Sainsbury Engineers Pty Ltd v Steven Jeffs

[2013] ATMO 55

TRADE MARKS ACT 1995

DECISION OF A DELEGATE OF THE REGISTRAR OF TRADE MARKS WITH REASONS

Re:Opposition by Sainsbury Engineers Pty Ltd to registration of trade mark application 1367916(37) - SAINSBURY ENGINEERS & DEVICE - filed in the name of Steven Jeffs.

Delegate:

Jock McDonagh

Representation:

Opponent: Brian Elkington of Adams Pluck Patent & Trade Mark Attorneys

Applicant: Steven Jeffs in person

Decision:

2013 ATMO 55

Section 52 opposition – grounds under ss42(b), 58, 60 and 62A pressed – no grounds established – trade mark to proceed to registration

Background

1. This is an opposition brought by Sainsbury Engineers Pty Ltd (“the Opponent”) pursuant to s 52 of the TradeMarks Act 1995 (“the Act”) to registration of an application filed in the name of the Steven Jeffs (“the Applicant”) as follows:

Appn No.	1367916
Priority Date	22 June 2010
Trade Mark	(“the Trade Mark”)
Services	Class 37: Mechanical engineering services (construction)

1. The parties filed and served evidence as follows:

Evidence in Support

• Statutory Declaration by Donald Kenneth Christian, Director of the Opponent, made 14 April 2011 (“Christian 1”).

Evidence in Answer

• Statutory Declaration by Steven Jeffs, Applicant, made 17 November 2011 (“Jeffs”).

Evidence in Reply

• Statutory Declaration by Donald Kenneth Christian made 30 August 2012 with Annexures A to C (“Christian 2”).

1. I heard the matter as delegate of the Registrar of Trade Marks on 17 April 2013 in Sydney.  Brian Elkington of Adams Pluck Patent and Trade Mark Attorneys, appeared for the Opponent. Steven Jeffs, the Applicant, appeared in person.

Grounds of Opposition

1. The notice of opposition (“the Notice”) nominated a number of grounds of opposition available under the Act. In his submissions, Mr Elkington advised that the following grounds were pressed by the Opponent:

   • Use of the Applicant’s trade mark would be contrary to law (Section 42(b))
   • The Applicant is not the owner of the opposed trade mark (Section 58)
   • Before the priority date for registration of the Trade Mark, one or more of the Opponent’s trade marks had  acquired a reputation in Australia and, because of that reputation, use of the Trade mark would be likely to deceive or cause confusion (Section 60)
   • The Application was filed in bad faith (Section 62A)

2. To succeed in its opposition the Opponent bears the onus of establishing at least one of these grounds in full. The parties acknowledged relevant date at which the grounds of opposition are to be tested is the priority date of the Trade Mark.

3. None of the evidence served and filed by the Opponent appears to go to the remaining grounds in the Notice that were not pressed and for the sake of completeness I find that these grounds have not been established.

Standard of Proof

1. The relevant standard of proof required of the Opponent is the ordinary civil standard based on the balance of probabilities.[1]

   [1] Following Gyles J in Pfizer Products Inc v Karam (2006) 70 IPR 599 at [6] to [26]. See also Fry Consulting Pty Ltd v Sports Warehouse Inc (2012) 94 IPR 551 per Dodds-Streeton J at [13].

Undisputed Facts

1. The Opponent has existed under various names all including the family name Sainsbury since 1926. It was registered as a company in 1995. (Christian 1 paragraphs 2 to 7, Christian 2 paragraph 6)

2. In November 2008, the Opponent company was sold via a share purchase agreement to a company called Resource Risk Management Pty Ltd (“RRM”). (Christian 1 paragraph 8, Christian 2 paragraph 10)

3. The purchase price was $1,918,000, paid by an initial lump sum of $575,400 and by way of a Vendor mortgage of $1,342,600. The mortgage was to be paid by 35 monthly payments of $42,072 and a final payment of $42,072.20 on 20 December 2011. The Opponent company was charged to Mr Christian to secure payment of the debt. (Christian 2, Annexures A, B, and C)

4. At the time of the sale, the managing director and company secretary of RRM was the Applicant. (Christian 1 paragraph 9, Christian 2 paragraph 10, Jeffs paragraph 2) The Applicant is the majority shareholder in RRM. (Jeffs paragraph 3)

5. The Applicant filed an application for the Trade Mark on 22 June 2010. He was sole director of the Opponent from 18 November 2008 to 8 December 2010. (Christian 2 paragraph 19)

6. In December 2010 the control of the Opponent reverted from the Applicant’s control to that of Mr Donald Christian. (Christian 1 paragraph 12) The Opponent and RRM and the Applicant are currently engaged in litigation relating to the Opponent company. (Christian 2 paragraph 35, Jeffs paragraph 8)

Discussion

1. It appears to me that, as at the priority date of the Trade Mark, the Applicant controlled the Opponent. He was the sole director of the Opponent and was the managing director and secretary of RRM, which was the owner of the Opponent. However, the shareholding in the Opponent had been charged to Mr Christian

2. By virtue of his appointments within RRM and the Opponent at the time, the Applicant would have ostensible authority to apply to register the Trade Mark on behalf of the Opponent. Further, in Jeffs paragraphs 7 and 9, the Applicant states that he had actual authority to do so.

