Red Bull Australia Pty Ltd v Sydneywide Distributors Pty Ltd

Case •

[2001] FCA 1228

•

3 SEPTEMBER 2001

FEDERAL COURT OF AUSTRALIA

Red Bull Australia Pty Limited v Sydneywide Distributors Pty Limited [2001] FCA 1228

N 197 OF 2001

SUMMARY

In accordance with the practice of the Federal Court in certain cases of public interest, I have prepared this brief summary to accompany the Reasons for Judgment that are being delivered today. This summary is necessarily incomplete. The only authoritative pronouncement of my reasons is that contained in the full Reasons for Judgment.

The proceedings brought by the abovenamed Applicant Corporations (Red Bull) against the abovenamed Respondents (Sydneywide and Mr Klimis respectively) are for injunctions (inter alia) to restrain Sydneywide from passing off the product LiveWire in its present packaging in 250ml cans and 330ml bottles as the product of Red Bull, and from misleading and deceiving consumers to such effect, and also to restrain Mr Klimis, the managing director of Sydneywide, from procuring inducing or being knowingly concerned in such conduct of Sydneywide.

Red Bull presently imports into and supplies for sale in Australia a carbonated taurine energy drink under the registered trade mark Red Bull. It has undertaken since about 1997 a substantial marketing and advertising campaign in Australia of its Red Bull product, with placed emphasis upon the unique blue silver and red colour arrangement, and other features, of the packaging of its only container, namely a 250ml cylinder can. In late 1998, Red Bull obtained approval from AQIS for importation of Red Bull into Australia, and the first commercial sales occurred in Australia in March 1999.

There are between 20 and 25 different energy drinks currently available for sale in Australia and sold in 250ml cylinder cans. Red Bull’s entry into the Australian market was highly successful, due at least in large part to the extent of its advertising and promotional campaigns. Sydneywide became a substantial distributor of Red Bull in Australia from early 2000, pursuant to arrangements made in the latter part of 1999. It was also a substantial distributor of other energy drinks and soft drinks in Australia. During the period from late 1999 until early 2001, that is to say, essentially during the period of its business association with Red Bull, Sydneywide planned secretly for the manufacture in New Zealand and importation into Australia of its own intended energy drink. At least by the time of the launch of Sydneywide’s product under the trade mark LiveWire, Red Bull and another product marked as “V” had became by far and away the two leading energy drink products in Australia.

The decision of the Court was that notwithstanding the obvious difference in the trade marks of the two products Red Bull and LiveWire, the packaging get up of LiveWire was so deceptively similar as to have enabled Sydneywide to appropriate part of the goodwill and custom of Red Bull into the marketplace for energy drinks. In reaching this conclusion, the Court drew the inference that Sydneywide, under Mr Klimis’ direction and decision-making, intentionally designed a packaging label which “sailed too close to the wind” in its endeavours to gain, at virtually no cost to Sydneywide, the benefit of Red Bull’s massive advertising and marketing campaign conducted over the preceding two or three years.

The consequential remedies of the Court were withheld however from Sydneywide’s 330ml bottled product LiveWire, as distinct from its 250ml can product. That was because the Red Bull promotion and merchandising of its product has been confined to the shape and size of the containers for most energy drinks, namely the 250ml can.

CONTI J
3 SEPTEMBER 2001

FEDERAL COURT OF AUSTRALIA

Red Bull Australia Pty Limited v Sydneywide Distributors Pty Limited [2001] FCA 1228

TORT – passing off – imported energy drink product only in cans widely advertised and promoted in Australia by applicants prior to distribution – first respondent appointed non-exclusive distributor in Australia of applicants’ product – second respondent the managing director of the first respondent – first respondent already a distributor of other brands of energy drinks and also of non-alcoholic drinks generally – preparations made by respondents for packaging and launch of competitive energy drink during time of appointment of first respondent as non-exclusive distributor for applicants without disclosure to applicants – whether first respondent passed-off its product for that of the applicants by reason of packaging of both can and bottle containers - dominance of blue, silver and red hue on both products – relevance of arrangement and extent of use of colour combinations - canned products of same shape and size - relevance of intentional adoption of a rival’s get-up – where obvious difference in brand names – importance of looking at totality of the conduct in passing off suits - whether first respondent’s package so designed as to “sail close to the wind” of applicants’ packaging – finding of passing-off in favour of applicants in relation to cans but not bottles.

TORT – joint tortfeasor – whether second respondent as managing director procured or directed the tort committed by the first respondent – second respondent not a one man company.

TRADE PRACTICES – misleading and deceptive conduct arising out of same facts and circumstances – whether second respondent knowingly concerned in misleading or deceptive conduct.

Trade Practices Act 1974 (Cth) ss 52, 53 and 75B

Apand Pty Ltd v Kettle Ship Company Pty Ltd (1994) 52 FCR 474 followed
Australian Woollen Mills Ltd v F S Walton & Co Ltd (1937) 58 CLR 641 followed
Bridge Stockbrokers Ltd v Bridges (1984) 4 FCR 460 followed
BM Auto Sales Pty Ltd v Budget Rent a CarSystem Pty Ltd (1977) 51 ALJR 254 referred to
Cadbury Schweppes Pty Ltd v Pub Squash Co Pty Ltd [1981] RPC 429 referred to
CA Henschke & Co v Rosemount Estates Pty Ltd (2000) AIPC 91-640 referred to
Conagra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 referred to
de Cordova v Vick Chemical Co (1951) 68 RPC 103 followed
Dr Martens Australia Pty Ltd v Rivers (Australia) Pty Ltd (1999) 47 IPR 499 referred to
Fencott v Miller (1983) 152 CLR 570 referred to
Freeman Cosmetic Corporation v Jenola Trial Pty Ltd (t/a South Pacific Cosmetics)
(Jenkinson J, 18 October 1993, unreported) followed
Jones v Dunkel (1959) 101 CLR 298 followed
Kettle Chip Co Pty Ltd v Apand Pty Ltd (1993) 46 FCR 152 followed
Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) 104 FCR 61 referred to
Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231 followed
Montgomery v Thompson (1891) 8 RPC 361 referred to
New South Wales Dairy Corporation v Murray Goulburn Co-Operative Company Ltd (1989) 86 ALR 549 referred to
Office Cleaning Services Ltd v Westminister Office Cleaning Association [1946] 1 All ER 320; 63 RPC 39 (HL) followed
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 referred to/distinguished
Reckitt & Colman Products Ltd v Borden Inc [1990] 1 WLR 491; [1990] RPC 340 (HL) followed
Re Remy Martin Amerique (O’Loughlin J, 19 February 1992, unreported) followed
Schweppes Ltd v Gibbens (1905) 22 RPC 601 referred to
Sony Music Productions Pty Ltd v Tansing (t/a Apple House Music) (1993) 27 IPR 640 referred to
Sterling Winthrop Pty Ltd v R & C Products Pty Ltd (1994) ATPR 41-308 followed
Telmak Teleproducts (Australia) Pty Ltd v Coles Myer Ltd (1989) 89 ALR 48 referred to
Thai World Import & Export Co Ltd v Shuey Shing Pty Ltd (1989) 17 IPR 289 referred to
WD & HO Wills (Australia) Pty Ltd v Philip Morris Ltd (1997) ATPR 41-590 followed
Windsor Smith Pty Ltd v Dr Martens Australia Pty Ltd (2001) 49 IPR 286 referred to
Wingate Marketing Pty Ltd v Levi Strauss & Co (1994) 49 FCR 89 referred to

Blanco-White and Jacob, Kerly’s Law of Trade Marks and Trade Names (12th ed, 1986) at pp. 401-402
Wadlow, The Law of Passing Off (2nd ed, 1995) at pp. 429-430
Webster and Page, South African Law of Trade Marks (3rd ed, 1986) at pp. 450-1

RED BULL AUSTRALIA PTY LIMITED & ANOR v SYDNEYWIDE DISTRIBUTORS PTY LIMITED & ANOR

N 197 OF 2001

JUDGE:         CONTI J
DATE:           3 SEPTEMBER 2001
PLACE:         SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

N 197 OF 2001

BETWEEN:

RED BULL AUSTRALIA PTY LIMITED
FIRST APPLICANT

RED BULL GmbH
SECOND APPLICANT

AND:

SYDNEYWIDE DISTRIBUTORS PTY LIMITED
T/as SYDNEYWIDE BOTTLERS AUSTRALIA
FIRST RESPONDENT

EMANUEL KLIMIS
SECOND RESPONDENT

JUDGE:

CONTI J

DATE OF ORDER:

3 SEPTEMBER 2001

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Pending the making of final orders in relation to the proceedings conducted up to and including the hearing which took place on 28-30 May 2001, the First Respondent by itself its servants and agents be restrained from selling and distributing in Australia any carbonated taurine energy drink in 250ml cylinder cans bearing or containing the present packaging get-up of the First Respondent product marketed under the trade mark LiveWire, and in particular any packaging comprising a combination of the colours red, blue and silver with a diagonal line or lines.

