Conagra Inc v McCain Foods (Aust) Pty Ltd

[1992] FCA 176
(1992) 33 FCR 302
(1992) 106 ALR 465
(1992) 23 IPR 193
(1992) AIPC 90-892

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(Judgment by: Gummow J)

Conagra Inc
vMcCain Foods (Aust) Pty Ltd

Court:

Judges: Lockhart J

Gummow JFrench J

Judgment date: 14 April 1992

Sydney

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Judgment by:
Gummow J

would dismiss the appeal and cross-appeal. The appellant should pay the respondent's costs of the appeal and the respondent should pay the appellant's costs of the cross-appeal.

I turn first to the passing off issues.

The facts upon which the appeal turns have been dealt with by Lockhart J and I do not repeat them. I agree that the primary judge's finding that the appellant did not establish that there was a substantial number of persons in Australia (being members of the class of potential purchasers of frozen food dinners) who were aware of the appellant's product, was not shaken on the appeal. The appellant complained of the way in which his Honour approached the question of reputation. Counsel contended that Hill J treated the appellant's "separate" claims of reputation in the name "Healthy Choice" and in the get-up as both depending upon the creation of a secondary meaning for the phrase "Healthy Choice". But Hill J dealt with reputation after he had decided that the respondent's packages (despite the prominent use of the name "McCain") suggested to a purchaser who was familiar with the appellant's product that there was a relationship of some kind between the appellant and the respondent or their respective products: see 101 ALR 461 at 482. His Honour reached that conclusion (with which I would agree) from the total impression conveyed by the two packages, taking the get-up and use of phrases (including "Healthy Choice") as a composite. Against that background, I cannot see any error in the approach then taken to the question of reputation.

It will be recalled that the "national launch" of the appellant's product in the United States occurred in January 1989 and that the present proceeding, essentially brought quia timet, was instituted 16 months later, in April 1991.

Putting to one side the necessity for a local trading goodwill, this is not a case of reliance upon a famous name or mark which over a substantial period has become well known in the forum. This was the position with "Selfridges" (Selfridges Ltd v Selfridges (Australasia) Ltd , Harvey CJ in Eq, Sydney Morning Herald, 6 April 1933); "General Motors" (Turner v General Motors (Australia) Pty Ltd (1929) 42 CLR 352 at 363 ) and "C & A" (C & A Modes v C & A (Waterford) Ltd [1978] FSR 126 at 137 ).

In cases where the courts have moved (whether on an interlocutory or final basis) to protect the potential exploitation, by the conduct of local trading, of an existing reputation in the forum, the plaintiff still has been required to make out (at the appropriate level for interlocutory or final relief) its case for the existence of that reputation. Examples are Sheraton Corp of America v Sheraton Motels Ltd [1964] RPC 202 at 203 ; Globelegance BV v Sarkissian [1974] RPC 603 at 612 ; Metric Resources Corp v Leasemetrix Ltd [1979] FSR 571 at 579 ; Home Box Office Inc v Channel 5 Home Box Office Ltd [1982] FSR 449 at 456 ; Esanda Ltd v Esanda Finance Ltd [1984] 2 NZLR 748 at 752-3 ; (1983) 2 IPR 182 and Orkin Exterminating Co Inc v Pestco Co of Canada Ltd (1985) 19 DLR 4th 90 at 93-4 . All of these judgments, save the last, were delivered upon applications for interlocutory relief; see also BM Auto Sales Pty Ltd v Budget Rent a Car System Pty Ltd (1976) 12 ALR 363 ; 51 ALJR 254 at 258 . Some caution is needed against treating findings as to reputation at the interlocutory level as if they were findings as to what would suffice to establish reputation at a trial.

Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd [1981] 1 NSWLR 196 , where a mandatory interlocutory injunction was granted requiring a change of company name, may be thought to be a case near the line. The plaintiff had been incorporated in New Zealand on 10 November 1980 and the defendant was incorporated in New South Wales on 15 December 1980. Nevertheless, in considering that decision, it is important to bear in mind the following passage, supra, at 198:

The incorporation of the plaintiff was an integral step in a then pending scheme for the amalgamation of three companies, Challenge Corporation Ltd, Fletcher Holdings Ltd and Tasman Pulp and Paper Co Ltd, each of which appears to have been a public company of some long standing and of significant commercial stature in New Zealand. The evidence thus far presented suggests that, in addition to being the holding company for one or more subsidiaries, each of the three companies was itself a trading company. Further, the evidence thus far presented suggests that some at least, of the three companies and their respective subsidiaries were registered as foreign companies, traded, and were well known, in Australia, not only to persons concerned with the goods or services which they provided but, as well to persons in what might be called 'the finance industry' and in 'the securities industry'.

...

It should be added that the evidence thus far tendered suggests that a number of substantial insurance companies and other financial institutions incorporated, registered and/or carrying on business in Australia and, as well, in New Zealand at all material times had significant shareholdings in the capital of one or more of Challenge Corporation Ltd, Fletcher Holdings Ltd and Tasman Pulp and Paper Ltd.

The failure of the appellant's case as to reputation spells doom for the appellant, whatever the position as to fraud. I agree that in a case such as the present a failure to establish a reputation in the forum cannot be overcome by proof of fraud on the part of the defendant. The role of fraud in the modern passing off action was debated before us and it is a topic to which I return later in these reasons. Another issue of law which arose on the appeal was the significance attached to the absence of local trade in the appellant's product.

Notwithstanding the failure of the appeal on the facts, the court should express its conclusions upon these important issues in the law of passing off, there being no binding Australian appellate authority.

Passing off

Within the passing off action, there is an accommodation and adjustment of three competing interests. First that of the plaintiff in protecting the commercial advantages flowing from his efforts and investment, secondly that of the defendant in being free to attract purchasers for his goods and services by what appears to him to be an effective means, and thirdly that of consumers in selecting between competing goods and services without the practice upon them of misrepresentations.

Attempts to produce a definition of the tort which is both succinct and comprehensive have had mixed success. In Erven Warnink Besloten Vennootschap v J Townend & Sons (Hull) Ltd [1979] AC 731 at 742 , Lord Diplock identified five essential characteristics of a passing off action, and Lord Fraser of Tullybelton [1979] AC 731 at 755-6, also identified, but in somewhat different terms, five such characteristics. There followed in the English Court of Appeal differences of opinion as to whether these two sets of criteria were distinct, overlapping, or cumulative and whether, in any event, either was comprehensive: Anheuser-Busch Inc v Budejovicky Budvar NP (1984) 4 IPR 260 ; [1984] FSR 413 at 463, 472 ; Bristol Conservatories Ltd v Conservatories Custom Built Ltd [1989] RPC 455 at 465-7 ; Morcom "Developments In the Law of Passing-Off" [1991] 10 EIPR 380 at 382. As Ralph Gibson LJ pointed out in the second of these cases (supra, at 466) the probanda formulated by Lord Diplock and Lord Fraser would not, for example, allow for cases of "reverse" passing off.

In Reckitt & Colman Products Ltd v Borden Inc (1990) 17 IPR 1 ; [1990] RPC 341 at 406 , Lord Oliver of Aylmerton formulated the essential elements in a passing off action without referring specifically to earlier authority. Now, Nourse LJ (in Consorzio del Prosciutto di Parma v Marks & Spencer plc [1991] RPC 351 at 368-9 ) has said that the formulations by Lord Diplock and Lord Fraser had not in his experience given the same degree of assistance in analysis and decision as "the classical trinity" of (1) reputation (2) misrepresentation and (3) damage. Nourse LJ regards what was said in the Borden case as signalling a "welcome return to the classical approach".

