Zahra 15 Pty Ltd v Saffron SA Pty Ltd
[2023] FedCFamC2G 387
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Zahra 15 Pty Ltd v Saffron SA Pty Ltd [2023] FedCFamC2G 387
File number(s): ADG 32 of 2022 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 12 May 2023 Catchwords: INTELLECTUAL PROPERTY – Practice and procedure – application by the respondent for summary dismissal of a proceeding for trade mark infringement on the ground that the claims made in the proceeding are barred by the terms of a deed made between the applicant and another company – whether the respondent was the company’s successor within the meaning of the deed and therefore a party to the deed – whether the respondent is entitled to a covenant given by the applicant to the company to release claims and causes of action the applicant had against the company – whether the release provided in the deed covered the claims the applicant made against the respondent in the proceeding – order for summary dismissal made. Legislation: Trade Marks Act 1995 (Cth)
Trade Marks Regulations 1995 (Cth) reg 3.1
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) r 13.13
Cases cited: Accordent Pty Ltd v Bresimark Nominees Pty Ltd [2008] SASC 196
Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337
Commissioner of Taxation of the Commonwealth of Australia v Murry [1998] HCA 42; (1998) 193 CLR 605
Cong v Shen (No 3) [2021] NSWSC 947
Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Geraghty v Minter (1979) 142 CLR 177
Inland Revenue Commissioners v Muller & Co’s Margarine Ltd [1901] AC 217
Moody v Condor Insurance Ltd [2006] EWHC 100 (Ch)
Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37
Needlegrove Investments Pty Limited v Thakral Brighton Hotel Pty Ltd [2007] NSWSC 89
Norman v Federal Commissioner of Taxation (1963) 109 CLR 9
O'Grady v Northern Queensland Co Ltd [1990] HCA 16
Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40
Prenn v Simmonds [1971] 1 WLR 1381
Re A. & K. Holdings Pty Ltd [1964] VR 257
Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5
Sayabath v Willowdale Nominees Pty Ltd, Williams, Cooper, Notley [2023] FedCFamC2G 104
Wollongong Coal Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135
Division: General Number of paragraphs: 69 Date of hearing: Decided on the papers Place: Sydney Solicitor for the Applicant: Y Intellectual Property Solicitor for the Respondent: Beena Rezaee Legal & Migration ORDERS
ADG 32 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: ZAHRA 15 PTY LTD (ACN 615 433 442)
Applicant
AND: SAFFRON SA PTY LTD (ACN 644 375 931)
Respondent
order made by:
JUDGE MANOUSARIDIS
DATE OF ORDER:
12 may 2023
THE COURT ORDERS THAT:
1.Pursuant to r 13.13 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) the proceeding is dismissed.
2.Subject to order 3, the applicant pay the respondent’s costs.
3.The parties have liberty to apply within 28 days after the day on which these orders are pronounced to vary or discharge order 2.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
The respondent (SAPL) applies for an order under r 13.13 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (GFL Rules) that the proceeding for trade mark infringement the applicant (ZPL) has brought against SAPL be dismissed. SAPL contends that ZPL’s claims are barred by the terms of a deed (Deed) made on 22 August 2018 between ZPL and Saffron Club Pty Ltd (SCPL) and, for that reason, ZPL does not have reasonable prospects of succeeding on its claims for trade mark infringement.[1]
[1] The parties agreed that I decide SAPL’s application on the papers. These consist of the statement of claim, affidavits made by each of SAPL’s solicitors, Mr Rezaee and Ms Margush; an affidavit made by ZPL’s solicitor, Mr Patale; and written submissions filed by each party (which include reply submissions by SAPL). The affidavits are to be taken to have been read for the purposes of these reasons.
I have set out elsewhere the principles that govern the exercise of the power to dismiss a proceeding under r 13.13 of the GFL Rules.[2] The parties, however, do not in their submissions address the question that arises on SAPL’s application under r 13.13 of the GFL Rules, namely, whether, given the existence of the Deed, ZPL does not have reasonable prospects of succeeding on its claims. The question they address is whether the Deed bars ZPL’s claims. In other words, the parties have framed their submissions as if the Court has ordered that it decide as a separate question whether the Deed bars ZPL’s claims. For reasons I give at the end of these reasons, nothing turns on the parties having conducted their cases on this basis.
BACKGROUND
[2] Sayabath v Willowdale Nominees Pty Ltd, Williams, Cooper, Notley [2023] FedCFamC2G 104, at [29]-[31]
The businesses of ZPL and SCPL
Since about December 2017 ZPL has been conducting a business under the name “Agha Juice House” at Blair Athol, South Australia. “Agha Juice” is a common description of a style of drink popular in Pakistan.
In about February 2018 SCPL commenced a business (Saffron Business) comprising a restaurant known as the “Saffron Club”, and a juice bar called “Agha Juice Point”, from Main North Road in Prospect, South Australia.
On 8 February 2018 ZPL applied to register “Agha Juice House” as a trade mark (Trade Marks) under the Trade Marks Act 1995 (Cth) (TM Act) in respect of goods falling within two of the classes of goods prescribed by reg 3.1 of the Trade Marks Regulations 1995 (Cth), and in respect of services falling within one of the classes of services prescribed by reg 3.1.
FC proceeding
On 28 February 2018 ZPL commenced a proceeding (FC proceeding) against SCPL in the Federal Court of Australia (FCA). ZPL alleged that SCPL had engaged in misleading and deceptive conduct, contrary to the Australian Consumer Law, and had committed the tort of passing off, by using the words or mark “Agha Juice” in the conduct of the Saffron Business. ZPL and SCPL agreed to settle the FC proceeding on the terms of the Deed.
The Deed
The Deed is made between ZPL and SCPL, who are identified “Zahra 15” and “Saffron Club” respectively, and are collectively referred to as “the parties”.
