Zane Solar Systems Australia P/L v Carlile Solar Products P/L
[1994] FCA 450
•12 Jul 1994
450 9~
JUDGMENT No. .,..,-,A .,.-.,, No. QG 84 of 1994
| U | - | THE F |
1
)
BETWEEN: m Applicant
AND I PTY. trTpr Reapondent
- RECEIVED
1s 1994
~rummond J
| : | - |
12 July, 1994
| WHERE: | Brisbane |
1. Until the trial of the action or further earlier order :
(a)
the respondent by itself, it8 employees, servant8 and agents is restrained from making further use of the Sydney telephone number (02) 498 3366;
(b)
so far as it 6 within it6 power, the respondent shall execute all necessary documents to transfer the telephone number (02) 498 3366 to the applicant and do all such things as may be necessary to permit the applicant to become the registered user of the said telephone number.
| m: Settlement and entry of orders is dealt with in | Order 36 of the -urt | r+Rulerr. |
1. The costa of today are reserved.
1 No. QG 84 of 1994
1
1
BETWEEN: 8
Applicant
AND I
Reepondent
Drummond J
| QSSdat | 12 July, 1994 |
| Z h X : | Brimbane |
Thim B an application for an order that the reapondent be restrained from making further uee of a particular Sydney telephone number and for an order that the rempondent execute all documentm necemeary to transfer that number to the applicant. I am informed the application im for interlocutory relief; in eubetance it is for final relief.
| The applicant is content to aeeume the burden of proving | entitlement to final relief with respect to thin number. The |
| esmential queetion m one of construction of the relevant provieione of a franchise agreement between the applicant franchimor and the respondent, its former franchisee. | |
| While the respondent's suhieeion concentrated on the heavy burden partiee meeking an interlocutory mandatory injunction must show, and on consideration8 relevant to the balance of convenience, the reapondent'a aolicitor did not eubmit that the agreement could not be interpreted without evidence as to the factual matrix out of which the agreement aroae. Him aubmiaaion was to the contrary. In answer to an objection by counsel for the applicant to certain paesagea in an affidavit relied on by the reepondent and aworn by Mr. Bloor, he aaid, in responae to my questioner |
"What do you say the relevance of this background material is, Hr Ruaaell, for preaent purpoee~?---Certainly not to put up a6 a baaia upon which the agreement should be construed.
Yea?---But it ia put up as proving or dieproving I should may, a pre-condition which my learned friend ha6 to eatabli6h to 6how a eerioue question to be tried before he get6 an injunction."
1 n H o r t i c o - v -
(1985) 1 N.S.W.L.R. 545 at 549 Young
J maid:
*On an application for interlocutory injunction
which raiae6 queationa of law, the approach of this Court haa been, I believe, to decide question6 of
law which arise unleas in the opinion of the judge, thoae queationa ahould be better left until later: I(araaulerrki v Bros. h Co. Ptv. [l9811 1 N.S.W.L.R. 267 at 269. I think that the only exception8 to that general rule are where t h e doea not permit proper consideration of the questions of law at the interlocutory stage, see Needham J'a
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decision in m v m. m (4 July 1984, unreported) or where the determination of the mints of law remires a = - factual matrix which i not available until the facts in the entire proceeding6 have been proved.'
If a decision on a question of law will determine the dispute, it seem to me that final relief is appropriate, whether by way of a declaration and accompanying final orders or simply by a final order.
