Taco Company of Australia Inc v Taco Bell Pty Ltd

Re: TACO COMPANY OF AUSTRALIA INC.; TACO BELL
And: TACO BELL PTY. LIMITED; DENBRAD MANAGEMENT PTY. LIMITED; ROBERT FRANCIS;
ERIC BAILLIE FRANCIS
No. G199 of 1981
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Franki J.
Deane J.
Fitzgerald J.

CATCHWORDS

Trade Practices - conduct likely to mislead or deceive to whether conducting restaurant under a name similar to that of another restaurant was such conduct - whether reputation in another country is relevant.

Passing-off.

Trade Practices Act 1974 s.52.

HEARING

SYDNEY

#DATE 22:7:1982

ORDER

1. The appeal is dismissed.

2. The orders made by the learned trial Judge on 22 December 1981 and 31 December 1981 are terminated as from today.

3. Taco Company of Australia Inc. by itself, its servants or agents, is restrained from operating any restaurants in the Sydney metropolitan area under the name "Taco Bell" or under any name similar thereto which is deceptive or misleading or which is likely to deceive or mislead.

4. Taco Company of Australia Inc. by itself, it servants, or agents, is restrained from passing-off goods and services supplied in any restaurants in the Sydney metropolitan area not supplied by Taco Bell Pty. Limited as and for goods and services supplied by Taco Bell Pty. Limited.

JUDGE1

This is an appeal by Taco Company of Australia Inc. and Taco Bell from a judgment of a single Judge of this court in proceedings which arose out of alleged contraventions of s.52 of the Trade Practices Act 1974 ("the Act").

The proceedings were commenced by the first respondent, Taco Bell Pty. Limited, against the first appellant seeking, inter alia, an injunction to restrain the first appellant Taco Company of Australia Inc., from operating any restaurant in the Sydney metropolitan area under the name "Taco Bell", or any name deceptively or misleadingly similar thereto, or which was likely to deceive or mislead by reason of its similarity thereto, and an injunction restraining the first appellant from passing-off goods and services supplied in any restaurant in the Sydney metropolitan area not supplied by the first respondent as and for goods and services supplied by the first respondent.

The learned trial judge set out the relevant primary facts very fully and I have drawn upon his judgment to a great extent in relation to those facts. The appellants attacked a number of inferences drawn by the trial judge but not his primary findings of fact.

The first appellant, relying upon s.52 of the Act, together with Taco Bell, a California company, which operated a chain of Mexican food restaurants in the United States of America, Canada and Guam, cross-claimed against the first respondent. Orders were sought, inter alia, restraining the first respondent from using the name "Taco Bell Pty. Ltd." or any name deceptively similar to the name "Taco Bell". An injunction was also sought restraining the first respondent from passing-off its business or goods or services as that or those of the cross-claimants or either of them. The appellants also joined certain companies and individuals as cross-respondents.

The first appellant was incorporated in the State of Delaware in the United States of America in 1980 for the purpose of establishing and operating Taco Bell restaurants in Australia. It is a wholly owned subsidiary of another American company, Pepsico Inc. of the United States of America. The Californian company, Taco Bell, is also a wholly owned subsidiary of Pepsico Inc.

The first respondent has for several years conducted a Mexican food restaurant at Bondi under the name "Taco Bell's Casa". It was originally incorporated on 13 March 1973 under the Companies Act 1961 (N.S.W.) as "B. and B. Mexican Enterprises Pty. Limited".

On 7 December 1976 B. and B. Mexican Enterprises Pty. Limited changed its name to "Taco Bell Pty. Limited". On 8 February 1974 that company registered the name "Taco Bell" and "Taco Casa" as business names under the Business Names Act 1962 (N.S.W.). At all material times since its incorporation the first respondent has conducted a Mexican food restaurant at Bondi. The original owner of the restaurant was an American, Bill Chillcoate, who opened it in September 1970. It seems that it was the first Mexican food restaurant opened in Sydney. It was first run under the name "Taco Bill's" and "Taco Bill's Casa".

Prior to June 1977 the shares in the first respondent were owned by James Bruce Baird and James David Baird. During their ownership the name of the restaurant was changed from "Taco Bill's" and "Taco Bill's Casa" to "Taco Bell's Casa".

On 3 June 1977 the shares in the first respondent were purchased from the Bairds by Eric Francis and Co. Pty. Limited and Denbrad Management Pty. Limited, which were joined as cross-respondents by the first appellant. Eric Francis and Co. Pty. Limited is now the sole beneficial shareholder of the first respondent and its directors are Eric Francis and his son Robert Francis, who were added as cross-respondents.

The restaurant at Bondi seats approximately 90 people and its gross sales have increased from approximately $170,000 in the year ended 30 June 1978 to approximately $306,000 in the year ended 30 June 1981. It is estimated that it provided between 48,000 and 49,000 meals in the year ended 30 June 1981. It caters mainly for customers who wish to be served by a waiter and dine on the premises, but it also offers take away food. Its meals are relatively inexpensive. The name "Taco Bell's Casa" is displayed on the awning and on the front window as well as on the menu and must be clearly visible to persons walking past. The learned trial judge was satisfied that the restaurant was known as "Taco Bell's Casa" or "Taco Bell's".

In January 1981 the first appellant opened a Mexican food restaurant at Granville under the name "Case Amiga" and on 3 September 1981 it opened another restaurant in George Street in the inner City of Sydney. At that time there were about 15 Mexican food restaurants in the Sydney metropolitan area. Since 3 September 1981, but not before, each of the restaurants conducted by the first appellant has traded under the name "Taco Bell". In advertising and on signs relating to its business, it has used the letters "T.M." in association with the name "Taco Bell" and has stated "Taco Bell" is the trade mark of "Taco Bell, a California Corporation".

The first respondent alleged, inter alia, that in using the name "Taco Bell" in its restaurants the first appellant was engaging in trade or commerce in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of s.52 of the Act.

The first respondent also alleged that because of the same facts the first appellant was passing-off its goods and services supplied in its restaurants as the first respondent's goods and services. No question arose concerning this court's jurisdiction but, of course, its initial jurisdiction is under the provisions of ss.52 and 80 of the Act.

Various types of conduct may contravene s.52 of the Act. It is obviously misleading or deceptive to describe a brass chain as a gold chain. All relevant persons must be assumed to know that gold is a metal separate and distinct from brass. In the case before us the question arises first, whether the use by the first appellant of the name "Taco Bell" for its two restaurants is misleading or deceptive or likely to mislead or deceive. It is obviously necessary to establish what, if anything, the words "Taco Bell" or "Taco Bell's Casa" mean to a relevant person when used by the first appellant in relation to a restaurant. It is necessary to examine any alleged deceptive conduct arising from the use of the words in the light of what those words mean to relevant persons when used in relevant situations. This involves two questions. First, who are the relevant persons and secondly, what, if anything, do the words mean to them. See generally Snoid v. Handley (1981) 38 A.L.R. 383 and Weitmann v. Katies Ltd. (1977) 29 F.L.R. 336 at pp.339-340, and 343.

In a number of cases this court has considered the question of who are the relevant persons and it is now accepted that those persons must be a significant section of people who are likely to be exposed to the conduct of which complaint is made. (Snoid v. Handley, supra, at p.388). It is sufficient to say that all persons exposed to the conduct should be considered although conduct which is only likely to mislead or deceive an extraordinarly stupid person would not fall within s.52. I set out what I said in Annand & Thompson Pty. Ltd. v. Trade Practices Commission (1979) 25 A.L.R. 91 at p.102:

"Broadly speaking it is fair to say that the question is to be tested by the effect on a person, not particularly intelligent or well informed, but perhaps of somewhat less than average intelligence and background knowledge, although the test is not the effect on a person who is, for example, quite unusually stupid. The question is not whether the purchaser was deceived but whether the conduct was misleading or deceptive."

The relevant persons here are those to whom the words "Taco Bell" had acquired a secondary meaning, namely, that the words indicated that a restaurant carried on under the name "Taco Bell" or "Taco Bell's Casa" was a restaurant operated by or in some relevant way associated with the first respondent and its restaurant. It is therefore necessary to examine the question whether the words "Taco Bell" in relation to a restaurant had acquired such a secondary meaning in the metropolitan area of Sydney at the relevant date.

It was submitted by senior counsel for the appellants that the evidence of this secondary meaning, or reputation as it is often called, was quite unsatisfactory because of the very limited number of witnesses who had been called. The question whether conduct is misleading or deceptive or likely to mislead or deceive is one for the court. (See eg. Snoid v. Handley, supra, at p.391).

There was some evidence that people referred to the first respondent's restaurant by name and indeed, evidence to this effect appears to be hardly necessary. Restaurants are usually referred to by name. There was also evidence of almost 50,000 meals having been provided in the year ended 30 June 1981.

In the Sydney telephone directories after, but not including the 1977 directory, the first respondent's restaurant has been referred to in both the ordinary and classified sections under the name "Taco Bell's Casa".

From time to time the restaurant was mentioned in newspaper and magazine articles, for example, an article in the National Times of 21 September 1980 dealt with the restaurant in some detail.

