Posture Slat (Aust) Pty Ltd v Bedco Pty Ltd
[1995] FCA 317
•19 May 1995
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION No VG 466/92
POSTURE SLAT (AUST) PTY LTD
Applicant
BEDCO PTY LTD
First Respondent
-and-
ADRIAN MORTON
Second Respondent
Coram: Olney J
Place: Melbourne
Date: 19 May 1995
REASONS FOR JUDGMENT
The application and statement of claim in this proceeding were filed on 1 December 1992. Originally there were two applicants, the second being Wentworth Furniture Company Pty Ltd (Wentworth). The respondent entered a conditional appearance on 5 February 1993. No defence has ever been filed. Pursuant to the order of a judge, the parties engaged in mediation discussions before the Registrar on 2 occasions between February and June 1993. No resolution was achieved.
On 5 August 1993 Wentworth was given leave to discontinue on condition that it paid the respondents' costs. The proceeding has since been conducted by Posture Slat (Aust) Pty Ltd (the applicant).
On 13 August 1993, the respondents, without admission of liability, gave an undertaking to which detailed reference will be made hereunder, and the applicant was given leave to discontinue. The Court ordered that the question of what order (if any) should be made as to the costs of the proceeding be adjourned for hearing at a later date.
The matter was fully argued before me on 8 May 1995. The applicant sought an order that the respondent pay its costs whereas the respondents submitted that there should be no order for costs.
It is necessary to refer briefly to the pleadings and to the facts of the case.
The applicant claimed to have acquired a substantial, exclusive and valuable reputation and goodwill in relation to the manufacture, promotion and sale of bedding products and adjustable beds under and by reference to the name and mark "Posture Slat". It complained that on 18 July 1992 the first respondent caused to be published in "The Age" an advertisement which offered for sale adjustable beds under and by reference to the name "Postureslat" which products had no connection, affiliation or association with the respondent or its business. The applicant pleaded contraventions of ss 52, 53(a) and 53(d) of the Trade Practices Act and passing-off. The second respondent was said to have aided and abetted, and been knowingly concerned in, the first respondent's conduct. Declaratory and injunctive relief and damages were sought against both respondents.
Affidavit evidence filed on behalf of the applicant for the purpose of the argument in relation to costs indicates that following publication of the advertisement the managing director of the first applicant one Carr contacted the second respondent by telephone complaining (apparently in forceful and somewhat inappropriate language) of the publication of the advertisement. On the same day the first respondent sent the following fax to Carr:
DATE:18/7/92
TO: REX CARR
FAX NUMBER: 03 457 5540
TOTAL PAGES: ONE
--------------------------
MESSAGE:
Following your telephone call to ourselves at 3.50pm on the 18/7/92 and having regard to your serious allegations we have re-examined our file and find no basis for you to have made the claims that you:
Own, and have owned the trademark Postureslat for the past ten years.
That we have no right to use the Trademark.
That you will see us in jail.
Our Trademark search shows that Woodstock furniture P/L, of 115 Russell St Rosewater SA 5013 applied for the Trademark Postureslat on 17 March 1982 and that application lapsed on 8 November 1984.
The relevant file number being 20 372 976.
As the current applicant proprietors of the Trademark Postureslat file number 580617 we are persuing(sic) all the rights and privileges accorded us in the course and conduct of our business affairs.
Your claim that you have owned the Trademark for ten years appears to have no basis in fact.
Your claim that you will see us in jail is viewed in the most serious terms and having regard to the foregoing you are requested to withdraw your remark in writing immediately.
If, as you have indicated, are using the word Postureslat as a Trademark covered within class 20 of the Australian Patent, Trademarks and Designs Act for goods or services related to any Bedding/Mattress/Adjustable beds then we demand that you cease to do so at the date and time of transmission given at the head of this facsimile and advise us in writing that you have complied with that demand at the earliest moment.
Yours sincerely,
BEDCO Pty Ltd.
Carr thereupon consulted a patent attorney who wrote at some length to the respondents on 22 July 1992. After canvassing certain factual matters the letter set out the following demands.
In view of the above matters we are instructed to demand that you immediately:
Cease marketing, selling, displaying and promoting furniture and bedding products in association with the name or trade mark POSTURESLAT or any deceptively similar name or trade mark, including immediately cancelling any and all advertisements using that trade mark which may have been ordered or arranged.
Cease marketing, selling, displaying and promoting furniture and bedding products in association with the name or trade mark MICRO-CELL or any deceptively similar name or trade mark, including immediately cancelling any and all advertisements using that trade mark which may have been ordered or arranged.