| ~t is common ground that Zane acts as a franchisor for the Zane brand of solar heating equipment manufactured by Waterco Limited, of which Zane is a wholly owned subsidiary. Zane operates its business Australia wide, primarily through franchise dealerships and it ham been operating in Australia since 1974. Zane holds patents, trademarks and copyright rights in relation to its solar heating systems and the name "Zane* is registered as a trademark, as is a logo incorporating the n m m "Zanea. It also holds intellectual property rightm in a solar pool heating system called Gulfatream. On 1 February, 1989, Zane entered into a f ranchise agreement with the respondent, then known as Carlile 8ane Solar Systems Pty. Ltd.. Carlile was granted a non- exclumive franchime in the Sydney metropolitan area in respect of Zane products. The respondent operated the franchise under | the company name I have referred to and during the term of the | franchise it used the telephone number in question for the |
| franchise businesm. By letter dated 11 May, 1994 the respondent gave notice that it did not intend to renew the franchise agreement and the parties later agreed that the agreement would expire on 30 June, 1994. With one exception, the arrangements for termination of the agreement, including the change of the respondent's name to delete the word 'Zane" |
and the return to Zane of relevant manuals and computer software, were made amicably. So far as the disputed telephone number is concerned, Zane, by letter of 10 June, 1994, called for transfer to it of this number. In reply, the respondent refused to meet that demand.
The respondent used this telephone number from 1986 in its business as a supplier of solar heating systems. It commenced to carry Zane's products from about 1982 and ultimately acted as Zane's franchisee from February 1989 to January 1994 under the agreement to which I have referred. Throughout the whole of the period of its arrsociation with Zane after 1986, the respondent used this telephone number in the course of carrying on this business. The respondent asserts that it also continued to use this same number in
| connection with others of | its businesses that are u n c o ~ e c t e d |
with the formerly franchised business: it operates a pool supply business under a Swimart franchise, in addition to it6 solar heating business; it also has other small businesa
| operations. |
The respondent's managing director, . Green, says that this telephone number is the main switchboard number at the 554 Pacific Highway premises from which the respondent operates. Mr. Green says he believes that to the extent that there is goodwill in that number, or to the extent that any company is entitled to the benefit of customers' familiarity with that number, that goodwill lies with the respondent and
not with the applicant. Although other numbers were advertised for the two Swimart franchises of the respondent, almost all of the administrative calls for those businesses come to the disputed number, so he says.
The current Sydney telephone book, white and yellow pages, lists Carlile Zane Solar Systems Pty. Ltd., the name the respondent traded under pursuant to the now terminated franchise agreement with Zane, under the disputed number. Its pool supply buainess at Killara and its pool supply business at Frenchs Forest are listed under the name "Swimart" against quite different telephone numbers in respect of which the applicant makes no claim.
What Hr. Green means when he said that almost all the administrative calls of those businesses, i.e., the respondent's two Swimart businesses, come to the disputed number appears from paragraph 7 of his affidavit where he
| says | 1 |
affairs of Carlile including its conduct of the two "The majority of calls to that number deal with the Swimart businesses and the general business of maintaining the company such as discussions with our professional advisers, with suppliers and
employees . '
Customers of the respondent' s two Swimart businesses, however, use the advertised numbers, not the disputed number, to deal with it.
I turn now to the franchise agreement. Recitals (a) to (c) record the applicant's established goodwill in the Sydney franchise area in the name "Zane" used in connection with its business of selling domestic and commercial solar heating systems. Clause 2.1 provides that:
"Zane hereby grants to the dealer [the respondent] the exclusive right or Franchise to operate a business in the territory set out in the Fifth Schedule hereto and the right to use insignia and
symbol^ as have hitherto been used by Zane in
relation to either the Zane Domestic System or the goodwill derived by the previous use by Zane of such insignia and symbols for the period [of the
franchise agreement] .
Clause 3, the clause of critical importance for the purposes of the present dispute, provides:
"Zane hereby grants to the Dealer the right to operate the business in the territory set out in the Fifth Schedule hereto under the business name 'Zane Solar Centreg or "(name of Dealer to be inserted) Zane Solar Centren; or "Zane Solar Centre (suburb)" or any other form or combination of the words "Zane Solar Centre"; or any one of them or any coloration
thereof. By clause 3.2, it is provided thatt
"Zane shall at the expense of the Dealer execute all such documents as may be required to give effect to the provisions of the last preceding paragraph and shall in particular sign, execute and lodge at the Dealer's expense all such documents as may be required by the Commissioner for Corporate Affairs in the State in which the Territory is located.'