There was evidence from about 10 persons who knew of the first respondent's restaurant that on seeing the first appellant's restaurant in George Street, or hearing about the first appellant's "Taco Bell" restaurants, each had concluded that they were connected by franchise with or conducted by the persons who conducted the first respondent's restaurant at Bondi. There was also evidence from the manager of the Bondi restaurant that on 27 August 1981 he had received a telephone call intended for the first appellant. The manager also gave evidence of enquiries he had made on two nights early in September 1981 about the residential address of patrons on those nights. Those enquiries showed that a significant percentage of those patrons had addresses outside the eastern suburbs.

I am satisfied at the 3 September 1981 that, to a significant section of the community in the Sydney metropolitan area, the words "Taco Bell" or "Taco Bell's Casa" distinguished the restaurant of the first respondent. Having reached this conclusion I consider that the trial judge was correct in taking some steps to protect consumers from being misled or deceived or being subject to conduct which was likely to mislead or deceive.

I will deal with the appellants' cross-claims later but, looking at the position broadly, if a significant number of relevant persons are likely to be misled or deceived by conduct engaged in by a trading corporation in trade or commerce the court must consider whether any orders which it is able to make in the exercise of its jurisdiction in the matter should be made to avoid that result.

The appellants appeal is against the restrictions on the use by the first appellant of the name "Taco Bell" and against the refusal by the trial Judge of the cross claims. If unsuccessful in this contention the appellants sought, in the alternative, to have the restriction on the first appellants' use, of the name qualified so as to permit that use provided its business was distinguished from the business of the first respondent. The appellants' alternative claim included the grant of an injunction restraining the use by the first respondent of the name "Taco Bell" or "Taco Bell's Casa" without the first respondent's business being distinguished from the businesses of the appellants.

The court is not able to prevent any person not before it from using the name "Taco Bell" in relation to a restaurant. In an appropriate case the court can prevent both appellants and respondents from using a name but this would be a rather extreme step to take in the absence of remarkable circumstances. The court could, of course, restrain both appellants and respondents from using the name "Taco Bell" in relation to restaurants without clearly distinguishing the business of a respondent from that of an appellant. However, the public will not use disclaimers no matter what the parties may be ordered to do by way of disclaimer.

"Taco" is a word of Spanish derivation and one of its meanings is "a snack" but it does not follow that it is so regarded in Sydney. The name "Taco Bell" is not a descriptive name and a person may be expected to identify a restaurant by a name which he regards as distinctive. The addition of the word "Casa" does not seem to me to be of any material significance.

Evidence was also before the court of alleged unsatisfactory conduct of the first appellant during a period when it was restrained by the learned trial judge on an interlocutory basis from using the name "Taco Bell" in any advertising for any fast food business conducted by it unless there was included in the advertisement a clear representation to the effect the business of the first appellant and that of the first respondent were not connected.

The appellants' restaurants conducted under the name "Taco Bell" were said to have such a distinctive "get-up" associated with them that persons familiar with the first respondent's restaurant would not be likely to be misled or deceived. However, a diner familiar with the first respondent's restaurant at Bondi might well be going to an address in the Western suburbs and hear that there was a "Taco Bell" restaurant at Granville and decide to visit it. It would not be any consolation to such a person, who had perhaps travelled some distance out of his way in order to visit such a restaurant, to find that it did not look quite like that which he had expected and to learn, as a result of inquiries, that it was not connected with the first respondent's restaurant which he knew.

The appellants argued that s.52 was not contravened unless the relevant conduct continued, as it was put, up to and including the point of sale. This argument was also advanced in relation to the issue of passing-off and I will deal with it in that regard later.

Whilst, in many instances, this Court has found that it is very helpful to have regard to law which has been worked out in relation to passing-off when considering the position under s.52 of the Act, there is no reason why this Court should import into the consideration of s.52 all the concepts which have been worked out in relation to passing-off. (See generally, Stephen J. in Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd. (1978) 140 C.L.R. 216 at p.227.)

The true basis of a passing-off action is clearly shown in the following passage from Lord Fraser of Tullybelton's speech in Warnink v. Townend & Sons (Hull) Ltd. (1979) A.C. 731. At p.754 where his Lordship said:

"I note in passing that the justification for the passing off action to prevent such misrepresentation continuing is not to protect the public (who might suffer no prejudice from it, if they have never tasted genuine advocaat) but to protect the appellants' property in the goodwill".

Stephen J., when considering the relationship between s.52 and passing-off in Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd., supra, at pp.226-227 said: "Section 52 of our Act is on the contrary exclusively concerned with consumer protection".

It is now clearly established that essential to passing-off is injury, or potential injury, to goodwill and damage, or the likelihood of damage, to the plaintiff. I will deal more fully later with this question. It is not necessary to consider whether the presence of these factors may strengthen the position of an applicant for relief based on s.52 but it is clear that the basic purpose of s.52 is that of consumer protection and therefore questions of goodwill or damage to an applicant are, in my opinion, unlikely to be of critical importance in deciding whether an action to restrain conduct, which would be in contravention of s.52, should succeed.

The appellants argue that, if any order is made against them, it should be a qualified order along the lines of the order which I have discussed and that such a qualified order should also be made against the respondents. This argument was based on an allegation that the appellants, or one or other of them, had a concurrent reputation in the use of the words "Taco Bell" in relation to restaurants. For the reasons which I have already stated I consider that any injunction associated with a disclaimer or qualification would not be adequate to protect the public from conduct likely to deceive or mislead. It is therefore strictly unnecessary to deal with the appellants' argument in relation to concurrent reputation but because it was the subject of lengthy submissions I will say something about it.

Although the appellants, in reply, submitted that the conduct of the parties was not relevant, an argument was advanced by the appellants that the relevant misleading conduct was that of the first respondent when it changed its name in 1976. In my opinion at that time, and also when the name of the restaurant was changed to "Taco Bell's Casa", there was no reason to assume that either of the appellants would ever commence business in Australia, or that these changes of name were in any way contrary to law.

The restaurants which the first appellant opened in 1981 in George Street and at Granville were said to be operated under licence from the second appellant "Taco Bell". It appears that this last mentioned company operates and grants franchises for the operation of a large chain of Mexican food restaurants under the name "Taco Bell" in the United States, Canada and Guam. It is the intention of the first appellant to open and operate under the name "Taco Bell", restaurants in the Sydney metropolitan area if not restrained. Restaurants in the Eastern suburbs would be included and alternatively franchises would be granted to operate the restaurants.

Evidence was given for the appellants that in 1962 a Mr. Glen Bell had opened a Mexican food restaurant in California under the name "Taco Bell" and that he subsequently opened and operated restaurants in the same style and under the same name and granted licences or franchises to operate similar restaurants. The second appellant is the assignee of the rights of the founder Mr. Glenn Bell to the name "Taco Bell". There were 325 of these restaurants in 1975 and at the time of the hearing before the learned trial judge there was evidence that 1,366 of these restaurants operated under the name "Taco Bell" in 40 States of the United States, Canada and Guam. There was also evidence that these restaurants had a distinct appearance of which the restaurant at Granville was typical. The restaurants operated under the name "Taco Bell" in the United States were carried on according to a standard system. This included the same menu and the food being prepared to the same recipe and presented in the same way. Liquor was not sold on the premises and it was company policy not to allow the consumption of alcohol. A particular colour scheme was adopted.

Mr. R. Francis gave evidence that he had always been of the view that, if the Bondi restaurant was successful, he would open other restaurants which might well include one in the inner city. He had arranged for inquiries to be made for suitable premises in various areas in the Sydney metropolitan area and in August 1981 he commenced negotiations to purchase a restaurant in Pittwater Road, Manly, in the name of a company in whose shares the first respondent is part owner. There was evidence that contracts had been exchanged in October 1981 and that it was the intention of the purchasing company to operate a Mexican food restaurant similar to the one at Bondi under the name "Taco Bell's Casa".

Mr. R. Francis also said that, at the time his family purchased the shares in the first respondent in 1977, he had never heard of the name "Taco Bell" in any other context and that he first heard of the name in connection with restaurants in America in July 1978.

Prior to 3 September 1981 no restaurant or other business under the name "Taco Bell" had been carried on in Australia apart from that of the first respondent. There was evidence that in August 1979 Mr. R. Francis had been approached by a representative of a corporation associated with the appellants enquiring whether he was interested in selling the name "Taco Bell".

The second appellant, Taco Bell, is registered in the United States as proprietor of the trade mark "Taco Bell" in various manifestations but it has no registration at present in Australia although applications are pending. The appellants called a body of evidence before the trial judge in an endeavour to establish that it had a concurrent reputation in Australia at the relevant time. This evidence showed that in the metropolitan area of Sydney there was a number of persons who had become aware of "Taco Bell" restaurants in America.

There was affidavit evidence filed by the first appellant from 57 persons in the metropolitan area of Sydney. None of these deponents set out his or her occupation. All of them had become aware of what they described as "Taco Bell" when they were in the United States of America. In general, these deponents did not allege any understanding about the words "Taco Bell" in relation to restaurants in Sydney. Almost all said that, to them, the distinguishing feature of the "Taco Bell" restaurants they had known in America was the unique style of architecture. Many also referred to a bell being incorporated in the exterior design of the restaurant and to certain other features.