2.Pending the making of final orders in relation to the proceedings conducted up at the said times, the Second Respondent be restrained from being knowingly concerned in or party to, directly or indirectly, any conduct prohibited by Order 1 above.

3.The parties to have liberty to apply in relation to the finalisation of the terms of declarations (if any) and orders to be made by way of giving effect to the terms of the Reasons for Judgment, and to provide submissions in writing in advance of the hearing of any such applications.

4.The Respondents to pay the Applicants’ costs of the proceedings up to the conclusion of hearing of the proceedings on 30 May 2001, other than any costs for which orders have already been made.

5.There be liberty to apply for directions as to the future conduct of the proceedings in relation to such assessment of damages and accounting for profits as may be sought by the Applicants.

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 197 OF 2001

BETWEEN:

RED BULL AUSTRALIA PTY LIMITED
FIRST APPLICANT

RED BULL GmbH
SECOND APPLICANT

AND:

SYDNEYWIDE DISTRIBUTORS PTY LIMITED
t/as SYDNEYWIDE BOTTLERS AUSTRALIA
FIRST RESPONDENT

EMANUEL KLIMIS
SECOND RESPONDENT

JUDGE:

CONTI J

DATE:

3 SEPTEMBER 2001

PLACE:

SYDNEY

REASONS FOR JUDGMENT

The parties, the causes of action and the defences thereto in outline

  1. The First and Second Applicants (referred to hereafter as “the Applicants” or individually as “Red Bull Australia” and “Red Bull GmbH”) are respectively the importer and supplier for sale in Australia since about March 1999 of Red Bull energy drinks, and the manufacturer and wholesaler internationally since about 1987 of energy drinks sold under the trade mark “Red Bull”. The Red Bull product has been advertised and otherwise promoted internationally since 1987, and in Australia since about 1997. The description “Red Bull” where hereafter used may be taken to refer generally to both Applicants, except where inconsistent with the context.

  2. The get-up of the Red Bull product, the packaging whereof takes the form solely of a beverage can of cylinder shape having a capacity of 250ml, is asserted by the Applicants in their amended statement of claim to comprise the following main features:

    ·    blue and silver background with a central element in red;

    ·    a diagonal line slashed across the face of the can;

    ·    a large blue and silver rhomboid shape; and

    ·    a horizontal line across the centre of the can.

  3. Such Red Bull packaging get-up is asserted in the amended statement of claim to have been visible and prominent in the advertising and promotion carried out by the Applicants in relation to the Red Bull product, wherever the same has been displayed for sale, both internationally and in Australia. The Applicants claim to have established substantial goodwill and reputation in relation to the Red Bull get-up, such that any energy drink products incorporating the get-up would signify, or would be likely to signify, to persons in Australia (as well as internationally) that such products are made by or with the license or approval of the Applicants.

  4. The First Respondent (“Sydneywide”) has at least since February 2001 imported into Australia from New Zealand, and has advertised, distributed and sold in Australia, an energy drink packaged in cans of the same shape and size of 250ml cans as those used by Red Bull, and also in bottles of 330ml capacity, under the trade mark “LiveWire”. Relief in the subject proceedings is sought by the Applicants against Sydneywide in relation to both its can and bottle product, notwithstanding that Red Bull is sold only in the can. The Second Respondent (“Mr Klimis”) is the managing director of Sydneywide and an equal shareholder therein with his brother. The Applicants allege that the packaging of LiveWire, both for its canned as well as bottled product, is substantially identical with and deceptively similar to the Red Bull packaging, the LiveWire packaging being said to include the four elements described in [2] above. The major focus of the Applicants’ case has, however, been upon LiveWire’s can rather than LiveWire’s bottle.

  5. The Applicants propound the following causes of action against Sydneywide by reason of its conduct so alleged, being first, contravention of ss 52 and/or 53 of the Trade Practices Act 1974 (Cth), secondly, carrying out of such conduct with the intention of appropriating and taking advantage of the reputation and goodwill of the Applicants in their product by passing off the same as the product of the Applicants, or as a product having the endorsement, approval or sponsorship of the Applicants, and thirdly, breach of certain agreements entered into about 1 February 2000 or 14 February 2000. The latter cause of action was not made the subject of the Applicants’ submissions to the Court, and will not be further referred to.

  6. The Applicants propound the following causes of action against Mr Klimis as Second Respondent, first, of being directly or indirectly knowingly concerned in or a party to the said conduct of Sydneywide constituting contravention of ss 52 and 53 of the Trade Practices Act, and secondly, of engaging in the said conduct of passing-off as a joint tortfeasor.

  7. The Applicants seek consequential relief by way of injunctions, an account of profits and damages. At this present stage of the proceedings, the relief sought by the Applicants is confined to that of declarations and injunctions.

  8. The Respondents respectively join issue upon the allegations the subject of such causes of action, and in that context, whilst admitting that the Red Bull product has been advertised and sold in Australia since about 1999 under the trade mark Red Bull, and further that the Red Bull packaging has a blue and silver background, the Respondents plead that such packaging also exhibits or comprises:

    (i)the trade mark Red Bull in large red upper and lower case lettering in a dominant position set in the middle of the can above a central device;

    (ii)the central device depicting two red coloured bulls charging towards each other against a gold circle;

    (iii)the words “Energy Drink” printed in red upper case lettering below the central device; and

    (iv)a blue and silver check pattern, the horizontal central line of which passes though the device, and the vertical central line of which is not entirely vertical, but is inclined to the diagonal.

  9. Furthermore, whilst also admitting that the product packaging of “LiveWire”, in the form of beverage cans and bottles, has a blue and silver background, the Respondents plead that the LiveWire packaging comprises:

    (i)in dominant feature, the trade mark LiveWire, in large and italicised upper case lettering above the middle of the container;

    (ii)the words “Energy Drink” printed in black upper case lettering across the middle of the container; and

    (iii)a lightning flash device in blue and silver.

  10. The following circumstances concerning the Applicants and their Red Bull product are formally accepted by Sydneywide to be common ground:

    (i)Red Bull Australia, which is incorporated in Victoria, is a partially owned subsidiary of Red Bull GmbH;

    (ii)The Red Bull Group of Companies is one of the largest energy drink manufacturers in the world;

    (iii)The Red Bull product is manufactured in Austria;

    (iv)The Red Bull product is imported from New Zealand for sale in Australia under the provisions of the Trans Tasman Mutual Recognition Agreement made between Australia and New Zealand;

    (v)The Red Bull product is sold in Australia in a slim-line 250ml can incorporating the Red Bell get-up;

    (vi)Private consumption of the Red Bull product is allowed under the provisions of the Imported Food Control Act1992 (Cth);

    (vii)The Red Bull companies are involved in the sponsorship of leading athletes;

    (viii)The Red Bull product is sold in retail outlets which include supermarkets, convenience stores, service stations, cafes, restaurants, night clubs and bars;

    (ix)The Red Bull product is sold in convenience stores and supermarkets and is presented thereby to consumers either unchilled on the shelf, or in refrigerators; and

    (x)Red Bull provides fridges known as barrel fridges, and bar fridges incorporating the Red Bull get-up, to certain retail outlets.

    The matrix of circumstances to the litigation propounded by Red Bull

  11. The Red Bull energy drink is a carbonated taurine energy drink which includes glucuronolactone, caffeine, inositol, niacin, pantothenic acid, and vitamins B6 and B12, as its key ingredients. It is marketed in fifty-five countries in Europe, Africa, the Middle East and America, as well as Australia. The Red Bull packaging is apparently identical worldwide, and the Applicants’ case is that until the arrival of LiveWire, the same was unique, certainly so far as Australia is concerned.