3. The Applicants control of the Opponent and its holding company did not at the filing date appear to result in any conflicts of interest. It also appears to make the grounds of opposition under sections 42(b), 58 and 60 logically unsustainable, and the section 62A ground difficult, as at the priority date.

4. Matters relating to the business relationships of the parties from December 2010 are beyond my jurisdiction to determine or comment upon.

Grounds of Opposition

1. The first ground of opposition argued by the Opponent was that under section 42(b) of the Act the use of the Trade Mark would be contrary to law. The Opponent submitted that any use of the Trade Mark in respect of the services for which registration was sought:

• Is likely to mislead or deceive consumers within the meaning of sections 18 and 29 of the Competition and Consumer Act 2010 (“CCA”) [I note that the equivalent relevant legislation at the priority date was section 52 of the Trade Practices Act 1974]; or

• Gives rise to a representation that such services have some sponsorship, affiliation or association with the Opponent’s services, which they, in fact, do not have, in contravention of the CCA.

1. There is no evidence before me to suggest that the Applicant intended to use, or in fact did use, the Trade Mark other than as the badge of origin of the Opponent’s services. Such use is not misleading or deceptive, nor giving rise to any false representation.

2. The first ground of opposition is not established.

3. The second ground of opposition argued was that under section 58 of the Act, alleging that the Applicant is not the owner of the Trade Mark. Mr Elkington submitted that the Opponent had used the same mark in respect of the same kind of services prior to the application to register and to any pre-filing use by the Applicant.

4. While such prior use might well have occurred (although this is not admitted by the Applicant), Christian 2 (at paragraph 12 and in Annex A) clearly shows that that the Share Purchase Agreement, which sold the Opponent company to RRM and the Applicant, specified that all intellectual property (including the name and trade marks) was transferred to the purchaser, albeit subject to a charge.

5. Therefore, at the priority date any prior ownership by the Opponent of the unregistered trade mark had transferred to the Applicant as the new owner of the Opponent. While Mr Christian might have held the legal ownership of the Opponent as mortgagee, the Applicant retained responsibility to manage the Opponent as a going concern and would be entitled to obtain registration for the benefit of the Opponent company.

6. The second ground of opposition is not established.

7. The third ground of opposition argued was that, under section 60 of the Act, before the priority date for registration of the Trade Mark, one or more of the Opponent’s trade marks had acquired a reputation in Australia and, because of that reputation, use of the Trade mark would be likely to deceive or cause confusion.

8. Mr Elkington correctly submitted that in order to make out this ground, the Opponent must establish that:

• At the priority date the Opponent owned a trade mark which had a reputation in relation to certain services; and that

• Because of the reputation enjoyed by the Opponent’s Trade Mark, use of the Trade Mark would be likely to deceive or cause confusion.

1. While Christian 2, at paragraph 8, arguably (but disputed by the Applicant) provides sales evidence to support the establishment of a reputation, this ground suffers the same defect as the first ground, in that the Trade Mark was presumably to be used by the Opponent under its new directorship, namely the Applicant. Such use would not be likely to deceive or cause confusion.

2. The third ground of opposition is not established.

3. Section 62A of the Act provides that the registration of a trade mark may be opposed on the ground that the application was made in bad faith.

4. Mr Elkington correctly submitted that the alleged bad faith must be assessed as at the priority date and must relate to the making of the application.

5. He further submitted that while an element of intentional dishonesty is present in most cases of bad faith, it has been found that the test of the “reasonable man in the applicant’s position should have considered himself constrained from applying for the opposed trade mark”, citing Hard Coffee Pty Limited v Hard Coffee Main Beach Pty Ltd [2009] ATMO 26.

6. Mr Elkington submitted that as the director of the Opponent that had used the trade mark he sought to register, the Applicant must have been aware that he had no ownership claim in relation to the Trade Mark and that he would be compromising the interests of the Opponent by using or registering the Trade Mark. This, it was submitted, fell short of what would be considered acceptable commercial behavior.

7. Mr Elkington also pointed to a pattern of behavior reported in Christian 2 that demonstrated bad faith. The repayment of the Vendor loan using the Opponent’s funds was alleged to be improper. Likewise it was alleged that the Applicant breached undertakings given when he purchased the company.

8. Finally, it was alleged that the filing of the application was in breach of the Applicant’s fiduciary duties as a director of the Opponent and, therefore, in bad faith.