The recitals record that since December 2017 ZPL had been carrying on the business under the name of “Agha Juice House” at Prospect Road, Blair Athol in South Australia; that on 8 February 2018 ZPL applied to register a trade mark in respect of “Agha Juice House”, which application had been accepted but had not yet been registered; since about February 2018 SCPL had carried on business under the name “Agha Juice Point” at Main North Road in Prospect, South Australia; that ZPL had commenced the FC proceeding claiming that SCPL’s use of the words “Agha Juice” constituted misleading and deceptive conduct; SCPL denied ZPL’s claims; and that the parties agreed to settle the FC proceeding “on the terms and conditions contained in this Deed”.
The Deed contains three principal sets of provisions. The first is cl 3.2, which contains mutual covenants that neither ZPL nor SCPL would engage in any new business using the name “Agha Juice” within a 2.5 kilometre radius of “an existing business” of the other. Clause 3.2 of the Deed is as follows:
On the execution of this Deed, the parties agree that a party must not:
(a) establish, conduct, carry on, promote, participate in, operate or engage in (whether on its own account or in partnership, in joint-venture or as an agent of or manager for any other person); or
(b) be concerned or interested in (directly or indirectly, or through any interposed body corporate, trust, partnership, or entity) as trustee, principal, agent, shareholder, unit holder, beneficiary, independent contractor, adviser. consultant or in any other capacity; or
(c) provide to any entity, in which the party has any direct or indirect legal or equitable interest, any financial assistance which assists that entity to engage in,
a new business within a 2.5 kilometre radius of an existing business of the other party, which trades under or by reference to the words ‘Agha Juice’ (including by using those words in combination with other words).
This clause 3.2 does not apply to the existing businesses of the parties, namely Zahra 15’s business and Saffron Club’s business (defined in the Recitals and which are the subject of the Proceedings).
SCPL’s business is defined in recital C of the Deed to mean the business SCPL had carried “under and by reference to the name ‘Agha Juice Point’”.
The second principal set of provisions relates to ZPL’s application to register the Trade Marks. Clause 4.1 provides that SCPL “undertakes not to commence any proceedings or otherwise take any steps whatsoever to oppose or revoke the registration of the trademark”.
The third principal set of provisions relates to releases; and here there are two relevant clauses. The first is that part of cl 4.1 that appears under the heading “Release”, which is as follows:
Save for a breach of this Deed, the parties release and forever discharge the other parties and their officers, employees or agents from all and any claims, actions, suits, causes of action, damages, losses, demands, liabilities and costs and expenses of any description relating to or in connection with the Proceedings.
The second clause that relates to a release is cl 6.1, which provides:
This Deed may be pleaded and tendered in evidence in any Court or Tribunal as a bar to any action, suit, claim, cause, action or proceeding commenced or at any time to be commenced by the parties against any other of them which is inconsistent with or contrary to its terms.
Particularly relevant to the matters on which SAPL relies is cl 1.1(h) of the Deed, which provides that, “[i]n this document, unless the contrary intention appears . . . a reference to a party to this document includes that party’s executors, administrators, successors and permitted assigns”. This definition, however, may need to be read with cl 7.6 of the Deed, which provides that the “parties may not assign or transfer any of its rights or obligations under this document without the prior written consent of all other parties”.
SCPL sells Saffron Business to SAPL
On 25 September 2020 SCPL’s board of directors resolved that SCPL sell the Saffron Business to SAPL. On 26 September 2020 SCPL and SAPL executed a contract for the sale of the Saffron Business (Contract). Under cl 2.2 of the Contract SCPL accepted the offer made by SAPL in cl 2.1 of the Contract to purchase the “Business”. The word “Business” is defined to mean “the business known and trading as “Saffron Club and Agha Juice Point” trading from the Premises,” and includes “the Assets”. “Premises” is defined as the “property where the Business is operated under the lease”; and “Lease” is defined to mean the “lease, licence or other agreement . . . that gives the Seller the right to possession of the Premises”.
The word “Assets” is defined to mean “the Goodwill and Plant and Equipment and the Stock owned by the Seller . . . but does not include the Excluded Assets”. “Goodwill” is defined to mean:
the goodwill owned by the Seller in relation to the Business including, but not limited to, the right of the Buyer to represent itself as carrying on the Business as the successor to the Seller but excludes all goodwill attaching to the Intellectual Property;
The expression “Intellectual Property” is defined to mean “all trademarks, copyright, patents and design rights and any other intellectual property rights owned by” SCPL. “Excluded Assets” is defined to include “the Intellectual Property and any goodwill attaching to the Intellectual Property”.
It is clear enough that, under the Contract, SCPL sold to SAPL physical assets that formed part of the Saffron Business; and it agreed to assign the lease to SAPL. The Contract, however, is less clear about the disposition of the “goodwill” in the Saffron Business. On the one hand the Contract provided for the sale of “goodwill . . . including . . . the right of” SAPL “to represent itself as carrying on the” Saffron Business as the successor to SCPL. On the other hand, the Contract excludes “goodwill attaching to the Intellectual Property” from the goodwill SCPL agreed to sell to SAPL. I will consider later the combined effect of these clauses.
The Contract was completed in about January 2021. On 11 June 2021 SAPL registered the business name “AGHA JUICE POINT” with the Australian Securities & Investments Commission, and on 12 July 2021 SCPL cancelled its registration of “Agha Juice Point”.
ZPL’s claims in FCFC proceeding
In the statement of claim it filed in this proceeding (FCFC proceeding) ZPL alleges as follows:
(a)Since about 31 December 2017 ZPL has operated a café and juice bar providing food and drink, including milk shakes and juice products, under and by reference to the trade mark “AGHA JUICE HOUSE”.
(b)ZPL is the owner of the Trade Marks. One is for goods falling within classes 29 and 32, being milk shakes and fresh fruit juices, and fresh vegetable juices. The other Trade Mark is for services falling within class 43, these being restaurant services; food and drink catering; providing food and drink; and takeaway food and drink services.
