Selectrode Industries Inc v Selectrode P/L

[1994] FCA 1017

SELECTRODE INDUSTRIES INC AND SELECTRODE IAF PTY LTD v. SELECTRODE PTY LTD AND
JOHN FIELDING
No. G502 of 1994
FED No. 1017/94 Number of pages - 7
Equitable Remedies
(1994) 30 IPR 399

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
TAMBERLIN J

CATCHWORDS

Equitable Remedies - interlocutory injunctions - passing off - misleading conduct - overseas supplier of welding consumables - "private label" arrangement - Australian product - different levels of supply - policy of US supplier not to compete with customers - whether distributors or customers could be deceived - delay - balance of convenience - whether damages an adequate remedy - interlocutory injunction refused.

Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 141
Richardson v Forestry Commission (1988) 164 CLR 261

HEARING

SYDNEY, 13 December 1994
#DATE 21:12:1994

Counsel for Applicants : Dr C J Birch

Solicitors for Applicants : Pigott Stinson Stuart Thom

Counsel for Respondents : Mr C R Newlinds

Solicitors for Respondents : A R Walmsley and Co

ORDER

THE COURT ORDERS THAT:
1. the application be dismissed. 2. the applicants pay the respondents' costs of this application.
NOTE : Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.

JUDGE1

Application
TAMBERLIN J This is a motion for an interlocutory injunction to restrain the respondents from selling, distributing or offering for sale any goods for use in regard to welding, having upon the packaging of the goods or upon the goods themselves the word "Selectrode" or any word deceptively similar to the word "Selectrode".

1. The respondents filed affidavit evidence to the effect that there would be substantial hardship caused if such orders were made on an interlocutory basis because it would be necessary to change the name of the company and its printing and packaging requirements at a claimed overall cost in the order of more than $85,000 and major disruption would be caused to their business. In response to this evidence, on the hearing, the applicants stated that they were willing to permit on the wrapping or packaging the statement:
   

"SUPPLIED BY

SELECTRODE PTY. LTD. 7/10 VICTORIA AVENUE CASTLE HILL 2154."

The respondents agreed that such a modification would substantially reduce any hardship which they might otherwise suffer.

1. In the course of the hearing the applicants indicated that they were prepared to give an undertaking as to damages and also to provide the sum of $10,000 as security for any damages which might be held to flow from the grant of the injunctive relief. The respondents contest the grant of the interlocutory injunction but do not dispute that the sum of $10,000 security would be adequate. The question of security arose because the first applicant is a US corporation and there was no evidence that the second applicant, its Australian agent, a New South Wales corporation, has assets readily available in Australia to satisfy any damages which might be suffered as a result of the injunction.

Background
4. The application was filed on 4 August 1994 together with the statement of claim. The notice of motion for the interlocutory injunction was filed on 29 November 1994.

1. The statement of claim makes the following allegations. First, the applicants claim that the first respondent Selectrode Pty Limited (Selectrode NSW) has engaged in misleading conduct in representing to retailers of welding rods and other welding products in Australia that the business conducted by it is the business conducted by the first applicant ("Selectrode US"). Second, it is claimed that Selectrode NSW has represented in regard to the supply of such products that its business has the sponsorship or approval of Selectrode US and will be conducted in accordance with the normal business methods of that company. Third, it is claimed that the first respondent has passed off and continues to pass off welding products supplied by it as products supplied by the applicants. Fourth, it is said that by lodging a trade mark application Selectrode NSW has falsely represented that it is the proprietor of the said mark. Fifth, it is claimed that the second respondent is a person involved in contraventions of the Trade Practices Act. The applicants seek injunctive relief; delivery up of labels and documents bearing the word "Selectrode" and an inquiry as to profits together with damages, interest and costs.

Chronology
February 1984
6. At this time, Mr Joseph Paternoster, the principal shareholder and manager of Selectrode US acquired his interest in that company. The company commenced the business of supplying private labelled maintenance welding alloy products, which description includes electrodes. From this time it commenced to solicit business in Australia. The business consisted of supplying products and packages which bear the label of the supplier's customers. The customers are retail suppliers or intermediate wholesalers. The business is such that the identity of the supplier will not commonly be known to the ultimate retail customers but will be known amongst retailers and intermediate wholesalers and competing manufacturers and wholesalers. The principal source of orders for Selectrode US is through advertisements in trade journals circulating in Australia, attendance at trade fairs and using business contacts. The policy of Selectrode US is to explicitly state to its customers that it is a supplier of the customer and not a competitor.

4 May 1984
7. Mr Fielding, the second respondent, commenced business on his own account by acquiring a company incorporated as Vamheld Pty Limited.

14 May 1984
8. Mr Fielding registered the business name "Selectrode Welding Supplies" and thereafter carried on business under that name as a commission agent and seller of welding products.

