Wang v Anying Group Pty Ltd (No 3)

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FEDERAL COURT OF AUSTRALIA

Wang v Anying Group Pty Ltd (No 3) [2012] FCA 1380

Citation: Wang v Anying Group Pty Ltd (No 3) [2012] FCA 1380
Parties: HUA WEI WANG, XINYING PTY LTD (ACN 118 548 977) and NEW CENTURY 2001 PTY LTD TRADING AS ANYING SYDNEY COMPANY (ACN 114 661 568) v ANYING GROUP PTY LTD (ACN 126 282 657), YANYAN SUN and YUN CHEN; ANYING GROUP PTY LTD (ACN 126 282 657), YANYAN SUN and YUN CHEN v HUA WEI WANG, XINYING PTY LTD (ACN 118 548 977), NEW CENTURY 2001 PTY LTD TRADING AS ANYING SYDNEY COMPANY (ACN 114 661 568), REGISTRAR OF TRADE MARKS, CHUANG WANG and ANYING INTERNATIONAL FINANCIAL PTY LIMITED (ACN 105 067 990) 
File number: NSD 768 of 2008
Judge: FOSTER J
Date of judgment: 4 December 2012
Catchwords: PASSING OFF – account of profits – relevant principles discussed and applied – whether, in the circumstances of the present case, all of the profits derived by the first respondent from passing off its business as that of the third applicant should be accounted for or whether an apportionment was necessary – whether legal fees and disbursements incurred by the first respondent in defending the proceedings should be allowed to the first respondent as an expense incurred by it in deriving profits by reason of its wrongful conduct
Legislation: Australian Consumer Law, ss 18(1), 29(1)(g), 232
Federal Court of Australia Act 1976 (Cth), s 51A
Trade Practices Act 1974 (Cth), ss 52, 53(d), 75B
Federal Court Rules 2011, r 22.05 and r 30.21
Cases cited: Anying Group Pty Limited v Hua Wei Wang [2012] FCA 702 related
Wang v Anying Group Pty Ltd [2011] FCA 1196 related
Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 applied
Dart Industries v Décor Corporation Pty Ltd (1993) 179 CLR 101 cited
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 cited
Multigroup Distribution Services Pty Ltd v TNT Australia Pty Ltd (2001) 109 FCR 528 cited
Date of hearing: 4 December 2012
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 30
Solicitor for the Applicants/First, Second and Third Cross-Respondents: Mr DP Barlow of Colin Biggers & Paisley
Solicitor for the Respondents/Cross-Claimants: The Respondents/Cross-Claimants did not appear
Solicitor for the Fourth, Fifth and Sixth Cross-Respondents:  The Fourth, Fifth and Sixth Cross-Respondents did not appear

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 768 of 2008
BETWEEN:

HUA WEI WANG
First Applicant

XINYING PTY LTD (ACN 118 548 977)
Second Applicant

NEW CENTURY 2001 PTY LTD TRADING AS ANYING SYDNEY COMPANY (ACN 114 661 568)
Third Applicant
AND:

ANYING GROUP PTY LTD (ACN 126 282 657)
First Respondent

YANYAN SUN
Second Respondent

YUN CHEN
Third Respondent
and between:

ANYING GROUP PTY LTD (ACN 126 282 657)
First Cross-Claimant

YANYAN SUN
Second Cross-Claimant

YUN CHEN
Third Cross-Claimant
AND:

HUA WEI WANG
First Cross-Respondent

XINYING PTY LTD (ACN 118 548 977)
Second Cross-Respondent

NEW CENTURY…

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Details
Case
[2012] FCA 1380
Decision Date

CaseChat Overview and Summary

The case of Wang v Anying Group Pty Ltd (No 3) involved the plaintiff, New Century 2001 Pty Ltd, seeking an account of profits from the defendant, Anying Group Pty Ltd, for the wrongful conduct of passing off its business as that of New Century and contravening consumer protection laws. The dispute was heard in the Federal Court of Australia. The central legal issues in the case were whether Anying Group Pty Ltd should account for all profits derived from its wrongful conduct or if an apportionment was necessary, and whether Anying Group Pty Ltd should be allowed to deduct legal fees and disbursements incurred in defending the proceedings.