(c)The registration of the Trade Mark that relates to goods has a priority date of 8 February 2018, and the registration of the Trade Mark for services has a priority date of 17 September 2018.
(d)Since at least 11 June 2021 SAPL has been using the mark “Agha Juice Point” in the course of trade in South Australia in relation to the operation of a café and juice bar, and the sale of milk shakes and juice products. In particular, SAPL has used its mark on various online food delivery platforms; it has used its mark to promote SAPL’s business on various online directories; and SAPL has been using its mark on signage at its business premises in Prospect, South Australia.
(e)SAPL’s mark is substantially identical with or deceptively similar to the Trade Marks.
(f)SAPL had therefore engaged in actionable conduct constituting the infringement of the Trade Marks.
PARTIES’ SUBMISSIONS
SAPL’s submissions
SAPL’s submissions address two subjects. The first is whether SAPL is entitled to the benefit of the Deed, even though it is not named as a party to the Deed. The second subject is, assuming SAPL is entitled to the benefit of the Deed, whether the Deed bars the claims ZPL makes in the FCFC proceeding.
SAPL’s entitlement to the benefit of the Deed
SAPL submits it is entitled to the benefit of the Deed on three alternative bases. The first is that SAPL is SCPL’s “successor” within the meaning cl 1.1(h) of the Deed, and, for that reason, it is a party to the Deed; and, being a party to the Deed, it is entitled to enforce the Deed, even though SAPL has not executed it. SAPL relies on the following passage from the judgment of Ward CJ in Eq (as her Honour then was) in Cong v Shen (No 3):[3]
In Wollongong Coal [Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135], at [55], Leeming JA endorsed the proposition in D Ibbetson and E Schrage, “Ius quaesitum tertio: A Comparative and Historical Introduction to the Concept of Third Party Contracts” in E Schrage (ed), Ius quaesitum tertio (2008, Duncker & Humbolt) at 26 that:
In the case of deeds inter partes, i.e. where the document itself specified who the parties were, all that was needed was that the intended beneficiary be named as a party. While the person undertaking the obligation had to put his seal on the document, there was no such requirement in the case of the beneficiary: naming was sufficient.
Reference is made to Morgan v Pike [1854] EngR 134; (1854) 14 CB 473 at 486, also cited with approval by Leeming JA in Wollongong Coal; and to Matouk v The Entrance Seabreeze Pty Ltd [2010] NSWSC 649 (Matouk) at [60], for the proposition that a person may still be able to rely on a deed for his or her benefit, despite not having executed the deed, provided that person is named as a party to the deed.
[3] Cong v Shen (No 3) [2021] NSWSC 947, at [1276]-[1277]
SAPL also relies on the following passage from the judgment of Leeming JA in Wollongong Coal Ltd v Gujarat NRE India Pty Ltd:[4]
…[A]t common law, only a person expressed to be a party to a deed inter partes could sue on the deed. … [I]f a person was named as a party, he or she could sue on the deed even though he or she had not executed the deed. In Morgan v Pike [1854] EngR 134; (1854) 14 CB 473; 139 ER 195, Jervis CJ concluded that “the covenantor may be sued upon his covenants, although the deed may not have been executed by the covenantee”. Cresswell and Williams JJ expressed the same view.
[4] Wollongong Coal Ltd v Gujarat NRE India Pty Ltd [2019] NSWCA 135, at [55]
The second basis on which SAPL submits it is entitled to the benefit of the Deed is premised on SAPL not being party to the Deed, and on the Deed’s being a deed poll, rather than a deed inter partes. SAPL relies on the following passage from the judgment of Ward CJ in Eq in Cong:[5]
[T]he test as to whether a deed operates as a deed poll rather than a deed inter partes is whether, as a matter of substance, objectively construed, one or more of the parties to the deed intended to use the document to make unilateral promises to or create rights enforceable by third parties (see Park J in Moody v Condor Insurance at [18]), as opposed to intending to make promises to the other parties to the deed (here, say, a promise by Ms Shen to Mr Cong as to steps that she would take to benefit the three elder children).
… [T]here can be no doubt that the Deed was intended to make provision for [the three elder children] (that being the stated purpose in Recital H) and, given that it was executed at a time when Mr Cong’s death was imminent … it must in my opinion have been intended to make promises to and create rights enforceable by the three elder children. … I consider that … the words [of the Deed] … convey the intention that the promises contained in the Deed for [the children’s] benefit were to be enforceable by [the children] notwithstanding that they were not joined as parties to the Deed.
[5] Cong v Shen (No 3) [2021] NSWSC 947, at [1291], [1292]
SAPL submits that the reasoning of Ward CJ in Eq applied in Cong applies to SAPL in relation to the Deed. SAPL submits that the Deed’s express definition of “parties” to include “successors” conveys an even stronger intention than in Cong that covenants contained in the Deed are “to be enforceable by the successors”.[6]
[6] Respondent’s Submissions, [35]
The third alternative basis on which SAPL relies for its contention that it is the beneficiary of the Deed is that the Contract effected an equitable assignment of the benefit of the Deed from SCPL to SAPL. SAPL submits that an equitable assignment of a chose in action can occur even without notice to the other party.
Deed bars claims
SAPL submits that although the cause of action on which ZPL relies in the FCFC proceeding is different from the cause of action on which it relied in the FC proceeding, ZPL nevertheless seeks the same relief; and it seeks to restrain the same conduct it sought to restrain in the FC proceeding, namely, the use of the words “Agha Juice” in the Saffron Business SCPL conducted immediately before SCPL sold the Saffron Business to SAPL. In those circumstances, SAPL submits that the release is wide enough to apply to the conduct of SAPL on which ZPL, in the FCFC proceeding, relies for claiming that SAPL infringed the Trade Marks. SAPL relies on the scope of the dispute the Deed settled, as identified in the recitals. The dispute concerned SCPL’s use of the words “Agha Juice”, and ZPL’s application to register the Trade Marks. Further, at the time the Deed was executed, it was contemplated that the Saffron Business would continue to use the words “Agha Juice”.
