which Mr Simonetta had in mind.  Perfection Fresh and Rijk Zwaan entered into a formal written agreement on 21 December 2001.  Mr Simonetta asserts that the quality and the consistency of the fruit produced from the seeds provided by Rijk Zwaan are much better than those of any other baby roma variety of fruit.  Indeed, it has been one of Mr Simonetta’s concerns that the product being marketed by Top Class is inferior in quality to that of Perfection Fresh, even though Top Class also refers to its product as a “grape tomato”.

10. There is considerable evidence in Mr Simonetta’s affidavit in relation to the use of the expression grape tomato by Perfection Fresh.  Mr Simonetta was the person who decided to call Perfection Fresh’s new product “grape tomato”.  He was aware, of course, that this expression was already in use in the United States, but claims that it was used for a different product, and, in any event, points out that it had not previously been used in Australia.  Mr Simonetta testifies that, for reasons which do not presently matter, tomatoes are not shipped from the United States to Australia for sale here. 

11. Mr Simonetta’s affidavit describes the method according to which Perfection Fresh’s product is sold in plastic punnets in supermarkets and elsewhere.  He describes Perfection Fresh’s expenditure on development of the Australian market for grape tomatoes.

12. Perfection Fresh selects high quality growers for production of its grape tomatoes.  The company developed and tested the product.  For example, in a period of some six to eight months in the year 2000, Perfection Fresh incurred costs in excess of $60,000 in developing the product.  Perfection Fresh launched its grape tomatoes commercially in January 2001.  Top Class accepts that this is so, and does not deny that it was Perfection Fresh which first introduced a product by reference to the name “grape tomato” in Australia.

13. The grape tomato is a small grape-shaped tomato with a sweet taste.  It has a higher sugar content and firmer skin (less “squish” factor) than the cherry tomato, and also has a longer shelf life. 

14. Between December 2000 and November 2001, Perfection Fresh spent, according to Mr Simonetta’s affidavit, approximately $50,450 on advertising and marketing, including radio advertising, newspaper advertising and participation in food and trade shows.  In the period from November 2001 to August 2002, Perfection Fresh increased its advertising and promotional activity in relation to grape tomatoes.  During this time, it spent approximately $170,000 in this activity. 

15. Perfection Fresh applied for registration of a trade mark under application number 882513 for “GRAPETOMATO”. It is an oversimplification to say that that application was in respect of this word mark because the “grape” part of that composite word was in bold lettering and the final “o” was in the shape of a tomato. In her third report, the examiner said that the evidence before her failed to overcome an objection raised under subs 41(5) of the Trade Marks Act 1995 (Cth) because the words “grape tomato” were a kind of tomato. She stated that the expression described a small tomato in the shape and size of Thompson’s seedless grapes. She observed that the grape tomatoes grow in bunches like grapes, have twice the sugar content of other tomatoes and have a thinner skin than other tomatoes. The application for registration lapsed on 8 November 2002. Perfection Fresh has, however, a pending divisional trade mark application which is not yet resolved.

16. Mr Simonetta’s affidavit deals with the sales which have taken place of Perfection Fresh grape tomato product.  He says that his company sells approximately 8,000 trays (96,000 punnets) of grape tomatoes per week.  He says that between January 2001 and November 2001 Perfection Fresh recorded sales of approximately 870,000 punnets of grape tomatoes.

17. Mr Simonetta’s concern with Top Class’s activities began in about July 2002 and there was a course of correspondence commencing on 8 July 2002 down to 15 October 2002 to which I will refer below.  In substance, Perfection Fresh complained that it had heard that Top Class was offering for sale tomatoes by reference to the expression “grape tomato”.  Threats of legal proceedings made on behalf of Perfection Fresh were resisted, and said to be groundless, by Top Class.  Mr Simonetta says that he did not become aware that Top Class was actually selling tomatoes by reference to the expression “grape tomatoes” until 6 December 2002.

18. Mr Simonetta's affidavit deposes to the harm Perfection Fresh would suffer if Top Class is allowed to continue to sell its product under the name, or any name including the words, “grape tomatoes”.