1. 1985
   9. Mr Fifield, now the Managing Director of the second applicant, and Mr Fielding had a conversation wherein Mr Fielding informed Mr Fifield that he was working as a commission agent under the name "Selectrode Welding Services".

1986 - 1987
10. Mr Fifield engaged Mr Fielding to carry out sales training in Indonesia and New Guinea and paid Mr Fielding for this work as "Selectrode Welding Products".

August 1992
11. Mr Paternoster became aware that the respondents had registered the "Selectrode" name and was using it to supply welding consumables. In about August 1992 Mr Paternoster told the second respondent Mr Fielding that the "Selectrode" name could no longer be used. Mr Paternoster did however satisfy a few "small orders" placed by Mr Fielding and supplied four orders of packaged "Selectrode" rods between October 1992 and December 1993 at a total invoice price of $10,049.

31 May 1993
12. The company of Mr Fielding, Vamheld Pty Limited, changed its name to Selectrode Pty Limited, the first respondent.

1 June 1993
13. Selectrode US entered into an agreement with Mr Fifield to appoint him as agent for Selectrode Industries in Australia with a view to expanding the business of that company into Asia.

22 June 1993
14. Mr Fielding caused an existing company Faz Pty Limited to change its name to Selectrode IAF Pty Limited (the second applicant).

September 1993
15. Mr Paternoster attended a world welding exhibition in Essen, Germany and was approached by a number of Australian businessmen who asked him whether Selectrode NSW was the Australian agent of Selectrode US.

6 October 1993
16. Mr Paternoster wrote to the second respondent alleging that the use of the "Selectrode" name was detrimental to the worldwide operations of Selectrode US. He sought to make arrangements with regard to printing plate changes and informed the second respondent that Selectrode US would no longer print labels or welding rods for Selectrode NSW with the name "Selectrode" on them.

1. After this date there was a conversation between Selectrode US and Mr Fielding wherein Mr Paternoster said he would "get back" to Mr Fielding about the use of the name "Selectrode". There was no further discussion between Mr Paternoster and Mr Fielding in relation to the name "Selectrode".

22 October 1993
18. Prior to this date Mr John Gardner was instructed by Mr Fifield to make application for an Australian trade mark "Selectrode" on behalf of Selectrode US.

9 February 1994
19. Mr Gardner wrote to Mr Fifield that Selectrode NSW had applied to register the trade mark "Selectrode" three weeks prior to the application by Selectrode US.

23 March 1994
20. Mr Shaddick, solicitor of Brisbane, wrote to Mr Fifield on behalf of the respondents seeking a written assurance that Selectrode IAF Pty Limited (Selectrode IAF) would cease to use the name "Selectrode."

5 April 1994
21. Mr Fifield wrote to Mr Fielding in response to the above solicitor's letter stating that:

"it is highly unlikely that you will achieve any advantage without litigation..."

7 October 1994
22. The respondents filed a cross-claim against the applicants seeking to restrain them from using the name "Selectrode".

Packaging
23. At present there appear on the packaging of products supplied by Selectrode NSW the statements set out below. The first is described as a "Warning Notice" and the second as a "Standard Shipping Label".

Submissions
24. The case put forward by the applicants is that Selectrode US is a supplier to the wholesale industry in Australia of welding consumables which are the subject of "private labelling". That is to say that the packaging and the welding rods are printed by Selectrode US with the names of the customer on them. The name "Selectrode" is not shown on the packaging or rods. However, the customers of Selectrode US, of course, are aware that the supplier is Selectrode US, which arranges for the manufacture and packaging of the rods and which carries out the printing on the rods and their packaging in the name of the customer. The applicants state that the sales of welding rods in Australia packaged and bearing the name "Selectrode" is minimal. The material before me indicates that the ultimate consumers of the Selectrode US products would generally not be aware of the identity of Selectrode US as the supplier of the rods sold under private labels nor would they be aware of the identity of the manufacturers of such rods. Selectrode US does not itself manufacture the welding products.

1. The applicants contend that it is an important part of the expressed marketing policy of Selectrode US that it will not compete with its customers by supplying rods and packaging under the name "Selectrode". If the respondents continue to market welding consumables to distributors and to end users the apprehension of the applicants is that their wholesale customers will see Selectrode as being in breach of this policy. There is further apprehension that the customers may wrongly take the view that Selectrode US has gained an unfair competitive advantage over them by knowing the nature trend and extent of the Australian market as a result of orders placed with Selectrode US by such customers. There is an additional concern that the perceived quality of the applicant's supplied products could be harmed if Selectrode NSW were to continue to supply using the name "Selectrode". It is said that by supplying the goods Selectrode US is in effect giving a stamp of approval or quality endorsement. Accordingly, they seek orders to restrain the use by Selectrode NSW of the name in the packaging and on the rods themselves, with the exception that, on an interlocutory basis only, the use of the notification "Supplied by Selectrode Pty Limited 7/10 Victoria Avenue Castle Hill 2154" would be permitted. The purpose of this temporary exception is to minimise potential damage and disruption which would otherwise be caused to the first respondent's business by requiring it to change its name and packaging at an interlocutory stage.