It is neither necessary nor appropriate for us to comment upon these vicissitudes of the recent English case law. But it is to be observed that the law of passing off contains sufficient nooks and crannies to make it difficult to formulate any satisfactory definition in short form. However, "the classical trinity" does serve to emphasise three core concepts in this area of the law. This appeal is concerned with all of them, namely, the geographical requirements for a sufficient reputation, the nature of the interests damaged, and the significance of fraud in the making of the misrepresentation.

Over 60 years ago, in dealing with the development of the action for passing off, Isaacs ACJ said that the courts had "constantly endeavoured to keep pace with the progress of trade by adapting fundamental doctrines to advancing methods and changing circumstances": Angelides v James Stedman Hendersons Sweets Ltd (1927) 40 CLR 43 at 59-60 . On the present appeal, counsel for the appellant urged us to continue that process. Counsel for the respondent urged us to bear in mind the existence in Australia of statutory causes of action now provided by Pt V of the Trade Practices Act 1974 (Cth) and the need in developing the common law to avoid the indulgence of idiosynscratic notions of what is fair in the market place; cf Moorgate Tobacco Co Ltd v Philip Morris Ltd (No 2) (1984) 156 CLR 414 at 445-6 ; 56 ALR 193 ; 3 IPR 545 .

The primary judge said (101 ALR at 474-5) that whilst the issue was one that could be resolved only by an appellate court, his view was that the time had come to recognise that, although the tort of passing off is based on the existence of a business or trade, it does not matter whether that trade or business is in fact itself carried on in the jurisdiction, provided that there is in respect of it a reputation which does exist in the jurisdiction. Counsel for the appellant submitted that we should adopt that position; counsel for the respondent submitted to do so would be to fall into error.

His Honour also discussed (at 476-7) the present relevance of fraud for the action of passing off. He held that the respondent had adopted the name "Healthy Choice" having regard to the success of the marketing by the appellant of its "Healthy Choice" product in the United States, and that the respondent had embarked upon a course of deliberately appropriating the name used by the appellant and aspects of the packaging of its goods, in such a way as, in Australia, could cause confusion between the two products or cause consumers to believe that the respondent's product was in some way connected with the product of the appellant. However, the primary judge also said (at ALR 476) that there was no modern formulation of the law of passing off which distinguished between cases involving fraud, and cases which do not, other than to indicate that proof of fraud makes the plaintiff's case easier "in an evidentiary sense"; it will be apparent from what later appears in this judgment that I do not share that view.

The trial was conducted in New South Wales and the applicable law as to passing off is that of this State: Judiciary Act 1903 (Cth) s 79. But there is no suggestion that the law is otherwise than uniform throughout Australia.

I turn first to consider fraud.

The meaning of fraud

Commentators have pointed to common historical antecedents of the action for passing off and the tort of deceit; see, in particular, Professor Morison's article "Unfair Competition and 'Passing Off' " (1956) 2 Syd L Rev 50 at 53-4. Upon this too great a significance should not be placed. The point was made by Lord Parker of Waddington in A G Spalding & Bros v A W Gamage Ltd (1915) 32 RPC 273 at 283-4 , where his Lordship said: "The plaintiff's remedy was said to have been in the nature of an action for deceit, but it only resembled the action for deceit in the fact that the misrepresentation relied on must have been fraudulently made. In all other respects it differed from an action for deceit. For example, the plaintiff was not the party deceived, and even if it were necessary to prove that someone had been deceived, nominal damage could be obtained though no actual damage was proved. Thus in Blofield v Payne (1833) (4 B & Ad 410) the defendants had sold their own hones in the plaintiff's wrappers as and for the plaintiff's, but there was no evidence that any purchasers had been actually deceived. Further, though special damage was alleged in the declaration, no actual damage was proved. On motion for a non-suit it was held in the King's Bench that the plaintiff was entitled to nominal damages."

But affinity to the action for deceit does serve to emphasise that the action for passing off protects the interests of customers as well as those of the plaintiff. As will appear, this is of some importance in dealing with the legal issues on this appeal. Further, there is continued significance in the connection between the presence of fraud on the part of the defendant and the range of remedies available to the plaintiff in a passing off action.