Cease marketing, selling, displaying and promoting furniture and bedding products in association with the name or trade mark POSTUREMATIC or any deceptively similar name or trade mark, including immediately cancelling any and all advertisements using that trade mark which may have been ordered or arranged.
Immediately arrange for all stock of the furniture and bedding bearing on labels, swing tickets, packaging or in any other way having associated therewith any of the three trade marks referred to be withdrawn from sale and any orders outstanding to be cancelled.
Advise us in writing of the extent to which the three trade marks have been used in relation to the goods including:
(a)quantities of furniture and bedding that have been promoted and sold in association with each of the trade marks referred to,
(b)information as to whom each of the items referred to in paragraph (a) above have been sold and delivered,
(c)information as to selling prices for each of the items of furniture and bedding referred to in paragraph (a).
Advise in full the names and extent of advertising in association with each of the trade marks including:
(a)where, when and what advertisements which include each of the trade marks, have been placed,
(b)what promotional material bearing each of the trade marks has been produced, and when and to whom has such promotional material been sent, including particularly material sent to traders in the relevant industry.
You agree to undertake corrective advertising of a content form and timing acceptable to our client in "The Age" newspaper, by direct trade mailings, and in other ways necessary to rectify
misrepresentations, deception and confusion caused by your activities referred to.
You agree to pay damages or profits or other adequate compensation to our clients for the infringing activities, the nature and level of such compensation to be determined in the future and acceptable to our clients.
You immediately withdraw trade mark application Nos. 580,615 for the trade mark POSTUREMATIC and 580,617 for the trade mark POSTURESLAT and provide us in writing proof of your withdrawal request to the Trade Marks Office.
Your full reply in writing and signed by an identified signatory in relation to demand Nos. 1, 2, 3, 4, 7, 8 and 9 is required by twelve noon Friday 24 July 1992. In relation to demand Nos. 6 and 7 we require your agreement to provide the listed information and particulars by the same deadline, the details and particulars themselves to be provided within a reasonable time thereafter.
If full and unconditional compliance with these demands is not forthcoming by the indicated deadline, further action to restrain your infringing activities as may be advised will be taken without further notice.
The first respondent replied by a letter which was dated 18 July 1992 but which is accepted in both sides as having been sent and received on 24 July 1992. The letter was as follows:
DATE:18/7/92
TO: Patent Attorney Services
ATTENTION: Michael J. Grant
FAX NUMBER: 03 890 1337
SENT BY: Adrian Morton
YOUR FAX REF: 22 July 1992
TOTAL PAGES: ONE
---------------------------
MESSAGE:
Thank you for your facsimile dated 22nd July 1992.
As you would know, the mere registration of a business name carries no rights to apply the same name as a trade mark.
Do you imply in page 2 paragraph 2 that your client/s are applying the business name Posturematic as a trademark?
Does this form the basis upon which you make the demand number 9 that we withdraw the POSTUREMATIC trademark application?
On the information supplied by yourselves to this point their (sic) appears no basis for us to do so, and we advise that in the absence of anything else to consider by yourselves that you note that we will act to protect and preserve our trademark application POSTUREMATIC should any party breach our rights under the Act. Your advice regarding POSTURESLAT is new material to us, and we will be investigating your claims, we are not in a position to comment fully by your timeline 12 noon Friday 24 July 1992, however we will suspend
any use of the mark for seven days as an interim measure, but please note that our actions to date are strictly in accordance with reasonable business acumen in that our search of the Trade Mark records has shown this as a lapsed mark, our application has been accepted and allocated a number, and has only thereafter been used in the normal course of business. We will write to you again at the end of that investigation or within seven days.
MICRO CELL is both a generic and commonly used term which describes the construction of insulation materials including polyurethane foams, polystyrene etc, with the possible additional usage of the words open or closed cell to fully describe the material construction, and in the absence of examiners reports or something to the contrary, it is most unlikely in our view that the words micro cell will ever become a registered trade mark and we have not used the words in anything other than a descriptive form.
Yours sincerely,
BEDCO PTY LTD.
On 27 July 1992 the patent attorney wrote to the applicant advising that as the first respondent had failed to respond to his demand, the applicant should consult solicitors in relation to the matter.
It is common cause that on 27 July 1992 the first respondent did in fact write to the patent attorney and that the letter was never received. The text of the letter was as follows:
BEDCO Pty Ltd
Patent Attorney Services
26 Ellingsworth Parade
Box Hill Vic 3128 27/7/1992
Dear Sirs,
We believe there has been a genuine mistake and the use of the word Postureslat by ourselves has now ceased.
