Corporate Cabs Limited v Kumar
[2022] NZHC 1088
•17 May 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1547
[2022] NZHC 1088
IN THE MATTER OF Passing off, misleading or deceptive conduct under the Fair Trading Act 1986 and breach of the Trade Marks Act 2002 BETWEEN
CORPORATE CABS LIMITED
Plaintiff
AND
PREM KUMAR
Defendant
Hearing: 23 March 2022 Appearances:
E W Davies for Plaintiff
No appearance for Defendant
Judgment:
17 May 2022
JUDGMENT OF HARVEY J
This judgment was delivered by me on 17 May 2022 at 4.30pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
Solicitors:
Skinners Law, Auckland
CORPORATE CABS LTD v KUMAR [2022] NZHC 1088 [17 May 2022]
Introduction
[1] Corporate Cabs Limited (CCL) provides taxi services throughout New Zealand. Mr Kumar was previously licenced by CCL to operate a taxi using CCL’s name, trademarks and business systems under an Owner Operator Agreement (the Agreement). However, the Agreement came to an end in November 2017. CCL says that since that time Mr Kumar has operated a taxi service under the brand “Business Cabs” or “Business Cab” and using a vehicle and presentation that CCL says is deceptively or confusingly like its own.
[2]The plaintiff, in summary, contended that the defendant had:
(a)breached the Agreement by advertising and marketing its services using the complained of Infringing Brands and Infringing Elements (first cause of action);
(b)used the Infringing Brand, which amounts to misleading and deceptive contact in trade under s 9 of the Fair Trading Act 1986 (second cause of action);
(c)used the Infringing Brand to pass off as the plaintiff’s intellectual property (third cause of action); and
(d)by using a combination of words, stylisation and colours that are like the plaintiff’s trademark, breached the Trade Marks Act 2002 (fourth cause of action).
[3] On 8 October 2021, Davison J issued an interlocutory decision restraining Mr Kumar from using what was defined by CCL as the “Infringing Brands or any similar brands” and “Infringing Elements” in the course of conducting a taxi service business or any similar business, pending determination of the plaintiff’s claims or further order of the Court.1 Davison J noted that Mr Kumar had taken no steps in the
1 Corporate Cabs Limited v Kumar [2021] NZHC 2700.
matter to date and had not appeared at the hearing on 4 October 2021.2 Accordingly, he made orders for service of the judgment and any further documents on Mr Kumar by email and directed that the defendant was to file a statement of defence by 21 October 2021.
[4] Notwithstanding those orders, the defendant took no steps and by minute of 4 November 2021 Wylie J set the matter down for formal proof.3
[5] When the proceeding was called before Harland J on 2 February 2022, as a formal proof hearing, the defendant had still not taken any steps. However, the Judge expressed concern regarding the plaintiff’s claim for a permanent injunction, given that there was no engagement by the defendant nor any updating evidence establishing that the defendant continued to engage in the misconduct complained of by CCL. Her Honour noted that “on a formal proof, the Court must more closely analyse the causes of action pleaded to consider whether they have been made out” and that an updating affidavit would assist.4 Harland J granted counsel further time to enquire as to the above and adjourned the hearing for that purpose, while noting that the plaintiff was no longer seeking damages.
[6] On 18 February 2022, the plaintiff filed an updating affidavit in which Mr Singh, a process server, confirmed that he had attended Mr Kumar’s address and viewed two cars in the driveway with no signage visible on either vehicle. Further, he said that a source told him that Mr Kumar is presently living in India with his family.
[7] At the hearing on 23 March 2022, the plaintiff submitted that, regardless of whether the defendant had removed the infringing brand and the infringing elements, a permanent injunction was still appropriate in all the circumstances. The focus of the hearing and the most recent submissions was on the first two causes of action: breach of contract and the Fair Trading Act. The plaintiff continues to seek costs on a 2B basis.
2 Corporate Cabs Limited v Kumar HC Auckland CIV-2021-404-001547, 4 November 2021 (Minute of Wylie J).
3 Corporate Cabs Limited v Kumar HC Auckland CIV-2021-404-001547, 2 February 2022 (Minute of Harland J).
4 At [3].
[8]Accordingly, the principal issues for determination are:
(a)Has Mr Kumar breached the Agreement?
(b)Has Mr Kumar breached s 9 of the Fair Trading Act 1986?
(c)Is a permanent injunction appropriate?