ZPL’s submissions
ZPL submits as follows:
(a)SAPL is not a successor of SCPL within the meaning of cl 1.1(h) of the Deed. The Contract only provided for the sale of the “Business”, which did not include SCPL’s rights under the Deed; and, given cl 7.6 of the Deed, the only way SCPL could have transferred its rights under the Deed was by assigning those rights after obtaining ZPL’s consent, but SCPL did not assign and did not obtain ZPL’s consent.[7] Further, as a matter of context and construction, and particularly having regard to cl 7.6 of the Deed, “the only way that [SAPL] could have properly ‘succeeded’ to the rights under the Deed would have been if there was a transfer or assignment of those rights” in the Contract.[8]
(b)The Deed is a deed inter partes, not a deed poll. The Deed is clearly made between two parties with different interests who made promises to each other concerning the claims they each made in the FC proceeding. The intent and effect of the Deed was not for the parties to make unilateral promises to other parties, such as to their successors.[9]
(c)Even if SAPL is entitled to the benefit of the Deed, cl 4.1 does not apply to the claims ZPL makes in the FCFC proceeding.
[7] Applicant’s Submissions, [12]
[8] Applicant’s Submissions, [14]
[9] Applicant’s Submissions, [15]-[19], relying on the judgment of Doyle CJ in Accordent Pty Ltd v Bresimark Nominees Pty Ltd [2008] SASC 196
Issues arising
On the competing submissions of the parties, the following questions arise:
(a)Is SAPL a “successor” of SCPL, within the meaning of cl 1.1(h) of the Deed, and therefore a “party” within the meaning of that clause?
(b)However (a) is answered, is SAPL entitled to the benefit of the Deed?
(c)Assuming SAPL is entitled to the benefit of the Deed, does cl 4.1 of the Deed bar ZPL from bringing and maintaining the claims for infringement of the Trade Marks it has brought in the FCFC proceeding?
Before I consider these questions it will be useful to set out some principles relating to the construction of deeds and contracts not under seal.
PRINCIPLES OF CONSTRUCTION
Courts have assumed that the general principles that apply to construing commercial contracts apply to commercial contracts whose terms are reduced into a deed.[10] Those principles stated by French CJ and Nettel and Gordon JJ in Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited:[11]
The rights and liabilities of parties under a provision of a contract are determined objectively, by reference to its text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose.
In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract.
Ordinarily, this process of construction is possible by reference to the contract alone. Indeed, if an expression in a contract is unambiguous or susceptible of only one meaning, evidence of surrounding circumstances (events, circumstances and things external to the contract) cannot be adduced to contradict its plain meaning.
However, sometimes, recourse to events, circumstances and things external to the contract is necessary. It may be necessary in identifying the commercial purpose or objects of the contract where that task is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”. It may be necessary in determining the proper construction where there is a constructional choice. The question whether events, circumstances and things external to the contract may be resorted to, in order to identify the existence of a constructional choice, does not arise in these appeals.
Each of the events, circumstances and things external to the contract to which recourse may be had is objective. What may be referred to are events, circumstances and things external to the contract which are known to the parties or which assist in identifying the purpose or object of the transaction, which may include its history, background and context and the market in which the parties were operating. What is inadmissible is evidence of the parties’ statements and actions reflecting their actual intentions and expectations.
[10] See, for example, Royal Botanic Gardens and Domain Trust v South Sydney City Council [2002] HCA 5, where the High Court held the principles for which Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 stands as authority applied to the construction of a deed. See also Prenn v Simmonds [1971] 1 WLR 1381, at pages 1383-4 where Lord Wilberforce said that the “time has long passed when agreements, even those under seal, were isolated from the matrix of facts in which they were set and interpreted purely on internal linguistic considerations”.
[11] Mount Bruce Mining Pty Limited v Wright Prospecting Pty Limited [2015] HCA 37, at [46]-[50] (footnotes omitted)
Although the general principles of construction of contracts also apply to deeds, particular principles of construction have been developed in relation to deeds. One set of principles relates to the use to which recitals may be put. Those principles were summarised by Campbell JA in Franklins Pty Ltd v Metcash Trading Ltd as follows:[12]
(1)The recitals are a part of the agreement, and can be used as an aid to construction of an operative provision in an agreement . . .
(2)Nevertheless, there is a distinction between the operative terms of a contract and the recitals. Although the recitals can assist in the construction of a contract, they are not themselves operative terms . . .
(3)There is a great deal of authority from the 19th and early 20th Century to the effect that the manner in which the recital can be used depends upon whether either the recital or the operative provision is “ambiguous” . . . . These authorities take the view that recitals can be used to determine the meaning of an ambiguous operative provision, but cannot cut down operative words that are clear and unambiguous, even if the recital is also clear and unambiguous and is contrary to the operative provision . . .
(4)There are also more recent authorities which state that recitals can provide a means of proving background facts that are themselves legitimate aids to construction . . . . They can be at the least an admission by the party to the deed of the truth of the matter stated, under the general law concerning evidence.
[12] Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407, at [380]
These principles are capable of being applied consistently with the general principles relating to the construction of contracts. That may be done by treating the matters stated in the recitals as the relevant background against which to identify the commercial purpose or object or genesis of the contract embodied in the deed, at least where it is necessary to do so because the operative parts of the deed are not unambiguous, or if the intended subject matter of those provisions are not identified in the operative parts. In Franklins Campbell JA referred to the availability of recitals to be used in this way:[13]
However, it should be emphasised that (at least for recitals not saying that one or other party will carry out a particular action) the recital is merely a means by which the surrounding circumstances and purpose of the transaction can be ascertained. Where recitals purport to record the surrounding circumstances and purpose of a transaction, it is those surrounding circumstances or purposes “as can be got from the language of the recital in the deed itself” that are used to construe the contract . . . . As Lord Wright put it in IRC v Raphael at 144: “The nature of recitals as statements of facts which are in the contemplation of the parties, is illustrated by the Scotch term ‘narrative.’”