19. Mr Chiefari, sole director of Top Class, has, like Mr Simonetta, been engaged in the fresh produce supply business in Australia for many years.  Top Class is a Sydney based wholesaler of fresh produce which markets on a national level and specialises in cherry tomatoes, Asian vegetables and exotic fruits.  It has some 30 employees with warehouses in New South Wales and Queensland, as well as representatives in Melbourne.  Top Class’s business premises are situated in the same building as are those of Perfection Fresh, namely, the Sydney Markets at Flemington.  As a result, there is frequent contact between the staff of the two companies.  Approximately 25 per cent of the fresh produce sold by Top Class consists of the variety of tomatoes known as “cherry tomatoes”.  These are a small spherical tomato, similar in shape to a cherry.  They have been on the market in Australia for more than 20 years. 

20. Mr Chiefari says that “descriptive or generic terms are widely and commonly used to describe the various types or varieties of tomatoes in Australia and the descriptions used are usually derived by the shape of the tomato”.  He gives as illustrations, not only the expression “cherry tomato”, but also “egg tomato”, “pear tomato”, “teardrop tomato” and “ox-heart tomato”.  He says that from his day to day activities in the produce market he is aware that during the last two years the term “grape tomato” has been used to describe a particular variety or type of oval, grape-shaped tomatoes. 

21. Apparently it was following the introduction by Perfection Fresh of its grape tomato in early 2001 that Mr Chiefari saw the possibility of Top Class also selling grape tomatoes as an extension to its “cherry tomato” variety.  He says that he began inquiries about 18 months ago (apparently mid-2001) in relation to the supply of grape tomatoes in Australia, including inquiries through the Internet.  His affidavit traces events since that time.  In short, after one delaying set back, in about December 2001 Top Class purchased seeds for grape tomatoes from the United States from a company known as Agrisales Inc, trading as “Agriset”.  Mr Chiefari says that Top Class distributed the seeds to growers.  From about November 2001 to about September 2002 Top Class sold small quantities of its “trial grape tomatoes” to independent grocers throughout the Sydney and Melbourne metropolitan areas, under what he calls “the generic name of the variety, ie. ‘grape tomatoes’”.

22. Mr Chiefari testifies that in October and November 2002 the sales of grape tomato products by Top Class increased to approximately 50 trays per week and that sales have increased to at least 200 trays per week in December 2002.  He says he expects an increase to approximately 1000 trays per week early in the New Year.  Since about November 2002 the grape tomato product sold by Top Class has been sold under Top Class’s trade mark “Sweet Kiss”.

    REASONING

    Trade mark significance or mere description

23. There can be no doubt that Perfection Fresh has, as Mr Simonetta says, undertaken most of the work in connection with opening up the Australian market for “grape tomatoes”.  Perhaps understandably, he feels aggrieved that Top Class should be able to take advantage of the establishment of that market by Perfection Fresh.  But if, upon proper analysis, all that has happened is that Perfection Fresh has opened up the market for a new product and Top Class has begun competing with Perfection Fresh in the selling of it, Perfection Fresh has no legal cause for complaint.

24. On the question whether there is a serious question to be tried, the fundamental submission made by Top Class is that the expression “grape tomato” is descriptive. 

25. There is not a clear demarcation between trade mark usage and descriptive usage.  As Hill J explained in Equity Access Pty Limited v Westpac Banking Corporation (1989) 16 IPR 431 at 448, “there is a continuum … the closer along the continuum one moves towards a merely descriptive name the more a plaintiff will need to show that the name has obtained a secondary meaning”.

26. The evidence in this matter is not yet closed, but on the evidence before me it is not clear by any means that the expression grape tomato has acquired trade mark significance.  There is a strong case for saying, if one excludes any secondary meaning shown to arise from use, that the word “grape” in the expression “grape tomato” is used adjectivally, with the significance, “grape-like”.  Whether the likeness is in shape, texture, taste, or more than one of these, I need not discuss.  Notwithstanding the voluminous evidence which Perfection Fresh has led of its use of the expression “grape tomato” in Australia, my impression is that that evidence is as consistent with a descriptive use of those words as it is with a trade mark use of them. 

27. So far as I can recall, the evidence is that in all cases Perfection Fresh’s own name has appeared where the expression “grape tomato” has appeared.  This does not necessarily mean that the expression grape tomato cannot have trade mark significance, but it removes one possible basis for arguing that a use of it has been a trade mark use. 