  12. The principal witness called by the Applicants was Mr P J Devereux, the Corporate Projects Manager for Red Bull’s operations in Australia and New Zealand. Marketing and promotional activities concerning the Red Bull get-up have been undertaken in Australia from December 1997 onwards. Private consumption sales of the Red Bull product incorporating the Red Bull get-up began in Australia on 10 December 1997. Between 10 December 1997 and late November 1998, 223 trays of the Red Bull product were sold, each tray containing 24 cans. Sales were made from about those times progressively in New South Wales, Victoria, South Australia, Queensland, Western Australia and the Australian Capital Territory. During 1997 and 1998, free samples of the Red Bull product were provided to sports athletes, and were also provided for other promotional activities undertaken during those years. Such promotional activities involved the distribution of flyers depicting a can bearing the Red Bull get-up to about 500 locations in Sydney and Melbourne from 30 July 1998 to 29 October 1998, 60,000 postcards depicting a can bearing the Red Bull get-up to 350 locations in Sydney and Melbourne from about May 1998 to July 1998, and 16,000 counter-display cards and 1000 coasters bearing the Red Bull get-up from about May 1998 onwards to various bars and clubs in Sydney. So-called “brand ambassadors” introduced themselves to attendees at events and locations and offered samples for consumption.

  13. Other promotional activity undertaken by Red Bull in Australia have included the following:

    (i)colour photographs of a can of Red Bull appearing in the September 1998 edition of Ansett Australia’s domestic inflight magazine “Panorama”, and in the Spring/Summer 1998/1999 edition of “Studio For Men” magazine;

    (ii)motor vehicles bearing the Red Bull get-up driven in Sydney, Melbourne, and Brisbane for promotional purposes from about 1998; and

    (iii)television, cinema and radio advertising, surpassing $5 million in expenditure in the year 2000, and projected to increase above that level in 2001.

  1. Approval from the Australian Quarantine Service for the importation from New Zealand of the Red Bull product into Australia for sale was granted to Red Bull on 18 December 1998. The first commercial sale of a Red Bull can in Australia occurred on 31 March 1999 in the State of New South Wales. Thereafter commercial sales took place in Victoria, Western Australia and South Australia from 7 April 1999, 23 August 1999 and 1 March 2000 respectively. Red Bull’s packaging of its product, as first imported into Australia, is the same as that which was used when the original Red Bull product was launched in Austria in 1987.

  2. The entire focus of marketing and promotion of the Red Bull product has been upon its slim-line 250ml can. Put another way, the fundamental image which is portrayed by its marketing is the Red Bull get-up incorporated into the packaging of such a can. Consumers customarily drink the Red Bull product from the can without a glass, something encouraged by Red Bull promotion. Marketing expenditure in Australia in 1999 and 2000 was substantial, as was and continues to be forecast marketing expenditure in Australia for 2001, particulars whereof are contained in a confidential exhibit. Marketing strategy in Australia, as also worldwide, centres upon four core activities, namely media, event marketing, athletic sponsorship and free sampling. Substantial information in relation to each such marketing activity was provided in evidence. A range of advertising materials used at sponsored or supported sporting and cultural events have included large inflatable replicas of the Red Bull can and a Red Bull tent/starshade. I have already set out in [2] above what the Applicants have pleaded to be the main features of Red Bull’s packaging. Mr Devereux elaborated upon the same in the following terms:

    “51.One of the most prominent and distinctive features of the front panel design of RED BULL can is a steep diagonal line that runs from top right to bottom left. This diagonal thrust is created by the positioning of trapezium shapes made up of alternating blocks of the colours blue and silver. This diagonal thrust is continued around the edge of the can to the rear panel where the detailed text is contained within a single trapezium area with a silver background.

    52.The vertical thrust is counter-balanced by a horizontal line across the centre of the front panel, created partly by the edges of the blue and silver trapezoids in the background and partly by the placement of the brand name text RED BULL in large red letters. The first letter of each of these words is capitalised.

    53.Also positioned in the centre of the can and immediately below the brand name is a graphic device depicting two red bulls charging each other in front of a small yellow circle or disc (the “bull device”). Immediately below the bull device are the words “energy drink” in red capitals. This device further acts to disrupt the vertical thrust.

    54.At the top of the front panel, appearing in very small silver font against the blue background of one of the trapezium shapes, is text describing the basic product, “Carbonated Taurine Drink with Caffeine. Serve Ice Cold”. I consider this text element to be relatively insignificant in terms of consumer recognition of the brand.

    55.At the bottom of the front panel, a thin band of horizontal text appears inside two thin trapezoids. These trapezoids reverse the colour of those immediately above and below them, once again divided at the centre around the diagonal vertical thrust. The thin blue band on the left has silver text superimposed “With Taurine”. The thin silver band on the right has blue text superimposed “Vitalizes Body and Mind”. These text elements, although slightly larger than the text at the top of the front panel, remain, in my opinion, relatively unimportant in terms of consumer visual recognition of the brand. However, in my opinion, the claim “Vitalizes Body and Mind” is likely to play a role in reinforcing the transformational associations indicated to consumers by the brand name RED BULL and the use of the bull device.

    56.The rear panel is made up of a silver background, with a significant amount of small horizontal text detailing product claims, warnings, a nutrition table, ingredients list, source of manufacture and bar code. A section of the text is red and the rest is blue. As mentioned above, the rear panel primarily takes the form of a diagonal trapezoid. Given that products in this category are generally displayed for sale with single facings (ie the product is displayed on a shelf with the front panel facing the consumer) and given the very small font size of the text elements on the rear panel, I consider this entire element to be relatively insignificant in terms of consumer recognition of the brand.”

  3. The evidence supports the claim of Red Bull that it is a leading brand in the energy drink category, indeed one of the two leading and major brands, the other being the “V” brand. Confidential net sales figures have been provided in evidence, the same reflecting the sums paid by Red Bull’s sub-distributors. The product is sold in a variety of outlets including night clubs, bars, supermarkets, convenience stores, service stations, cafes and restaurants. Red Bull’s sales concentration has been thus upon two sales channels, namely licensed premises, where the Red Bull product is sold alongside or together with alcohol, and consumed on such premises, and “off-premise”, meaning thereby retail sales streams other than licensed premises, including so-called “impulse channels” (petroleum sites, convenience stores, takeaways, food bars, milk bars and general stores), and “grocery channels” (supermarkets and other large retail outlets but not corner stores). Such “off premise” outlets are supplied with Red Bull stock by sub-distributors engaged by Red Bull. Mr Devereux asserted that the marketing of Red Bull was targeted to six core groups who are said to regularly need energy, namely drivers, students, workers, athletes, evening drinkers and clubbers. An A C Nielsen survey published on 24 December 2000 shows that Red Bull enjoys market leadership in the grocery and “impulse purchase” sales streams with the two products marketed as “V” (see [19] below), well above the many other competitors in the Australian market, except perhaps for the four “Red Eye” products taken in the aggregate of their respective market shares. An earlier A C Nielsen survey published on 26 November 2000 showed the “V” product ahead of Red Bull, though Red Bull was still well ahead of the next brand “Lift Plus Energy”, though it is to be remembered that the “V” product is also produced in a bottle.

  4. Red Bull has asserted in evidence that few of the competing energy drink brands are available for sale in licensed premises. The Respondents’ product “LiveWire” is sold primarily in convenience stores, and is presently unavailable in supermarket outlets. The extent of its market penetration has not been disclosed in evidence. The Red Bull product distributed through both convenience stores and supermarkets is presented to consumers unchilled on the shelf, or in refrigerators. Refrigerators incorporating the Red Bull get-up, of the kind referred to in [10(x)] above, and other Red Bull point of sale materials, are placed in positions of prominence in stores or night clubs, usually near the counter or bar.

  5. There are between 20 and 25 different energy drinks currently available for sale in Australia and sold in 250ml cans, and a further 10 other energy drinks sold in different sized cans or bottles, though as in the case of LiveWire, for instance, both forms of packaging are used. Such energy drinks differ in their effects from other function energy drinks, in that the latter are said not to provide the same energy benefit as energy drinks so-called which are the subject of the proceedings. Thus in the case of other function energy drinks in the nature of sports drinks, the same are directed to the replacement of fluid, carbohydrate and electrolytes after sustained strenuous exercise, and in the case of other function energy drinks in the nature of refreshment energy drinks, the same incorporate elements of both energy drinks so-called and sports drinks.

  6. A table has been produced in evidence on behalf of Red Bull, showing the ingredients listed in the packaging of inter alia the following energy drinks (not being sports drinks or refreshment drinks), which are available for sale in Australia, namely Red Bull, LiveWire, Professor Head’s Smart Drink, V, IQ, Red Eye and Bull Rush. The testimony of Mr Devereux is that only LiveWire has identical active ingredients to those of Red Bull. Red Bull’s ingredients have already been described in [11] above.

