NZ Tax Refunds Limited v Brooks Homes Limited
[2012] NZHC 2598
•5 October 2012
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2012-409-001200 [2012] NZHC 2598
BETWEEN NZ TAX REFUNDS LIMITED Plaintiff
ANDBROOKS HOMES LIMITED First Defendant
ANDMY REFUND LIMITED Second Defendant
ANDSTEVEN CAVELL BROOKS Third Defendant
Hearing: 5 September 2012
Appearances: Z G Kennedy and M Toulmin for Plaintiff
D Russ for First, Second and Third Defendants
Judgment: 5 October 2012
JUDGMENT OF FOGARTY J
Introduction
[1] The plaintiff has commenced proceedings against the three defendants alleging the tort of passing off and misleading conduct in trade. It seeks to injunct the defendants from using brand names and website names similar to its own. The plaintiff and the defendants supply essentially the same services.
[2] The third defendant owns the first and second defendants. The first and third defendants have registered various domain names. The second defendant operates the relevant websites. The first and third defendants agree that the Court treat the
second defendant as the defendant for the purposes of analysis.
NZ TAX REFUNDS LIMITED V BROOKS HOMES LIMITED & Ors HC CHCH CIV-2012-409-001200 [5
October 2012]
[3] Both the plaintiff and the defendant are online tax refund service providers. The plaintiff operates a website The defendant’s website is plaintiff and the defendant and at least two other sizeable service providers are in competition to obtain tax refunds for their customers. Their customers’ taxable income is principally from wages and salaries. The service providers take advantage of the willingness of the Inland Revenue Department to offer a direct internet connection with Inland Revenue data to approved Inland Revenue agents.
[5] Proceedings were issued on the basis that the plaintiff was the first company to provide online tax refund services to the public and that the defendant registered its website in June 2010 in order to pass itself off as the plaintiff, or that the use of their name and website is misleading conduct in trade.
[6] This is an application for interim relief. The principles are well settled. The applicant should first establish it has a serious question to be tried in respect of one or more of its causes of action. The second question is a consideration of the balance of convenience, or impact of such an order, on the parties were it to be made. The ultimate question is where the overall justice lies in granting or refusing an application.1
Main issues:
1. Has the plaintiff shown that there is a serious cause of action of passing off?
2.Has the plaintiff shown there is a serious cause of action through misleading conduct or trade?
1 See Klissers Farmhouse Bakeries Limited v Harvest Bakeries Limited [1985] 2 NZLR 129, DB Breweries Limited v Lion Nathan Limited (2007) 12 TCLR 25 at [17], where Harrison J refers to more recent authorities signalling a tendency back to an evaluation of the merits in injunction cases.
3. Where does the balance of convenience lie?
4. Is it in the overall justice of the case that the Court should intervene now by way of interim injunction?
Relevant essentials of passing off
[7] The necessary elements for a cause of action in passing off have been restated in the case of Reckitt & Colman Products Limited v Borden Incorporated. The plaintiff must prove: 2
(a) That the plaintiff’s goods or services have acquired a goodwill or reputation in the market and are known by some distinguishing feature;
(b)There is a misrepresentation by the defendants (whether intentional or not) leading or likely to lead the public to believe that the goods or services provided by the defendants are goods or services of the plaintiff; and
(c) That the plaintiff’s business, reputation or goodwill has suffered or is likely to suffer damage as a result of the erroneous belief engineered by the defendants’ misrepresentation.
[8] Courts will not readily assume confusion resulting from incorporation of descriptive words in the trade names employed by competitors.3 If the descriptive words, however, be proven to acquired a secondary meaning or reputation identifying that name with the plaintiff’s services or product, the descriptive words can thereby be the foundation of a tort of passing off. The principle underlying the
tort of passing off is prohibiting a defendant to use or confuse the name of another
2 Reckitt & Colman Products Limited v Borden Incorporated [1990] All ER 873 at 880.
3 Office Cleaning Services Limited v Westminster Window and General Cleaners Limited (1946)
63 RPC 39 at 42.
competitor in order to obtain the benefit of the plaintiff competitor’s goodwill
identified in the market by trading with that name.