By clause 3.3, it is provided that:
contemporaneously with the delivery by Zane of all such documents as may be required to give effect to this Clause, the Dealer shall hand to Zane such Statement of Change of Particulars of the Business ~ a m e or such other form as may be prescribed by the Commissioner for Corporate Affair8 transferring and assigning to Zane the use of any of the business names referred to in Section 3.1 of this Clause which shall be held by Zane until the termination of this Agreement for any cause whatsoever whereupon Zane shall be empowered to lodge any such Statement of Particulars of Business Name or such other form as may be prescribed with the office of the Commissioner of Corporate Affairs in the State in which the territory is located.'
BY clause 3.4, omitting some words, it is provided:
"In consideration of these presents the Dealer hereby irrevocably ... appoints Zane ... the ... Attorney of the Dealer to ... execute and deliver all . such .. . instruments . .. as Zane may in its absolute discretion see fit for further assuring to Zane the power, rights and privileges hereinbefore conferred upon Zane pursuant to this Clause also in the name and on behalf of the Dealer to execute and procure the registration of any statement or return with the Commissioner for Corporate Affairs
... and generally to do, execute and perform all
acts, matters and things whatsoever relating to the use by the Dealer of any one or more of the business names referred to in Section 3.1 of this Clause as
fully and aa effectually . . . as the Dealer could do
the Dealer ratifying ... all and whatsoever Zane
the use of a busineslr name . . . and shall lawfully do or cause to be done in or about it is hereby agreed and declared the powers conferred by this Section of clause 3 shall not be exercised by Zane unless this Agreement shall be determinable ... by Zane under the provisions hereof
S . . By clause 3.6, it is provided: "Save and except as provided in Section 3.1 of this clause ... the dealer shall not register any business, trade or corporation name or style
incorporating any business name or corporation name
or style of Zane or its related corporation:
Clause 4 deals with Zane's obligations. They include the following: clauee 4.1:
"Hake available to the Dealer the use of the name
or such other name as may be used
by the Dealer pursuant to Section 3.1 of Clause 3 . "
By clause 4.2:
"Provide to the Dealer Zane's knowledge in the
promotion of the Zane domestic system.'
By clauee 4.3:
"Sell to the Dealer the Zane Domestic System and any part or component necessary for the installation of the Zane Domestic Systems ...
By clause 5.1, it is provided that:
the creation or development of any of Zane8s trade "The Dealer acknowledges that it has had no part in marks, service marks or trade names or the Industrial Property referred to herein and disclaims any right to any interest therein or to the goodwill derived therefrom."
Clause 6 sets out the dealer's obligations. They include, by clause 6.3, the obligation that:
"The Dealer . . . shall and during the term of this Agreement, cause the Franchise Business to be managed and controlled by the Dealer's Nominee who shall attend at the place of business of the Dealer during all normal business hours ...
By clause 6.12 the dealer is obliged:
"To provide at his own expense a suitable office as a retail outlet within the territory set out in the Fifth Schedule ..:
By clause 6.10 the dealer is obliged:
"To pay for ... the pages of the telephone directories which cover the territory, such advertising to be under such classifications and of such style as Zane may determine in its absolute discretion ..."
By clause 6.21 the dealer is obliged:
"To use Zane's property rights strictly in accordance with the requirements of Zane and to comply with Xane's requirements in relation to sign writing, promotion, publicity and advertising material. '
| Clause 8 deals with a restraint on the dealer's activities upon termination of the agreement. I t is generally framed as a series of restrictions, limited by reference to various periods of time from one year to three years. The dealer is not tot |
"Carry on or participate in any business which includes the sale and or distribution of solar hot
water systems and or solar heating and or cooling
devices of any description."