Background
[9] The background to this proceeding is set out in the judgment of Davison J at paragraphs [1]– [4] and [8]– [28] and need not be repeated here.5
The Owner Operator Agreement
[10] On 13 May 2016, CCL and Mr Kumar entered into the Agreement. CCL granted Mr Kumar a non-exclusive licence to operate a taxi business using the CCL brand and intellectual property. The Agreement required the defendant to purchase a vehicle from one of the plaintiff’s nominated suppliers and required that he complies with the plaintiff’s directions for fit out and any signage. The Agreement was terminated in November 2017 by the plaintiff on the grounds that the defendant had breached the terms of its operating rules.
[11]Regarding intellectual property the Agreement provides:
6.9 You and the Guarantors severally agree that you will not at any time, whether during or after this Agreement ends, challenge the Licensor and/or our ownership of the Intellectual Property or use or try to claim ownership of any Intellectual Property, company, business name, trade mark or logo that is substantially the same as or deceptively or confusingly similar to the Intellectual Property.
6.10 The provisions of this clause 6 remain in full force and effect after the expiry or termination of this Agreement and are not extinguished or merged.
[12] The Agreement provides under cl 16.8 that upon termination the operator’s rights immediately cease and the operator is to immediately stop operating the business, cease using CCL’s intellectual property, and return the operating rules and
5 Corporate Cabs Limited v Kumar, above n 1.
all other consumable used in the operator’s taxi business containing any of CCL’s intellectual property to CCL.
[13]Intellectual property is defined in the Agreement as follows:
“Intellectual Property” means all or any of the following which we now or in the future own or have the right to use:
(a)all logos, Trade Marks or trade names, insignia, signage, décor and colour scheme, copyright, promotional material, drawings, plans, creative concepts, specifications, know-how, software, trade secret, and any other proprietary right or form of intellectual or industrial property (protectable by registration or not) conceived, used, developed or produced by us or the Licensor in connection with or embodied in the System;
Plaintiff’s submissions
[14] In response to concerns expressed by Harland J about whether the defendant was continuing to act in breach of the injunction granted by Davison J, Mr Skinner referred to the affidavit of Simran Jeet Singh dated 18 February 2022. Mr Singh confirmed that he attended the defendant’s last known address and observed that the latter’s car, licence plate NUZ797, was parked in the driveway alongside a Toyota Prius, licence plate NZU795, with no visible signage. Mr Singh confirmed that he had been told by “a source” that the defendant had returned to India where he was living with his family. Annexed to the affidavit was a picture of both cars in the driveway, neither of which had visible signage.
[15] Counsel pointed out that, given the ease with which signage can be used and then removed from vehicles, the absence of any signage from the defendant’s vehicle was not confirmation that future breaches of the injunction were no longer relevant.
[16] In any event, counsel submitted that s 41 of the Fair Training Act 1986 has particular relevance to the present proceedings. Specifically, that the Court may issue an injunction to prevent any person from engaging in conduct that has been deemed to be contravening any of the provisions of parts 1 to 4 of the Act. Section 41(3)(a) of the Act provides the Court with jurisdiction to grant an injunction if it is satisfied the defendant has engaged in conduct in breach of s 9 of the Act, regardless of whether that behaviour will be repeated.
[17] Regarding s 9, Mr Skinner contended that the defendant’s use of the infringing brand amounted to misleading and deceptive conduct in trade, contrary to the legislation. Given that the plaintiff and defendant operated in the same market, given the similarities between the plaintiff and defendant’s brands is such that there is a strong likelihood of confusion. Further, the plaintiff has been operating under the brand Corporate Cabs since 1999, which is a well-known brand in the public domain and it would not be unreasonable to expect members of the public to mistake one business for the other or to wrongly assume they are one and the same business.
[18] Even though the defendant has removed the infringing brands and the infringing marks, counsel argued that it is appropriate for the Court to order a permanent injunction per s 41 of the Fair Trading Act 1986 or in accordance with its inherent jurisdiction given that the defendant has breached the Agreement with the plaintiff and s 9 of the Fair Trading Act. If, on the other hand, the defendant is no longer acting contrary to the injunction, he will not be affected by a permanent injunction. This is because, according to counsel, the permanent injunction simply continues to protect the plaintiff’s rights under the Agreement and the Fair Trading Act 1986.
[19] Alternatively, if the permanent injunction is refused, the plaintiff will be prejudiced because it will be denied the ability to enforce its rights under the Agreement or those under the Fair Trading Act. Put another way, counsel submitted that other owner-operators might then then deem their obligations under the contractor unenforceable.
[20] As to the issue of damages, Mr Skinner contended that they were not an adequate remedy. The failure to issue a permanent injunction will have ongoing risks and impacts on the ability of the plaintiff to properly operate its business and may indeed encourage others to challenge its intellectual property.
