Thai Silk Company Ltd v FF & E Services & Procurement (Aust) Pty Ltd

[1991] FCA 600

Re: THE THAI SILK COMPANY LIMITED and ARKITEX FABRICS PTY LIMITED
And: F. F. and E. SERVICES and PROCUREMENT (AUST) PTY LIMITED
No G504 of 1989
FED No. 600
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Hill J.(1)

CATCHWORDS

Trade Practices - misleading or deceptive conduct - applicants' silk fabric supplied for bedspread in mock-up room of hotel - ultimate bedspread used substantial reproduction of applicants but on cotton - cotton cheaper and more serviceable - respondent engaged as fit-out and procurement consultants in furnishing of hotel - whether conduct of respondent misleading or deceptive or likely to mislead or deceive members of the trade as to the origin of the fabric.

Trade Practices Act 1974 (Cth): ss.52, 53(c), 82

HEARING

SYDNEY

#DATE 2:10:1991

Counsel and Solicitors M.S. Willmott instructed by
for Applicant: Parish Patience

Counsel and Solicitors S.D. Epstein instructed by
for Respondent: McLaughlin Gordon and Lennon

ORDER

The application be dismissed.

The applicants pay the respondent's costs.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This case was heard at the same time as the proceedings brought by the same applicants against Aser Nominees Limited and Pak-Poy Kumagi Pty Ltd in the proceedings G115 of 1989, judgment in which has just been delivered. Reference is made to that judgment so far as it sets out the relevant legal principles.

1. The applicants are the Thai Silk Company Limited, the designer and manufacturer of silk fabrics which are exported into Australia and distributed in Australia under an exclusive distributorship agreement by the second applicant, Arkitex Fabrics Pty Limited. The respondent, F.F. and E. Services and Procurement (Aust) Pty Limited carries on the business of fit-out and procurement consultant, and was engaged by an agreement made on or about 31 July 1986 by Concrete Constructions (ACT) Pty Limited ("Concrete Constructions"), the construction manager for the Hyatt Canberra Hotel to act as fit-out and procurement consultant for the furnishing of that hotel.

2. The precise terms of the agreement with Concrete Constructions are not in evidence, but the duties of the respondent under that agreement included reviewing the budget for equipping the hotel, producing a procurement programme for items to be used in the hotel, and implementing that programme. The respondent acted as purchasing agent for Concrete Constructions, that is to say that goods ordered for the hotel were ordered by the respondent as a disclosed agent for Concrete Constructions, that is to say that goods ordered for the hotel were ordered by the respondent as a disclosed agent for Concrete Constructions and were paid for by Concrete Constructions and in the result title to goods so ordered never passed to the respondent.

3. As part of its duties the respondent was required to set up a mock-up guest room for the Hyatt Canberra Hotel. The design of that mock-up room was the responsibility of the interior design firm of Hirsch Bedner and Associates Limited of Hong Kong ("Hirsch Bedner"). That company was engaged by the owner and developer of the hotel, not a party to the present proceedings. A design was prepared by Hirsch Bedner. Specified as material for use in bedspreads was a silk fabric manufactured by the first applicant and sold in Australia by the second applicant numbered PDB2219A. No evidence was given by any representative of Hirsch Bedner in the proceedings.

4. The applicants' fabric may be described as a handwoven Thai silk of floral design on a background of grey/green. There are elements of apricot, cream and two shades of blue in the design which consists largely of leaves and flowers. The ultimate version in cotton has the same basic design of leaves and flowers and the same colourways save that it is printed on cotton and that the flowers in the pattern are bigger than those on the original silk.

5. The evidence was unclear as to the circumstances in which the applicants' fabric was purchased for the mock-up room. It would seem that the quantity necessary was in fact not purchased from the second applicant in Australia, but was probably purchased directly in Hong Kong or perhaps Bangkok. The evidence, however, makes it clear that the material for the mock-up room if ordered by the respondent was not acquired by the respondent as principal. Certainly the evidence makes it clear that the respondent did not pay for it. Rather, it would seem, it was probably acquired by the respondent acting as agent for Concrete Constructions in circumstances that title passed to the latter company.