9. Mr Jeffs referred me to the relevant principles enunciated by Dodds-Streeton J in Fry Consulting Pty Ltd v Sports Warehouse Inc. (No. 2) [2012] FCA 81, at [166]:

   ... mere negligence, incompetence or a lack of prudence to reasonable and experienced standards would not, in themselves, suffice, as the concept of bad faith imports conduct which, irrespective of the form it takes, is of an unscrupulous, underhand or unconscientious character.

10. Mr Jeffs pointed out the following matters relevant to the date of application:

• The Opponent was a subsidiary of RRM and the companies were clearly connected;

• The Applicant was sole director of the Opponent and a director of RRM;

• The Applicant registered the Trade Mark as a common link for the connected businesses; and

• The Applicant had spent considerable time and finances in building the reputation during a 20 month period of ownership of the Trade Mark prior to registration.

1. In a recent case, DC Comics v Cheqout Pty Ltd [2013] FCA 478, Bennett J distilled relevant authorities from the United Kingdom also considered by Dodds-Streeton in Fry Consulting Pty Ltd v Sports Warehouse Inc., supra, (at [145]–[166]). These authorities stated, relevantly:

• Bad faith is a serious allegation and the more serious the allegation, the more cogent the evidence required to support it.

• Bad faith does not require dishonesty.

• Bad faith is a combined test that involves subjective and objective elements. The subjective element refers to the knowledge of the relevant person at the time of making the application. The objective element requires the decision-maker to decide whether, in the light of that knowledge, the relevant person’s behaviour fell short of acceptable commercial standards.

• The question is whether the conduct falls short of the standards of acceptable commercial behaviour observed by reasonable and experienced persons in the particular area. It is whether the knowledge of the applicant was such that the decision to apply for registration would be regarded as in bad faith by persons adopting proper standards.

• It is difficult to see how a person who applies to register, in his own name, a mark he has previously recognised as the property of a potential overseas principal can be said to be acting in accordance with acceptable standards of commercial behaviour. Combining the mark with the applicant’s own name is no answer to that criticism.

• The registration of a trade mark is designed to enable bona fide proprietors to protect their proprietary rights without having to prove unfair trading.

• All the circumstances surrounding the application to register the mark are relevant.

• An act of bad faith cannot be cured by an action after the date of application.

1. Taking into account the evidence, the submissions, and the judicial authority cited above, I am not persuaded that the Applicant’s conduct amounted to applying in bad faith.

2. Jeffs provided evidence that the Applicant had the authority of RRM and the Opponent when he applied for the Trade Mark in his own name. I also consider that it is likely that he was aware that his fiduciary duties would have meant that a constructive trust for the benefit of the Opponent would have arisen.

3. The relevance of the source of the loan repayments was not explained in evidence or submissions. I note that the Deed of Charge (Christian 2, Annexure C, clause 5.1 (a)) requires the Charger (the Opponent) to pay the debt to the Chargee (Mr Christian). Christian 2 shows that loan repayments had been made on time as at the priority date and beyond, albeit not much beyond.

4. While I consider it might have been more prudent for the Applicant to have applied for registration of the Trade Mark in the name of either RRM or the Opponent, it is not uncommon practice for directors to apply in good faith for registration of a trade mark to be used by their company.

5. While I acknowledge that the Applicant and the Opponent (under Mr Christian’s directorship) are engaged in litigation relating to the Opponent, the specific relevance to these proceedings was not demonstrated to me. I cannot use the fact of litigation to support the Applicant’s intention as at the priority date.

6. The evidence is not sufficient to demonstrate unscrupulous, underhand or unconscientious conduct by the Applicant as at the priority date. The final ground of opposition has not been established.

7. The fact that the Applicant, as at the date of the hearing, apparently was no longer director of the Opponent does suggest that there are likely to be further decisions to be made regarding the registration. However, such decisions are to be made elsewhere.

Decision

1. Section 55(1) of the Act provides:

   Unless subsection (3) applies to the proceedings, the Registrar

   must, at the end, decide:

   (a) to refuse to register the trade mark; or

   (b) to register the trade mark (with or without conditions or limitations) in respect of the goods and/or services then specified in the application;

   having regard to the extent (if any) to which any ground on which the application was opposed has been established.

   Note: For limitations see section 6.

1. I have found the opposition to be unsuccessful on the grounds pressed pursuant to sections 42(b), 58, 60 and 62A of the Act.

2. The trade mark application may then proceed to registration one month from the date of this decision.  If the Registrar has been served with a notice of appeal before that time, I direct that registration shall not occur until the appeal has been decided or discontinued.

Costs

1. In the event that the Applicant prevailed, Mr Jeffs sought an award of costs in his favour. As the successful party, the Applicant is entitled to its costs and I accordingly award costs against the Opponent in accordance with Schedule 8 of the Trade Marks Regulations 1995.

Jock McDonagh

Hearings Officer

Trade Marks Hearings

9 July 2013