[21] Counsel submitted that even though it may appear the defendant is no longer using the plaintiff’s intellectual property, his breaches in 2020 and 2021 have already tarnished the plaintiff’s brand and may continue to impact its good name. The plaintiff seeks to eliminate the risk of copycat intellectual property infringers if such
individuals observe that there have been no consequences for the defendant’s actions. In other words, it is important for the plaintiff to establish a precedent so that none of its existing drivers be impacted by comparable copycat behaviour from other operators to the detriment of the plaintiff’s brand and of the business of its proprietors.
[22] In summary, Mr Skinner submitted that a permanent injunction was appropriate and just, considering all the relevant circumstances of the present proceedings. As foreshadowed, while the defendant may have left the country, he may yet return and the risk of him restarting his conduct contrary to the injunction and in defiance of his contract with the plaintiff and the plaintiff’s rights under the Fair Trading Act, justified the grant of a permanent injunction.
Legal principles
[23] As the plaintiff is no longer seeking damages, and as is indicated by counsel’s submissions, the focus of the case is firmly on whether an order for a permanent injunction can be made either under s 41 of the Fair-Trading Act 1986 for a breach of s 9 of that Act, or under the Court’s equitable jurisdiction to remedy a breach of contract.6
Breach of contract
[24] The question, if a breach if proved, is whether a permanent injunction is the appropriate remedy as the plaintiff’s claim. The orthodox remedy for breach of contract is the recovery of damages at common law. It is also well settled that the Court has equitable jurisdiction to grant an injunction where damages would be an inadequate remedy. The Court will order the defendant to refrain from doing what he or she has expressly promised not to do. Regarding permanent injunctions, Burrows, Finn and Todd on the Law of Contract in New Zealand provides:7
Another way in which the performance of a contract in specie may be enforced is by the grant of an injunction. An injunction is either prohibitory or mandatory. So far as concerns the law of contract, a prohibitory injunction is granted only in the case of a negative promise. If, for instance, the defendant has broken an agreement not to ring the church bell at five o'clock each
6 Minute of Harland J, above n 3, at [5].
7 Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (7th ed, LexisNexis, Wellington, 2022) at [21.4.1] – [21.4.2].
morning, or not to sell beer other than that brewed by the plaintiff, the court will order the defendant to refrain from doing what he or she has expressly promised not to do. This is equivalent to “the specific performance by the Court of that negative bargain which the parties have made”. However, there is still a residual discretion in the court as to whether or not an injunction should be granted and the nature of the covenant and the surrounding circumstances must be taken into account.
…
It is clear that the exercise of the equitable jurisdiction to grant specific performance or an injunction is a matter within the discretion of the court. … in Attorney-General for England and Wales v R, Tipping J emphasised that specific performance and restraint by injunction were not available as of right. But the discretion involved was a judicial discretion and had to be exercised in a principled way.
Factors which bear upon the discretion to award specific performance or injunction, and which the courts will bring into account, include: the question of unfairness in making the contract; whether damages would cause disproportionate hardship to the defendant; whether the contract is for personal services; whether the contract is for the sale of land; whether performance would require supervision by the court; whether the remedy would be available to both parties; and whether there has been a delay in seeking relief. These are all recognised bases by reference to which an order for specific performance may be granted or refused.
(footnotes omitted)
Fair Trading Act 1986
[25]Alternatively, an injunction is sought under s 9 of the Fair Trading Act 1986:
9 Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is misleading or deceptive or is likely to mislead or deceive.
[26]If s 9 is breached, then the plaintiff seeks a permanent injunction under s 41:
41 Injunctions may be granted by court for contravention of Part 1,
Part 2, Part 3, and Part 4
(1)The court may, on the application of the Commission or any other person, grant an injunction restraining a person from engaging in conduct that constitutes or would constitute any of the following—
(a) a contravention of any of the provisions of Parts 1 to 4:
(b) any attempt to contravene such a provision:
(c) aiding, abetting, counselling, or procuring any other person to contravene such a provision:
(d) inducing, or attempting to induce, any other person, whether by threats, promises or otherwise, to contravene such a provision:
(e) being in any way directly or indirectly, knowingly concerned in, or party to, the contravention by any other person of such a provision:
(f) conspiring with any other person to contravene such a provision.
(2)The court may at any time rescind or vary an injunction granted under this section.
(3)Where an application is made to the court under this section for the grant of an injunction restraining a person from engaging in conduct of a particular kind the court may,—
(a) if it is satisfied that the person has engaged in conduct of that kind, grant an injunction restraining the person from engaging in conduct of that kind; or
(b) if in the opinion of the court it is desirable to do so, grant an interim injunction restraining the person from engaging in conduct of that kind,—
whether or not it appears to the court that the person intends to engage again, or to continue to engage, in conduct of that kind.