Several deponents said that he or she knew of Taco Bell Restaurants as a chain of Mexican fast food restaurants. No deponents expressed any view of the geographical location to which they referred. Most said they had never heard of "Taco Bell's Casa" at Bondi. About a dozen went out of their way to say that they did not, or would not, regard this Bondi restaurant of the first respondent as being associated with the restaurants which they had known in America. Examples of these depondents are K. Straw, D.E. Myers, V. Lenehen, F.A. Straley, M.B. Harris, S. Mason, N. M. Casey, M. L. Hanrahan and M. La Fave. These affidavits gave me the impression that the deponents' main contention was that they would not think the first respondent's restaurant at Bondi was in any way associated with the restaurants each had known in the United States of America. The deponents were not cross-examined. It was conceded by senior counsel for the appellants that there was no direct evidence that anyone had been misled into thinking that the first respondent's restaurant at Bondi was associated with the restaurants he had known in the United States of America.

A letter from the solicitors for the first appellant to the solicitors for the respondent of 4 September 1981 contained the following passage:

"The cumulative effect of all these factors is to ensure that there will be no associations in the minds of the public between the TACO BELL'S CASA restaurants at Bondi, and the TACO BELL restaurants in George Street, City and Granville."

While the question of the likelihood of a person being misled or deceived is always a matter for the court the denial of deception by deponents whose affidavits were filed by the appellants must be given considerable weight. Perhaps it is understandable that so many expressed the view that they would not be deceived if one bears in mind that their only knowledge of restaurants associated with the appellants was overseas in the United States of America.

Senior counsel for the respondents pointed out that "Taco Bell" is a registered business name of the first respondent and that under s.9 of the Business Names Act 1962 (N.S.W.), except with the consent of the Minister, a business name shall not be registered, if it is, in the opinion of the Commissioner, undersirable or is a name, or a name of a kind, that the Minister has directed the Commissioner not to accept for registration. It was agreed that the Minister had made a direction not to accept for registration any business name that is a name that is likely to be confused with the name of a company registered under the Act. It seems to follow from this that the court, at least, should be disinclined to make any order which was based upon the propriety of either of the appellants trading under the business name "Taco Bell". I would reject the appeal against orders made or refused in relation to s.52 of the Act.

The learned trial judge made an order restraining the first appellant for passing-off goods and services. Were it not for the fact that an appeal has been brought from this order and that the matter has been extensively argued I would be inclined to adopt the view that there is little, if anything, which would be restrained under the order in respect of passing-off which would not be restrained by the order under s.52 of the Act.

It is appropriate to commence the consideration of the appeal in relation to passing-off by an examination of the judgment of the House of Lords in Warnink v. Townend & Sons (Hull) Ltd., supra. Whatever may have been the position prior to that case the minimum requirements to establish passing-off were clearly set out in the various speeches in that case. Viscount Dilhorne, Lord Salmon and Lord Scarman said no more than that they agreed with the draft speeches of Lord Diplock and Lord Fraser of Tullybelton. Lord Diplock at p.742 said that it was possible to identify five characteristics which must be present in order to create a valid cause of action for passing-off. They are:

"(1) a misrepresentation (2) made by a trader in the course of trade, (3) to prospective customers of his or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) and (5) which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so."

Lord Fraser of Tullybelton at pp.755-756 said:

"It is essential for the plaintiff in a passing off action to show at least the following facts:- (1) that his business consists of, or includes, selling in England a class of goods to which the particular trade name applies; (2) that the class of goods is clearly defined, and that in the minds of the public, or a section of the public, in England, the trade name distinguishes that class from other similar goods; (3) that because of the reputation of the goods, there is goodwill attached to the name; (4) that he, the plaintiff, as a member of the class of those who sell the goods, is the owner of goodwill in England which is of substantial value; (5) that he has suffered, or is really likely to suffer, substantial damage to his property in the goodwill by reason of the defendants selling goods which are falsely described by the trade name to which the goodwill is attached. Provided these conditions are satisfied, as they are in the present case, I consider that the plaintiff is entitled to protect himself by a passing off action." (Emphasis added).

From these speeches it is now beyond argument that to succeed in a passing-off action a plaintiff must have goodwill in the geographical area for which the injunction is sought and show that the conduct sought to be restrained is such as has caused, or is really likely to cause, damage to the property in that goodwill.

Lord Fraser at p.752 also cited a passage from Lord Diplock in Star Industrial Co. Ltd. v. Yap Kwee Kor (1976) F.S.R. 256 at p.269. The passage cited included the following:

"A passing-off action is a remedy for the invasion of a right of property not in the mark, name or get-up improperly used, but in the business or goodwill likely to be injured by the misrepresentation made by passing off one person's goods as the goods of another. Goodwill, as the subject of proprietary rights, is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached. It is local in character and divisible; if the business is carried on in several countries a separate goodwill attaches to it in each. So when the business is abandoned in one country in which it has acquired a goodwill the goodwill in the country perishes with it although the business may continue to be carried on in other countries."

I propose to consider first the cross-claims of the appellants in which they allege passing-off by the respondents.

In the case before this court it is clear that at the relevant date - (see Cadbury-Schweppes Pty. Ltd. v. Pub Squash Co. Pty. Ltd. (1981) 1 W.L.R. 193 at p.204) neither appellant had carried on business in Australia nor had it used the mark "Taco Bell" or the name "Taco Bell" in relation to restaurants or goods or services supplied in any restaurants in the Sydney metropolitan area. The evidence certainly shows that a number of people in the relevant area knew of restaurants operated in America by the second appellant or operated under franchises granted by the second appellant. There is, however, absolutely no evidence that either appellant had, to use the words of Lord Fraser, sold in the Sydney metropolitan area "a class of goods to which the particular trade name applies", or to use the words of Lord Diplock, there was no evidence that the respondents or any of them made a misrepresentation "calculated to injure the business or goodwill" of either appellant. The plain fact is that neither appellant had any relevant goodwill or business in the Sydney metropolitan area at the relevant time.

It is appropriate to cite the following passage from the speech of Lord Fraser of Tullybelton in Warnink's Case, supra, at p.755 where his Lordship is considering the requirement that the secondary meaning of a word relied upon is distinctive. His Lordship said:

"In my opinion its meaning in countries other than England is immaterial because what the court is concerned to do is to protect the plaintiffs' property in the goodwill attaching to the name in England and it has nothing to do with the reputation or meaning of the name elsewhere."

The learned trial judge dealt with the question of passing-off with great care and in considerable depth and I do not disagree with his conclusions. There are a great number of authorities to which the learned trial judge referred, dealing with the problem of passing-off where a question has arisen of the extent, if at all, to which a plaintiff's business had been carried on in the area in which it sought relief.

Since Warnink's case was determined, Walton J. considered a similar question to that before us in The Athletes Foot Marketing Associates Inc. v. Cobra Sports Ltd. (1980) R.P.C. 343. Walton J. analysed the earlier cases in detail and summarized his view in the following passage at p.350:

" . . . it would appear to me that, as a matter of principle, no trader can complain of passing off as against him in any territory - and it will usually be defined by national boundaries, although it is well conceivable in the modern world that it will not - in which he has no customers, nobody who is in a trade relation with him. This will normally shortly be expressed by saying that he does not carry on any trade in that particular country (obviously, for present purposes, England and Wales) but the inwardness of it will be that he has no customers in that country: no people who buy his goods or make use of his services (as the case may be) there."

The learned trial judge said that he agreed, in general terms, with the conclusion which Walton J. had reached and I am of the same opinion.

The Privy Council in Cadbury-Schweppes Pty. Ltd. v. Pub Squash Co. Pty. Ltd., supra, referred at pp.198-199 to the speeches of Lord Diplock and Lord Fraser of Tullybelton in Warnink's Case and said that they were of general application.

I am satisfied that at the relevant date neither appellant had any relevant goodwill in the name "Taco Bell" in the Sydney metropolitan area and therefore any claim for passing-off must fail even if limited to a claim restraining passing-off a business or goods or services without clearly distinguishing that business or those goods or services from the business or goods or services of either appellant. I also note that the initial proceedings were against the first appellant and the reputation the appellants sought to establish could only be that of the second appellant, Taco Bell, which carried on or granted franchises in respect of the restaurants in the United States of America. It follows that I would reject the appeal so far as it relates to the cross claims for passing-off.

I proceed next to deal with the appeal in relation to the order restraining passing-off which the learned trial judge made against the first appellant. I have already set out the requirements for success in a passing-off action. It is clear that the first respondent was the owner of goodwill in the name "Taco Bell's Casa" and "Taco Bell" in the Sydney metropolitan area and that, if either appellant commenced a restaurant business under the name "Taco Bell", the first respondent was really likely to suffer substantial damage to its property in that goodwill. Considerable attention was directed by senior counsel for the appellants to an argument that the misrepresentation occasioned by the conduct of which complaint was made must continue up to the point of sale. He argued that, once a prospective customer reached a restaurant of the character which was alleged to distinguish a restaurant conducted by either appellant, the customer would undoubtedly notice the difference between the restaurants and would not proceed to make a purchase.