2. The submission on behalf of the respondents is that there should be no interlocutory relief for two reasons. The first is that there is no serious question to be tried. The second is that the balance of convenience does not justify the granting of interlocutory relief.

Serious Question
27. In relation to this question the respondents submit that the case of the applicants is an extremely weak one for a number of reasons. First, that there is no evidence to support the assertions in the statement of claim that the name "Selectrode" or "Selectrode Industries" is well and favourably known in Australia, among retail vendors of maintenance welding alloy products, as denoting the business and products of Selectrode US and no other. Second, there is no evidence to support the allegation that the names "Selectrode" and "Selectrode Industries" is distinctive of and exclusively associated with the business of Selectrode US in relation to welding consumables. Consequently it is said that there is no evidence that Selectrode US has acquired a substantial exclusive and valuable reputation in Australia in those names as asserted in the statement of claim.

1. Whilst it is true that no third party evidence has been given in support of these claims, on the material before me I think there is some evidence in the affidavit of Mr Paternoster to support the assertions made in the statement of claim in relation to the matters raised by the respondents although such material is meagre.

2. A second matter raised is that there is evidence that since about 1960 a Swedish company known as ESAB AB of Gothenburg, claimed to be the biggest manufacturer of welding products in the world, has been selling products in Australia using the name "Selectrode". There is no evidence of any protest or claim by the applicants in respect of the use of the name "Selectrode" in relation to these products. The boxes in which the Swedish products are supplied contain the labels "OK Selectrode 83 50". However, the consumable rods which are contained in the package tendered only contain the terms "OK 83.50" printed on them and do not have the word "Selectrode" on them. These rods are packaged in distinctive yellow boxes with quite distinctive yellow labelling.

3. In relation to this matter the applicants say that the Swedish product is well-known in the industry to be clearly a Swedish product closely associated with the name ESAB which has a world wide reputation and that the term "Selectrode" is of little or no significance in relation to these products. The critical association is with ESAB or ESAB OK.

4. At this interlocutory stage of the proceedings I am not in a position to express any firm view on the applicants' prospects of success but in my opinion there is at least one serious question raised for trial as to the rights of the parties and that is whether Australian customers of Selectrode US may be misled by the marketing of the products of Selectrode NSW into believing that Selectrode US is competing with its own customers.

Balance of Convenience
32. It is clear from the material before me that the applicants have known of the business and marketing of the respondents' products since the period July to August 1992. No action was commenced until 4 August 1994 in relation to the claimed passing off and misleading conduct. The present application for interlocutory relief was not filed until 29 November 1994.

1. Although generally delay will not of itself be a defence in proceedings for interlocutory relief, it does afford some indication that there is little significant damage being caused to the applicants. Otherwise, of course one would normally have expected such proceedings to have been instituted earlier.

2. The delay of over two years in bringing these proceedings is, in my view, a factor of some significance in refusing interlocutory relief at this stage.

3. As far as the packaging is concerned, in my view, there is no important difference between the reference which the applicants are prepared to allow to be printed on the packaging on a temporary basis, namely "Supplied by Selectrode Pty Limited 7/10 Victoria Avenue Castle Hill 2164" and the marks which presently appear on the packaging by the company in relation to the warning and the name of the despatcher set out above in these reasons.

4. The labelling on the packaging of the respondents on its face simply indicates that the goods are despatched by Selectrode Pty Limited of Castle Hill. There is no link up with Selectrode US or Selectrode IAF Pty Limited. Neither the Warning nor the Despatch Notification imply in my view that the goods are manufactured by Selectrode NSW. Indeed, the reference to "Selectrode Welding Services" is consistent with a representation that Selectrode is a type of operation or company which provides services as opposed to supplying or manufacturing goods. It was suggested in argument that the symbol of the shield and the welding helmet represented that Selectrode NSW was a manufacturer, when taken in conjunction with the claimed history of that symbol, but on the evidence presently before me I do not think that this argument has been made out.

5. Finally, there should generally be established a "real" as opposed to a "bare" possibility that damages will not be an adequate remedy for the applicants. In the present case I am not satisfied that the applicant has satisfied this general requirement. See Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 141 at 153; Richardson v Forestry Commission (1988) 164 CLR 261 at 275.

6. Accordingly, weighing all the above considerations I do not consider that the applicants have made out a case at this stage that there will be sufficient detriment to them to justify interlocutory relief in this matter if the respondents are permitted to continue packaging and shipping rods which are imprinted with the name "Selectrode" on them and/or which are packaged as outlined above.

Conclusion
39. For the above reasons I dismiss the application for an interlocutory injunction and order the applicants to pay the costs of the application.