[27]Regarding s 9, the Supreme Court in Red Eagle Corporation Ltd v Ellis
described the test for a breach:8
The question to be answered in relation to s 9 in a case of this kind is accordingly whether a reasonable person in the claimant's situation — that is, with the characteristics known to the defendant or of which the defendant ought to have been aware — would likely have been misled or deceived. If so, a breach of s 9 has been established. It is not necessary under s 9 to prove that the defendant's conduct actually misled or deceived the particular plaintiff or anyone else. If the conduct objectively had the capacity to mislead or deceive the hypothetical reasonable person, there has been a breach of s 9. If it is likely to do so, it has the capacity to do so.
[28] “Likely” means a real risk, rather than a mere possibility, but need not be more likely than not.9 As has been noted in regard to similar products, also in the taxi context, “what is important is what catches the eye generally and to compare points of similarity or difference one by one is not always helpful”.10
8 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20, [2010] 2 NZLR 492 at [28].
9 Airport Rentals Ltd v Airport Car Rentals (Southern) Ltd (1995) 6 TCLR 664 (HC) at 667; citing
Bonz Group Pty Ltd v Cooke (1996) 7 TCLR 206 (CA) at 214.
10 Green Cabs Ltd v Naidu [2014] NZHC 2749 at [24]; agreeing with Wellington Combined Taxis Ltd v Wellington Ace Taxis Ltd & Ors HC Wellington CP265/96, 11 October 1996 at 4.
Discussion
Has Mr Kumar breached his agreement with CCL?
[29] A formal proof can sometimes be difficult to decide, in the absence of engagement from the defendant to oppose the application, and where the plaintiff has provided a somewhat sparse case before the Court with an arguable lack of evidence to support the causes of action as pleaded. For example, notwithstanding Harland J’s minute of 2 February 2022 requesting further information and an updating affidavit, counsel has supplied only a one-page affidavit of Mr Singh. Even so, the Court must decide based on the evidence filed. The result here is that the substantive hearing must now be determined on essentially the same evidence that was available to Davison J when he heard the interim injunction application. On the evidence provided, I consider that the strongest cause of action is in contract.
[30] Under cl 6.9 of the Agreement, the defendant has agreed not to use or try to claim ownership of any Intellectual Property, company, business name, trademark or logo that is substantially the same as or deceptively or confusingly similar to the Intellectual Property after the Agreement is terminated. The definition of “Intellectual Property” in the agreement includes “insignia, signage, décor and colour schemes…”. Annexed to Mr Allison’s affidavit of 29 July 2021 is an image of the top light box of a CCL taxi. It uses white font on a dark blue background:
[31] The evidence confirmed that Mr Kumar had been continuing to operate a taxi service in his white Holden Commodore following termination of the Agreement under the name “Business Cab”. In terms of the top light, Mr Kumar originally used the same font, on a dark blue background. On 6 April 2021, CCL’s solicitors wrote to
Mr Kumar, noting he had changed from dark blue to black, and added a silver fern. The following is Mr Kumar’s door, and top light box after those changes:
[32] On 21 July 2021, Mr Kumar replied by email that he had “All ready change colour green”. The plaintiff also noted that Mr Kumar continued to use his old CCL cab number, and continued to display it on the side of the top light box.
[33] Notwithstanding that it is no longer clear whether Mr Kumar is using the branding and insigna, although he retains the Holden Commodore, it is evident that he has done so in the past. The use of the Holden Commodore, which the plaintiff submmitted is unique amongst taxi companies, and the colour scheme and positioning of the signs, can certainly be classed as “confusingly similar”. In support, the plaintiff provided examples of such confusion including an incident in which a Sofitel employee managing the hotel forecourt (which CCL pays a monthly fee to use), did not recognise that Mr Kumar’s Business Cab was not a CCL vehicle.
[34] In summary, I consider that the “Business Cab(s)” branding and model of car, coupled with the manner in which Mr Kumar had been using and positioning his taxi, appeared to be intended to take advantage of the close resemblance of “Business Cab(s)” to “Corporate Cabs”. This is at least confusingly like the Intellectual Property and accordingly is in breach of cl 6.9 of the Agreement.
Has Mr Kumar breached the Fair Trading Act 1986?
[35] On the available evidence, I do not consider that the plaintiff can succeed in proving a breach of s 9 of the Fair Trading Act 1986. While Mr Kumar’s use of the intellectual property is confusing, I am not persuaded that it rises to the level of misleading or deceptive for the purposes of s 9. Moreover, CCL has put forward no
real evidence as to how potential patrons might reaonsably mistake Mr Kumar’s “Business Cab” for a Corporate Cab.