No clear authority was referred to in support of this argument but some regard was paid to what was said by Lord Scarman in Cadbury-Schweppes Pty. Ltd. v. Pub Squash Co. Ltd. (supra), at p.205. There their Lordships referred to the learned trial judge having said he would accept that, on occasions, there was confusion at the point of sale but that there was plenty of evidence on which he could find that the confusion was almost always corrected before the moment of sale. This passage appears to be directed to the question of whether the "get-up" of the two cans of soft drinks were sufficiently different. However, I do not regard this passage, whatever may be its relevance in relation to the sale of two cans of soft drink, as being directed to the question of whether relevant persons are likely to be deceived where a restaurant is operated under a name deceptively similar to that of another restaurant.

The argument that the necessary reputation in the words "Taco Bell" had not been established by the first respondent was also pursued in relation to passing-off. Whilst it may be that to succeed in an action for passing-off, the secondary meaning which must be established may be somewhat more difficult to establish for an applicant than under s. 52 of the Act, I consider that it has been sufficiently established in this case.

The requirement of misrepresentation which is constituted by the use of a word which has a secondary meaning is illustrated by a passage from the speech of Viscount Simonds in the House of Lords in T. Oertli A.G. V. E.J. Bowman (London) Ltd. (1959) R.P.C. 1. At p.4 his Lordship said:

"It is a condition precedent to the success of such an action, where the alleged representation consists of the use of a name in connection with the goods, that that name should have become distinctive of the Plaintiff's goods, not necessarily meaning thereby that his name should be known (see William Edge & Sons, Ld v. William Niccolls & Sons, Ld (1911) A.C. 693, 28 R.P.C. 582), but at least meaning that they should be regarded as coming from a particular source known or unknown."

Senior counsel for the appellants referred us to W.A. Gilbey Ltd. v. Continental Liqueurs Pty. Ltd. (1960) 103 C.L.R. 406 on the question of the evidence which was necessary to establish reputation in a case where there was some knowledge of the word under which the product was sold being known to persons who had become familiar with that name overseas. The case before us is different. It is concerned with the reputation of a restaurant in the Sydney metropolitan area.

The extent of the reputation which it is necessary to establish is illustrated by the following passage from the speech of Viscount Maugham, with whom Lord Russell of Killowen and Lord Romer agreed, in Saville Perfumery Ld. v. June Perfect Ld. (1941)58 R.P.C. 147 at p.176.

"No doubt the plaintiff has to prove that to a substantial proportion of persons who are purchasers or probable purchasers of goods of the kind in question the name, mark or other symbol of origin, indicates the goods of the plaintiff; but it is a mistake to think that all or almost all such purchasers must entertain that view."

It may be that the secondary meaning need not be established to the same extent when the question is one of a trade name under which a business is carried on and not a trade mark used in relation to goods. Lord Simonds in Office Cleaning Services,Ld. v. Westminster Windsor and General Cleaners, Ld. (1946) 63 R.P.C. 39 said at p.42:

"It is not a condition of success in the supposed action that the plaintiffs should establish that the words in dispute had acquired a secondary meaning. The real question is the simple and familiar one. Have the Appellants proved that the use by the Respondents of the trading style 'Office Cleaning Association' is calculated to lead to the belief that their business is the business of the Appellants? It is in these words 'calculated to lead to the belief' that the issue lies".

Lord Goddard, Lord Wright and Lord Porter agreed with Lord Simonds' opinion. In the case before us it is not necessary to examine this case in detail because I am satisfied that the first respondent has established that the words "Taco Bell's Casa" and "Taco Bell" have acquired the relevant secondary meaning and that the use of the name "Taco Bell" by either appellant would constitute passing-off. The question of likelihood of deception is again one for the Court. See, for example, Colgate- Palmolive Ltd. v. Pattron (1978) R.P.C. 635 per Lord Edmund-Davies at pp.665-666.

In my opinion the appeal should be dismissed and the appellants should be ordered to pay the respondents' costs of the appeal.

It appears desirable to recast the orders made by the learned trial Judge.

I would order that:-

1. The appeal is dismissed.

2. The orders made by the learned trial Judge on 22 December 1981 and 31 December 1981 are terminated as from today.

3. Taco Company of Australia Inc. by itself, its servants or agents, is restrained from operating any restaurants in the Sydney metropolitan area under the name "Taco Bell" or under any name similar thereto which is deceptive or misleading or which is likely to deceive or mislead.

4. Taco Company of Australia Inc. by itself, its servants or agents, is restrained from passing-off goods and services supplied in any restaurant in the Sydney metropolitan area not supplied by Taco Bell Pty. Limited as and for goods and services supplied by Taco Bell Pty. Limited.

5. The appellants pay the costs of the respondents in the appeal.

6. The cross claim of the appellants is dismissed.

7. The first respondent has liberty to apply to the trial Judge, or if he is not available, to any other Judge of this Court to deal with any question of damages and any reserved costs before the trial Judge not already the subject of an order.

JUDGE2

In the United States of America, there is a large chain of "fast food" restaurants which sell Mexican-style food and which are named "Taco Bell". In the Sydney beachside suburb of Bondi, there is an unpretentious restaurant which specializes in Mexican-style food. It is known as "Taco Bell's". The United States chain has spread to a number of other countries and has reached Australia. In 1981, two restaurants associated with it were opened in Sydney. The result was that from 3 September, 1981, there were three Sydney restaurants specializing in Mexican-style food named either "Taco Bell" or "Taco Bell's".

On 4 September, 1981, Taco Bell Pty. Limited instituted proceedings in the Federal Court against Taco Company of Australia Inc.. Taco Bell Pty. Limited ("the Bondi company") carries on the Bondi restaurant. Taco Company of Australia Inc. ("the U.S. company") operates the two Sydney members of the Taco Bell chain. The proceedings were for alleged contravention of the Trade Practices Act, 1974 ("the Act") and passing-off. The U.S. company cross-claimed, again for contravention of the Act and passing-off, against the Bondi company. An associated company of the U.S. company, called Taco Bell, was added as cross-claimant and the shareholders and directors of the Bondi company were added as cross-respondents. Each of the U.S. company and Taco Bell ("the appellants") is a corporation incorporated in the United States of America and is a subsidiary of Pepsico Inc., which conducts the "Pizza Hut" chain in Australia and the United States.

The proceedings were heard at first instance by Ellicott J. who found in favour of the Bondi company on its action. His Honour granted injunctive relief, made an order that the U.S. company pay the Bondi company's costs and reserved liberty to the Bondi company to apply for damages. The effect of the injunctive relief granted was that the U.S. company was restrained from operating any restaurant in the Sydney metropolitan area under the name "Taco Bell" or under any name similar thereto which is deceptive or misleading or which is likely to deceive or mislead, and from passing-off goods and services supplied in any restaurant in the Sydney metropolitan area not supplied by the Bondi company as and for goods and services supplied by the Bondi company. No order was made in respect of the cross-claim which, however, was plainly intended to be dismissed.

The orders sought on this appeal by the appellants are that the claims of the Bondi company be dismissed and that the relief claimed by the appellants in their cross-claim be granted. No notice of cross-appeal was given by the Bondi company in respect of the refusal of the learned primary judge to grant certain other relief which it had claimed.

The Facts

In 1962, a Mr. Glen Bell opened a Mexican food restaurant in California under the name "Taco Bell". The word "taco" is of Spanish derivation and one of its meanings is a "snack". It is used to denote a crisp folded corn wafer filled with other food, typically, cooked ground beef, fresh lettuce, tomato and shredded cheese.

Mr. Bell subsequently opened more restaurants operated in the same style and under the same name and granted licences or franchises to others to do likewise. The second appellant, Taco Bell, is the assignee from Mr. Bell of his rights in the name "Taco Bell". It is registered in the United States as the proprietor of the trademark "Taco Bell" in various manifestations. It has also applied for registration of the trademark "Taco Bell" in Australia and those applications are pending.

There are at present some 1366 restaurants operated under the name "Taco Bell" in 40 States of the United States, in Canada and in Guam. The number of restaurants increased from 325 in 1969 to 1100 in 1979. In 1970 there were 232 operating in California and 157 in other States of the United States. In 1980 there were 345 operating in California and 925 in other States. The number of restaurants operated by Taco Bell itself presently exceeds those operated by others under franchise from it. The whole chain employs over 10,000 people.

The Taco Bell chain restaurants have a characteristic appearance with Mexican decor and architecture. They customarily feature a distinctive bell tower and bell. Further, the restaurants' operations are standardised. All aspects of establishing, operating and promoting "Taco Bell" restaurants are specified in a number of manuals and handbooks and in memoranda regularly circulated by the central management of the chain in the United States. Matters dealt with include customer service, food preparation, menu preparation, packaging, service procedures, daily restaurant operations, business records, restaurant security and control, accounting, safety and cleaning and maintenance. The menu is the same. The food is prepared to the same recipe and is presented in the same way. There is no table service and bookings are not accepted. Customers order their food at the counter, receive it wrapped, and either take it away or eat it at tables provided. Liquor is not sold on the premises and the consumption of alcohol is not permitted. There is an emphasis on hygiene, cleanliness and tidiness. The restaurants are brightly lit. All staff wear uniforms. The general colour scheme of yellow, orange and brown is followed in packaging, signs and uniforms. The restaurants compete directly with other chains selling what is often referred to as "fast food", such as "McDonald's".