[9] So, the first issue resolves, in this context, to this: is there a serious case that the name “NZ Tax Refunds” has become distinctive of the plaintiff in the market so that it has acquired a secondary meaning of identifying itself in the market with the services provided by the plaintiff?
Misleading conduct in trade
[10] Section 9 of the Fair Trading Act (FTA) provides:
9 Misleading and deceptive conduct generally
No person shall, in trade, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
[11] Section 11 of the FTA provides:
11 Misleading conduct in relation to services
No person shall, in trade, engage in conduct that is liable to mislead the public as to the nature, characteristics, suitability for a purpose, or quantity of services.
[12] Section 13 of the FTA provides:
13 False or misleading representations
No person shall, in trade, in connection with the supply or possible supply of goods or services or with the promotion by any means of the supply or use of goods or services,—
(a) make a false or misleading representation that goods are of a particular kind, standard, quality, grade, quantity, composition, style, or model, or have had a particular history or particular previous use; or
(b) make a false or misleading representation that services are of a particular kind, standard, quality, or quantity, or that they are supplied by any particular person or by any person of a particular trade, qualification, or skill; or
(c) make a false or misleading representation that a particular person has agreed to acquire goods or services; or
(d) make a false or misleading representation that goods are new, or that they are reconditioned, or that they were manufactured, produced, processed, or reconditioned at a particular time; or
(e) make a false or misleading representation that goods or services have any sponsorship, approval, endorsement, performance characteristics, accessories, uses, or benefits; or
(f) make a false or misleading representation that a person has any sponsorship, approval, endorsement, or affiliation; or
(g) make a false or misleading representation with respect to the price of any goods or services; or
(h) make a false or misleading representation concerning the need for any goods or services; or
(i) make a false or misleading representation concerning the existence, exclusion, or effect of any condition, warranty, guarantee, right, or remedy; or
(j) make a false or misleading representation concerning the place of origin of goods.
[13] Section 41(1)(e) provides:
41 Injunctions may be granted by Court for contravention of Part
1, Part 2, Part 3, and Part 4
(1) ...
(e) Being in any way directly or indirectly, knowingly concerned in, or party to, the contravention by any other person of such a provision:
...
[14] The core concept in the FTA is that of “mislead” or “misleading”. The same concept underpins the tort of passing off. Formulated in FTA terms the issue becomes “does the use of Tax Refund NZ mislead persons in the market who are intending to do business with the plaintiff?” I think the trial issue reduces down to the same issue of fact set out above which underpins whether or not there is a serious case for a tort of passing off.
[15] In both cases where a plaintiff is unable to show confusion in the marketplace, such that consumers think that they are dealing with the plaintiff when
they are in fact dealing with the defendants, then the defendants’ conduct cannot be said to be passing off, nor can it be said to be misleading.
Relevant market characteristics
[16] To address the trial issue it is necessary to understand the competition in the market. Both the plaintiff and the defendants are supplying the service of obtaining tax refunds for their clients. The service is provided to salaried and self-employed persons.
[17] Both the parties in this case entered the market in 2008. The defendant used the brand My Refund and operated by leasing booths in shopping malls . From these booths employees or agents of the defendants would take details of a client’s income and expenses, obtain the client’s approval to act as agent, forward on the information to the Inland Revenue and obtain, where it was available, the refund, and arrange for payment to the client. The defendant’s entry was not wholly online. It initially had the largest market share.
[18] The plaintiff also entered the market in 2008. But, unlike the defendants, it did so from the start as an online service. It is likely that this gave them, to a degree, a first mover advantage. This is because as the market generally matured with suppliers offering totally online services the defendants had to exit from lease commitments in shopping malls.
[19] From 2009 it seems that the market matured into a number of providers all providing an online service. Taxpayers who think they might be entitled to a tax refund can, at the end of their financial year, provide online their relevant details and information to the service provider and, critically, appoint the service provider as their tax agent. The service provider as a tax agent then has electronic interconnection with the IRD data and is able to not only ascertain whether or not there is a tax refund but to access that fund and pay it to its customer less commission/fees. Taxpayers only apply for tax refunds once a year and usually in the months after 31 March, the end of the tax year for most people.
[20] As is frequently the case with markets as they mature, it is difficult to differentiate the services or products being offered to the customers.