  7. The retail price ranges of certain energy drinks available for sale in Australia, inclusive of five of those referred to in [19] above, has been assembled by Mr Devereux in the following further table which is reproduced below:

Product Grocery (Outlets) Convenience (Outlets)
Live Wire N/A (see [17] above) $2.00 - $2.20
Smart Drink $1.80 - $2.00 $1.80 - $2.00
Red Eye $1.80 - $2.00 $1.80 - $2.00
V $1.80 - $1.90 $2.00 - $2.20
Lift Plus $1.75 $2.00 - $2.20
Red Bull $2.65 - $2.75 $2.85 - $3.20

On 14 March 2001, according to the evidence of Ms Christopher, a Solicitor in the employ of Sydneywide’s retained firm of Solicitors, the following price differences between Red Bull and LiveWire products were apparent in three Sydney convenience stores as follows:

Store Red Bull Can Live Wire Can Live Wire Bottle
Skyline Seafood Takeaway $2.00 $2.30 $2.90
North Sydney Convenience Store $3.00 $2.50 $3.00
City Convenience Store $3.50 $2.20 $3.20

Moreover Mr Scott Carter, Red Bull Australia’s Regional Energiser, found that in the course of his visits to thirteen impulse channels (the meaning of which is explained at [16] above) between January and March 2001, the pricing of energy drink products was not apparent or visible to consumers in ten of such stores.

The sub-distributorship relationship between Red Bull Australia and Sydneywide and the events leading to its termination

  1. As stated in [16] above, Red Bull has supplied its “off premise” outlets by means of sub-distributors which it engages for the time being. One such sub-distributor was the First Respondent Sydneywide, whose managing director at all material times, as stated in [4] above, has been the Second Respondent, Mr Klimis. Sub-distributors were supplied by Red Bull on an order-by-order basis placed in favour of Red Bull as supplier on Red Bull stationery. Since the month of February 2000, Sydneywide commenced the taking of orders for the Red Bull product from “off premise” outlets, and thus the presentation of such orders to Red Bull Australia, and the uplift of product by Sydneywide from Red Bull Australia pursuant thereto, and the subsequent delivery of such product by it to those outlets. It appears that Sydneywide obtained credit terms of sixty days for remitting payment pursuant to such procedural regime to Red Bull Australia for the product so collected and distributed. A presentation had been previously undertaken in or about December 1999 by Red Bull representatives of its product at Sydneywide’s premises in Condell Park, such Red Bull representatives comprising Red Bull’s National Distribution and Merchandising Manager Mr Trevor Carter, and two other Red Bull personnel. Approximately seven Sydneywide personnel had attended the presentation, including Mr Klimis, his father and one of his brothers. Sydneywide was provided with Red Bull promotional material and samples. Mr Klimis estimated the first shipment of the Red Bull product to have arrived at Sydneywide’s premises in late 1999. The purpose of the presentation was said to be to educate Sydneywide sales representatives on the following points of emphasis, first as to the way Red Bull required the product to be sold (for example, the sale of the product based on image and quality of ingredients), secondly, the background to the international Red Bull group of companies, in order to demonstrate the size, history and seriousness of involvement of the Red Bull group globally, thirdly, as to Red Bull’s marketing plans and advertising “spins”, and fourthly, as to the value of the Red Bull brand and its position as a premium product. The first of those points of emphasis was particularly significant, because Red Bull Australia, as apparently in the case of other energy drink suppliers in Australia, was only permitted by law to import its product into this country for private consumption, and it was necessary to ensure that its customers were legitimately engaged in selling only for purposes of private consumption. Hence its advertising and promotional programme was geared to compliance with that import restriction.

  2. By about February 2000, Red Bull Australia had commenced fulfilling orders placed by Sydneywide for the supply of the Red Bull product. There had been a limited number of distributors available to Red Bull up to this time, because many distributors were already distributing other brands of energy drinks. Red Bull’s preference, and its international policy, has been to focus on marketing its brand, and not on itself as physically delivering the same to retain outlets, a policy which it has found to be the most effective.

  3. Sydneywide continued to submit orders for the supply of the Red Bull product until on or about 14 February 2001. During such period of approximately one year of Sydneywide submitting orders and Red Bull fulfilling the same, Sydneywide placed customer orders for more than 1.128 million cans from Red Bull, for a total Red Bull invoice value of $1,727,347.58. Red Bull’s major distribution relationship in Sydney during that yearly period was that which it conducted with Sydneywide. Sydneywide derived a gross profit margin of $4.50 per case of Red Bull for its distribution services undertaken for Red Bull, and as already indicated, was allowed a period of sixty days within which to collect payment from customers and remit the same to Red Bull Australia.

  4. Mr Trevor Carter of Red Bull Australia assisted Sydneywide sales representatives to sell the Red Bull product during the period from May to October 2000, by visiting the market place with them and giving practical merchandising demonstrations, and generally maintaining dialogue with such representatives and monitoring their performance. He claimed to have enjoyed a good working relationship with Mr Klimis, and to have participated in many discussions with him as to the means of increasing the Red Bull customer base by way of improvement of the selling techniques and procedures of Sydneywide’s sales representatives. Mr Carter observed that from about mid-May 2000, Sydneywide’s sales of Red Bull commenced to plateau, and that new business accounts introduced by Sydneywide to Red Bull Australia virtually ceased to occur, despite Red Bull Australia’s introduction of a “one-off” incentive program for Sydneywide’s sales representatives to locate and introduce new accounts.

  5. On or about 2 February 2001, Red Bull Australia first came to hear about the sale of the LiveWire brand of energy drink. Such time may be taken to be that for determining whether or not the Applicants had established the necessary reputation in its get-up for the purposes of its causes of action based upon the tort of passing-off and s 52 of the Trade Practices Act: Cadbury Schweppes Pty Ltd v Pub Squash Co Pty Ltd [1981] RPC 429 at 494 and Thai World Import & Export Co Ltd v Shuey Shing Pty Ltd (1989) 17 IPR 289 at 302. The source of such information was not Sydneywide, which had given no hint to Red Bull Australia of its intention to enter the market with its own product. Mr Scott Carter journeyed forthwith to the Century Tower Convenience Store in Pitt Street Sydney and noticed a LiveWire can stacked immediately adjacent to Red Bull cans. Later on the same day, he observed three LiveWire bottles and three LiveWire cans on display at the Gebara City Convenience Store in George Street Sydney, which he duly purchased. By about the week commencing 12 February 2001, Mr Scott Carter said that the LiveWire energy drink was available for sale in almost all of the convenience stores within the Sydney central business district which he visited. The uncontradicted evidence of Red Bull Australia’s executives is that at no time did Sydneywide give notice to Red Bull of its intention to launch a new energy drink, either with the get-up of LiveWire or at all. There is no evidence of Sydneywide having advertised the launch of “LiveWire”, or of having subsequently advertised the ongoing marketing of the product, at least in the media. But of course, its positioning in the marketplace in Sydney as a substantial sub-distributor of non-alcoholic drinks may well have rendered the outlay of such expenditure unnecessary, or largely so.

  6. By letter dated 14 February 2001, Red Bull’s solicitors asserted inter alia that Sydneywide had gained a special positioning in the energy drink market as a result of its involvement as a sub-distributor of Red Bull energy drinks, and that its commencement of distribution of the LiveWire energy drink, having a get-up strikingly similar to that of Red Bull by virtue of its adoption of the same colour combination, angular blocking and can size, involved conduct which was in the nature of passing off, and was also misleading and deceptive conduct or likely to be so. No allegation was made as to infringement of Red Bull’s trade marks, nor has the same ever since been made. Sydneywide’s solicitors denied such allegations by letter of 16 February 2001, referring to the circumstances that it had already been a distributor of “energy type drinks” additionally to those of the Red Bull brand, and that the size of cans employed in the energy drink market were very similar, and further that the LiveWire name was dissimilar to Red Bull, and further again that LiveWire’s colour configuration was dissimilar in style to that of Red Bull. What the letter did not then say was that Sydneywide never intended LiveWire to be a competitor of Red Bull, something which Mr Klimis later asserted under cross-examination.