[13] Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407, at [389]
IS SAPL SCPL’S “SUCCESSOR”?
As I have already noted, ZPL submits that “the only way that [SAPL] could have properly ‘succeeded’ to the rights under the Deed would have been if there was a transfer or assignment of those rights” in the Contract.[14] That submission, however, does not address the question of construction that arises on SAPL’s application. The question is whether SAPL is the “successor” of SCPL. As SAPL in effect submits, that is a different question from whether SAPL “‘succeeded’ to the rights under the Deed”.
[14] Applicant’s Submissions, [14]
Preliminary observations
There are a number of observations that may be made.
(a)First, “successors” is one of four classes of persons cl 1.1(h) of the Deed identifies as persons who fall within the definition of “party”. These classes of persons are “executors”, “administrators”, “successors”, and “permitted assigns”.
(b)Second, before any person who falls within these four classes of persons can be a “party” within the meaning of cl 1.1(h) of the Deed, the person must have a relation with ZPL or SCPL. In particular, before a person can fall within the definition of “party” in cl 1.1(h) of the Deed, the person must either be ZPL’s or SCPL’s “executor”, “administrator”, “successor”, or “permitted assign”.
(c)Third, that cl 1.1(h) of the Deed identifies four classes of persons who may be a party implies that each class of person has characteristics that differ from the characteristics of the others; and, for that reason, each class of persons may become a party in different ways. That requires the determination of three questions:
(i)What is denoted by “executor”, “administrator”, “successor”, and “permitted assign”?
(ii)What must be established before an “executor”, “administrator”, “successor”, and “permitted assign” can be characterised as ZPL’s or SCPL’s “executor”, “administrator”, “successor”, or “permitted assign”?
(iii)Does the Contract render SAPL SCPL’s “executor”, “administrator”, “successor”, or “permitted assign”?
It is clear that SAPL could not be considered to be SCPL’s “executor” or “administrator” and for that reason, I do not consider the three questions I identify in subparagraph 35(c) in relation to “executor” and “administrator”. I will consider those questions in relation to “permitted assigns” and to “successors”.
“Permitted assign”
“Assign”, when used as a verb, denotes an act by a person, the assignor, which effects an “assignment”, namely, “the immediate transfer of an existing proprietary right, vested or contingent, from the assignor to” another person, the assignee.[15] In cl 1.1(h) of the Deed, however, “assigns” is used as a noun; and it denotes the person to whom the party may assign an immediate right of property. In other words, “assigns” in cl 1.1(h) of the Deed denotes assignees.
[15] Norman v Federal Commissioner of Taxation (1963) 109 CLR 9, at page 26 (Windeyer J)
Next, the assignee must be a “permitted” assignee. That is, the assignee must be a person or persons to whom the party - either ZPL or SCPL - is entitled to assign property without the permission of another person, and the party has assigned the property to the person; or the assignee is a person to whom the party is entitled to assign property, but only with the permission of another person, the other person has given such permission, and the party has assigned the property to the other person. [16] That invites attention cl 7.6 of the Deed, which provides that the “parties may not assign or transfer any of its rights or obligations under this document without the prior written consent of all other parties”.
[16] Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd [2006] FCAFC 40, at [71]
Thus, “permitted assignee” in cl 1.1(h) of the Deed means a person to whom ZPL or SCPL has assigned a right of property, provided that, where the right of property is a right ZPL or SCPL has under the Deed, ZPL or SCPL has assigned such right with the consent of SCPL or ZPL, as the case may be.
“Successor”
The ordinary meaning of “successor” is a person “who succeeds another in an office, dignity, function, or position”.[17] The expression “party’s . . . successors” in cl 1.1(h) of the Deed presupposes that each “party”, that is, each of ZPL and SCPL, undertakes some functions; and that the expression “party’s . . . successors” denotes persons who may take over the functions ZPL or SCPL had been undertaking. The functions each of the “parties”, that is, ZPL and SCPL, have been undertaking are described in the recitals of the Deed. In the case of ZPL, the function consisted of carrying on the business described in recital A, namely, the “business under and by reference to the name ‘Agha Juice House’”; and in the case of SCPL, the function consisted of carrying on the business described in recital C, namely, the “business under and by reference to the name ‘Agha Juice Point’ (Saffron Club’s business) at 242-246 Main North Road, Prospect, South Australia”.
[17] Oxford English Dictionary, online edition.
Thus a party’s “successor”, that is, ZPL’s or SCPL’s “successor”, is any person who takes over from ZPL or SCPL the carrying on of the businesses referred to in recitals A or C of the Deed that ZPL and SCPL respectively had been carrying on.
This construction, which relies on the ordinary meaning of “successor”, is supported by the reasoning of Nicholas J in Needlegrove Investments Pty Limited v Thakral Brighton Hotel Pty Ltd.[18] In that case, his Honour construed a clause in a deed which provides that a “reference to a person includes a reference to the person’s executors, administrators, successors, substitutes (including, without limitation, persons taking by novation) and assigns”. Nicholas J said:[19]
[18] Needlegrove Investments Pty Limited v Thakral Brighton Hotel Pty Ltd [2007] NSWSC 89
[19] Needlegrove Investments Pty Limited v Thakral Brighton Hotel Pty Ltd [2007] NSWSC 89, at [60]-[62]
Clause 1.2(e) provides that a reference to a person is to be understood in wide terms. It extends the identity of those persons specifically referred to in the deed. The deed is to be understood to refer to, for example, the “successors” and “assigns” of a person specified, for example, the “Mortgagor”. These terms ordinarily have wide meanings, and are unqualified in the deed. There is no reason to give them a narrow or technical meaning. The text of the provision does not require consideration of some legal form of succession or assignment or other transaction.