[21] There is no clear evidence as to the number of service providers of the service in the New Zealand market. This is because of a paucity of information.
[22] The plaintiff argues that it has the largest market share. It estimates it holds
33% of the market.
[23] The plaintiff’s estimate of current market shares is as follows:
(a) NZ Tax Refunds (the plaintiff) 210,000 clients; (b) TaxRefunds.co.nz 120,000 clients;
(c) MyTax.co.nz 100,000 clients; and
(d) Others, including the defendant, 195,000 clients.
The plaintiff’s evidence was that since June 2012 NZ Tax Refunds customers have increased to 267,000.
[24] Obviously this is a market with low entry barriers, by the number of similar domain names. A number of firms appear to have more than one potential name and/or are firms that have not yet tried to enter the market or have tried in the past. The defendants provided the Court with a list of 24 websites in New Zealand (not including their own) which use the term “tax refund” or something similar and the evidence is 15 of those are “live”. A number of firms, including the parties in this case, have more than one website.
1. The defendant operates Its brands at present are My Refund and Tax Refund NZ. The services themselves are provided by My Refund through its related company My Accountant.
[26] The following are other registered tax refund websites owned by the defendants:
On the above list of 24 websites, item 3 is the plaintiff’s website, although the plaintiff describes it as The plaintiff also operates another website, The descriptive names of all these websites and their similarities is striking. There must be an obvious reason for that, and there is. It reflects a belief that having a reference to tax refund and NZ in one’s trade name greatly assists the likelihood of the search engines listing your service on the first page.
[29] Whether this is a rational belief was one of the matters argued. The search machine most prominent in New Zealand is Google. Counsel agreed that no one quite knows how Google selects sites for presentation following the entering in of key words. It seemed to be agreed by counsel that the exercise is a lot more sophisticated than simply having a site name similar to the key words.
[30] Designers of sites have in the past, and may still do, insert into the data embedded in the website meta tabs, key words likely to attract the attention of the search machines.
[31] Mr Kennedy, for the plaintiff, argued that it is not necessary for the defendants to use a name very similar to the plaintiff in order to compete. He implied that it is rather old fashioned to suggest that it is necessary to have the key words in the domain name.
[32] That may be so, but at the present time, on the evidence before the Court, it is abundantly plain that every competitor in the market tries somehow to introduce the words “tax” and “refund” into the domain name. And I note that this is not a domain name dispute, with the possible exception of nz-taxrefund.co.nz. That name is no longer being used by the defendants, since the dispute arose.
[33] There is a related dispute as to the utility of meta tags embedded in websites. It is the defendants’ case that when the My Refund website was built in 2008 the following meta tags were included in the website at that date:
New Zealand Tax Refunds, New Zealand Tax Refund, tax, tax refund, tax refunds, process tax, nz tax refunds, inland revenue, salary, wage, registered tax agents, tax agents, my refund, registered tax agent, tax agent, new zealand, tax returns, tax return services, tax return, process income tax refunds, New Zealand Tax Return Services.
[34] At the time the plaintiff, NZ Tax Refunds’, website was built it contained the
following meta tags:
nz tax refunds, New Zealand Tax Refunds, New Zealand Tax Refund, tax, tax refund, tax refunds, process tax, inland revenue, salary, wage, registered tax agents, tax agents, my refund, registered tax agent, tax agent, new zealand, tax returns, tax return services, tax return, process income tax refunds, New Zealand Tax Return Services.
[35] No doubt in response to the need to differentiate itself from its rivals, the plaintiff has sought to innovate and be more distinctive. This is principally in two ways. It provides a very quick (60 second) response as to whether or not there will be a refund. Secondly, in addition to its trade name of NZ Tax Refunds it brands itself as “Woo Hoo”. The additional branding appears both on radio ads and on its website. The plaintiff has invested more than $3.5m in advertising, marketing and promoting itself, particularly by the use of radio.
Proof by plaintiff of the distinctiveness of its name, NZ Tax Refunds
Relevant case law
[36] The plaintiff ’s counsel rely on four cases in which Courts have held that descriptive names have nonetheless acquired a secondary meaning or reputation attributable to the plaintiff and therefore capable of protection. I agree that these cases illuminate the question to be decided. That said, they also have distinguishing features.
