Rainbow Custom Products Inc. v B. Lawlor Automotive Pty Ltd

[1986] FCA 126

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	1
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NEW SOUTH WALES DISTRICT REGISTRY	) No. G.105 of 1985
)
GENERAt DIVISION	)

BETWEEN: RAINBOW CUSTOM PRODUCTS

INCORPORATED

Applicant i

m:

BRIAN LAWLOR AUTOMOTIVE

PTY LIMITED

Respondent

AM):	BRIAN LAWLOR AUTOMOTIVE
F'TY LIMITED

Cross Claimant

m: RAINBOW CUSTOM PRODUCTS

INCORPORATED

Cross Respondent

CORAM :	WILCOX J.
W:	27 MARCH 1986
PLACE :	SYDNEY

MINUTE OF ORDERS

2.

THE COURT ORDERS THAT: : . I ,.

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1.        The respondent to file and serve any further amended Cross claim on or before Tuesday 8 April 1986.

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2 .        The respondent in the principal proceeding pay the

applicant's costs of the motion. L.

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

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NOT FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	)
1
NEW SOUTH WALES DISTRICT REGISTRY	1 No. G.105 of 1985
)

DIVISION GENERAL 1

BEXW32N: RAINBOW CUSTOM PRODUCTS

INCORPORATED

Applicant

m: BRIAN LAWLOR AUTOMOTIVE PTY LIMITED

Respondent

m:	BRIAN LAWLOR AUTOMOTIVE
PTY LIMITED

Cross Claimant

m: RAINBOW CUSTOM PRODUCTS

INCORPORATED

Cross Respondent

CORAM:	WILCOX J.
DATE:	27 MARCH 1986
PLACE :	SYDNEY

EXTEMPORE REASONS FOR JUDGMENT

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2.

This matter was last before me on 7 March when I

acceded to an application made by the applicant to strike out

the cross claim as pleaded in the Defence and Cross claim

filed on 15 August 1985. By the Cross claim as it then stood

the cross claimant, the respondent in the principal

proceeding, sought to recover damages in respect of two

matters arising under contracts alleged to have been made

between the parties in 1983 and 1984 respectively. I was of

the view that those claims did not arise out of a common

i	substratum of facts with the claim made in the principal
proceeding and which is within the ordinary jurisdiction of
thk Court.

The claim made in the principal proceeding is brought

under 5.52 of the Trade Practices Act 1974. The essence of

the claim is that the applicant, which is an American company,

markets a product referred to as tinted window film under the

name "Sunshine Window Film" and packaged in a particular way.

It is alleged'that since September 1984 the respondent has

marketed tinted window film under the same name and with the

same packaging. The allegation is that the respondent's

conduct constitutes misleading or deceptive conduct infringing

5 .52 .

The Defence filed admits that the respondent has

supplied tinted window film, although it denies most of the

specific allegations in regard to the method of marketing. By

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para.5 of the Defence the respondent pleads what would appear

to be an alternative defence: that by an agreement made in

about August 1984 the applicant granted to the respondent a

licence to use the name "Sunshine Window Film" in Australia. attaching to the name "Sunshine Window Film" and to the- packaging used by the applicant has thereby been acquired by the respondent and that the applicant is estopped from claiming the relief sought.

I am not sure that estoppel is the appropriate

concept but, as -1 understand it, the essence of the case

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sought to be made by the Defence is that its conduct is not

misleading or deceptive because it is marketing a product

which suggests an association with the product of the '

applicant but with the leave and licence of the applicant, so

that in truth there is an association. Perhaps an alternative

way of saying this is	to say that its conduct is not deceptive
in any way.

It is obviously fundamental to this alternative

defence that the respondent rely upon and prove the agreement

referred to. During the argument on the previous application

I was informed of the fact of an agreement dated 31 August

1984, which dealt with this matter and which also dealt with

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the matter of a credit to be issued by the cross respondent in

favour of the cross claimant in the sum of $23,733 upon the

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4.

* return by the cross claimant to the cross respondent of

certain window film previously supplied and said to be

defective. The previous Cross claim made no reference to the

agreement of 31 August 1984 but I expressed the view that it

was arguable that a claim arising out of that agreement, being

a document central to’at least one of the defences pleaded in ._

the principal proceeding, arose out of a common substratum of

fact with the issues in the principal proceeding. I gave

leave to the respondent to amend the Cross claim within 14

days.

In fact the respondent did file an amended Cross

claim. The amended Cross claim repeated virtually unchanged I . , .

the whole of the material in the earlier Cross claim but added

four new paragraphs, being paras.11 to 14, in which reference

was made to the agreement of 31 August 1984.