Clause 10, another provision of critical importance, deals with the dealer's obligations on termination. Clause 10.1.4 provides:
'In the event that the Dealer shall have used the business name as provided in Clause 3 hereof and shall have a telephone service connected to the premises at which the Franchise Business is conducted under the aforesaid business name, the Dealer shall forthwith discontinue the telephone service and transfer to Zane the telephone service and use of the number then held by the Dealer."
The respondent submits that, insofar as the applicant's application is founded upon clause 10.1.4 of the
franchise agreement, there is no evidence that the
precondition in that sub-clause has been satisfied and that
the respondent's evidence establishes, on the contrary, that
the respondent has not used the business name as provided in
clause 3 hereof, within the meaning of that expression in
| clauae 10.1.4. | This submission is based upon what Hr. Green, |
the managing director of the respondent, says at paragraph 4:
"At no time did Carlile trade under any of the business names referred to in clause 3.1 of the Franchise Agreement which is Exhibit BL1 to the affidavit of Bruce Leech filed in these proceedings."
The submission also relies upon what Mr. Bloor, the
former managing director of the applicant, who has filed an
affidavit on behalf of the respondent, eays in paragraph 18
where he says that:
"... after execution of the franchise agreement
whilst I was Managing Director of Zane (until
January, 1989) ... 8 (a) Zane did not prepare or execute any documents for lodgment with the Commieaioner for Corporate Affair8 ... registering any bueinees name in the name of Carlile ... ;
Carlile did not trade under any of the business
(b) namee referred to in Clause 3.1; (c) Carlile did not hand to Zane . . . any Statement of Change of Particulars of the Busineee Name ...,
(d) Carlile did not elect to operate the bueineee in New South Wale8 under any of the eaid business namee;
(e)
Carlile did not register any bueineee, trade or corporation name or style incorporating any bueiness name or corporation name or style of Zane or any corporation related to Zane:
The evidence shows that the respondent changed its
name, prior to entry into the franchise agreement, to Carlile
Zane Solar Systems Pty. Ltd.. This, in my opinion, ie still a
| the name or style "(Name of dealer to be inserted) Zane Solar | mcoloration" within the meaning of that term in clause 3.1 of |
| Centre' in that clause. Mr. Green Bays, in paragraph 3 of hie affidavit: |
"When I firet began trading in the pool eupply and heating bueineee, I worked in co-operation with the well-known Olympic ewhaing coach, Forbee Carlile. The Carlile name therefore became well known in the pool supply business, and, in my opinion, acquired a valuable reputation. The company wae then called Carlile Solar Syeteme (NSW) Pty. Ltd.. When Carlile
became a Zane distributor, therefore, I declined the invitation to change the name of the company to 'Zane Solar Centre Pty. Limitedw which I believe is the trading style adopted by most Zane distributors. At the request of Trevor Bloor, then managing director of Zane, I consented to change the name of the company to "Carlile Zane Solar Systems Pty.
Limited'. That change occurred on August 19, 1987, at a time when Carlile was a distributor of Zane products but had not become a franchisee. The company was already trading under that name when, in 1989, Zane changed its distribution system to appoint franchisees, and Carlile agreed to become its franchisee for the Sydney metropolitan area. Prom July 1988 until June 30, 1994, Carlile traded as a franchisee of Zane, but maintained its existing name of Carlile Zane Solar System Pty. Limited."
It is that name that is, as I have said, listed in the white pages of the current Sydney telephone directory against the disputed number. The address there given is the respondent's Pacific Highway, Killara address, from which it now conducts one of its Swimart businesses. The evidence is clear that in terns of clause 3.1, the respondent, by one of the style. of name referred to in that clause, operated the franchised solar heating business from 1989 to June 1994. It follows that, in terms of clause 10.1.4, the respondent had a
| telephone service c o ~ e c t e d to its Killara premises at which |
it conducted the franchise business under one of the styles of name referred to in the clause, i.e., the service in the name of Carlile Zane Solar Systems Pty. Ltd..