(a) National Timber Co Ltd v National Hardware, Timber, and
Machinery Co Ltd4
4 National Timber Co Ltd v National Hardware, Timber, and Machinery Co Ltd [1923] NZLR
(i) The plaintiff was a timber company set up in 1920, the defendant was set up in 1921. The plaintiff applied for an injunction restraining the defendant from continuing to carry on business given the close resemblance of its name to the plaintiff’s.
(ii) The Court considered that:5
... the question to be determined is: Are the names of the companies so much alike that persons who under ordinary circumstances would be customers of such companies for the commodities in which they deal are likely to be deceived into dealing with the new company in mistake for the old, to the detriment of the latter?
(iii) The Court held that although the plaintiff had no monopoly in “National” or “Timber”, it could claim exclusive rights to the combination of “National” and “Timber”. It therefore answered the above question in the affirmative and granted the injunction.
(b) New Zealand Insurance Co Ltd v New Zealand Insurance Brokers
Ltd6
(i) The plaintiff had existed for 100 years. When the defendant changed its name to “New Zealand Insurance Brokers”, the plaintiff opposed the change. The parties operated in different business areas (as insurer and insurance broker) but within the same industry.
(ii) The Court held that “New Zealand Insurance” had acquired a secondary meaning in trade.
(iii) In granting the injunction, the Court distinguished Office Cleaning and was guided by National Timber and the judgment of Lord Denning MR in Legal and General Assurance Society Ltd v Daniel.7
It seems to me that, although these words ‘Legal and General’ are descriptive words, nevertheless they have acquired such a connotation, such a significance in business and elsewhere, that they have become especially associated with the plaintiff company. The words are very different from the words ‘office cleaning’ which were considered in the House of Lords in Office Cleaning Services Ltd v Westminster Window and General Cleaners Ltd... Those words ‘office cleaning’ were very common, ordinary descriptive words. These words ‘Legal & General’ are less common, less descriptive, more specialised, and rarely used in combination except by the plaintiffs.
5 At 1270.
(iv) The Court held that exclusive rights could be claimed in a combination of descriptive words, in this case “New Zealand” and “Insurance”. The addition of the word “brokers” was insufficient to differentiate the defendant’s name.
(c) Shotover Gorge Jetboat Ltd v Marine Enterprises Ltd8
(i) The plaintiff had been the sole operator of a tourist jet boat on the Shotover River using the name “Shotover Jet” for 8 years and the only operator on that part of the river which had publicised jet boat rides for 13 years. The defendant set up in competition using the name “Lower Shotover Jet”. The plaintiff brought an action in passing off against the defendant, seeking an interim injunction to restrain the defendant from using the name “Lower Shotover Jet”.
(ii) It was held that there was a serious question to be tried on the basis that:9
...assuming the plaintiff can establish that it has goodwill in the name of Shotover Jet, then:
(a) it may be difficult for the plaintiff to show that the words have a secondary meaning that identifies them with an operation conducted by the plaintiff alone; but
(b) although those words in their ordinary meaning may be merely descriptive, there is a strong argument that the plaintiff would be entitled to protection against a competitor which sought to operate under those words alone; and
(c) the addition of the word “Lower”, even if displayed more prominently, is likely to be insufficient to prevent confusion, when there is considered first the likelihood of abbreviation; and secondly the absence of any definition of “Lower Shotover”, so that the use of the adjective on boats operating above Tucker Beach may well create its own confusion.”
(d) Airport Rentals Ltd v Airport Car Rentals (Southern) Ltd10
(i) The plaintiff sought an interim injunction preventing the defendant from using its proposed name on the basis of a breach of s 9 of the Fair Trading Act 1986 and the tort of passing off.
(ii) It was held that:11
8 Shotover Gorge Jetboat Ltd v Marine Enterprises Ltd [1984] 2 NZLR 154
9 At 160.
10 Airport Rentals Ltd v Airport Car Rentals (Southern) Ltd (1995) 6 TCLR 664.
11 At 669.
Although the names are semantically different... an ordinary person interested in hiring a rental car is unlikely to think like a lawyer. Some looseness of thought and speech must be likely to occur. It is in my view really self-evident that the two names are materially so similar that the potential for confusion and people being misled is considerable.