In the Macquarie Dictionary (4th edition) the word “successor” is defined to mean “1. someone or something that succeeds or follows. 2. someone who succeeds another in an office, position, or the like”. The word “assigns” is defined to mean “9. a person to whom the property or interest of another is or may be transferred”.
In Retravision (NSW) Limited v Copeland [Unreported, NSWSC, 8 October 1997] Young, J (as he then was) observed:
“If one looks at Stroud’s Judicial Dictionary see e.g. 4th edition at page 2661, one can see a simple definition:
“a successor is “he that followeth or cometh in another’s place”.
That is a wide definition, but it tends to be the sense in which the word is used in the cases, though none of the cases that I have found are in pari materia”.
Effect of Contract
I have already noted that, under the Contract, SCPL sold to SAPL physical assets that formed part of the Saffron Business; and it agreed to assign the lease to SAPL. I have also noted, however, that, on the one hand, the Contract provided for the sale of “goodwill . . . including . . . the right of” SAPL “to represent itself as carrying on the” Saffron Business as the successor to SCPL; and, on the other hand, the Contract excluded “goodwill attaching to the Intellectual Property” from the goodwill SCPL agreed to sell to SAPL. These clauses do not appear to use “goodwill” in its accepted legal sense.
As the plurality in Commissioner of Taxation of the Commonwealth of Australia v Murry noted,[20] one of the most cited definitions of “goodwill” for legal purposes is that given by Lord Lindley in Inland Revenue Commissioners v Muller & Co’s Margarine Ltd:[21]
Goodwill regarded as property has no meaning except in connection with some trade, business, or calling. In that connection I understand the word to include whatever adds value to a business by reason of situation, name and reputation, connection, introduction to old customers, and agreed absence from competition, or any of these things, and there may be others which do not occur to me. In this wide sense, goodwill is inseparable from the business to which it adds value, and, in my opinion, exists where the business is carried on. Such business may be carried on in one place or country or in several, and if in several there may be several businesses, each having a goodwill of its own.
[20] Commissioner of Taxation of the Commonwealth of Australia v Murry [1998] HCA 42; (1998) 193 CLR 605, at [16]
[21] Inland Revenue Commissioners v Muller & Co’s Margarine Ltd [1901] AC 217, at page 235
The plurality also referred with approval[22] to the following passage from the judgment of Barwick CJ in Geraghty v Minter:[23]
[G]oodwill is not something which can be conveyed or held in gross: it is something which attaches to a business. It cannot be dealt with separately from the business with which it is associated.
[22] Commissioner of Taxation of the Commonwealth of Australia v Murry [1998] HCA 42; (1998) 193 CLR 605, at [22]. The plurality, in footnote 32 notes that, in the same case, Stephen J said that goodwill was “inherently inseverable from the business to which it relates”.
[23] Geraghty v Minter (1979) 142 CLR 177, at page 181
The plurality in Murry also noted that, although it is common to describe goodwill as being composed of elements, it is more accurate to refer to goodwill as having sources:[24]
[G]oodwill is a quality or attribute that derives inter alia from using or applying other assets of the business. Much goodwill, for example, derives from the use of trade marks or a particular site or from selling at competitive prices. But it makes no sense to describe goodwill in such cases as composed of trade marks, land or price, as the case may be. Furthermore, many of the matters that assisted in creating the present goodwill of a business may no longer exist. It is therefore more accurate to refer to goodwill as having sources than it is to refer to it as being composed of elements.
[24] Commissioner of Taxation of the Commonwealth of Australia v Murry [1998] HCA 42; (1998) 193 CLR 605, at [24]
The true intention of the parties to the Contract was not to sever from the Saffron Business a part of the goodwill that was derivable from any intellectual property SCPL used in connection with the Saffron Business. The parties’ true intention was for SCPL to transfer to SAPL the goodwill attached to the Saffron Business; retain the ownership of the “intellectual property” SCPL used in connection with the conduct of the Saffron Business, including the words “Agha Juice Point”; but licence SAPL to continue to use such intellectual property in connection with its conduct of the Saffron Business.
Determination
The Contract does not contain any provision by which SCPL expressly or impliedly assigned its rights under the Deed to SAPL. For that reason SAPL is not SCPL’s “permitted assignee” and, therefore, cannot, for that reason, be a party to the Deed.
The purpose and effect of the Contract, however, was SCPL’s delivering into the hands of SAPL the running of the Saffron Business on its own account. In other words, the purpose and effect of the Contract was for SAPL to take over the functions SCPL had been performing in relation to the Saffron Business, namely, running the Saffron Business. On completion of the Contract, therefore, SAPL became SCPL’s “successor” within the meaning of cl 1.1(h) of the Deed; and, for that reason, a “party” within the meaning of cl 1.1(h) of the Deed.
IS SAPL ENTITLED TO THE BENEFIT OF THE DEED?
ZPL appears to accept that, if SAPL is SCPL’s “successor”, it is a party to the Deed, and is entitled to the benefits under the Deed to which SCPL was entitled. The basis of that acceptance is the judgment of Doyle CJ (with whom Duggan and Anderson JJ agreed) in Accordent Pty Ltd & Portellos v Bresimark Nominees Pty Ltd, where his Honour said: [25]
Subject to certain exceptions (none were suggested to be material in this case) the covenants in an indenture are enforceable only by the parties to the Deed (or, obviously enough, the successors and assigns if the Deed so provides and if there has been a succession or an assignment).
[25] Accordent Pty Ltd & Portellos v Bresimark Nominees Pty Ltd [2008] SASC 196, at [67]
His Honour does not explain the basis on which a covenant that is expressed to be made to a party and the party’s unnamed successors may become enforceable by a person who at a later time may properly be characterised as the party’s successor. It is appropriate I briefly identify what that basis may be.