Answers to your questions are:
1. Yes.
2.Used in descriptive form only.
3.No.
4.Nil bearing Postureslat.
5.a) First test advertisement
b) Nil.
c) Not relevant. Not sold.
6.a) One ad, 18 July 1992, Age, Small point, Single column x 6cm.
b) Nil.7.The advertisement was in effect free publicity.
Regarding Posturematic, we say absolutely No to withdrawing our application. Regarding Postureslat, we have ceased use of the words as stated above. The application should lapse automatically or be rejected by the Trade Marks examiners.
Yours sincerely,
Adrian Morton.
It is also common cause that no other communication took place between the parties until the application was served.
On 25 January 1993 the respondents' solicitors wrote to the applicant's solicitors at length. The letter included the following:
We have had an opportunity of discussing this matter with Mr Morton on behalf of the respondents and have obtained the following information:
The secondnamed respondent personally searched the Trade Marks Office records in June 1992 in relation to the trade mark 'Postureslat' ('the Mark') and finding no current registration in respect of that work, proceeded to lodge an application;
Subsequently in July 1992, the firstnamed respondent placed a small advertisement in the Melbourne Age to test the market;
Apart from responses from Mr Carr of your clients, the advertisement only attracted one other response being a general enquiry which did not result in any sale;
Until contacted by Mr Carr of your clients and subsequently Patent Attorney Services, the respondents were ignorant of any rights which might attach to the Mark;
Upon receiving clarification of the situation, the respondents admitted by letter dated 27 July 1992 that there had been a genuine mistake and stated that all use of the word 'Postureslat' had ceased.
The respondents have no interest in using the Mark in the future, as it was only by an oversight and in ignorance of any rights that the applicants may have that the word Postureslat was displayed in a single advertisement in the first place. The firstnamed respondent has never used by the Mark on any of its products or in any manner other than that stated above;
The respondents have clearly not received any profits through the use of the Mark.
In light of the above, it is clear that even if the firstnamed respondent infringed your clients' rights (which is denied), our clients have ceased to engage in any activity with respect to the word 'Postureslat'. If anything, the firstnamed applicant has merely sought to exploit the situation by reason of the distribution of a 'Warning Notice' to clients dated 30 July 1992. We have
briefly viewed a copy of that notice and consider that it makes a number of misleading and deceptive statements which we will address in due course should this matter proceed. In our view, your clients could not recover damages or an account of profits since the respondents have not made any profit nor caused damage to your clients.
...
In order to resolve this matter once and for all, we are instructed to undertake on behalf of the respondents, without any admission as to liability, that:
Bedco Pty Ltd, its directors, servants, agents or otherwise howsoever, will not in the future use the name, word or mark 'Posture Slat' or any substantially identical or deceptively similar name, word or mark in connection with the supply or promotion of adjustable beds.
Subsequent telephone conversations between the respective solicitors revealed that it was the applicant's position that the letter dated 27 July 1992 was never received. A copy was sent to the applicant's solicitors on 26 January 1993. The applicant's solicitors responded by letter dated 28 January 1993 stating that the undertaking offered by the respondents in the letter of 25 January 1993 was unacceptable. An undertaking in the following form was sought, namely that the first and second respondents by their solicitor undertake to the Court that they will:
not, whether by themselves, or through the firstnamed respondent's directors, officers, servants or agents or otherwise howsoever:
1.1carry on any trade or business as a manufacturer or vendor of beds, bedheads, bedbases or mattresses or any such other similar trade or business under or by reference to any name or mark which includes the words "Posture Slat" or any word or words misleading or deceptively similar thereto;
1.2represent in the course of trade or business as a manufacturer or vendor of beds, bedheads, bedbases or mattresses or any other similar trade or business thereto or in connection with the promotion by any means for supply or use of the same that such trade or business has the sponsorship or approval or is affiliated with the firstnamed applicant;
1.3pass off or enable to be passed off the business or goods or any business or goods of the firstnamed respondent as or for the business or goods of or business or goods
approved by or associated with the firstnamed applicant; and
1.4infringe Australian Registered Trade Mark No A392,589 and in particular not use the Trade Mark "Postureslat" or any words, names or marks substantially identical or deceptively similar thereto in the course of trade on or in relation to any of the goods in respect of which the said Registered Trade Mark is registered.