    Sydneywide’s prior involvement in the non-alcoholic drink market generally, and the energy drink market in particular, and its planning for and commencement of the production sale and distribution of LiveWire (aside from packaging design detail)

  7. Sydneywide had earlier commenced its involvement in Sydney in the business of distributing beverages, predominantly soft drink products, in about late 1996. In about 1997, it expanded the business by specifically targeting energy drinks, due to the higher margin available from distributing such beverages in comparison with others such as Coca Cola and lemonade, the latter not being energy drinks strictly so-called. Mr Klimis explained his understanding of energy drinks as beverages generally containing ingredients aimed at having a stimulating or boosting effect, being ingredients such as caffeine, B group vitamins, guarana or other herbal ingredients, and that guarana is an added source of caffeine. He asserted that most brands of energy drinks in Australia are generally sold in slimline 250ml cans, and further that most have metallic colours, silver being one of the main colours, and further again that several brands are predominantly blue and silver. Mr Klimis produced in evidence many cans and bottles of energy drinks currently claimed by him as being offered for sale on the Australian market, whereof the majority were sold in slim-line 250ml cans. The cans have been described in [52] below.

  8. Sydneywide began distributing three brands of energy drinks in 1997, namely “Jolt Cola”, “Columbian Cola” and “Feeling Seedy”. By 1998, Sydneywide was distributing other energy drinks, and in addition to manufacturing as well as distributing LiveWire energy drinks as from February 2001, it has been manufacturing and selling “Ice Cool Sodas” (a non-energy drink) and “Ice Cool Water” (which comprises still water). Sydneywide claimed to be one of the largest, if not the largest, independent distributor of beverages in Sydney, and to have been so since about late 1998 or early 1999, being independent in the sense of not being owned or controlled by any major beverage manufacturer. Sydneywide also distributes such products in Victoria, Queensland, South Australia and Western Australia.

  1. At the present time, apart from distributing its own product LiveWire, Sydneywide claimed to be a distributor of the following energy drinks, namely “Black Stallion”, “Bull Rush”, “Columbian Cola”, “Red Eye”, “Feeling Seedy”, “Jolt”, “Liquid B”, “Lipovitan”, “Lucozade” and “Crack” (most of which are included in the list at [52] below), and in addition some seventeen non-energy drinks, including “Coca Cola” and “Schweppes” soft drinks.

  2. Mr Klimis asserted that it was about the year 1997 that he first became interested in the project of Sydneywide distributing its own energy drink in Australia, and such interest was said to be by reason of the high margins involved. There was no reason conceded on his part for disclosure of such interest to Red Bull Australia at any material time prior to actual commencement of distribution of LiveWire. Sydneywide claimed to have been a non-exclusive national distributor of the first energy drink sold in Australia in the slimline 250ml can, namely Black Stallion, from November 1997 to May 1999, and to have become the exclusive distributor of Black Stallion from June 1999 to September 2000. LiveWire was not the first non-alcoholic drink which it manufactured, Sydneywide having manufactured (and sold) a sports drink “ATP Sports Drink” in about mid 1999 for about two months, being a venture said to have been unsuccessful.

  3. Mr Klimis claimed that it was in about November 1999 that Sydneywide set in train its plans to manufacture its own energy drink for distribution in Australia. By this time, Red Bull’s substantial marketing activities had been underway for nearly two years (see [12] above), and the commercial distribution of Red Bull had been underway for about eight months (see [14] above). As in the case of Red Bull, Sydneywide became aware of the shelter provisions of the Trans Tasman Mutual Recognition Agreement concerning importation into Australia of energy drinks produced in New Zealand (see [10(iv) and (vi)] above), notwithstanding restrictions upon manufacture of most energy drinks so-called in Australia. Upon the recommendation of Mr Philip Carter, Sydneywide’s general manager, Mr Klimis enquired of Mr Michael Erceg, managing director of Independent Liquor of New Zealand, a beverage manufacturer with canning facilities in New Zealand for 250ml energy drink cans, as to whether his company would make energy drinks for Sydneywide and export the product to Australia. In furtherance of such plans, Mr Klimis’ father, Mr Harry Klimis, travelled to New Zealand, and thereafter wrote on 25 November 1999, upon a letterhead styled “Harris Enterprises”, as follows:

    “Re: Production of energy drinks

    Firstly, I would like to sincerely thank you for your hospitality and tour of the factory and production facilities, we were very impressed with your operations.

    This letter is to confirm my interest in you manufacturing a range of energy drinks for my company. I am interested in 250ml slimline cans and also preferably 355ml glass bottles.

    The flavour profile I am requiring is similar to Vitalise and/or liquid B with guarana, taurine, caffeine, inositol and glucoronolactone added. Is it possible to send me samples of these, and if the samples are to my expectations, I will immediately proceed with an official order for you to commence production. In the meantime, I will proceed from my end, with designing of graphics. Please advise terms of payment you require also lead time from date of official order delivered to Sydney, Australia, as well the lead time for reorders.
    Your earliest response in this matter would be sincerely appreciated and we look forward to a long and mutually beneficial business relationship.

    Best regards

    Harry Klimis
    Harris Enterprises.”

    Mr Klimis said that his father did not write this letter on Sydneywide’s letterhead “as I was concerned about Sydneywide jeopardising its relationship with Black Stallion by producing a competing energy drink at the time”. That may have been so, but I would infer that Mr Klimis would have been more concerned about Sydneywide prematurely jeopardising its embryo relationship with Red Bull Australia (see again [21] above) for a similar reason, at least until Sydneywide was ready to sell its proposed new product, Red Bull enjoying a much larger Australian market share even by that time, so I would infer, than Black Stallion, and Red Bull having been gearing up its very substantial promotional and selling activities from the times to which I have already referred.

  4. On or about 27 November 1999, Mr Klimis spoke again to Mr Erceg of Independent Liquor and sought confirmation that Independent Liquor would provide Sydneywide’s own brand of finished energy drink product, and on about 27 November 1999, he received from Independent Liquor a response which is Confidential Exhibit EK3. Subsequently on about 12 April 2000, Sydneywide received from Independent Liquor Confidential Exhibit EK4, and on 1 May 2000 Mr Klimis wrote back to Independent Liquor, so far as is material, as follows:

    “Thank you for visiting my warehouse and it was a pleasure to finally meet you in person. After our conversation I am very confident in increasing our business relationship with Independent Liquor with products such as Liquid B and LiveWire…”

    On or about 14 March 2000, Sydneywide lodged a trademark application in Australia in relation to LiveWire for use in connection with its energy drink, and on 27 October 2000, the trademark was registered. What transpired in relation to the manufacture, importation and distribution of Liquid B was not the subject of attention in the evidence, Liquid B’s packaging colour scheme being orange, blue and yellow as disclosed in [52] below.

  5. Earlier in February or March 2000, Mr Klimis met in Sydney with Mr Casey of Independent Liquor. Mr Casey suggested that Mr Frank Scarisbrook could do the graphics for the packaging for the Sydneywide product which Mr Klimis had in mind. At that time, Mr Klimis asserted in cross-examination that “I don’t think colour was an issue”. When asked whether he mentioned Red Bull in conversation with Mr Casey, Mr Klimis commenced his unfortunate and repeated practice of purportedly answering questions the subject of cross-examination with his own question – “Why [would] I want to mention Red Bull in a conversation?” In early April 2000, Mr Erceg visited Mr Klimis at Sydneywide’s Condell Park premises. On about 15 May 2000, Sydneywide received from Independent Liquor the first artwork relating to LiveWire’s packaging, the design of which had been prepared by Mr Scarisbrook. It is apparent from correspondence in evidence that Mr Scarisbrook must have received instructions prior to 1 May 2000 (see letter of 1 May 2000 from Sydneywide to Independent Liquor). According to Mr Klimis, such design instructions were furnished to Mr Scarisbrook by Mr Casey, but that such instructions to Mr Casey were only that he wanted “Something striking using the words LiveWire”. Thereafter until about mid November 2000, many communications took place between Mr Klimis and Mr Scarisbrook until the form and content of the artwork for LiveWire’s packaging was finalised. Over approximately the same period of time, so Mr Klimis’s affidavit evidence inferred, the colour scheme for the LiveWire packaging, both for cans and bottles, evolved and was settled. Mr Klimis did not in his evidence distinguish between the development of the design for the can and the bottle, and presented the same as one design process. Earlier in April 2000, Sydneywide reached agreement with Independent Liquor upon the flavour for LiveWire, after receiving a number of samples made up from various unbranded energy drink mixes. I will return later to the further detail of Sydneywide’s planning for the launch of its product in Australia.