(iii) Tipping J granted the interim injunction on the basis that there had been a breach of s 9 of the Fair Trading Act 1986, namely that use of the name would mislead or deceive consumers who had been used to dealing with the complainant under its name for over seven years. The distinctiveness was based on the reputation that the plaintiff had accumulated over years of trading in Christchurch.
[37] These cases reinforce the authority of Office Cleaning Services that a descriptive name can acquire a secondary meaning. But the market settings in each of these cases is different, and particularly different from the present case.
[38] I do not consider that the brand name National Timber is particularly descriptive. As I read the decision of the Court of Appeal, this was not a decision decided on the basis of a descriptive name. Reed J usefully, and relevantly to this case, framed the question this way: 12
Are the names of the companies so much alike that persons who under ordinary circumstances would be customers of such companies for the commodities in which they deal are likely to be deceived into dealing with the new company in mistake for the old, to the detriment of the latter? In considering this question, it is material to ascertain:
(i) Whether the two companies are dealing, inter alia, in the same commodity.
(ii) Have mistakes already been made? It is not essential there should be evidence of this fact, but where it exists “it would be very material in assisting the Court in coming to the conclusion that the” [name] “complained of was calculated to deceive”: per Farwell J in Bourne v Swan & Edger Ltd13
(iii) The nature of the business carried on by the two companies, and the probability, on account of that nature, of persons doing business with them making mistakes as to their identity.
12 National Timber Co Ltd v National Hardware, Timber, and Machinery Co Ltd, op cit, at 1270 and 1271.
[39] I also note that in cases where it is plain that the words used by the defendants were calculated to deceive, it is not necessary to prove a secondary meaning. This point is made by Hardie Boys J in Shotover Gorge Jet Boats Ltd.14
However, it appears that it is not essential to prove a secondary meaning in this sense before a descriptive name will be protected. In the Office Cleaning Services case (pp 41-42) Lord Simonds was at pains to emphasise that the essential question was not whether the plaintiff’s name had acquired a secondary meaning, but whether the words used by the defendant were calculated to deceive.
[40] The Shotover Jet is also not, strictly speaking, a descriptive name case. The two competing companies were Shotover Jet and Lower Shotover Jet. Lower Shotover Jet used to ply the Lower Shotover River, and Shotover Jet the upper reaches. It was when there was a change in the regulations which allowed the Shotover Jet to utilise the whole of the Shotover River that the potential confusion occurred.
[41] Of the cases relied upon by the plaintiff, the material facts closest to this case are in the Airport Rentals decision. The plaintiff had begun operating in the South Island in 1988. The defendant did not begin operating until four years later in 1992. Tipping J held that the plaintiff had established its identity in the rental car market in Christchurch before Airport Car Rentals (Southern) Ltd entered the market.
[42] In two passages I find useful, Tipping J said:15
As I said in the introduction to this judgment, words which are purely descriptive are less likely to be susceptible of protection than words which are distinctive. There is, however, no absolute embargo on descriptive words being afforded some measure of protection. The point can be made by assuming for the moment the plaintiff was seeking protection for a name comprising only the words “car rentals” or to put it at a more extreme level simply the word “rentals”. Obviously those examples would be a very fragile basis for any claim to protection. The word “airport” when added to the word “rentals” is a step towards greater distinctiveness.
The more is this so if there is evidence demonstrating that the trading name as a whole is associated in the particular location with a particular business. There is in the present application no direct evidence of this, but it is a
14 Shotover Gorge Jet Boats Ltd v Marine Enterprises Ltd, op cit, at 159.
15 Airport Rentals Ltd v Airport Car Rentals (Southern) Ltd, op cit, at 667.
reasonable prima facie inference, which may or may not be confirmed after further enquiry, that the name Airport Rentals Ltd has become known in the car rental market in Christchurch as descriptive for the plaintiff’s business. To that extent the name may be regarded as distinctive.
