Dream Doors (NZ) Ltd v Mike Fatches Design Ltd

[2014] NZHC 290

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

CIV-2013-443-307 [2014] NZHC 290

BETWEEN  DREAM DOORS (NZ) LTD First Plaintiff

ANDDEREK LILLY and PHILLIP JAY Second Plaintiffs

ANDMIKE FATCHES DESIGN LTD First Defendant

ANDMICHAEL ERNEST FATCHES Second Defendant

ANDDREAM DOORS KITCHENS LTD Third Defendant

Hearing:                   25 February 2014

Appearances:           D Watson for Plaintiffs

ME Fatches, Second Defendant, in person

Judgment:                25 February 2014

ORAL JUDGMENT OF TOOGOOD

DREAM DOORS (NZ) LTD v MIKE FATCHES DESIGN LTD [2014] NZHC 290 [25 February 2014]

Introduction

[1]      This  judgment  concerns  an  interlocutory application  by the  plaintiffs  for interim orders providing both prohibitory and mandatory injunctions pending determination of the substantive claims.   The first  plaintiff, Dream  Doors (NZ) Limited (“Dream Doors (NZ)”), owns the Dream Doors franchise system for the renovation and installation of kitchens and joinery.  It claims that it has the right to use in New Zealand all Dream Doors trademarks and intellectual property in connection with the system.

[2]      The second plaintiffs are Derek Lilly and Phillip Jay, trustees of The Dream Trust.  The Trust owns the Dream Doors trademark, which depicts the words “Dream Doors” in white font against a red background.  The second plaintiffs have given the first plaintiff a licence to use the trademark including the rights to grant franchises to use the trademark.

[3]      The first defendant, Mike Fatches Design Limited (“Mike Fatches Design”), and the third defendant, Dream Doors Kitchens Limited (“Dream Doors Kitchens”), are Taranaki companies involved in the installation of kitchens.   The second defendant, Michael Fatches, is the sole proprietor and director of both companies.

Background

[4]      On 1 July 2011, Dream Doors (NZ) granted a franchise to Mike Fatches Design.  The franchise agreement allowed Mike Fatches Design to use the Dream Doors concept and to operate a Dream Doors business within Taranaki.  Mr Fatches personally guaranteed the obligations of Mike Fatches Design under the franchise agreement.      That   agreement   contained   provisions   protecting   the   plaintiffs’ intellectual property both during and after the term of the agreement.   Intellectual property was defined broadly to include the system itself as well as brand names, trademarks, telephone numbers, know-how and many other things.   Mike Fatches Design acknowledged in the franchise agreement that the Dream Doors concept should be regarded as confidential and was to remain the whole property of Dream

Doors  (NZ).    It  was  licensed to  use the  Dream  Doors  concept  and  intellectual property during the term of the agreement and for no other purpose.  The franchise agreement was terminated by consent on 31 May 2012.

[5]      On 1 June 2012, Dream Doors (NZ) granted Mr Fatches a one-year agency to carry  on  in  New  Zealand  the  business  of  a  Dream  Doors  agency  using  the intellectual property.  The agency agreement contained similar intellectual property protection provisions to those in the franchise agreement.  The plaintiffs allege that the agency agreement expired on 31 May 2013 but, in any event, Dream Doors (NZ) took steps to terminate the agency agreement on 6 June 2013.

The plaintiffs’ allegations

[6]      Dream Doors (NZ) now alleges that the defendants have committed breaches of trademark and contract.  It alleges that Mike Fatches Design and Mr Fatches have committed those breaches by incorporating Dream Doors Kitchens in order to carry out a kitchen-installation business; continuing to promote the business as Dream Doors; using Dream Doors (NZ)’s trademark and colour scheme; and refusing to return the plaintiffs’ intellectual property, including transferring telephone numbers and uniforms.

[7]      The Trust as owner of the Dream Doors trademark alleges that the defendants have breached s 89 of the Trade Marks Act 2002.  They rely on the same facts.  The plaintiffs  allege  further  that  the  defendants  have  engaged  in  misleading  and deceptive  conduct  in  breach  of  s 9  of  the  Fair  Trading Act 1986  because  their activities are likely to lead consumers to think they are affiliated with Dream Doors (NZ).  Dream Doors (NZ) also alleges that the defendants are engaged in passing-off their services as those which it provides.