  6. The first shipments of LiveWire arrived in Sydney from New Zealand in late January 2001, and the first sales thereof to the public occurred in early February 2001. A letter claimed to have been sent uniformly to “various customers, notifying them of the introduction of the LiveWire product”, is “Confidential Exhibit EK5”. Letters of introduction to LiveWire were accompanied by a circular as follows:

    “Live Wire Energy Drinks

    250ml slimline can and 330ml glass bottle.

    As you are aware when we came to you originally with Black Stallion in 1999 who in Australia would believe what an impact beverages would have in Australia.

    The proof is now clear that the market has developed and many new energy drinks have been introduced to the market place some with little success others dominant.

    Sydneywide Distributors have developed Live Wire Energy Drink to take advantage of this still growing segment. The graphics on both pack sizes is striking in particular the 330ml bottle, which is sensational using the shrink sleeve and the long neck bottle to ensure fridge attraction.

    Live Wire has been released with a long-term vision to compete with the market leaders and help to grow the energy drink category with a strong alternative brand.”

    (The above reference to 330ml bottle capacity represented a modification to the 355ml capacity originally proposed – see [31] above). Of course, as already mentioned in [16] above, one of the two market leaders was Red Bull, which by then had been pursuing for about four years a substantial promotional campaign, and during the latter part of which time, Sydneywide had been fulfilling the function of what appears to have been that of Red Bull’s main distributor, at least in the Sydney metropolitan area.

  7. LiveWire has been sold in convenience stores such as Seven 11, service stations for instance carrying the BP brand, take-away outlets, milk bars and mixed business stores. Such retail outlets constituted the places with which Sydneywide had built up a strong and reliable distribution relationship from about 1996, to the extent of preferred supplier status in the case of convenience stores and service stations since about 1997. Whether sold in 250ml cans or in 330ml bottles, the LiveWire product is said to be sold mainly from tall glass door refrigerators in which it is exhibited alongside other drinks, usually energy drinks. Sydneywide claims to be selling about as many bottles as cans of LiveWire, the bottles selling in the $2.85 to $3.00 range, though no statistical material or its documentary foundation has been provided by Sydneywide. LiveWire promotional materials have been apparently limited merely to free samples, given away once only, at two different prominent railway stations, and in addition T-shirts, posters and electrostatic fridge stickers have been provided by Sydneywide at point of sale locations.

  8. Mr Klimis deposed to the essence of Sydneywide’s defence to Red Bull’s claims of passing off and misleading and deceptive conduct in the following terms:

    “54.In introducing LiveWire into the market, including choosing the packaging, the ingredients and distributing LiveWire, it has never been my intention or Sydneywide’s to associate LiveWire in any way with Red Bull. No directions have been given by me or the management of Sydneywide to anyone in the company or to anyone outside the company to suggest any association between the two companies or their products. As managing director, I have not received any reports from our customers or consumers that any such association has been represented or made.

    …

    Our direct competitors are ‘V’ and the other energy drinks in our general price range. The Red Bull product sells to consumers at between around $2.85 to $3.20 per can in the same market. In my view, Red Bull is sold as a premium product in the energy drink market. We do not aim to compete in that segment.”

    No statement or assurance to the effect of such assertions were communicated to Red Bull Australia prior to LiveWire’s introduction into the market in Australia, nor prior to commencement of the proceedings. Moreover as will later be seen, Red Bull’s retail prices have not necessarily been marketed generally at a premium (see the discussion for instance at [51] below). Incidentally, such assertions were not corroborated by Mr Klimis’ father and brothers engaged in its business operations, nor by Mr Philip Carter (general manager of Sydneywide referred to in [31] above) nor by any of the New Zealanders identified in [31] and [33] above, namely Messrs Erceg, Casey or Scarisbrook. None of those persons provided any affidavit or viva voce testimony in the proceedings.

  9. In the course of the proceedings, Sydneywide proffered three causes of the cessation of its relationship with Red Bull Australia. One cause was said to be related to the replacement by Red Bull Australia of one of its two distributors in the Sydney Region (the other distributor being Sydneywide); such replacing distributor (Anglo Distributors) was said to have caused a loss of custom to Sydneywide, though no details were given in evidence by Sydneywide. Another was said to be Red Bull Australia’s decision to confine Sydneywide’s outlets of supply to Sydney service stations, and thus to exclude convenience stores as outlets of supply, though when such confinement was effected, and in what circumstances, was not particularised. A third cause was said to be related to Red Bull Australia’s demand that Sydneywide enter into a certain supply agreement, and provide a certain guarantee and indemnity agreement as a condition of ongoing supply, but whether such requirement was in fact implemented, and if so when, is unclear. Whatever were the merits of Sydneywide’s position taken in relation to such alleged issues, Sydneywide had been in any event actively pursuing the establishment of its own energy drink LiveWire since about November 1999, without disclosing such circumstance of potential conflict of interest to Red Bull, and for that purpose had engaged in the design of the labelling of its product containers over the majority of that period of time, being a period of time during which Sydneywide would have been obviously witnessing at first hand significant growth in Red Bull product patronage, against the background of Red Bull’s substantial promotional campaign since late 1997.

    Sydneywide’s design of the packaging for its LiveWire canned and bottled product

  10. In Australian Woollen Mills Ltd v F S Walton & Co Ltd (1937) 58 CLR 641 at 657, the following passage appears from the joint judgment of Dixon J (as he then was) and McTiernan J:

    “The rule that if a mark or get-up for goods is adopted for the purpose of appropriating part of the trade or reputation of a rival, it should be presumed to be fitted for the purpose and therefore likely to deceive or confuse, no doubt, is as just in principle as it is wholesome in tendency. In a question how possible or prospective buyers will be impressed by a given picture, word or appearance, the instinct and judgment of traders is not to be lightly rejected, and when a dishonest trader fashions an implement or weapon for the purpose of misleading potential customers he at least provides a reliable and expert opinion on the question whether what he has done is in fact likely to deceive. In the present case it has caused a prolonged and expensive inquiry into the states of mind, motives and intentions of three people whose combined judgment decided that the company should adopt the trade brand and description complained of. This in turn necessitated an investigation of the steps by which the picture was obtained, considered and adopted and what was said and done by a number of persons in relation to the subject….”

    Subsequently in Office Cleaning Services Ltd v Westminister Office Cleaning Association [1946] 1 All ER 320; 63 RPC 39 at 42, Lord Simonds said to similar effect as follows:

    “Confusion innocently caused will yet be restrained. But if the intention to deceive is found, it will be readily inferred that deception will result. Who knows better than the trader the mysteries of his trade?”

    The first mentioned passage in Australian Woollen Mills has often been cited in Australia in passing off and misleading and deceptive conduct cases involving trade rival disputes, albeit that the context of the passage was a trade mark infringement dispute: see for instance WD & HO Wills (Australia) Pty Ltd v Phillip Morris Ltd (1977) ATPR 41-590 at 44,146 per Davies J; Windsor Smith Pty Ltd v Dr Martens Australia Pty Ltd (2001) 49 IPR 286 at 293 per Sundberg, Emmett and Hely JJ, and Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) 104 FCR 61 at 76-77 per Beaumont, Tamberlin and Emmett JJ. It was doubtless with such long established precepts in mind that Senior Counsel for the Applicants undertook his cross-examination of Mr Klimis, whose evidence in chief concerning the development of LiveWire’s packaging has been thus far initially referred to in [33] above. As there appears, the first design of artwork for Livewire packaging had occurred by 15 May 2000, at the hand of a Mr Scarisbrook, to whom further reference will now be made

  11. As foreshadowed in [31] above, Mr Klimis testified in his evidence in chief that it was in about November 1999 that Sydneywide set in train its plans to establish its own energy drink for distribution in Australia (see again in that regard Confidential Exhibits “EK2” to “EK4”). When cross-examined on that subject, Mr Klimis initially maintained that “… we had the view of launching our own energy drink previous to any discussion with Red Bull”, though he conceded that it was in October 1999 that Red Bull had first approached Sydneywide for the formation of a distribution arrangement between them, and that it was during the following month when he first telephoned Mr Erceg of Independent Liquor in the circumstances set out in [32] above, and when his father visited Independent Liquor’s factory in New Zealand (see [31] above), by which time he would have been doubtless aware that Red Bull was a prominent overseas energy drink product likely to make a substantial impact in Australia. It was only thereafter that the planning of LiveWire's packaging get-up was initiated by Mr Klimis. Mr Klimis further accepted in cross-examination that Sydneywide would not have launched a new energy drink without Sydneywide having had a major input into the package design. Mr Klimis asserted that what Sydneywide briefed Independent Liquor to produce by way of artwork for the packaging of LiveWire was to be “very simple… something that’s very bold, very distinctive”, because its energy drink can would be “… competing with a multitude of brands on the market place” and “fighting for shelf space,” and in that context competing “for facings”; repeated subsequently, his “brief” to Independent Liquor was said to be for “something striking and very bold…”. But as already appears from the discussion in [16] above, the realistic competition or fight for shelf space would have been directed largely at the product of the newly emerging and highly promoted multinational product Red Bull, and at what I would infer to have been then the market leader, namely the “V” product.