28. All I indicate at present, and then only on a tentative basis, is that although there is a serious question to be tried, on the existing evidence there is not a clear case by any means for thinking that the expression “grape tomato” has that trade mark significance which Perfection Fresh will need to establish on the final hearing. 

    Delay

29. On the matter of delay there were conflicting submissions.  On 8 July 2002, Baldwin Shelston Waters, the trade mark attorneys for Perfection Fresh, wrote to Top Class a letter which stated among other things:

    “It has come to our client’s attention that you have been offering for sale product, which is not our client’s product, under the name ‘GRAPE TOMATOES’. 

    Our client has not authorised you to use its trade mark, and by representing your products as GRAPE TOMATOES, you are trading off our client’s established goodwill and reputation and engaging in conduct which is likely to mislead or deceive persons into assuming that you are selling our client’s product.

    The letter concluded with this paragraph:

    “We require your reply by 4 pm Wednesday, 17 July 2002 failing which our client shall take such further action it considers appropriate, and reserves the right to commence legal proceedings without further notice to you.”

30. Top Class submits that this letter shows that Perfection Fresh knew from 8 July 2002 that Top Class was selling tomatoes by reference to the name “grape tomatoes”.  There is affidavit evidence on which Perfection Fresh relies as explaining away the letter.  The affidavit is generally to the effect that the instructions given were only that Top Class was known to be offering for sale in the future.  But however one regards the letter, Perfection Fresh at least understood that Top Class was already offering for sale in the future in a manner which, according to its case, would infringe its supposed trade mark (in fact there was no registered trade mark). 

31. Top Class replied on 10 July 2002, denying any wrongdoing, and, in substance, asserting that the expression “grape tomatoes” was merely descriptive.

32. On 12 July 2002 Perfection Fresh wrote to Top Class and complained that it was passing off its product as the product of Perfection Fresh.  Perfection Fresh’s letter referred to the goodwill it had built up in “the name”.  A particular concern expressed in the letter was that Top Class’s product was inferior to that of Perfection Fresh.

33. There was a lapse of time until 6 September 2002 when Top Class wrote to Perfection Fresh’s trade mark attorneys stating that Top Class proposed, from 1 November 2002, to market a variety of grape tomatoes to be called “Honey Sweet Grape Tomatoes”.  The letter invited the trade mark attorneys, if they had any concerns, to write to Top Class within 14 days, otherwise Top Class would implement its marketing intention “with your consent”.

34. On 16 September 2002 Baldwin Shelston Waters replied, again objecting to any use of Perfection Fresh’s “GRAPE TOMATO trade mark, or any mark which is substantially identical or deceptively similar to that trade mark”.  The letter asserted that the use of the expression “Honey Sweet Grape Tomatoes” would be damaging to Perfection Fresh’s goodwill and reputation in respect of its “GRAPE TOMATO trade mark”.   The letter threatened that if Top Class continued with its plan, Perfection Fresh would have no option but to take appropriate action to protect its rights and reputation in respect of its grape tomato trade mark and product.

35. Top Class replied on 18 September 2000 referring to the fact that Perfection Fresh had never provided any proof that a trade mark existed, and stating that Top Class would use a brand clearly labelled “Honey Sweet” which, it asserted, could not give rise to confusion “with the Perfection brand name”.

1. On 26 September 2002 Baldwin Shelston Waters replied, referring to Top Class’s invitation to them to proceed with a legal action against Top Class.  Nonetheless, they engaged in debate in the letter with a view to persuading Top Class to hold its hand.  In particular, the letter pointed out that trade mark rights could arise, not only through registration, but also through use.

2. The last letter in the series was one from Baldwin Shelston Waters to Top Class dated 15 October 2002 noting that that they had not had a reply to their letter of 26 September 2002, of which an additional copy was enclosed.

3. There was a telephone conversation on 16 October 2002 between Mr John Simonetta and Mr Chiefari.  There is some dispute as to some of the contents of the conversation but at least it is clear that Mr Chiefari said he wished to sell tomatoes using the name “grape tomato”.  Mr John Simonetta protested, referring to the hard work which Perfection Fresh had undertaken in opening up the market in Australia for grape tomatoes.