The Court examined the principles of accounting for profits in cases of passing off, referencing the leading case of Colbeam Palmer Ltd v Stock Affiliates Pty Ltd. The Court determined that the plaintiff was entitled to an account of only those profits derived by the defendant from the wrongful conduct. The Court rejected the defendant's argument to add back legal fees and disbursements as an expense incurred in deriving profits by reason of its wrongful conduct. The Court concluded that these expenses should not be deducted from the profits derived from the wrongful conduct, as they were not directly related to the profits made from the infringement or passing off. The Court ordered Anying Group Pty Ltd to pay New Century 2001 Pty Ltd $138,000, comprising $125,334 in profits and $12,666 in interest, and also to pay New Century's costs of the proceedings.

Orders

Orders of the court

1. Pursuant to r 30.21 of the Federal Court Rules 2011, the hearing of the third applicant’s claim against the first respondent for an order for an account of profits and for an order quantifying those profits proceed generally in the absence of the first respondent.

2. Accounts having been ordered and taken of the profits made by the first respondent by carrying on business under or by reference to the name “Anying” and by using in connection with such business the logo and four Chinese characters depicted below:

either alone or in conjunction with the Anying name thereby passing off its business as the business of the third applicant, the first respondent pay to the third applicant $138,000 being the total of the amount of the said profits as determined by the Court after the taking of accounts namely $125,334 and a lump sum in lieu of interest hereby ordered pursuant to s 51A(1)(b) of the Federal Court of Australia Act 1976 (Cth) in the amount of $12,666.

3. The first respondent pay the third applicant’s costs of and incidental to the third applicant’s claim for an account of profits against the first respondent as described in par 2 above.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