The sole question is this: did the respondent, in carrying on businees in this way, "Use the business name as provided in clause 31" The respondent's argument is that clause 3.1 only applies to users of a name of a kind referred
to therein that ia regiatrable under legislation of the State in which the respondent carriea on the franchise bueinesa, here, New South waler. That argument in, I think, untenable. The agreement itaelf record8 that the applicant has extensive goodwill in the name "Xane" applied to solar heating eyatem. I have already referred to recitals (a) to (c) of the franchine agreement. The grant made by the applicant to the respondent in clauae 3.1 is the grant of the right to 80 use the name "Zane" in the franchise territory.
The expression "buainees name" in clause 3.1 refera, I think, to any atyle of name linking Zane with solar operated equipment of the kind marketed by Zane. Clause 3.1 confer8 on the reapondent the right it would not otherwise have to carry on the buaineaa of aelling solar heating equipment that the public are likely to identify aa Zane producta. On ita true construction, this grant carries with it the right in the reapondent to register that style of name as a buaineas or company name. Thin a why clause 3.2 and clauae 3.3 contemplate that the respondent may regiater ita choaen
| businesa ntuue or company name. But neither clause casts any | trading name that incorporates the word "Xane" as a regiatered | |||
| obligation on the respondent to do that or even confers permianion to do that. Nor is there any other provision in the agreement that oblige8 the respondent to carry on the franchise buaineaa only under a registered name. All clauee 3.2 does is cant an obligation on the applicant, in the event that the reapondent chooses to register its trading name as the applicant8 s f ranchiclee, to co-operate with the respondent | ||||
| in ensuring that the respondent will be able to obtain that registration which it might be unlikely to be able to obtain without the applicant's consent. | ||||
| Clause 3.3 operates to protect the applicant's interest in any name that the respondent, as its franchisee, chooses to register with the applicant's consent. It provides no basis for the suggestion that the grant in clause 3.1 is the grant only of a right to register a business name incorporating the word "Zane" and to use a name so registered. The covenant for further assurance in clause 3.4 is, in my view, inconsistent with any such notion and consistent, rather, with the view that the grant in clause 3.1 is the grant of the right to use the name Zane in carrying on the business of selling Zane solar heating equipment. | ||||
| It is implicit in the grant in clause 3.1 that the respondent has no lawful right to use the name Zane in | ||||
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| franchised area. Clause 3.6 complements this by prohibiting the respondent from registering a name including the word "Zane" as a business or company name, save to the extent permitted by clause 3.1. | ||||
| It does not, in my view, matter that at the applicant's request some time prior to the execution of the | ||||
| franchise agreement the reepondent agreed to, and did include the name "Zane' in ita registered company name. That the respondent may have already been trading under the name Carlile Zane Solar Systems Pty. Ltd. under other arrangements | ||||
| with the applicant doe6 not mean that clause 3 . 1 is, for that | ||||
| reason, deprived of effect. By the franchiee agreement of | ||||
| which clause 3 . 1 is an element, the respondent got a non- exclusive franchise to aell Zane producta in the defined area. It was the agreement that regulated the rights and obligations | ||||
| of the partiee inter ee from February 1989. It was not | ||||
| suggested that, deepite ita earlier arrangement with the applicant, after execution of the f ranchise agreement the respondent had righta to use the name Zane in connection with its business of selling Zane aolar heating equipment additional to those conferred by the agreement. Any such | ||||
| suggestion would be inconeietent with clause 5.1. | ||||
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| final relief. | ||||
| But the reapondent objects to that course and aubmits, for reasons identified in argument, that it would be denied natural juetice if I were to follow that course. An interlocutory order only will therefore be made. | ||||
| I certify that the preceding | ||||
| 15 page8 an, a true copy of the | ||||
| reanon8 for judgment herein of the Honourable Hr. Justice Drummond. | ||||
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