  12. Before being referred in detail under cross-examination to Sydneywide’s briefing of Mr Scarisbrook, Mr Klimis accepted, when pressed after a degree of prevarication on his part, that during the period of Sydneywide’s distribution of the Red Bull product of about one year from February 2000 to February 2001, Red Bull Australia supported its own product with “a considerable degree of advertising and promotion”, and that though Mr Klimis claimed to have played no role in the selection of ingredient inputs into LiveWire, he did know that LiveWire listed on its packaging identical nutritional information as Red Bull, that is to say, the same amounts of taurine, glucuronolactone, caffeine, inositol, niacin, pantothenic acid, and vitamins B and B12 (see [11] above). Mr Klimis claimed, however, that Independent Liquor “took it on themselves… to fill that panel up”, and that such “was not of my doing”. Nevertheless Mr Klimis conceded that it was “possibly right” that before Sydneywide “finally signed off on the pack design”, he knew that the nutritional panels of the “final pack design” of the Red Bull and LiveWire cans would be identical. Particularly in the light of the content of Mr Klimis Senior’s letter of 25 November 1999 sent on what appears to have been the feigned letterhead of “Harris Enterprises” (extracted in [31] above), Mr Klimis exhibited some difficulty in offering a credible denial for any input on Sydneywide’s part into the design of the artwork thereof for LiveWire’s labelling and the content thereof.

  1. The Australian authorities which I have thus far reviewed should be characterised as “rare”, or else as having occurred in circumstances where the “failure rate is predicably high”, so Sydneywide contends upon the basis of various text book commentaries. Counsel referred to Blanco-White and Jacob, Kerly’s Law of Trade Marks and Trade Names (12th ed, 1986) at 401-2 where the learned authors stated:

    “It is usually true in some degree that a trader’s goods are recognised as his or their general appearance or ‘get-up’. Accordingly, resemblance of get-up is not uncommonly an ingredient in passing off, and it is possible for imitation of get-up alone to amount to passing off. Such cases of rare, since few traders rely on get-up alone to distinguish their goods, so that trade names and word trade marks are ordinarily present too; and in these days, in this country, a difference in names is enough to warn the public that they are getting one trader’s goods and not the other’s. Accordingly, there can hardly be passing- off by get-up alone… unless the resemblance between the goods is extremely close, so close that it can hardly occur except by deliberate imitation; and even that may not be enough… The relative importance to be attributed to names and word marks on the one hand, and to get-up on the other, is a matter upon which different people have different views; with the result that the outcome of disputes about get-up is exceptionally hard to predict.”

    To similar effect are the observations of Webster and Page, South African Law of Trade Marks (3rd ed, 1986) at 450-451:

    “Where the get-up has been used in conjunction with a name or other word mark, the plaintiff faces a twofold difficulty: first, in establishing his reputation in the get-up excluding the mark; and second, in showing that whatever mark the defendant has used in conjunction with the get-up does not exclude the likelihood of deception. The failure rate in such proceedings has been predicably high.”

    I observe the degree of qualification in the above passage from Kerly by reference to “deliberate imitation”, a circumstance which I have found to be attributable to Sydneywide. In the light of the authorities emerging in the last decade which I have referred to above, I would prefer the description “unusual” to “rare”.

  2. I would infer that Sydneywide identified distinct advantages for the launch and establishment of LiveWire in a broadly dispersed marketplace for its manufactured energy drink, by causing to be designed by Mr Scarisbrook, and to be made by Independent Liquor in New Zealand, a packaging get-up which would likely be of significant advantage in the retail market-place for a newly emerging product in the form of LiveWire, without the need moreover for costly advertising and promotion, being an advantage available for exploitation as a consequence of the very substantial promotional and marketing activities which had been undertaken by Red Bull Australia in relation to the Red Bull product over the preceding three years or thereabouts (see in particular in the foregoing context [25] above). Sydneywide would have been able to readily identify the implications of such an advantage, particularly by reason of its substantial existing involvement in the energy drink trade as a distributor, and in particular as a major distributor of Red Bull as one of the two leading energy drink brands. Sydneywide would have appreciated the further advantage it held, as an already established distributor of the Red Bull product, to merchandise its LiveWire product in at least some of the places where it had been already distributing Red Bull. The temptation to market a product with packaging, which potential consumers would identify as similar in get-up presentation or “general characteristics” (adopting the Full Court’s expression in Kettle referred to in [63] above) to the already heavily publicised Red Bull product, was something which I would infer was too great a temptation for Sydneywide to resist. Sydneywide would have doubtless perceived that from the normal or usual standing distance of potential retail customers of energy drink products from the shelves and refrigerated containers of retailers, there was scope for such customers to mistake the LiveWire product for the Red Bull product, particularly if no Red Bull product was also on display, or where both products were on display in circumstances where either or both brand names were not readily discernible. Even in the situation where both brand names were to be discernible at the point of sale to the potential customer, there would also be the “Ms Carswell” kind of customer, who might think that both products emanated from the same manufacturing stable, for all sorts of reasons, logical or otherwise.

  3. The conclusion I would thus draw is that Sydneywide identified the opportunity to enter this new and expanding market, on the coat tails of Red Bull’s massive promotional efforts and success already achieved as a co-market leader, at virtually no promotional cost to Sydneywide, as something too attractive to forego. As an already established large scale distributor of energy drinks, including Red Bull itself, Sydneywide was well placed to determine how it could most favourably exploit the advantage of Red Bull’s very substantial publicity and promotional campaigns of the previous few years. Such exploitation occurred, for one matter, merely by Sydneywide refraining from advertising LiveWire otherwise, than at the most, to a very insignificant extent (see [35] above). Sydneywide was already delivering substantial quantities of the Red Bull product to persons with whom Sydneywide could readily connect as in effect existing retail customers of Sydneywide (see for instance [23] above). The prospective achievement of profitable levels of return, by manufacturing a product with packaging “sailing close to the wind” of Red Bull as one of the two market leaders, prompted and encouraged Mr Klimis to plan for and adopt the packaging get-up (and so-called gestalt) whereof the Applicants have complained to this Court. The expression “sail close to the wind”, which I have used in my finding set out in [47] above, has been of course adopted in numerous Australian authorities (see for example Wingate Marketing Pty Ltd v Levi Strauss & Co (1994) 49 FCR 89 at 129 per Gummow J), and in my opinion, Sydneywide has sailed too close to obviate the Applicants’ entitlement to the Court’s intervention. Put another way, Sydneywide “went too far”, the description used by O’Loughlin J in Remy Martin (see [68] above), by seeking to “cash in” on the reputation of Red Bull, and in so doing stepped over the lines of misrepresentation and deceit: see Twentieth Century Fox Film Corporation v The South Australian Brewery Co Ltd (1996) 66 FCR 451 at 467.

  4. It is material to the conclusion which I have reached that the market for energy drinks is in the nature of an impulse market, as Dr Beaton has rightly postulated. As I have foreshadowed in [62] above, such market is distinguishable in that context from for instance, furniture and clothing retail markets, where potential buyers will customarily tend to first identify brand names before making their commitments to purchasing: see for instance Windsor Smith at 289, 293 and 295-6. Burchett J implicitly recognised this distinction in Kettle Chip (see the passage cited in [65] above, by his reference to “a small price without long consideration”). The following passage in Wadlow, The Law of Passing Off (2nd ed, 1995) at 429-430 is apposite to the present circumstances:

    “It is probably quite normal for customers selecting goods from supermarket shelves to go by some aspect of the overall appearance as much by the name. What is more difficult is to identify the precise visual clues on which the customer relies. Despite the fact that many of the brands of any particular commodity often bear an overall resemblance to one another, the eye seems to be able to distinguish them and select one without any conscious reference to the brand names as such. Unfortunately, there has been no objective analysis of this effect in the reported cases, and self-serving assertions of what is or is not distinctive do not help.”