On 21 October 2011, I gave judgment in these proceedings in relation to all claims for relief other than the parties’ claims for pecuniary relief (Wang v Anying Group Pty Ltd [2011] FCA 1196) (the principal judgment). These Reasons for Judgment which I now give ex tempore should be read in conjunction with the principal judgment. To the extent that it is appropriate to do so, I shall adopt in these Reasons the same acronyms and abbreviations as were used in the principal judgment. The conclusions reached in the principal judgment may be summarised as follows: (a)The Registered Trade Mark (comprising the Anying name and logo as described in the principal judgment) registered in the name of Hua Wei Wang (Harry Wang) was to be cancelled and removed from the Australian Register of Trade Marks.(b)New Century 2001 Pty Ltd (New Century) (the third applicant) was entitled to declaratory and injunctive relief against Anying Group Pty Limited (Anying Auburn) (the first respondent) in respect of Anying Auburn’s contraventions of s 52 and s 53(d) of the Trade Practices Act 1974 (Cth) (the TPA) and s 18(1) and s 29(1)(g) of the Australian Consumer Law (the ACL) and in respect of Anying Auburn’s conduct in passing off its business as the business of New Century. (c)New Century was also entitled to declaratory and injunctive relief pursuant to s 75B of the TPA and s 232 of the ACL against Yanyan Sun and Yun Chen (the second and third respondents respectively) in respect of Anying Auburn’s contraventions of s 52 of the TPA and of s 18(1) of the ACL. All other claims for relief made by various parties in the earlier part of the proceedings were rejected. There remained, of course, New Century’s claims for pecuniary relief. These Reasons for Judgment determine the only claim for pecuniary relief which was actually pressed by New Century viz its claim for an account of profits against Anying Auburn. On 16 November 2011, I made orders giving effect to the principal judgment. The orders which I made on that occasion were in the following terms: THE COURT:1.By consent, ORDERS that, with effect from 28 June 2010, the applicants’ entitlement to pecuniary remedies (if any) and the cross-claimants’ entitlement to pecuniary remedies (if any) and the quantum of any such remedies to which any party might be entitled be heard separately from and after all other questions in the proceedings.2.ORDERS that, pursuant to the provisions of s 88(1)(a) of the Trade Marks Act 1995 (Cth), the Register of Trade Marks kept under s 207 of that Act be rectified by cancelling the registration of Australian Registered Trade Mark No 1100722.3.DECLARES that:(a)By carrying on business under or by reference to the name “Anying” (the Anying name); and(b)By using in connection with such business the logo and four Chinese characters depicted below:whether alone or in conjunction with the Anying name (the Anying trade mark), the first respondent has:(i)Passed off its business and the foreign currency exchange services provided by it as those of the third applicant;(ii)In trade or commerce, engaged in conduct that is misleading or deceptive or likely to mislead or deceive within the meaning of s 18(1) of the Australian Consumer Law and, until 1 January 2011, within the meaning of s 52 of the Trade Practices Act 1974 (Cth); and (iii)In trade or commerce, in connection with the supply or possible supply of services namely foreign currency exchange services and in connection with the promotion of the supply or use of such services, made false or misleading representations that it had and continues to have the sponsorship or approval of the third applicant or was affiliated with the third applicant and thereby contravened s 29(1)(g) of the Australian Consumer Law and, until 1 January 2011, contravened s 53(d) of the Trade Practices Act 1974 (Cth).4.DECLARES that the second and third respondents aided, abetted, counselled or procured the contraventions by the first respondent of the Trade Practices Act 1974 (Cth) and the Australian Consumer Law specified in Order 3 above and were knowingly concerned in or party to those contraventions and were thus involved in such contraventions with the consequence that they are both liable for such contraventions by reason of the provisions of s 75B of the Trade Practices Act 1974 (Cth) and ss 2, 18 and 236 of the Australian Consumer Law.5.ORDERS that the first respondent by itself, its officers, its employees, its servants and its agents and otherwise howsoever, be restrained from carrying on business or trading under or by reference to the Anying name or the Anying trade mark or any name or trade mark substantially the same as the Anying name or the Anying trade mark.6.ORDERS that the second and third respondents by themselves, their officers, their employees, their servants and their agents and otherwise howsoever, be restrained from carrying on business or trading under or by reference to the Anying name or the Anying trade mark or any name or trade mark substantially the same as the Anying name or the Anying trade mark.7.ORDERS that the second and third respondents, and each of them, by themselves, their servants, their agents and otherwise howsoever be restrained from:(a)aiding, abetting, counselling or procuring; and(b)being in any way knowingly concerned in or party to another person or entity carrying on business or trading under or by reference to the Anying name or the Anying trade mark or any name or trade mark substantially the same as the Anying name or the Anying trade mark and be further restrained from conspiring with others to cause another person or entity to carry on business or trade in such a manner.8.DECLARES that, by representing to members of the public that:(a)The business of the third applicant and the business of the first respondent were one and the same; (b)The owner of the foreign currency exchange business conducted by the third applicant was the same person or entity as the owner of the foreign currency exchange business conducted by the first respondent; and(c)There was a business connection between the third applicant and the first respondent(the representations)the first respondent:(a)in trade or commerce, engaged in conduct that is misleading or deceptive or likely to mislead or deceive within the meaning of s 18(1) of the Australian Consumer Law and, until 1 January 2011, within the meaning of s 52 of the Trade Practices Act 1974 (Cth); and(b)in trade or commerce, in connection with the supply or possible supply of services namely foreign currency exchange services and in connection with the promotion of the supply or use of such services, made false or misleading representations that it had and continues to have the sponsorship or approval of the third applicant or was affiliated with the third applicant and thereby contravened s 29(1)(g) of the Australian Consumer Law and, until 1 January 2011, contravened s 53(d) of the Trade Practices Act 1974 (Cth).9.ORDERS that the first respondent by itself, its officers, its servants, its agents and otherwise howsoever, be restrained from making the representations, or any of them.10.NOTES that the third applicant has elected to claim an account of profits from the respondents (rather than damages) for passing off and for contraventions of the Trade Practices Act 1974 (Cth) and the Australian Consumer Law.11.ORDERS that the Application and the Further Amended Cross-Claim Application and Second Further Amended Cross-Claim (both of which were filed on 25 May 2010) (the Cross-Claim) otherwise be dismissed to the intent that, save for the relief granted by Orders 2 to 9 above and the preservation to the third applicant by these orders of its right to pursue the respondents for an account of profits, all other claims for relief stand dismissed. 12.ORDERS that, by no later than 23 November 2011, the parties file and serve any Written Submissions that they may wish to make on the question of costs both of the Application and of the Cross-Claim.13.ORDERS that thereafter the question of costs be dealt with on the papers. 14.ORDERS that the proceeding be listed for directions at 9.30 am on 30 November 2011 before Foster J for the purpose of making directions in respect of the third applicant’s claims for an account of profits.