Remedies sought

[8]      The substantive remedies sought under all causes of action are essentially the same.  Dream Doors (NZ) seeks prohibitory injunctions restraining the defendants from trading or promoting themselves in trade using the name Dream Doors or any

similar name, either with  or without the colours  red  and  white, in  any manner including in their registered company name and in the operation and marketing of the business, and from infringing the trademark of Dream Doors.   Dream Doors (NZ)  also  seeks  mandatory  injunctions  requiring  Mike  Fatches  Design  and Mr Fatches to deliver to Dream Doors (NZ) all documents and information in any form  containing  or  covering  in  any  way  any  part  of  its  intellectual  property, including all uniforms containing any part of its intellectual property, and all other items containing or referring to in any way any part of its intellectual property, and to transfer   to   Dream   Doors   (NZ)   its   telephone   numbers   027   444   2860   and

0800 645 333.   Dream Doors (NZ) also seeks damages for loss of goodwill and reputation of an amount to be quantified following discovery, plus costs.  The Trust seeks the same prohibitory injunctions and damages.   The plaintiffs made an undertaking as to damages dated 30 October 2013.

Claim for interim injunctions

[9]      I have been concerned today with an application by the plaintiffs for interim orders pending further order of the Court and pending determination of the substantive claims. The application sought interim orders as follows:

(a)      An injunction to restrain the defendants from operating the website injunction to restrain the defendants from using the name Dream Doors  or  any  similar  name  [in]  any  manner  including  in  their registered company name, or in the operation and marketing of the defendants’ business.

(c)      An injunction to restrain the defendants from infringing the trademark of Dream Doors or any similar version thereof.

(d)A mandatory injunction requiring the defendants to deliver to the first plaintiff all documents and information in any form containing or covering in any way any part of the intellectual property of Dream

Doors, and including all uniforms containing any part of the intellectual property of Dream Doors and all other items containing or referring to in  any way any part of the  Dream Doors intellectual property.

(e)       A mandatory injunction requiring the defendants to transfer to the first plaintiff, its telephone numbers 027 444 2860 and 0800 645 333.

[10]     Mr Fatches appeared in person to represent himself.  After hearing from him, I was satisfied that the two corporate defendants are closely held companies in which he is the sole shareholder and of which he is the sole director.   On  that basis Ms Watson quite properly did not object to Mr Fatches appearing on behalf of the companies also and leave for him to do so was granted at the commencement of the hearing.

[11]     In correspondence with the Court and again this morning, Mr Fatches made it clear to me that he had closed down the business of Dream Doors Kitchens.   He explained that he has obtained a clearance from the Department of Inland Revenue for the removal of Dream Doors Kitchens from the Companies Register and that he has taken steps with the Companies Office to de-register the company.  While those steps have been taken, it appears that Dream Doors Kitchens may still be registered as a company, but Mr Fatches made it clear that he no longer intends to use the Dream Doors name in connection with any business operated by him or by any company owned or operated by him.

[12]     In respect of the interim orders sought, however, Mr Fatches objected to an order preventing him from operating the website He said that, on its face, there is no relationship to the Dream Doors business and the website no longer contains any reference to the Dream Doors business.  He also objected to any order requiring him to return any property in his or the companies’ possession related to the Dream Doors business as it was formerly operated by him.  He said that the agreements requiring him to return such property on their termination did not specify how that could be done and said that the plaintiffs could call on him to collect the property if they wished.

[13]     Further, and significantly from his point of view, he said that the mobile telephone number identified in the pleadings had been his for some 20 years prior to his entering into these arrangements with the plaintiffs and that the 0800 number was also his prior to entering into those agreements.  He objected to the proposition that he should transfer those numbers to the plaintiffs, but he did indicate that he would not use the numbers in connection with the business identified as a Dream Doors business.

[14]     After hearing from Mr Fatches and Ms Watson, I invited them to confer to see whether or not an order similar to that sought in paragraph (b) of the application for interim injunction might meet the plaintiffs’ concerns on an interim basis.   I considered it might also be consistent with the assurance Mr Fatches had given that he no longer intended to use the name Dream Doors or any similar name or to market any products or services using the Dream Doors name.  While Mr Fatches considered he had not breached any trademark owned by the plaintiffs, I am satisfied from  hearing  from  him  that  he  does  not  fully  understand  the  implications  of trademark law but, in any event, he does not intend to use advertising either by way of business cards or any other promotion which uses the name Dream Doors or appears similar to the Dream Doors trademark.

Orders

[15]     On that basis, Ms Watson and Mr Fatches have agreed that an order for interim injunction may be made by consent in these terms, and I order accordingly:

That an injunction shall issue pending further order of the Court to restrain the defendants from today from using the name Dream Doors or the Dream Doors trademark or any similar name in the operation and marketing of the defendants’ business, including the operation of any website and in connection with the phone numbers 027 444 2860 and 0800 645 333.

[16]     Any application for costs shall be made by memorandum which is to be filed and served on or before Friday 28 March 2014.

[17]     Any memorandum responding to an application for costs shall be filed and served on or before Thursday 24 April 2014.

[18]     Costs  shall  then  be  determined  on  the  papers  unless  the  Court  directs otherwise.

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Toogood J