The applicant has now made a further application to

strike out the Cross claim, contending that it suffers from

the same vices as the earlier version. It seems to me that in

relation to paras.1 to 10 this is correct. These paragraphs

may perhaps be regarded as background to the agreement of 31

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August 1984, so as to show that there had been disputes I

between the parties regarding two particular orders and to

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explain why it was that in the agreement of 31 August 1984 the

cross respondent should be prepared to agree -- conditionally .

on return of the defective window film	-- to issue	a credit in
the sum of $23,733.

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- Leaving aside whether it would have been necessary to

plead the detail of the previous claims by way of background,

the position is that paras.1 to 10 are not able to be

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construed as merely background material. In terms, claims are ..

made for damages in respect of each of these earlier alleged

breaches of contract -- see paras.5 and 10 respectively. It

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seems t6 me that they are in exactly the same position as the

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matters alleged in the earlier Cross claim, and this is not

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surprising since they are virtually unchanged. There is a

question in my mind whether it is open to the cross claimant i

to bring any action in respect of these alleged earlier -

defaults, having regard to the agreement of 31August 1984,

and I note in that connection that the current version of the

Cross claim opens para.11 with	a statement that that agreement
was :

"By way of settlement of the claims against the

cross respondenty detailed in paragraphs	1 to
10 of this Cross claim."

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I am told from the bar table that this might be erroneous in

relation to the claim in paras.6 to 10 inclusive and it is,

therefore, possible that these causes of action are still

available. If so, I am of the clear opinion that they are

not available in this Court; since they do not arise out of

the same substratum of fact-as the issues required to be

litigated in the principal proceeding. If the cross

claimant wishes to pursue these claims then, regrettably in

my opinion, it has to be sent away to	a different court for
that purpose.

6.

In relation to the matters sought to be raised by

paras.11 to 14 I am of the opinion that some amendment of

the drafting is required. However, a properly drafted Cross

claim which alleges the making of the agreement of 31 August 1984, that is the same agreement as is referred to in para.6 of the Defence, and which refers to two obligations

undertaken by the cross respondent -- one being the grant of

exclusive distributorship, a matter directly arising under

para.6 of the Defence, and the other being an obligation to

pay $23,733 upon return of the defective window film --

would be a matter arising out of a common substratum of

fact. The agreement would have to be tendered in the

principal proceeding if the respondent desires to pursue the

defence raised by para.6, and the claim for the sum of

$23,733 arises directly from this agreement.

It seems to me, therefore, that the overlap of

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factual material is extensive. It is true that one further

matter would have to be proved -- namely, that the defective

window film was, in fact, returned; but the authorities in

the High Court dealing with common substratum of fact do not

suggest that it is essential that there be no other item of

evidence required. Indeed, it is commonplace that there is I

. some additional evidence arising, for example, out of a

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different method of quantifying damage. The essential point

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*is that the matters to be relied upon as the basis of

liability be substantially similar to those which arise in

the princpal proceeding out of which the Court's

jurisdiction arises.

It is not possible to deal with the matter simply

by striking out paras.l.to 10 of the amended Cross claim and

leaving paras.11 to 14 to stand. As I have said, some

redrafting will be necessary, particularly because the

opening words of para.11 would be unintelligible if paras.1

to 10 are struck out. Under those circumstances it is, I

think, appropriate to allow to the respondent one further

opportunity to plead an effective cross claim. I think that

this should be regarded as the final opportunity in that regard, and the amendment should be filed within five

i	working days from the present time. Having regard to the
intervention of Easter, this means that any further amended
cross claim should be filed no later than Tuesday 8 April
!	next.

In relation to costs, Mr Jacobson, on behalf of the

applicant, seeks the costs of the motion. Mr Coombs says

that his client has had some success and that the costs

should be costs.1n the principal. I do not think that this.

would be an appropriate order because the fact is that the

applicant has been forced to make this application in order

to have the pleadings varied so as to accord with the

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8.

. jurisdiction of the Court. It is regrettable that the

,respondent faces a second order for‘costs in relation to a

motion to strike out the Cross claim; but I do not see why

the applicant should be deprived of the costs incurred by it

in making the application which has been successful. I have

no alternative other than to order that the respondent in

the principal proceeding pay the applicant‘s costs	of the
motion. I so order.

I certify that this and the seven ( 7 )

preceding pages are a true copy of

the Reasons for Judgment herein of

his Honour	Mr Justice Wilcox.
Associate:	V l l 7 m A - e A.n--4+mw

Date : 16 April 1986

Counsel for the applicant:	- Mr P Jacobson
Solicitors for the applicant:	Messrs Freehill, Hollingdale
& Page
Counsel for the respondent:	Mr J A Coombs
Soiicitors for the respondent:	Messrs Michie, Shehadie & CO
Date of hearing:	27 March 1986