[36] Indeed, it appears that CCL is primarily a taxi booking service, where customers prebook the taxi rather than hailing it at the roadside. In contrast, there is no evidence given that Business Cabs has an online presence or is even available for bookings, and it appears that Mr Kumar was only operating at the roadside. Objectively, therefore, it is difficult to see how a potential patron might mistake Mr Kumar’s taxi for a Corporate Cab when anyone looking for a Corporate Cab would most likely have specifically booked one.
[37] In its evidence, it is notable that the plaintiff has not provided examples of customers confusing the two services. In the absence of more evidence, I do not see how this cause of action can succeed.
Is a permanent injunction appropriate?
[38] As the Court of Appeal confirmed in Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd, albeit in relation to the tort of passing off, damages will rarely be an adequate remedy where there are allegations of likelihood of confusion in trade.11 By analogy, here too damages would be an inadequate remedy and the plaintiff is not seeking them in any event. What is being sought, and what is required is an injunction to prevent Mr Kumar from acting in such a way as to breach the Agreement in future and to preserve CCL’s intellectual property. As the plaintiff argued, signage and lights can be removed or added to vehicles, and the fact that Mr Kumar does not appear to be using them at present is no guarantee that he will not do so in future. If he does, then without a permanent injunction, CCL will be put to the cost of initiating proceedings again.
[39] Moreover, from the plaintiff’s evidence, which includes instances of Mr Kumar apparently ‘driving erratically’ in the Sofitel forecourt, driving on the wrong side of the road and mounting the kerb, Mr Kumar has behaved in a manner which would cause disrepute to CCL’s brand if the public is to mistakenly associate “Business
11 Klissers Farmhouse Bakeries Ltd v Harvest Bakeries Ltd [1985] 2 NZLR 129, at p 139, citing
Cab(s)” with “Corporate Cabs”. Corporate Cabs is a well-known brand which relies on goodwill associated with it and with its reputation. Doubtless, that reputation has been built up over two decades by the hard work, dedication and commitment of its proprietors. In the era of uber and related transport services, this reputation is more important than ever. I accept the plaintiff’s argument that an injunction is required in order to give effect to their contractual rights and to prevent the risk of reputational damage.
[40] Equally importantly, I do not consider that this injunction will be disproportionate for Mr Kumar, taking into account all the relevant circumstances. It will not prevent him from operating a taxi service, but it will stop him from doing so using the infringing elements. Moreover, his lack of engagement with proceedings underscores this conclusion.
[41] In his judgment of 8 October 2021, after finding that the plaintiff had demonstrated a seriously arguable case against the defendant for breaching the Agreement and its intellectual property rights arising from its registered trademarks and its established and well-known Corporate Cabs branding, signage and taxi vehicles,12 Davison J concluded:
[36] In my view the plaintiff has shown that it has a strong case against the defendant for damages and a permanent injunction to restrain him from carrying on his taxi business in the manner and style the plaintiff has shown him to have been doing since shortly after the termination of the Agreement in November 2017. In my view the harm that would be caused to the plaintiff if an interim injunction is not granted well outweighs the harm that would be caused to the defendant should he successfully defend the plaintiff’s claim against him. By being restrained from conducting his taxi business as he has been under the “Business Cabs” brand and style does not prevent him from carrying on his taxi business under some other name and style that is clearly and distinctly different from the plaintiff’s during the period until the substantive proceeding is determined.
[42] I agree with both points made by Davison J, and, that the granting of a permanent injunction is necessary in this case. The fact that the defendant has taken no steps to defend either the interim injunction or this application for a permanent injunction speaks its own message. That he may have left the jurisdiction and could
12 Corporate Cabs Limited v Kumar, above n 1, at [32].
return at some point in the future is also acknowledged, although I note that this submission from the defendant is based only on Mr Singh’s claim that he heard this from “a source”, which remains unidentified. The short point is that the defendant has, based on the evidence, breached the Agreement with the plaintiff. I am satisfied that a permanent injunction against the defendant is appropriate.
Decision
[43] The application of Corporate Cabs Limited for a permanent injunction against Prem Kumar is granted on the terms sought by the plaintiff, restraining the defendant, Prem Kumar, whether himself, his servants or agents, from using the Infringing Brands or any similar brands and the Infringing Elements in the course of conducting a taxi service business or any similar business.
[44]Corporate Cabs Limited is entitled to costs on a 2B basis against Prem Kumar.
Harvey J
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