One possible basis is the authorities on which SAPL relies. Those authorities, however, concern circumstances where the identity of the person who has not executed the deed, and who seeks the benefit of covenants contained in the deed, is known or at least ascertainable at the time the deed is executed by the covenantor. Where those circumstances do not prevail – and that will be so in most cases where persons are described as a party’s “successor” – regard must be had to the principles Sholl J identified in Re A. & K. Holdings Pty Ltd:[26]
But at any rate in the case of deeds inter partes it is settled that at law a covenant cannot be made with a person non-existent at the date of the deed, such as “the first son of A to be born” (Kelsey v. Dodd (1881), 52 L.J. Ch. (N.S.) 34, at p. 39, per Jessel, M.R.); or a person not then ascertainable, e.g. the future occupiers of land (see Forster v. Elvet Colliery Co. Ltd., [1908] 1 K.B. 629, at p. 637, per Fletcher Moulton, L.J.).
[26] Re A. & K. Holdings Pty Ltd [1964] VR 257, at page 262
These principles may not, however, apply to “deed polls”.[27]
[27] Re A. & K. Holdings Pty Ltd [1964] VR 257, at page 262: “Whether the principle that a covenant cannot be validly made with a non-existent person or a class of persons not presently ascertainable applies to a covenant in a deed poll, such as this . . . I find it unnecessary to stay to consider”.
An approach that does not rely on the technical distinction between deeds inter partes and deeds poll is the approach Park J adopted in Moody v Condor Insurance Ltd.[28] The question in that case was whether a covenant to pay money to named persons who were not parties to the deed, and who did not execute the deed, was enforceable by those named persons. Park J said (emphasis added):[29]
In my judgment it is necessary to consider, not just whether one or two persons executed the documents, and not just whether the word ‘between’ appears. It is necessary to examine what the parties who execute a document, saying that they are executing it ‘as a deed’ (the modern equivalent of affixing a wax seal), set out to do by it. Does one or more of them in fact make promises to the other or others (as one would expect of a deed inter partes), or do they rather seek to use the document as a means for each of them to make unilateral promises to a person who is not a party to it (or to persons who are not parties to it)? When the conventional word ‘between’ appears, is it an appropriate word given the content of what appears in the document that follows? When those questions are asked in this case it becomes, in my judgment, clear that the Loan Note and Guarantee instrument and the guarantee were the types of deeds which not merely were intended to create rights enforceable by non-parties (Mr Moody and Mr Miller), but which in law achieved the intention.
[28] Moody v Condor Insurance Ltd [2006] EWHC 100 (Ch)
[29] Moody v Condor Insurance Ltd [2006] EWHC 100 (Ch), at [16]
On this approach, whether a person who does not execute a deed can enforce a covenant contained in the deed does not turn on the technical distinction between deeds inter partes and deeds poll. It turns on the covenantor’s intention, objectively determined: what did the covenantor intend when he or she made the covenant? Where a covenantor makes a covenant to the other party and to the other party’s successors, the covenantor plainly intends that he or she would perform the covenant in relation to a person, whether ascertainable or not at the time the covenant is made, who answers the description of the other party’s successor. Given I have found that SAPL is the successor of SCPL, the covenants that ZPL made to SCPL and to its successors, and in particular, the covenant contained in cl 4.1 of the Deed, are enforceable by SAPL, the successor of SCPL.
DOES THE DEED BAR ZPL’S TRADE MARK CLAIMS?
Clause 4.1 of the Deed may conveniently be analysed as containing three elements.
(a)The first are the things cl 4.1 purports to release or discharge. These are “claims, actions, suits, causes of action, damages, losses, demands, liabilities and costs and expenses of any description”.
(b)The second element is the subject to which these things relate; and this is “the Proceedings”. That is a reference to the FC proceeding.
(c)The third element is a relation between the things released and the subject; and the relation is “relating to or in connection with”.
In determining, therefore, whether the claims ZPL makes in the FCFC proceeding fall within cl 4.1 of the Deed, it is necessary, first, to construe “the Proceedings”; second, to determine whether ZPL’s claims in the FCFC proceeding constitute “claims, actions, suits, causes of action, damages, losses, demands, liabilities and costs and expenses of any description”; and, third, assuming that question is answered in the affirmative, whether ZPL’s claims relate to, or are connected with, “the Proceedings”.
The “Proceedings”
The “Proceedings” is defined in recital D to the Deed as follows:
On 28 February 2018, Zahra 15 commenced proceedings against Saffron Club in the Federal Court of Australia, action number SAD 51/2018, claiming that, by use of the word’s ‘Agha Juice’ in Saffron Club’s business, Saffron Club has engaged in misleading and deceptive conduct in contravention of the Australian Consumer Law and passing off (the Proceedings).
“Proceedings” therefore includes the claims ZPL made in the FC proceeding. These consist of the facts ZPL alleged in the statement of claim, and the relief ZPL claimed on the basis of those alleged facts. Among the alleged facts on which ZPL relied were SCPL’s advertising, promoting, and selling juices, milk shakes, and ice creams “in a get up comprising, and under and by reference to the name/mark “Agha Juice””.[30] The statement of claim also alleged that “[a]s a result of [SCPL’s] wrongful conduct”, ZPL “has suffered loss and damage and will, unless [SCPL] is restrained by this Honourable Court, continue to do so”. As for relief, ZPL claimed an injunction to restrain SCPL from continuing to engage in the conduct ZPL alleged was unlawful, namely, the use of the words “Agha Juice”.
[30] Affidavit of B Rezaee, [9]; annexure BR2, statement of claim, [7]
ZPL’s claims in the FCFC proceeding
There can be no question that in the FCFC proceeding ZPL makes “claims”, within the meaning of the word in cl 4.1 of the Deed. It alleges, among other things, that SAPL has been using the words “Agha Juice Point” in the course of trade in South Australia in relation to the operation of a café and juice bar, and the sale of milk shakes and juice products, and in so doing, it has infringed the Trade Marks. ZPL also alleges “causes of action”, and the FCFC proceeding is itself a “suit”, within the meaning of “cause of action” and “suit” in cl 4.1.