The Bondi restaurant was opened, in September, 1970, by another American, one Bill Chillcoate. It was initially named "Taco Bill's" or "Taco Bill's Casa". The word "casa" is also of Spanish derivation and means "house".

The Bondi restaurant was, in 1973, acquired by the Bondi company which had been incorporated in that year under the name "B. & B. Mexican Enterprises Pty. Ltd". The shares in it were then owned by James Bruce Baird and James David Baird. On 31 January, 1974 and 8 February, 1974 respectively, the Bondi company registered the names "Taco Casa" and "Taco Bell" as business names under the Business Names Act, 1962 (N.S.W.). On 7 December, 1976 the Bondi company's name was changed to Taco Bell Pty. Limited. Whilst the Bairds owned the shares, the name of the Bondi restaurant was changed to "Taco Bell's Casa". On 3 June, 1977, the shares were purchased from the Bairds by two companies, one of which is now the sole beneficial shareholder. Mr. Eric Francis and his son Mr. Robert Francis became directors. They did not know of the name "Taco Bell" in any context other than as the name of their restaurant until July, 1978 when one of them saw a newspaper article referring to the American "Taco Bell" chain.

Even if those who originally caused the Bondi company to adopt the name "Taco Bell" were aware when they did so that that was the name of a chain of Mexican food restaurants in the United States, there was no evidence that they were aware of the chain's reputation in Australia. When those presently controlling the Bondi company became aware of the American "Taco Bell" chain, they did not attempt to take advantage of the chain's reputation. The restaurant at Bondi has never been conducted with a view to attracting persons familiar with the American chain.

The Bondi restaurant seats approximately 90 people. Its gross sales have increased from approximately $170,000 in the year ended 30 June, 1978 to approximately $306,000 in the year ended 30 June, 1981. It is estimated that it catered for between 48,000 and 49,000 diners in that year. Its customers reside mainly in Bondi, the Eastern Suburbs, and other parts of Sydney. It caters principally for persons who wish to be served by a waiter and dine on the premises but it also offers take-away food. Its meals are relatively inexpensive. The name "Taco Bell's Casa" is displayed on the awning and on the front window of the restaurant as well as on the menu. The name "Taco Casa" appears on a board on the front window of the premises and this name has in the past been used in connection with the restaurant. The name "Taco Tucker" was also used after the take-away food operation was commenced. The Bondi restaurant has since 1971 been advertised in the ordinary and classified sections of the Sydney telephone directory. Since (but not including) the 1977 directory, it has been advertised in each section under the name "Taco Bell's Casa". It has also been advertised in the "Wentworth Courier", a newspaper circulating in the Eastern Suburbs of Sydney. In the "National Times" of 21 September, 1980 and the "Sydney City Monthly" of March, 1981 it is referred to as "Taco Bell's Casa". The learned primary judge found that the Bondi restaurant is known as "Taco Bell's Casa" or "Taco Bell's".

Commencing in August, 1979, representatives of one or other of the corporations associated with the American chain approached Mr. Robert Francis to attempt to acquire the name "Taco Bell" from the Bondi company. Mr. Francis indicated that the the Bondi company would require to be paid a very large sum of money in return for whatever rights it may have in respect of the name. That attitude was not inconsistent with the rights having been innocently and legitimately acquired. The learned primary judge concluded that the negotiations, which proved fruitless, established that as early as August, 1979 those associated with the U.S. chain were aware of the restaurant at Bondi and of the Bondi company's firm intention to continue to use the name "Taco Bell's".

Around November, 1980, it was announced that Pepsico Inc. was about to set up in Australia a chain of Mexican fast-food outlets under the name "Casa Amiga". Newspaper articles to this effect dated January, 1981 are in evidence. In that month a restaurant was opened at Granville under that name by the U.S. company which had been incorporated in the United States for the purpose of establishing and operating "Taco Bell" restaurants in Australia. The restaurant at Granville was conducted under the name "Casa Amiga" until 3 September, 1981 when the name was changed to "Taco Bell". On that day, the U.S. company opened another restaurant under the same name in George Street in the central city area of Sydney. Franchise Agreements between the U.S. company and Taco Bell dated 7 August, 1981 in respect of each of the George Street restaurant and the Granville restaurant are in evidence. Since 3 September, 1981, each of the restaurants conducted by the U.S. company has traded under the name "Taco Bell". In advertising and on signs relating to its business, the U.S. company has used the letters "T.M." in association with the name "Taco Bell", and has stated that "Taco Bell is the Trademark of Taco Bell - a California Corporation".

The restaurant at Granville is typical of the "Taco Bell" chain. The George Street restaurant is also typical except for the fact that it was not practical to change the style of architecture of the building to conform exactly to the usual "mission" style of "Taco Bell" buildings. It is the intention of the U.S. company to open and operate other "Taco Bell" restaurants in the Sydney metropolitan area, including restaurants in the Eastern Suburbs, if it is successful in the present proceedings. In the long term, other persons would be franchised to operate such restaurants.

The Bondi company also intends to operate other "Taco Bell's Casa" or "Taco Bell's" restaurants, including possibly a restaurant in the inner city. Sites have been considered in a number of Sydney suburban areas, and a site has now been acquired in the Sydney suburb of Manly by a company in which the Bondi company has an interest.

Prior to 3 September, 1981, no restaurant or other business was carried on in Australia under the name "Taco Bell" by any person or company associated with the U.S. chain. Nor, until shortly before that date, was there any advertising in Australia by or related to the U.S. chain's operations. Nonetheless, there is a significant number of people in the Sydney area who, by reason of having lived or travelled in the United States, are and were aware of the "Taco Bell" chain of restaurants in the United States, of the use in relation to those restaurants of the name "Taco Bell", and of the distinctive nature of their architecture, decor and service. It is not, we think, in dispute that that was also the position at the time the Bondi company commenced to use "Taco Bell's" in connection with its Bondi restaurant.

Conversely, when the U.S. company's business operations in Australia using the name "Taco Bell" were commenced on 3 September, 1981, there was a significant number of members of the public in the Sydney metropolitan area who regarded the name "Taco Bell's Casa" or "Taco Bell's" as denoting or meaning the Bondi restaurant business conducted by the Bondi company.

The Starting Point

The essential reference point of the claim propounded by the Bondi company is September, 1981 when the U.S. company changed the name of its Granville restaurant and opened its city restaurant. The U.S. company's cross-claim goes back to a much earlier time. It raises for consideration the propriety of the adoption by the Bondi company of the name "Taco Bell's".

The appellants' case comprised two basically incompatible assertions. Their primary argument was that there is no actual or potential confusion between the two business operations. Alternatively, they contended that it is the Bondi company which has been guilty of contravening the Act and passing-off since it adopted "Taco Bell's" in connection with its Bondi restaurant 4 or 5 years ago. A further submission was made that, in any event, the appellants' reputation in the Sydney area entitled them to use the name "Taco Bell" without breach of the Act or passing-off.

In the view we take, the appropriate starting point is not when the U.S. company commenced its operations in Australia in September, 1981, but when the Bondi company changed its name to Taco Bell Pty. Ltd., registered the business name "Taco Bell", and commenced to use the name "Taco Bell" or some variant thereof in respect of its restaurant business. The questions which first arise are those raised by the cross-claim, namely, whether, having regard to the appellants' reputation in connection with the name "Taco Bell", the Bondi company, or its shareholders or directors, then breached s.52 of the Act or engaged in passing-off.

The Cross-Claim for Passing-off

The appellants' claim for passing-off must be tested as at the date at which the Bondi company commenced to use the name "Taco Bell" or a variant thereof in respect of its business (Cadbury-Schweppes Pty. Ltd. v. Pub Squash Co. Pty. Ltd. (1981) 1 W.L.R. 193, at p. 204). At that time, the appellants had no connection with any restaurant business in Australia.

At first instance, Ellicott J. concluded that the appellants' reputation in Sydney at the relevant point of time, which was wholly dependent on user of the name "Taco Bell" overseas, did not entitle the appellants to bring a passing-off action in respect of the Bondi company's local activities. In that regard, his Honour took into account what had been said in a large number of cases in relation to the necessary foundation for a passing-off action. There is a degree of inconsistency in the cases. We find it unnecessary, however, to consider the question whether any goodwill or any reputation which the appellants possessed was sufficient to base their action for passing-off. It seems to us that the claim in passing-off against the Bondi company can be disposed of on a narrower and what seems to us to be a surer ground.

A party seeking relief in a passing-off action must establish some actual or probable damage: see for example, Erven Warnink Besloten Vennootschap v. J. Townend & Sons (Hull) Ltd. ((1979) A.C. 731, per Lord Diplock at p. 742). The appellants quite failed to establish, and indeed we doubt whether they even sought to prove, that at the time at which the Bondi company commenced to use the name "Taco Bell" there was a probability that its so doing would have any effect whatsoever on the appellants' reputation, goodwill or business. No attempt was made to establish that in 1976-1977 any probability existed that the appellants would seek to extend the "Taco Bell" restaurant chain to Sydney. Further, whatever reputation the appellants or either of them had in Australia at that time, it was a reputation soley related to purely local business operations in other countries. Neither its businesses in the countries where the restaurant chain then operated, nor, if it be different, its goodwill in respect of those businesses, including any element thereof related to its reputation in Australia, was shown as likely to be damaged by the Bondi company's restaurant business in Australia operating under the same name, even if the result of the Bondi company's so operating had been that it was genuinely but erroneously believed in Australia that there was a business connection between the Bondi company's business and the overseas chain. In fact, the evidence adduced by the appellants indicates that those persons in Sydney who were aware of the existence of the overseas chain and of the Bondi restaurant would not have been under any misconception as to the existence of any such business connection.