Swear a Statutory Declaration to be provided to us attesting to the facts that:
2.1the advertisement published by the firstnamed respondent in the Melbourne Age on the 18th July, 1992 was the only use of Trade Mark No A392,589 made by them;
2.2there were no invoices, signs, cards, other advertising material or packaging of any kind or any other documents of any kind printed or in existence bearing any company name, business name, style, Trade Mark, name or device that includes the words "Postureslat" or any word or words substantially identical or deceptively similar thereto printed by your client; and
2.3there were no sales of any products by your client sold by reference to any company name, business name, style, Trade Mark, name or device that includes the words "Posture Slat" or any word or words substantially identical or deceptively similar thereto; and
Agrees to pay our client's taxed costs of this proceeding.
Upon such undertaking being given, the applicant would agree to have the proceeding struck out with no further orders.
It may be observed at this stage that the complaint in paragraph 10 of the statement of claim was that the first respondent had published an advertisement which offered for sale "adjustable beds under and by reference to the name "Postureslat" and that the primary declaration sought in the application was that the conduct "described in paragraph 10 of the statement of claim" contravened the relevant sections of the Trade Practices Act. The undertaking offered in the first respondent's letter dated 25 January 1993, insofar as it related only to adjustable beds appears to have been directed
specifically to the only matter of substance complained of in the statement of claim.
The first directions hearing was on 9 February 1993. After the circumstances of the case were explained Sweeney J ordered that the matter be referred to the Registrar for mediation.
On 12 February 1993 the respondents' solicitors wrote to the applicant's solicitors in these terms:
Dear Sirs,
Bedco Pty Ltd & Anor ats Postureslat Australia Pty Ltd and Wentworth Furniture Co Pty Ltd
We refer to the extensive discussions between Antony de Jong of our office and Bruce Caine, counsel for the applicants on 9 February 1993.
As you are aware, Sweeney J has directed that the case go before the Registrar for mediation. In order that further costs not be needlessly incurred, we reiterate that our clients are prepared to agree to confidential terms of settlement on the following basis:
The respondents give an undertaking, without any admission as to liability, that they will not in the future, whether by themselves or through the firstnamed respondent's directors, servants, agents or otherwise howsoever, without the consent of the applicants, use the name, word or mark 'POSTURESLAT', or any substantially identical or deceptively similar name, word or mark in connection with the supply or promotion of adjustable beds, beds, bed heads, bed bases or mattresses or any other similar trade or business.
The secondnamed respondent will swear by affidavit or statutory declaration as to the items in 2.1, 2.2 and 2.3 in your letter to us dated 28 January 1993 which affidavit will confirm that the respondents hold no copies of the advertisement placed in The Age on 18 July 1992 or bromides relating thereto.
The respondents will pay an amount of $2,500 towards your clients' costs in this matter in full and final settlement of the proceedings and solely in the interests of achieving a commercial resolution.
Based on our discussions with Bruce Caine, we understand that your client presently does not accept our client's offer of contribution towards your clients' costs notwithstanding that the other matters are agreed in principle. We have made enquiries of our independent costs consultants and on the basis of their advice, we consider that our clients' offer is generous in the circumstances.
If your client has incurred unnecessary additional costs in this matter, we remain of the view that such costs could have been avoided had there been any communication on behalf of the applicants after our client's initial response to Patent Attorney Services. Even if the breakdown in communications suggested on behalf of the applicants is accepted by the court, we are yet to receive any explanation of your conduct in commencing proceedings in the face of our clients' initial facsimile to Patent Attorney Services and in the absence of a letter of demand from you. Further, since our client has received notice of these proceedings, it has reiterated that its use of the mark occurred in an isolated incident and also reiterated its undertaking not to repeat the conduct complained of. To ensure that there can be no misunderstanding of our client's position, it has also withdrawn its trade mark application.
In relation to the assertions in the third paragraph of your letter dated 28 January 1993 we confirm our advice to Mr Caine that there has only ever been a single telephone conversation between the officers of our respective clients and that a copy of your clients' 'Warning Notice' to the industry was not in fact obtained by our clients until after the commencement of the proceedings.
In view of the above, please advise us whether your clients will reconsider their position and accept our clients' settlement proposal. We are instructed that this proposal is to remain open to be accepted until 5.00pm on 16 February 1993. After that time our clients' offer will lapse and our clients will look to the applicants for payment of their costs associated with the continued defence of this matter.
The applicant's solicitors replied by letter dated 17 February 1993 as follows:
Dear Sirs
Re: Postureslat Australia Pty. Ltd. & Anor v. Bedco Pty Ltd & Anor
We refer to your facsimile letter dated the 12th February 1993 and are instructed that our clients accept Items 1 and 2 of the proposed Terms of Settlement offered by your client, however do not accept the sum of $2,500.00 as full and final settlement of their costs.