[43] Airport Rentals was a case where the Court ultimately relied on a course of action under the Fair Trading Act. Tipping J said:16
It is my view, having considered the evidence as a whole and counsels’ submissions, that there remains a very real risk of confusion to the point where it can be said, and I hold, that the plaintiff has a fairly arguable case that the defendant’s conduct in adopting its present name amounts to a breach of s 9 of the Fair Trading Act 1986. It is not therefore necessary for me to discuss the passing-off course of action in detail. It is sufficient to say that I am of the view that the plaintiff has shown an arguable case for passing-off as well.
[44] On the question of balance of convenience some other remarks of Tipping J
are useful as well.17
The status quo, for present purposes, is that which prevailed prior to the beginning of June of this year when the plaintiff was the only company trading in Christchurch under a name bearing any similarity to the names in issue. In cases such as the present the Court normally favours a retention of the status quo once an arguable case has been demonstrated. That is not an invariable rule but, if the defendant has come into the market deliberately and with knowledge of the plaintiff’s operation, it seems to me that the plaintiff has a good start for maintaining the status quo once it shows an arguable case to stop the conduct complained of.
...
I do not overlook the fact that in the course of having to change its name, at least in the interim, the defendant may lose some business. That will not be so easy of assessment. However, the defendant must have known that it was sailing very close to the wind, if not worse, when deciding to start up in business under its present name.
Evidence of distinctiveness
[45] Since the plaintiff ’s business was launched in March 2008, it has grown into a business employing more than 30 people, including separate teams for processing and handling IR3 forms, with a dedicated marketing manager, chief technology
officer, student community manager and trust account manager.
16 At 669.
17 At 669-670.
[46] At the time it commenced business Ms Hegarty, its principal, was aware of one other provider of similar services called “Simple As Refunds” which largely conducted business by face to face contact with potential clients at shopping malls in Auckland. It did not offer an online service. Ms Hegarty says that it was the plaintiff which pioneered the concept of providing an online tax refund service in New Zealand.
[47] As already summarised the plaintiff has sought to differentiate itself by offering innovative new services to clients. Its ‘Alpha’ software enables it, within 60 seconds of receiving a completed application, to advise the applicant whether they are entitled to a tax refund in respect of any of the preceding five tax years. It has also introduced a promise to turn around the payment of refunds to clients within three business days of the application being submitted, except in respect of refunds for the just completed financial year. Other competitors promote a five to seven day service, while others do not make any promise, says Ms Hegarty, as to the timeframe for repayment of funds. The plaintiff was the first provider to introduce a third party identity verification process.
[48] Unlike, it would appear, most of its competitors, the plaintiff advertises through television, internet streamed television, radio, print media, online social media and email.
[49] On 1 April 2012 it started promoting the “Woo Hoo” brand in order to better distinguish itself from its competitors. It continues to operate from the URL but when its site is opened the “Woo Hoo” brand is prominent. “Woo Hoo” is used on billboards, and in radio spots.
[50] With two other online tax refund providers, MyTax.co.nz Limited and TaxRefunds.co.nz Limited, it has established the Online Tax Association of New Zealand Incorporated (OTANZ). OTANZ is an incorporated society to encourage higher standards in the personal tax refund industry in New Zealand and to liaise with the IRD on current and future policies relating to that industry.
[51] As already summarised, the defendant, My Refund Ltd, also started in 2008 but was not fully online. It secured kiosks in all the major shopping mall outlets. Each of the kiosks was staffed by a customer representative with a computer. The client provided the representative with information, that information was inputted into a computer system running proprietary software at the point of contact with the client. That computer system was in turn linked with the IRD online services. The information provided by the client was manually transferred from the proprietary software to the IRD online services. Office staff would make contact with the Inland Revenue by telephone. The refund application would be processed by telephone. The refund would be then sent by the Inland Revenue Department to My Refund who would then account for that to the client less their fees/commission.
[52] Mr Brooks for the defendant says a number of other tax refund business converted to online services shortly afterwards and true online services did away with the need to have representatives in kiosks. He agrees that the plaintiff is likely to be the firm who launched the full online service first. During the time that it was operating out of kiosks My Refund also undertook advertising through other media, newspapers and radio and direct marketing to the universities.