The cross-claim for passing-off fails. It does not, however, follow as of course that the Bondi company's conduct in adopting and using "Taco Bell's Casa" was not "misleading or deceptive or . . . likely to mislead or deceive" within the meaning of s.52(1) of the Act.

The relationship between s.52(1) and passing-off

In Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Limited ((1977-78) 140 C.L.R. 216), the High Court considered the operation of s.52(1). The decision involved, directly, only the narrow issue of whether the use by one party of a name which was accurately descriptive of the nature of its business was misleading or deceptive because its use led persons to believe that it was associated with another party which had a similar descriptive name. The Court allowed an appeal from the Commonwealth Industrial Court which had granted an interlocutory injunction. The decision was delivered before the words "or is likely to mislead or deceive" were introduced in s.52(1) in 1977. The leading judgment was delivered by Stephen J. with whom Jacobs J. agreed. Barwick C.J., with whom Aickin J. agreed, also expressed agreement with Stephen J. in so far as Stephen J's reasons supported Barwick C.J's conclusions.

Whilst, as was pointed out by Stephen J. (ibid, at p. 227), the long experience in the courts in relation to passing-off should not be disregarded and some principles which have been developed in that context may be also applicable to s.52, it is, in our opinion, important to heed his Honour's emphatic rejection on the same page of any suggestion that s.52 is no more than a statutory re-enactment of passing-off principles. (See, also, the remarks of Brennan J. in World Series Cricket Pty. Ltd. v. Parish (1977) 16 A.L.R. 181 at p. 199 and the judgment of Northrop J. in McWilliam's Wines Pty. Limited v. McDonald's System of Australia Pty. Limited (1980) 33 A.L.R. 394 at p.405ff.). The backgrounds of s.52 and of the law of passing-off are quite different. Their respective purposes and the interests which they primarily protect are contrasting. Their areas of operation do not coincide. The indiscriminate importation into s.52 cases of principles and concepts involved in passing-off and the associated area of trade mark law is likely to be productive of error and to give rise to arguments founded on false assumptions.

Deception up to "the point of sale"

It was submitted by the appellants that conduct cannot constitute a contravention of s.52 unless it causes, or is likely to cause, misleading or deception which continues to what was described as "the point of sale". This submission involved the application to s.52 of what was said to be a principle of the law of passing-off. In support of it, reliance was placed upon the following comments of Lockhart J. in Stuart Alexander & Co. (Interstate) Pty. Ltd. v. Blenders Pty. Ltd. (1981) 3 A.T.P.R. 40-244 at p. 43,208):

"There is evidence that some buyers in supermarkets seeking Moccona first mistakenly select Andronicus; but realise their mistake before paying for their purchases at the cashier's desk. These incidents do not support the applicant's case. I adopt the following passage from the opinion of the Judicial Committee, given by Lord Scarman, in Cadbury-Schweppes Pty. Ltd. v. Pub Squash Co. Pty. Ltd. (1981) 1 W.L.R. 193 at p. 205: 'He (the learned trial Judge) accepted that on occasions there was confusion at the point of sale: but he found, and there was plenty of evidence on which he could find, that the confusion was almost always corrected before the moment of sale. Such confusion as there was arose, in his view, from the casual attitude of many purchasers in the market to the product offered and not from any failure of the defendant sufficiently to distinguish its product from 'Solo'.' The Pub Squash case concerned passing off and not misleading or deceptive conduct under the Trade Practices Act 1974; but the passage which I have cited applies in my opinion to the present case".

It is, however, apparent that Lockhart J. was not, in the above passage, seeking to lay down any general principle of law either as to the point at which or as to the period for which there must be misleading or deception or a likelihood of misleading or deception before one can have a contravention of s.52. His Honour's remarks and the quoted comments from the opinion of the Privy Council in Cadbury-Schweppes v. Pub Squash (supra) were, in each case, made in connection with what was alleged to be deceptively similar labelling and packaging of two brands of a product, and were particularly concerned with the presentation of the rival brands for sale, rather than with advertising or other aspects of the respondent's conduct. In each there was a critical finding of fact that the evidence did not establish even confusion between the two brands except in the casual act of initially picking up the one brand for the other. Neither brand was deliberately selected for purchase, and neither was purchased, under a mistaken belief. The passage quoted from Stuart Alexander v. Blenders (supra) fits easily into place if taken in conjunction with another passage from Lockhart J's judgment (ibid at p. 43,207):

"The plain fact is that the two brands of coffee are well known and the brand names are prominently displayed on every label. In my view there is no real likelihood of confusion, let alone confusion to the extent of being misled or deceived".

Nor would it accord with the legislative purpose underlying s.52 to import from the law of passing-off a limitation restricting the applicability of the section to conduct which misleads or deceives, or is likely to mislead or deceive, "up to the point of sale". The mere fact that such a principle existed in a field of law concerned primarily with protecting the business or goodwill of a trader against the conduct of others would be of little relevance in determining the scope of the statutory provisions of s.52. It is true that a rival trader may take advantage of that section to obtain an effective remedy in respect of conduct which answers the statutory description and causes damage to the goodwill of his business (see, e.g., Hornsby Building Information Centre v. Sydney Building Information Centre, supra, at p. 226 and p. 234; The Queen v. The Federal Court of Australia; Ex parte Pilkington A.C.I. (Operations) Pty. Ltd. (1978) 142 C.L.R. 113 at pp. 128-129). It is, however, a matter of debate as to whether such protection of rival traders should properly be seen as part of the legislative purpose to be discerned in s.52 (see, Hornsby Building Information Centre v. Sydney Building Information Centre, supra; Snoid v. Handley (1981) 3 A.T.P.R. 40-247 at p. 43,236). Even if it should, it is plain that the primary legislative purpose which s.52 was intended to serve is consumer protection (see, generally, per Northrop J., McWilliam's v. McDonald's, supra). It would ill accord with that primary purpose to restrict the operation of the section to conduct which, at common law, would entitle a trader to sue a rival or to impose a limitation upon that operation merely because the common law accepted, or was thought to accept, such a limitation as applicable to proceedings for passing-off.

It is, in the circumstances, unnecessary that we form or express any concluded view on the question whether it is a principle of the law of passing-off that deception must continue, or be likely to continue, to the "point of sale". As a matter of principle and of logic, it is difficult to see why it should be. For the purposes of the present appeal, it suffices to say that, even if such a limitation should be recognized in the law of passing-off, we see no ground for importing it into the provisions of s.52 of the Act. In our view, it is sufficient to enliven s.52 that the conduct, in the circumstances, answers the statutory description, that is to say, that it is misleading or deceptive or is likely to mislead or deceive. It is unnecessary to go further and establish that any actual or potential consumer has taken or is likely to take any positive step in consequence of the misleading or deception. That is not to say that evidence of actual misleading or deception at the point of sale and of steps taken in consequence thereof is not likely to be both relevant and important on the question whether the relevant conduct in fact answers the statutory description and as to the relief, if any, which should be granted.

McWilliam's v. McDonald's and "Erroneous Assumption"

The question whether particular conduct of which complaint is made is misleading or deceptive or likely to mislead or deceive is, in the ordinary case, a question of fact to be answered in the context of the evidence as to the alleged conduct and as to relevant surrounding facts and circumstances. If the resolution of the question were entrusted to a jury, the question whether a respondent had engaged in conduct of the type described in s.52 would be susceptible of a simple monosyllabic answer without disclosure or record of reasoning processes. Where resolution of the question is entrusted to a court constituted by a judge without a jury, however, it is encumbent upon the court to indicate the process of reasoning which has led to the answer which is given. It is inevitable that that process of reasoning will tend to be worded in the language of the lawyer and that the path to decision of the factual question will be paved with generalizations which, particularly when enshrined in the volumes of law reports, bear a superficial resemblance to formulations of legal principle but which are, in truth, no more than part of an exposed process of reasoning in the course of deciding the question of fact.

In McWilliam's v. McDonald's (supra), a Full Court of this Court held that conduct of McWilliam's in using the expression "BIG MAC" in connection with the supply or possible supply of wine, in a context where that expression was wellknown as the name of a particular type of hamburger sold by McDonald's, did not constitute conduct which was misleading or deceptive or likely to mislead or deceive within the meaning of s.52(1) of the Act. In the course of their respective judgments, Smithers J. and Fisher J. placed particular emphasis on the fact that a person would only be misled or deceived into thinking that the use of the expression "BIG MAC" by McWilliam's indicated some arrangement between McWilliam's and McDonald's if he made the erroneous assumption that the expression could not have been used by McWilliam's in the absence of such an arrangement. There has been a tendency - in our view mistaken - to see their Honours' comments in that regard as involving some general proposition of law to the effect that intervention of an erroneous assumption between conduct and any misconception destroys a necessary chain of causation with the consequence that the conduct itself cannot properly be described as misleading or deceptive or as being likely to mislead or deceive.