6. It was ultimately conceded by the applicants that there was no contract for the supply of the Jim Thompson silk fabric used in the mock-up room between the applicants or either of them and the respondent.

7. Affidavit evidence was read from Mr Glover, who was the Contracts Administrator of the respondent, and from Mr Finlay who was the Project Manager of Concrete Constructions. Mr Finlay deposed to the preparation of the mock-up room and the obligation of the respondent to purchase equipment etc on behalf of Concrete Constructions in accordance with the "instructions" of Hirsch Bedner and Concrete Constructions. He said that Hirsch Bedner had originally specified the silk fabric PDB2219A for use in the bedspreads, but that, as a result of budgetary constraints, a number of items had been changed form the original specifications. His affidavit then proceeded to refer to the order of an "alternative cotton fabric" for use in the bedspreads in the hotel. He said:
   

"The paisley fabric was approved by the Design Consultants, Hirsch Bedner and Associates. The fabric was used because of its low cost and serviceability. The silk fabric specified was considerably more expensive and did not have the same degree of serviceability."

1. Mr Graham, the Managing Director of the respondent, was equally silent as to the manner in which the cotton cloth closely resembling the applicants' silk came to be ordered. In his affidavit, he too referred to variations from the original mock-up design and to the order of a fabric to be used in bedspreads, being the cotton fabric. He, however, did mention that the respondent had engaged a textile consultant, a Mr Viney, to advise on the purchase of fabrics and left it to implication, at least, that Mr Viney may have had something to do with the matter.

2. Mr Viney was not called, nor for that matter were other witnesses who could, no doubt, have given greater detail than that given by Mr Graham. A little more of the story came out in cross-examination. Despite the attempt in the affidavits to suggest that the similarity in the two fabrics arose by pure coincidence, it was clear that that was not the case. Mr Graham gave Mr Viney instructions to obtain a fabric "with similar design intent". That fabric was to save on costs and to be serviceable. There seems little doubt that thereafter negotiations were carried on between Mr Viney and the supplier of the fabric, Interior Textiles Pty Limited, which happened to be a company in which Mr Viney was personally interested. It seems that that company merely arranged for the fabric to be produced overseas and imported into Australia.

3. I have no hesitation in inferring that the respondent, in arranging for the supply of the cotton fabric on behalf of Concrete Constructions, deliberately set about ensuring that a fabric would be produced which was substantially similar in design to that of the applicants' silk fabric but on cotton, and with small differences which, while obvious when the two fabrics are compared together, pale into insignificance when they are not. There is no doubt that the overall effect of the cotton fabric is the same as that of the applicants' silk fabric, save as to the material upon which the design is printed.
   The case as pleaded

4. The applicants' case, as pleaded, was put on three alternative grounds. First, it was said that there had been an agreement for the supply of silk between the second applicant and the respondent for the purpose of being used as a bedspread in the display in the mock-up room in the new Hyatt hotel and that there was an implied term in that agreement. Second, a case was pleaded under s.52 of the Trade Practices Act 1974 (Cth) ("the Act"). In that case it was said that the respondent had:
   

"acquired, (or) displayed the offending fabrics in a manner which amounts to a representation that the offending fabrics are the

fabrics of/or are connected with the fabrics of the Applicants

which in fact they are not."

1. It was said that by making that representation the respondent had:
   

"offered, sold, supplied, acquired, displayed the offending

fabrics in a manner calculated to and which is likely to

deceive, mislead or confuse the traders and members of the

interior decorating industry into believing that..."

the cotton fabric was sourced from the applicants.