[53] There was no direct proof the plaintiff’s name has become identified with its business in the minds of the consumers. There was no evidence of how much repeat business the plaintiff gets. There was no evidence as to whether or not the plaintiff seeks permission to re-contact clients the next financial year to ask whether they want to apply again for a refund. I presume on the probabilities, however, that they do. There is no evidence of confusion.
[54] I assume, on the probabilities, that the current build up in the plaintiff’s business from a list of clients of 210,000 to almost 270,000, over a transition from one financial year to another, indicates that the plaintiff is keeping most of its clients and building new clients. This is what one would expect from a company that provides a good service. The fact that it is retaining custom does not necessarily mean, however, that its name has become distinctive. Its existing customers may just be retrieving the email address previously used, from their own computer’s memory, rather than searching again for a provider on the internet. I keep in mind
that a taxpayer seeks only one tax refund per annum. Let us also assume in favour of the plaintiff that it does not have a system of reminding existing clients of the opportunity to provide for a new refund.
[55] There is a potential for confusion. But that is not just with the defendants’ business, Tax Refund NZ, but with at least one other provider using the domain also known as TaxRefunds.co.nz. I referred to this competitor earlier. It is a member of OTANZ. And, according to the plaintiff, has
120,000 clients.
[56] Essentially, the argument in support of the plaintiff’s name becoming distinctive is because of its contended 33% market share.
[57] Its argument for a source of confusion is much stronger in respect of the defendants’ other domain name, That name is virtually identical with the plaintiff’s, In conclusion I think that it is too early to say whether or not there is a seriously arguable case that the plaintiff ’s name has become distinctive. The plaintiff’s case is not as strong as the plaintiff in Airport Rentals. The plaintiff may, however, at trial, be able to show that customers have been misled. Discovery may show loss of some customers to the defendants and subsequent interviewing of those customers may disclose that they became confused - that they thought they were dealing with the same company from whom they had, in a previous year, obtained a tax refund.
Balance of convenience
[59] Internet businesses are notoriously fast moving. That said, the competitive behaviour described in this judgment fits into a familiar business experience whereby established competitors seek to differentiate common products and services in order to hold and grow their market share. The plaintiff is doing this by being innovative, by endeavouring to improve its efficiency, and by adding the brand “Woo Hoo”.
[60] The defendants have responded to this dispute by ceasing to use The status quo is one where the plaintiff has the largest share in a competitive market, and appears to be a growing its market share.
[62] The plaintiff remains concerned that the brand name NZ-Tax-Refund might be reactivated but for this litigation.
[63] It is one thing for all the competitors to endeavour to use the word TAX or tax and REFUND or refund in both branding and URLs. It is another to adopt precisely the same combination. There is a serious argument that using NZ-Tax Refund was a deliberate act to pass off the defendants as the plaintiff, and to mislead in trade. The dictum of Tipping J in Airport Rentals, cited above, may apply.
[64] I am satisfied that it is appropriate that there be an interim order in favour of the plaintiffs restraining the defendants from using the name NZ-Tax Refund, and its domain name, The defendants can plainly carry on in business without the name NZ-Tax-Refund for it has only briefly, if at all, been used as a trade name.
[65] It is another question, however, as to whether the defendants should be stopped using the name Tax Refund NZ and This would be a significant immediate impairment of its business, and not necessarily to the immediate advantage of the plaintiff, given the other very similar names in use.
[66] I do not think it is in the overall justice of the case, as it has progressed so far, for this Court to injunct, even on an interim basis, the continued use of Tax Refund NZ and That would very likely force the defendants into a new brand name which does not use the words “tax” or “refund”. The plaintiff is not challenging Tax Refunds.co.nz. On the evidence, so far, this company has the second highest market share with 120,000 clients.
Conclusion
1.The defendants are enjoined from using the brand name NZ-Tax Refund and its domain name, or until further order of this Court.
2. In all other respects this application by the plaintiff for interim relief is dismissed.
3. Costs are reserved.
[67] If the parties wish to pursue the question of costs I will receive a synopsis of submissions by each party, circulated in draft between the parties before filing, and limited to five pages.
Solicitors:
Minter Ellison Rudd Watts, Auckland , [email protected]
Fletcher Vautier Moore, Nelson, [email protected]
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