In truth, of course, no conduct can mislead or deceive unless the representee labours under some erroneous assumption. Such an assumption can range from the obvious, such as a simple assumption that an express representation is worthy of credence, through the predictable, such as the common assumption in a passing-off case that goods marketed under a trade name which corresponds to the well-known trade name of goods of the same type have their origins in the manufacturer of the well-known goods, to the fanciful, such as an assumption that the mere fact that a person sells goods means that he is the manufacturer of them. The nature of the erroneous assumption which must be made before conduct can mislead or deceive will be a relevant, and sometimes decisive, factor in determining the factual question whether conduct should properly be categorized as misleading or deceptive or as likely to mislead or deceive. Beyond that, generalizations are themselves liable to be misleading or deceptive. Thus, one might generalize that the need for a simple assumption that an express representation is literally true could never be a factor militating against a finding that conduct which has misled or deceived is of its nature misleading or deceptive. Such a generalization would, however, ignore the part that irony can legitimately play in human communications. On the other hand, conduct which could only mislead or deceive if the representee were to make a fanciful assumption and which ordinarily would be innocent, may be misleading or deceptive if it appears that the person engaging in the conduct knew that the person to whom the relevant conduct was directed was convinced of the validity of that assumption.

Confusion

In McWilliam's v. McDonald's (supra), the Full Court held that, although the conduct of McWilliam's was likely to have caused confusion or wonderment, it did not appear that in the particular circumstances of that case the conduct was misleading or deceptive or likely to mislead or deceive. As we read their Honours' judgments, that was a factual conclusion. Their Honours were not suggesting that there is, for the purposes of s.52 of the Act, a necessary dichotomy between "confusion" on the one hand and "misleading or deception" on the other.

Conduct which produces or contributes to confusion or uncertainty may or may not be misleading or deceptive for the purposes of s.52. In some circumstances, conduct could conceivably be properly categorized as misleading or deceptive for the very reason that it represents that confusion or uncertainty exists where, in truth, there is no proper room for either. Ordinarily, however, a tendency to cause confusion or uncertainty will not suffice to establish that conduct is of the type described in s.52. The question whether particular conduct causes confusion or wonderment cannot be substituted for the question whether the conduct answers the statutory description contained in s.52.

As has already been noted, the High Court in Hornsby Building Information Centre v. Sydney Building Information Centre (supra) held that the respondent's use of a name similar to the name of the applicant did not, in the particular circumstances of that case, offend s.52(1). The names there were descriptive and thus not distinctive of any particular business. However, the possibility of confusion was recognized and the conclusion was arrived at notwithstanding evidence that persons had been led, by the similarity of names, to believe that the Hornsby Centre was a branch of, or otherwise associated with, the Sydney Centre. At p. 230, Stephen J. said:

"Evidence of confusion in the minds of members of the public is not evidence that the use of the Hornsby Centre's name is itself misleading or deceptive but rather that its intrusion into the field originally occupied exclusively by the Sydney Centre has, naturally enough, caused a degree of confusion in the public mind. This is not, however, anything at which s.52(1) is directed".

The case of Hornsby Building Information Centre v. Sydney Building Information Centre (supra) provides guidance as to the general approach to be adopted in s.52 cases involving the use of similar names. As Stephen J. said (ibid at p. 228), it is "of particular importance to identify the respect in which there is said to be any misleading or deception" and "to determine whether there has been any contravention of s.52(1) it is necessary to inquire why . . . misconception has arisen". In World Series Cricket v. Parish (supra, at p. 201), Brennan J. correctly commented that "a statement which conveys no meaning but the truth cannot mislead or deceive or falsely represent; although a statement which is literally true may nevertheless convey another meaning which is untrue, and be proscribed accordingly" (see, to the same effect, per Stephen J., Hornsby Building Information Centre v. Sydney Building Information Centre, supra, at pp. 227-228).

Irrespective of whether conduct produces or is likely to produce confusion or misconception, it cannot, for the purposes of s.52, be categorized as misleading or deceptive unless it contains or conveys, in all the circumstances of the case, a misrepresentation. The difficulty which will commonly arise in a s.52 case is in determining whether the conduct contains or conveys, in all the circumstances, a misrepresentation and in assessing the significance to that question of evidence that one or more persons were in fact led into error. In extreme, but not necessarily infrequent, cases, it may be correct to hold that, as a matter of law, conduct said to contravene s.52 is incapable of conveying the untrue meaning alleged or any other false meaning. Such cases aside, whether or not conduct amounts to a misrepresentation is a question of fact to be decided by considering what is said and done against the background of all surrounding circumstances. In some cases, such as an express untrue representation made only to identified individuals, the process of deciding that question of fact may be direct and uncomplicated. In other cases, the process will be more complicated and call for the assistance of certain guidelines upon the path to decision. In a case, such as the present, where the suggested misrepresentation has not been expressly made and it is alleged that the relevant deception or misleading is, or is likely to be, of the public, the following propositions appear to be established as affording guidance.

First, it is necessary to identify the relevant section (or sections) of the public (which may be the public at large) by reference to whom the question of whether conduct is, or is likely to be, misleading or deceptive falls to be tested (Weitmann v. Katies Ltd. (1977) 29 F.L.R. 336, per Franki J. at pp. 339-340, cited with approval by Bowen C.J. and Franki J. in Paula Brock v. The Terrace Times Pty. Ltd. (1982) A.T.P.R. 40-267 at p. 43,412).

Second, once the relevant section of the public is established, the matter is to be considered by reference to all who come within it, "including the astute and the gullible, the intelligent and the not so intelligent, the well educated as well as the poorly educated, men and women of various ages pursuing a variety of vocations": Puxu Pty. Ltd. v. Parkdale Custom Built Furniture Pty. Ltd. ((1980) 31 A.L.R. 73, per Lockhart J. at p. 93); see also World Series Cricket v. Parish (supra), per Brennan J. at p. 203.

Thirdly, evidence that some person has in fact formed an erroneous conclusion is admissible and may be persuasive but is not essential. Such evidence does not itself conclusively establish that conduct is misleading or deceptive or likely to mislead or deceive. The Court must determine that question for itself. The test is objective. (See, generally, Annand & Thompson Pty. Ltd. v. Trade Practices Commission (1979) 25 A.L.R. 91, per Franki J. at p. 102; Sterling v. Trade Practices Commission (1981) 35 A.L.R. 59 per Franki J. (with whom Northrop J. agreed) at p. 66 and per Keely J. at p. 69; Snoid v. Handley, supra, per the Court (Bowen C.J., Northrop and Morling JJ.); and Brock v. Terrace Times, supra, per Bowen C.J. and Franki J.).

Finally, it is necessary to inquire why proven misconception has arisen (Hornsby Building Information Centre v. Sydney Building Information Centre supra, at p. 228). The fundamental importance of this principle is that it is only by this investigation that the evidence of those who are shown to have been led into error can be evaluated and it can be determined whether they are confused because of misleading or deceptive conduct on the part of the respondent.

The Section 52 Cross-Claim

The application of the above propositions to the conduct of the Bondi company in the present case inevitably leads to a conclusion that it did not contravene and is not contravening s.52, either in its pre-1977 or its current form.

The first period by reference to which the Bondi company's conduct must be examined is the period from the time when the Bondi company commenced to use the name "Taco Bell" or some variant thereof in respect of its Bondi restaurant up to the time when the U.S. company commenced to carry on its two restaurants under the name Taco Bell. As has been mentioned, the Granville restaurant operated from January to September, 1981 under the name "Casa Amiga"; otherwise the appellants had no connection with any restaurant in Sydney during that period. Those people in Sydney who knew of the overseas Taco Bell chain knew of it only as existing outside Australia. The appellants can point to nothing in the proved conduct of the Bondi company in that period beyond the similarity between the name adopted for its restaurant and the name of the overseas chain, and the fact that both the Bondi restaurant and the overseas chain specialized in Mexican food. It was conceded by senior counsel for the appellants that there was no direct evidence that anyone had been misled or deceived in that period by the Bondi company's adoption of the name "Taco Bell".

The relevant section of the public, by reference to whom the Bondi company's use of the name "Taco Bell's Casa" or "Taco Bell's" falls to be tested, comprises those persons who, at the relevant time, knew or know of the appellants' "Taco Bell" chain of restaurants. Even if attention be confined to those unaware of the considerable dissimilarities between the nature of the respective restaurant operations, it could not reasonably be concluded that a Mexican food restaurant in Sydney is, by reason merely of such a similarity of names, connected with an overseas chain of Mexican food restaurants. This view of course accords, so far as it goes, with the appellants' primary argument that there is no actual or potential confusion and with the evidence which the appellants themselves adduced. Viewed objectively, the conduct of the Bondi company could not properly be described as containing or conveying a representation that there was any connection between the Bondi restaurant and the overseas Taco Bell chain.