1. A third count, based on the same facts, relied not on s.52 of the Act but on s.53(c) of that Act. No attempt was made in submissions to suggest that the result under s.53(c) in a case such as the present would differ from that under s.52 and indeed no submissions at all were directed at the case under s.53(c).
   The case based on a breach of an implied term

2. The applicants' case for breach of an implied term fails in limine because there was no contractual relationship at all between the applicants, or either of them, and the respondent. On the evidence there was a contract between Concrete Constructions and the first applicant, but that was not a contract to which the respondent was a party. Even if there had been a direct contractual relationship between the second applicant and the respondent as the pleadings had alleged, in my view the case for an implied term would fail for the same reasons as it failed in the case against Aser Nominees Pty Limited in proceedings G115 of 1989.
   The case under s.52

3. The case as pleaded alleged that the respondent had acquired or displayed the offending fabrics or offered, sold, supplied, acquired or displayed them. It is clear as a matter of fact that title to the fabrics never passed to the respondent, such that the respondent never acquired them and certainly never sold them. The respondent was not the owner of the hotel and can hardly be said to have displayed the offending fabrics other than in causing them to be delivered to the owner of the hotel or to be installed in made-up bedspread form in the bedrooms in the hotel. In so far as the respondent can be said to have made any representation at all, that representation was made to Concrete Constructions or the hotel owner, persons who were not in any way misled or deceived or likely to be misled or deceived as to the origin of the fabric.

4. What in fact the respondent did, of course, was to arrange for the copy to be made, acting ultimately as agent for Concrete Constructions. While such conduct may very well, at least in some circumstances, constitute an accessory offence under s.79 of the Act, it does not represent a breach of s.52.

5. In the present case, even if it could be accurately said that there was some representation made by the respondent to persons who were members of the trade of interior decorators, the case under s.52 fails for the same reason as the case against Aser Nominees fails.

6. There is no doubt that the two fabrics are very similar. There is no doubt, and the evidence clearly establishes, that while an interior decorator looking at the fabrics from afar, might well be misled, any such misleading would evaporate upon a closer look at the fabrics. One is silk, the other is cotton, one is very finely designed and executed, the other is a cheap imitation.

7. One witness, Ms Carr, a Victorian interior designer, deposed that she had stayed overnight at the Hyatt Hotel in Canberra, had seen the fabric and thought it was a Jim Thompson fabric, notwithstanding that it was cotton. Prior to that time, all marketing to her of Jim Thompson fabric had been in relation to silk rather than cotton.

8. Ms Carr was familiar with the silk fabric in question and had, in fact, used it on a project as upholstery for dining furniture. She emphasised that unique approach which Jim Thompson fabrics have to patterns, colours and quality.

9. The evidence of other witnesses, however, made it clear that they were likely to be deceived or misled only momentarily, if at all, as to the origin of the cotton fabric, having regard to their association of Jim Thompson fabrics at that time with silk rather than cotton.

10. The problem really is that even if the evidence of Ms Carr sufficed to demonstrate that members of the interior decorating trade could be deceived or misled into believing that there was an association between the two fabrics, that evidence does not suffice to show that it was likely that persons in the trade would be misled. But even if it were likely, the conduct which would in such circumstances be in breach of s.52 of the Act was not conduct of the respondent at all but conduct of some other person.

11. In these circumstances there is no need to consider further the issue of damages. Suffice it to say that the same difficulties emerged for the applicant in the present case as emerged in the case of Aser Nominees Pty Limited. The evidence did not establish that the silk fabric would have been ordered had the copy not been made. Essentially the cost of the applicants' product put it out of reach of the hotel budget. Further it was not regarded as sufficiently serviceable. The evidence established no decline in the reputation of the Jim Thompson fabric range, nor did it establish that other decorators would hesitate to use the fabric having regard to its placement in the Hyatt Hotel.

12. Accordingly, applicant has not made out a case under s.52 of the Trade Practices Act, nor has it made out a case for damages under s.82 of that Act. The application must accordingly be dismissed with costs.