We note that you have made enquiries of your costs consultants and consider the offer generous in the circumstances. Our client is prepared to accept its assessed costs through taxation in full and final settlement or alternatively the sum of $4,000.00 as was offered by Counsel at the first Directions Hearing.
Failing acceptance of our client's offer regarding costs, our clients and ourselves shall attend the Mediation at 9.00am on the 18th February 1993. If that Mediation is unsuccessful in resolving the issue of costs, we suggest that your client offer the undertakings and the Statutory Declaration to the Court and leave the issue of costs to be determined by the Court on an appropriate date to be fixed by the Court.
Other negotiations relating to proposals to settle the matter took place subsequently but did not prove to be fruitful.
Apart from a consent adjournment on 16 July 1993, the matter next came before the Court on 5 August 1993 when Wentworth was granted leave to discontinue and the matter was adjourned to 13 August 1993. On 13 August 1993 the applicant was given leave to discontinue upon the respondents undertaking by their Counsel, without any admission of liability
... by themselves, their servants and agents to refrain from using the name, word or mark 'POSTURESLAT' or any other names, words, marks, logos or devices substantially or deceptively similar to the name, word of mark 'POSTURESLAT' in connection with the supply and promotion of beds, adjustable beds, bed-heads, bed bases or mattresses or other similar trade or business:
A substantial part of the hearing on 13 August 1993 involved argument as to whether the respondent should provide security for the respondents' costs of the hearing on the question of costs. The respondents had raised the question of security in their letter of 25 January 1993 but the applicant refused to provide security. The respondents' subsequent application was unsuccessfully opposed by the applicant. On 13 August 1993 Ryan J ordered the applicant to provide security in the sum of $1500 which it did on 23 August 1993.
The Court's power to make an order for costs is beyond question. It is a power which lies within the discretion of the Court to exercise. Such discretion will be exercised judicially. In the ordinary course, costs will follow the event, but in a case such as this in which the claim has been compromised the ordinary rule can have no application and it is for the Court to assess the relative merits of the
competing claims and to make such order as the justice of the case requires.
The following matters are in my view relevant. After receipt of the respondents' letter (wrongly dated 18 July 1992) on 24 July 1992 in which the respondent indicated that it would investigate the claim in relation to Postureslat and would write again within 7 days, the applicant's patent attorney did not bother to wait the 7 days, or to indicate that such a delay was unacceptable but rather after 3 days he wrote to the applicant recommending that action be taken. Despite this haste, nothing more was done for over 5 months until the application was filed without further demand or warning. Given the conciliatory tone of the letter received on 24 July 1992 the applicant's conduct in commencing proceedings without further demand or notice was in my opinion unreasonable. There is every reason to believe, that had the respondents been approached before litigation was instituted, the matter would have been resolved by negotiation. Indeed, that is what ultimately occurred. The only matter left unresolved had to do with the costs of the proceedings, a matter which would not have been an issue had the applicant acted more reasonably.
Despite the assertions of the applicant's Counsel to the contrary, on the material before the Court, it is not possible to say that had the matter proceeded to trial the applicant would have succeeded in obtaining any relief. Given the undisputed facts as to the respondents' very limited use of the name 'Postureslat' as set out in the correspondence there seems to be no basis upon which any award of damages could have been obtained and given the fact that the only infringing conduct complained of was the publication of a single advertisement some 5 months before proceedings were commenced, it is highly unlikely that the declaratory and injunctive relief sought by the applicant would have been granted. At the highest the applicant's case was trivial. The proceedings bordered upon being an abuse of process.
From the receipt of the respondents' solicitors letter of 25 January 1993 it was obvious that the applicant could achieve nothing of substance in pursuing the litigation. Had the matter stopped there it would have been reasonable to expect that the respondents would pay something towards the applicant's costs. The offer contained in the respondents' solicitors letter of 12 February 1993, appears in the circumstances to have been more than reasonable. In my opinion the rejection of this offer was unreasonable and thereafter the applicant's unreasonable conduct, which was demonstrated from the outset, has been persisted in. Its unsuccessful opposition to the respondents' request for security for costs is but another example. The respondents have been required to incur substantial costs which in my
opinion would have been avoided had the applicant's conduct been reasonable.
In my opinion it would not be just or reasonable to now order the respondents to pay any of the applicant's costs. Substantial justice will be done if there is no order for costs.
I certify that this and the preceding 14 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney
Associate:
Dated:
Heard: 8 May 1995
Place: Melbourne
Judgment: 19 May 1995
Appearances:
Mr C. Golvan (instructed by Coltmans) appeared for the applicant.
Mr K. Howden (instructed by McDonald & Charman) appeared for the respondents.
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