    I think that Dr Beaton’s comprehensive evidence came to grips with the marketing phenomena, which the author is here speaking, more effectively than Ms Strachan. I do not think that she addressed, or addressed sufficiently, the significance of the circumstance, testified by Messrs Devereux and Scott Carter and noted by Dr Beaton, as to the manner in which a retailer’s presentation of both the LiveWire and Red Bull cans at a given point of sale, particularly when placed together without both brand names being distinctively visible, may add to their respective similarities in a context of a few seconds decision-making. Especially would that be so where the decision-making relates to a product such as an energy drink having a retail price of the order spoken of in the evidence (see again [21] and [51] above). In de Cordova v Vick Chemical Co (1951) 68 RPC 103 at 106, Lord Ratcliffe said:

    “[I]n most persons the eye is not an accurate recorder of visual detail, and … marks are remembered rather by general impressions or by some significant detail than by any photographic recollection of the whole.”

  5. In the present proceedings, the shape and size of the 250ml can, in addition to the colour, attracted much attention in the presentation of the Applicants’ case, the Red Bull product being sold only by means of such dimensional can: see [15], [56(v)] and [58(iv)] above. By far the majority of energy drink brands are in fact produced in 250ml cans (see [4] above). LiveWire has been produced and sold both in such sized cans and in 330ml bottles (see [34] above), supposedly in approximately equal numbers (see [35] above). The Applicants seek relief in relation to the LiveWire bottles as well as the LiveWire cans, but the focus of their case, and in particular the presentation of their evidence, has been related essentially to the packaging of LiveWire in the 250ml cans. Whilst to adopt the description used by the Full Court in Apand Pty Ltd v Kettle Chip Company Pty Ltd (1994) 52 FCR 474 at 482, the LiveWire bottle, as well as the packaging of the LiveWire can, embodies some of the “matrix of memory hooks” of the packaging of the Red Bull can, that factor is not sufficient enough to carry the day in favour of the Applicants. I do not understand Dr Beaton, at any rate explicitly, to have related his conclusions to the LiveWire bottle. The size and shape of the LiveWire bottle is sufficiently distinct from that which now represents the most common size and shape of energy drink bottle containers.

  6. Does it follow that the conclusion which I have reached in relation to the cause of action for passing off applies also to the cause of action based upon s 52 of the Trade Practices Act, bearing in mind that both causes of action centre upon the notion of misrepresentation (see the concluding observations in [64] above)? In Mark Foys at 73 it was said that “s 52 is not restricted by common law principles relating to passing off but provided an additional remedy”, thereby reflecting the observation of Mason J in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 205, where his Honour also spoke of s 52 providing “wider protection” to that of the tort of passing off. Sydneywide relied strongly in its submissions upon the factual circumstances involved in Parkdale, where a manufacturer of furniture had copied the trade dress or get-up of another’s goods, but affixed thereto a distinctive and clear brand or label of its own, and was found not to have contravened s 52. As I have already pointed out however, there is a factual distinction, generally speaking, between deception concerning the kind of product here involved, and for instance the furniture and fashion clothing cases, since in the latter circumstances, prospective customers will tend to more closely examine the commodity, and in particular the label attached thereto, before committing to a purchase. The circumstances of the present case reflect more closely those addressed in the following passage from the judgment of Lockhart J (as a member of a unanimous Full Court) in Sterling Winthrop Pty Ltd v R & C Products Pty Ltd (1994) ATPR 41-308 at 42,124 as follows:

    “His Honour (the Trial Judge being Beaumont J) said it should also be borne in mind that, because they are inexpensive products (each sold under $2), and usually sold in supermarkets, it is reasonable to expect that consumers would not carefully study the labels on these products. It is more likely that decisions to buy this kind of product would be made quickly so that the first impressions of the consumer are likely to be important.”

    and further at 42,126 his Honour continued:

    “Of course, one must examine the whole of the relevant material; but it must be kept steadfastly in mind that in the circumstances of misleading or deceptive conduct in relation to rival products of the kind with which this case is concerned, sales and market shares are determined by consumers’ decisions in shops, especially supermarkets, where rival products are usually found side by side or close together in the same shelves and these decisions are made quickly and based on fleeting impressions.”

    Here again, albeit in the context of s 52, one sees again judicial emphasis upon the distinction involved in circumstances involving inexpensive products from those of comparably more expensive products such as clothing and furniture (see again [21] and [51] above).

  7. As stated by the Full Court in Windsor Smith at 290, “Once the primary facts have been found, the question whether conduct is misleading or deceptive or is likely to mislead or deceive is itself a conclusion of fact”. Essentially for the reasons which I have advanced in support of my conclusion adverse to Sydneywide, I would further conclude that the conduct of Sydneywide complained of in these proceedings in relation to the packaging of its 250ml LiveWire can constituted misleading and deceptive conduct within s 52 in relation to the class of persons who would seek to purchase energy drinks in such containers, and thus be likely to be affected by such conduct: Parkdale at 199. I do not find it necessary to make any finding as to an additional contravention of any sub-paragraph of s 53 of the Act, none of which appears to have been isolated at least in the Applicants’ written submissions.

  8. The final principal issue in the proceedings is whether Mr Klimis was a joint tortfeasor with Sydneywide in relation to the conduct which I have found to constitute passing off, and in any event whether he was knowingly concerned in or a party to what I have found to be the misleading and deceptive conduct of Sydneywide, pursuant to s 75B of the Trade Practices Act. The evidence which I have reviewed, and the findings which I have made, demonstrate that Mr Klimis, as the self styled Managing Director, and, I would infer, the decision-maker or ultimate decision-maker of Sydneywide at all material times and in all material respects, was personally involved in such capacity in the process of design, and the ultimate choice of design, of the packaging for the LiveWire can, and that he had sufficient knowledge of the risks to which Sydneywide was exposed, if Sydneywide’s conduct subsequently complained of did in fact and reality “sail too close to the wind”. Taking up the expression “natural persons whose conduct brings about the contravention of the law by the corporation” used in Fencott v Miller (1983) 152 CLR 570 at 583 per Gibbs CJ, Mr Klimis was closely, as distinct from remotely, involved in Sydneywide’s contravention of s 52 of the Act: Fencott at 584. Such evidence and findings are not however sufficient to render Mr Klimis liable at common law as a joint tortfeasor. Though he was the decision-maker for Sydneywide in the circumstances and to the extent indicated above, Sydneywide appears to have been a family company involving Mr Klimis’ two brothers, and semble also his father, in varying capacities, as well as of course Mr Klimis. It was not a “one man company” in the sense described by Lindgren J in Microsoft Corporation v Auschina Polaris Pty Ltd (1996) 71 FCR 231 at 246.

  9. In the result, relief should be granted by way of appropriate orders against each of the Respondents in relation to the LiveWire 250ml can. Pending the finalisation of such orders, I grant interim relief with liberty to apply. Since the Applicants have obtained substantial success, they should have in principle an order for costs of the proceedings in their favour. The further hearing of the Applicants’ claim as to damages and for an account of profits will require appropriate orders by way of directions, once an appeal against the findings of the Court the subject of these Reasons for Judgment has been resolved.

  10. The Respondents should therefore be ordered to pay the Applicants’ costs of the proceedings. Although I have found in favour of the Respondents in relation to the LiveWire bottle, the reality is that the issues in the proceedings were contested essentially, if not almost wholly, in relation to the LiveWire 250ml can, in relation to which the Applicants have been successful.

I certify that the preceding seventy-seven (77) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti.

Associate:

Dated:             3 September 2001

Counsel for the Applicant: Mr D K Catterns QC and Mr R Cobden
Solicitor for the Applicant: Baker & McKenzie
Counsel for the Respondent: Mr A B S Franklin
Solicitor for the Respondent: Griffith Hack Lawyers
Date of Hearing: 28-30 May 2001
Date of Judgment: 3 September 2001
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Cases Cited

10

Statutory Material Cited

0

Mark Foys Pty Ltd v TVSN (Pacific) Ltd [2000] FCA 1626
Mark Foys Pty Ltd v TVSN (Pacific) Ltd [2000] FCA 1626
Australian Woollen Mills Ltd v FS Walton & Co Ltd [1937] HCA 51