Ratio Decidendi

Legal Principle Established

Initially, Mr Barlow submitted that New Century was entitled to a lesser sum viz $64,076. This latter figure was arrived at by adding back the total amount of legal fees and disbursements expensed in the Detailed Profit and Loss Statements for the years ended 30 June 2009 and 30 June 2011 and, in respect of the year ended 30 June 2010, adding back the total amount rendered in the memoranda of fees and tax invoices in that year. I informed Mr Barlow that I considered that this approach was not correct since it did not adopt the same source for legal expenses for each year in question and failed to take into account timing differences between legal fees and disbursements expensed in the Detailed Profit and Loss Statements in any given year, on the one hand, and those derived from memoranda of fees and tax invoices, on the other hand. In light of my comments, Mr Barlow then submitted that I should take a consistent approach across all years and use the figures for legal fees and disbursements derived from the Detailed Profit and Loss Statements. As I have noted at [16(d)] above, this revised approach by Mr Barlow justified a profit figure of $125,334. CONSIDERATION The submissions made by Mr Barlow are sound in principle and supported by the evidence. I accept them. There will, therefore, be an award on New Century’s claim for an account of profits against Anying Auburn in the amount of $125,334 plus interest. I propose to award a lump sum for interest pursuant to s 51A(1)(b) of the Federal Court of Australia Act 1976 (Cth). I think that an amount which broadly equates to interest at the rate of 6.75% pa on $125,334 for one and a half years is appropriate. I have in mind awarding $12,666 by way of interest. I shall now explain my reasons for the orders which I propose to make. The leading case in which the relevant principles were discussed is Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25. In that case, the wrongful conduct was the infringement of the first plaintiff’s registered trade mark. Windeyer J explained that the plaintiff in such a case is entitled to an account of only those profits which were derived by the infringer from the infringement of the registered trade mark. In the circumstances of that case, what needed to be shown was the precise amount of profit derived from using the trademark in question in respect of certain painting sets sold by the defendant. The point was that his Honour did not think that all of the profit made from selling the painting sets should be the subject of an account. Rather only that proportion of those profits which was truly referable to the infringing conduct should be brought to account. In the course of dealing with the matter before him, Windeyer J made a number of references to the way in which the core principle might be applied in a passing off case. After discussing the common form of order for an account, at 37–38, his Honour said: It was suggested that the defendant’s profit should be measured by the difference between the amount it received for painting sets bearing the trade mark and the amount it had paid to obtain them. The account taken when a patent has been infringed was suggested as an analogy. But to my mind there is an important distinction. If the infringer of a patent sells an article made wholly in accordance with the invention and thereby obtains more than it cost him to make or acquire it, he is accountable for the difference as profit. That is because he has infringed the patentee’s monopoly right to make, use, exercise and vend the invention. But in the case of a registered trade mark, infringement consists in the unauthorized use of the mark in the course of trade in relation to goods in respect of which it is registered. The profit for which the infringer of a trade mark must account is thus not the profit he made from selling the article itself but, as the ordinary form of order shews, the profit made in selling it under the trade mark. This creates a difficulty in taking the account—a difficulty which also arises sometimes in cases of patents for improvements: see e.g. Goodlet v. Fowler ((1876) 14 S.C.R. (N.S.W.) 496). In passing-off cases an infringer has sometimes been required to account for the whole profits made by his selling of an article under a spurious description. For example in Lever v. Goodwin ((1887) 36 Ch. D. 1) the Court of Appeal upheld the order of Chitty J. to this effect, Cotton L.J. saying that the sale of soap “in a fraudulent dress was a wrongful act” and that “the profit for which the defendants must account is the profit which they have made by the sale of soap in that fraudulent dress”. In a case of that sort, where a man sells goods by a false representation, the profit for which he is accountable may well be the profit which he makes by selling the goods. But there is nothing in the evidence to suggest that in this case the defendant by its use of the plaintiff’s trade mark in fact passed off the painting sets it sold as the goods of the plaintiff. There is no evidence that the name Craftmaster had come to denote for the Australian public the plaintiff’s goods. Indeed it seems that the name was as likely, perhaps more likely, to have meant a kind of article than the products of either the plaintiff or the American company.