Do the claims ZPL make in the FCFC proceeding relate to the “Proceedings”?
The expression “in relation to”, when used in statutes, is “of broad import”;[31] and the expression “requires no more than a relationship, whether direct or indirect, between two subject matter”.[32] The same may be said when “in relation to” is used in private law instruments, such as deeds. The question is whether the claims and causes of action ZPL made or maintained in the FC proceeding bears a relation with the claims ZPL makes in the FCFC proceeding.
[31] O'Grady v Northern Queensland Co Ltd [1990] HCA 16, at [19]
[32] O'Grady v Northern Queensland Co Ltd [1990] HCA 16, at [27]
ZPL submits that a cause of action for trade mark infringement varies considerably from the protection provided by the common law action of passing off; and, for that reason, the cause of action for trade mark infringement ZPL propounds in the FCFC proceeding is very different from the causes of action based on passing off and on misleading and deceptive conduct ZPL propounded in the FC proceeding. ZPL further submits that SCPL’s covenanting in cl 4.1 of the Deed that it would not oppose ZPL’s application for registration of the Trade Marks manifests a mutual intention that “the rights of both parties in relation to trade mark infringement proceedings were preserved”.[33]
[33] Applicant’s Submissions, [34]
The question is not whether the causes of action ZPL propounds in the FCFC proceeding are different or very different from the causes of action ZPL propounded in the FC proceeding. That follows from the text of cl 4.1 which applies to the release of, among other things, “any . . . causes of action”. The question is whether the causes of action ZPL propounds, and the claims for relief it makes, in the FCFC proceeding relate to or are made in connection with “the Proceedings”, namely, the facts ZPL alleged in the FC proceeding and the claims for relief it made in the FC proceeding. Those alleged facts included SCPL engaging in a business using the words “Agha Juice”; and the claim included an injunction to restrain SCPL from continuing to use the words “Agha Juice”. The causes of action based on trade mark infringement ZPL propounds in the FCFC proceeding are related, and substantially related to the causes of action it propounded in the FC proceeding. The only additional facts on which ZPL relies is that the Trade Marks have been registered as trade marks under the TM Act; and that it is SCPL’s successor (SAPL), rather than SCPL, who has been engaging in the conduct ZPL alleged in the FC proceeding was wrongful.
ZPL’s submission that cl 4.1 of the deed manifest an intention that “the rights of both parties in relation to trade mark infringement proceedings were preserved” must be assessed by reference to other provisions of the Deed, and in particular to cl 3.2. As I have already noted, the effect of cl 3.2 of the Deed is that each of SCPL and ZPL covenanted they would not conduct any business within a 2.5 kilometre radius of an existing business of the other; and these mutual covenants were stated not to apply to the business identified in recitals A and C that SCPL and ZPL were respectively then conducting. Clause 3.2 signifies a mutual intention that each of ZPL and SCPL would be at liberty to continue to conduct the businesses identified in recitals A and C; they could continue to create new businesses provided they did not do so within a 2.5 km radius from a business of the other; and that this state of affairs would continue even if ZPL were to succeed in registering the Trade Marks under the TM Act. It is open to infer that this was ZPL’s actual intention. If, as ZPL contends, the intention of the parties was to preserve “the rights of both parties in relation to trade mark infringement proceedings”, ZPL would have commenced proceedings for trade mark infringement against SCPL immediately after the Trade Marks were registered, something it appears it did not do.
I am satisfied that cl 4.1 of the Deed applies to the causes of action based on trade mark infringement ZPL propounds in the FCFC proceeding, and to the claims for relief for which it applies on the basis of those causes of action. The effect of cl 4.1 of the Deed is that ZPL released those causes of action and claims for relief in relation to, or that arise out of the facts ZPL alleges in the statement of claim ZPL filed in the FCFC proceeding.
CONCLUSION AND DISPOSITION
I have concluded that SAPL is SCPL’s successor within the meaning of cl 1.1(h) of the Deed, and therefore is a party to the Deed. Being a party to the Deed, SAPL is entitled to the benefit of cl 4.1. That means that, by the operation of cl 4.1 of the Deed, ZPL has released SAPL from any cause of action, including one based on trade mark infringement, ZPL might otherwise have had against SAPL in relation to the conduct the statement of claim it filed in the FCFC proceeding alleges SAPL has engaged in; and, for that reason, ZPL is barred from maintaining against SAPL the causes of action for trade mark infringement it propounds in the FCFC proceeding.
I have expressed my conclusion as if I were determining on a final basis the question to which my conclusions apply. That reflects the manner in which the parties addressed the question of whether the Deed barred the claims ZPL makes in the FCFC proceeding. Even if, however, the parties had addressed their submissions by reference to whether, because of the Deed, ZPL does not have reasonable prospects of succeeding on the claims it makes in the FCFC proceeding, I would have undertaken the same analysis of the parties’ contentions. The issues raised by the application are not straightforward; and as Barwick CJ, in General Steel Industries Inc v Commissioner for Railways (NSW), said in relation to a power to summarily dismiss:[34]
. . . I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.
[34] General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, at page 130
The grounds on which SAPL applied for contending ZPL has no reasonable prospects of succeeding on its trade mark claims required the parties to make the extensive submissions they did; and these were necessary to enable me to determine whether ZPL did not have such reasonable prospects. Having considered the detailed submissions of the parties, I am satisfied that, because of the Deed, ZPL does not have reasonable prospects of succeeding on its claims for relief in the FCFC proceeding.
DISPOSITION
I propose to order that the proceeding be dismissed. I will also order that ZPL pay SAPL’s costs, but I will reserve to the parties liberty to apply within 28 days from the day after I make the order to vary or discharge the order for costs I propose to make.
I certify that the preceding sixty-nine (69) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 12 May 2023
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