The second period by reference to which the Bondi company's conduct must be examined is the period after the U.S. company commenced to conduct its two Sydney restaurants under the name Taco Bell. It may well be that, during that period, there arose a real likelihood that the public or a significant section of it would be misled or deceived into believing that there was a connection between the Bondi company's restaurant and the Taco Bell chain of restaurants. If that be so, however, the reason for any such likelihood of misleading or deception could not properly be seen as the conduct of the Bondi company in continuing to carry on its restaurant under its, by then, established name. As discussed hereunder, the reason for any such likelihood of misleading or deception was the conduct of the U.S. company.

It was and is legitimate for the Bondi company to adopt the name which it did and trade as it does. The appellants failed to make good their cross-claim for contravention of s.52.

The Section 52 claim against the U.S. company

By September, 1981, the Bondi company had by virtue of its operations acquired a significant local reputation and goodwill throughout Sydney, especially, but not only, in the Eastern Suburbs, in respect of the business of a Mexican food restaurant known and associated with names consisting of or including the words "Taco Bell". However, that reputation was related only to its particular Mexican food restaurant at Bondi, and not to any more general use of that name. The appellants, on the other hand, also had a reputation in Sydney prior to September, 1981, by reference to a substantially identical name, not in connection with a local business, but only in connection with their overseas operations.

The first question which arises is whether there exists, or whether there is likely to exist, in the minds of the relevant section of the public a belief in a connection between the first appellant's restaurants at Granville and George Street, Sydney and the first respondent's restaurant at Bondi. If so, it is necessary to decide why that misconception has arisen or is likely to arise. The relevant section of the public is not a narrow one. It consists at least of persons who know of the existence in Sydney of the U.S. company's Taco Bell chain of Mexican food restaurants and of the existence at Bondi of a Mexican food restaurant named "Taco Bell's".

If all that the U.S. company had done had been to open one Mexican food restaurant in a Sydney suburb under the name "Taco Bell", we entertain some doubt as to whether it could properly be held that the mere adoption and use of that name in respect of another Mexican food restaurant in a quite different part of a large metropolis like Sydney could properly be seen as a representation that the new restaurant business and the Bondi company's restaurant business were connected. It is not, however, necessary to form or express any concluded view on that question. The U.S. company's conduct involves far more than the mere opening of one suburban restaurant under the name "Taco Bell".

It is clear from the evidence that the U.S. company's restaurants in Granville and central Sydney must be seen as part of a proposed chain of Mexican food restaurants. The intentions of the U.S. company in that regard are established by the evidence and have been made known to the public. In these circumstances, each of the U.S. company's restaurants should and will be seen as part of a chain of restaurants established in Sydney and bearing the name "Taco Bell". It is inevitable that some members of the above-mentioned section of the public, who are unfamiliar with the actual operations of both the chain and the Bondi restaurant, already believe or will in due course believe that the Bondi company's restaurant is part of the chain. It is nothing to the point that any such persons are likely to be disabused if they actually attend the Bondi company's restaurant: for reasons which we have already given, s.52 contains no requirement that deception continue to point of sale.

We have already indicated our view that the conduct of the Bondi company in continuing to carry on its restaurant under its established name cannot properly be seen as the cause of any actual or likely misconception as to a connection between its Bondi restaurant and the Taco Bell chain. The cause of any such misconception is the use by the U.S. company of the name "Taco Bell" in connection with the Sydney operations of a chain of Mexican food restaurants in circumstances in which the U.S. company had no prior reputation in respect of the local use of that name and in which that name was, in respect of local operations, clearly associated with an established Mexican food restaurant at Bondi. Such conduct by the U.S. company is misleading or deceptive or is likely to mislead or deceive within the meaning of the section. We agree with the decision of Ellicott J. that the U.S. company's conduct in establishing and operating its two Mexican food restaurants under the name "Taco Bell" constituted and constitutes conduct of the type proscribed by s.52 of the Act. That conduct is, in the circumstances, such as to convey to a significant section of the public the representation that there was a connection between the Bondi restaurant and the Taco Bell chain.

Passing-off:

As we followed the argument, it was not suggested on behalf of the Bondi company that it is entitled to relevantly different relief for alleged passing-off from that available to it in respect of the contravention of s.52 of the Act which attracted the jurisdiction of the Federal Court.

It is, no doubt, ordinarily desirable that a trial court should make all findings appropriate to the determination of each claim where a number of causes of action are properly joined. It is also plainly desirable that if it is proposed to bring proceedings both for contravention of s.52 of the Act and for passing-off in respect of substantially the same conduct, both claims shall be pursued in the Federal Court which alone has jurisdiction to deal with the claim for contravention of s.52. On the other hand, we consider that the Federal Court should not, as a matter of general discretion, proceed to decide additional claims where it is pointless so to do. There are plainly many cases where an associated claim for passing-off provides no basis for wider or more effective relief than the primary claim for contravention of s.52 and where, if the primary claim fails, the associated claim will plainly also fail. In such cases, the court should not be troubled by the associated claim.

On the other hand, there may well be cases in which there are legitimate reasons for pursuing a claim for passing-off in addition to a claim for contravention of s.52. It is, for example, conceivable that a claimant might be entitled to relief for passing-off even though his primary claim for contravention of s.52 of the Act fails. Alternatively, a wider form of injunction or more extensive damages might, arguably, follow from success in the associated claim for passing-off. In such circumstances, however, the applicant should, either in his pleading or in the presentation of his case, make clear the reason for the joinder of the associated claim or claims. Such a course would both highlight whether there is any purpose in such joinder and permit the identification of any additional issues which arise beyond the claim which primarily attracts the jurisdiction of the Federal Court. A side benefit of that course would be that it would better enable it to be seen whether the joinder of the associated claim is within jurisdiction and otherwise appropriate.

As we have mentioned, it has not been suggested that the Bondi company would be entitled to wider or more effective relief in the present case by reason of its claim for passing-off than that to which it is entitled as a result of its claim for contravention of s.52. It is apparent that the circumstances are not such as to warrant the making of an order for an account of profits. Nor, in our view, would success in the associated claim for passing-off warrant the granting of any wider injunctive relief than that to which the Bondi company is entitled as a result of the U.S. company's contravention of the provisions of s.52. In these circumstances, we have considered whether we should set aside the finding that the Bondi company was entitled to succeed on its associated claim for passing-off on the ground that the Court should not have been troubled with it. In view of the facts that the point was not taken before us and that his Honour reserved leave to apply for damages, we have come to the view that it is not appropriate to adopt that course in the present case. We do not, however, propose to engage in a detailed discussion of what we see as being essentially an academic question. We content ourselves with saying that we are unpersuaded that there is any ground for interfering with the decision at first instance that the Bondi company was entitled to succeed on its passing-off claim.

Additional defences:

The appellants advanced a number of arguments why the injunction granted by the learned primary judge should be set aside. Reference was made to the belated and unexplained adoption of the name "Taco Bell" by the Bondi company for itself and as the name of its restaurant, and to the attempt to negotiate a very high price for a sale of the name to the appellants. It was also suggested that the detriment to the appellants in being deprived of their international reputation is disproportionate both to any loss which the first respondent might sustain and any damage or inconvenience to an individual consumer who was misled. Any force in these submissions depends, of course, on the relevance of the conduct and position of the parties in such proceedings as the present (cf. World Series Cricket v. Parish, supra, at pp. 189-190 (Bowen C.J.), pp. 195-196 (Franki J.) and pp. 203-204 (Brennan J.)).

Even if it be assumed that the above considerations are relevant to the question of relief, we are quite unpersuaded that, whether considered individually or together, they provide any real reason for interfering with the injunctive relief which Ellicott J. granted. As we have said, the provisions of s.52 of the Act are, at least primarily, concerned with the protection of the consumer. None of the above considerations provides any adequate reason why the consumer should be subjected to a continuation of the U.S. company's misleading and deceptive conduct. This is particularly so in view of the fact that the critical conduct of the U.S. company, namely the establishment of the chain of restaurants in Sydney, will have an effect which is both ongoing and increasingly significant.

Conclusion

In the result, the Bondi company was entitled to succeed in its action against the U.S. company and the Bondi company and the other cross respondents were entitled to succeed on the U.S. company's and Taco Bell's cross claim. The question arises whether the injunctive relief granted by Ellicott J. was unnecessarily wide.

It is important to remember that it is at least the primary purpose of s.52 to protect consumers, in this case, consumers of Mexican food who are prospective customers of the restaurants involved. It is not part of the intended operation of s.52 that it give the Bondi company a monopoly in the use of a word such as "taco" which those knowledgable on the subject would generally know and consider apt to describe a common Mexican food. Injunctive relief granted to restrain contravention of s.52 of the Act should plainly be limited to what is necessary in the circumstances of the particular case.

The injunction based on s.52 which Ellicott J. granted was restricted to operating a restaurant in the Sydney metropolitan area under the name "Taco Bell" or under "any name similar thereto which is deceptive or misleading or which is likely to deceive or mislead". That form of injunction is, in our view, appropriate to the circumstances of the case. It precludes no more than what would constitute a contravention of s.52. It seemsto us that the injunction based on the finding of passing-off adds, for practical purposes, nothing of significance to the injunction based on s.52. It is in the ordinary form of a passing-off injunction. On balance, we see no reason for interfering with it.

We agree with the orders proposed by Franki J.

[1982] FCA 170

23 August 1982