4. I have no doubt that the more substantial sales by Top Class have occurred only quite recently.  Perfection Fresh relies on a number of affidavits which were filed in reply by various sellers in the market who say that they have seen Top Class’s product only in the last few weeks, that is, in December 2002.  Indeed, Mr Chiefari’s own affidavit is to the effect that its sales have taken off only in the last month or so.  But there has been, nonetheless, an element of delay because it was made quite clear in July, or September at the latest, that Top Class did intend to use the expression “grape tomatoes”.  Perfection Fresh could then have sought quia timet relief.

   Balance of convenience

5. The last matter to which I should turn is that of the balance of convenience.  Mr Chiefari deals with this matter in paragraphs 20 to 23 of his affidavit which are as follows:

   “20.     I presently have arrangements in place under which nurseries are growing some 10,000 seedlings of grape tomato plants on my behalf to sell to growers.  I have placed orders for a further several thousand dollars of grape tomato seed from the United States to place with nurseries in order to ensure a continuous supply of seedlings to growers.

   21.      Top Class Fruit has already expended in excess of $15,000 in packaging and labelling of its SWEET KISS grape tomatoes, which includes the variety description ‘grape tomatoes’ on that packaging.  Furthermore, I estimate that it would take at least 21 days to have any new packaging and labels produced were Top Class Fruit required to do so.  In the intervening period, it is likely that the shelf life of the grape tomatoes would have passed and the tomatoes would be no longer vendible.

   22.      I have also made arrangements with EAN Australia in relation to the bar coding for the SWEET KISS grape tomatoes packaging to supply such products to Coles Supermarkets, as stipulated by Coles Supermarkets.  Now shown to me ... is a copy of the ‘bar code verification report’ for the SWEET KISS grape tomato packaging from EAN Australia.  As that barcode includes the product description ‘grape tomatoes’, it would be necessary to arrange for a new bar code to be filed and processed by EAN Australia in the event that Top Class Fruit was prevented (during any interim period) from using the words ‘grape tomatoes’.  I understand that it may take up to 4 to 6 weeks to obtain a new bar code, and for the new coded product to be added to the Coles Supermarkets, particularly given the interruptions during and pressures of the Christmas/New Year holiday season.  This would lead to not only loss of sales but also considerable embarrassment and disruption in commercial relations with an important major client of Top Class Fruit.

   23.      In my experience, the latter half of December, covering the Christmas and New Year festive season, is one of the busiest business periods for the fresh produce industry in Australia due to a significant increase in consumption of fresh produce during the festive season.  In my experience, sales during this period triple or quadruple the usual amount of sales during the year.  Any interim order preventing the use of packaging or any references to the words ‘grape tomatoes’ by Top Class Fruit is likely to have the effect of Top Class Fruit being unable to sell any grape tomato products during this important period as it would not have the time or resources during this extremely busy period to package and meet existing orders.  Any such delay will result in lost orders for grape tomatoes and a negative effect on the business relationships that Top Class Fruit has with its customers for failing to meet such orders during a very important period.”

6. There has been evidence filed on behalf of Perfection Fresh seeking to detract from some of this evidence of Mr Chiefari.  In effect, it is said that Mr Chiefari overstates the disadvantages to Top Class.  It may be that there is some overstatement, but on this interlocutory application I accept that there will be loss, inconvenience and disruption to Top Class, even if it were required to cease its activity only after using up its stock on hand.

   CONCLUSION

7. In an application of this kind, a balancing exercise is involved.  I emphasise again that the only question before me is what is the appropriate régime in all the circumstances from now down to the hearing.  Having regard to my misgivings based on the existing evidence as to trade mark use, the element of delay and the balance of convenience, taken together and considered as a whole, there should not be an interlocutory injunction but there should be a tight undertaking by the respondents to Perfection Fresh and to the Court to make, keep and expose for inspection by or on behalf of Perfection Fresh, records of purchases and sales.  There will be orders accordingly.

I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.

Associate:

Dated:             6 January 2003

Counsel for the Applicant:	F M Douglas QC and D T Kell
Solicitor for the Applicant:	Baldwin Shelston Waters Law
Counsel for the Respondent:	R Cobden
Solicitor for the Respondent:	Sprusons: Solicitors
Date of Hearing:	19, 20 December 2002
Date of Judgment:	24 December 2002