In Kettles and Gas Appliances Ltd v Anthony Hordern & Sons Ltd (1934) 35 SR (NSW) 108 at 129 , Long Innes J said: "There is, however, a clear distinction (see Angelides v James Stedman Hendersons Sweets (40 CLR 43 at 60, 61) between cases where the plaintiff has a legal right which is enforceable at his option either at law in an action of deceit or in Equity in an action for fraudulent passing off and cases of an innocent passing off, where the plaintiff's only remedy is equitable, and where in order to obtain any relief he must come into Equity and invoke the discretionary remedy, in which case he is subject to the Equity maxim that he who comes into equity must come with clean hands." How did this situation come about? In answering this question, it is necessary to examine various 19th century decisions. In so doing, it is important to bear in mind that the lawyers who argued and decided those cases may have done so upon common, but unstated, legal assumptions, some of which have fallen away in the course of subsequent development of the law.

In actions at common law under the old system of pleading, the plaintiff's declaration alleged that he was accustomed to mark goods manufactured by him with the trade mark in question in order to denote that manufacture and to distinguish his goods from articles of the same description manufactured by other persons; the plaintiff further alleged that he enjoyed a great reputation with the public on account of the good quality of those goods, and that the defendant had acted, in the manner complained of, knowing the premises and fraudulently, against the will and without the licence and consent of the plaintiff. An example of such a declaration may be found in the report of Sykes v Sykes (1824) 3 B & C 541 ; 107 ER 834 . The issue of fraudulent intention was, of course, for the jury upon which it rested to determine whether the intention so pleaded was proved upon the evidence before it; see the authorities collected in Sebastian, The Law of Trade Marks 3rd ed, 1890, pp 174-6.

In aid of his legal rights, the plaintiff might seek equitable relief, in particular, an injunction (interim or final) and an account of profits. The difficulty, particularly where interim relief was sought, was that a court of equity had no jurisdiction to usurp the function of the common law jury in determining whether the plaintiff had established the legal rights in aid of which equitable relief was sought. It was not until 1852 that the British parliament provided (15 & 16 Vic c 86, s 61) (Imp) that the Court of Chancery was to have full power to determine any questions of law which in the judgment of that court were necessary to be decided before the decision of the equitable question at issue between the parties. In 1862 the substance of that provision was repeated at greater length in Sir John Rolt's Act (25 & 26 Vic, c 42, s 1) 1902 (Imp).

The Chancery practice in the period before these reforms took hold appears from Croft v Day (1843) 7 Beav 84 ; 49 ER 994 ; Rodgers v Nowill (1847) 6 Hare 325 ; 67 ER 1191 ; and Farina v Silverlock (1856) 6 De GM & G 214 ; 43 ER 1214 . In the first of these cases, Lord Langdale MR had before him a motion to restrain what was alleged to be an intentional fraud by the defendant in selling his goods with labels which were colourable variations only of those labels appearing upon the goods of the plaintiff. The Master of the Rolls granted the injunction sought saying (7 Beav at 87; 49 ER at 996): "There are cases like that of the London Conveyance Company, in which the injunction is granted at once; there are cases like that of the Mexican Balm, in which the injunction is refused until the plaintiff has established his right at law. In short, in such cases, there must be a great variety of circumstances; and the court must deal with each case according to the nature of its particular circumstances."

On the other hand, in Rodgers v Nowill, supra , a question arose as to the existence and composition of a partnership involving the defendants and Wigram V-C held that the plaintiff's bill be retained in Chancery for a year, with liberty to the plaintiffs in the meantime to proceed at law touching the matters in question in the cause as they might be advised, and subject to such directions as might be given in Chancery as to the making of admissions so as to secure a fair trial of the questions at law. In the proceedings then brought at law, the declaration alleged, in the manner I have above described, that the defendants had acted knowingly and fraudulently. The cause was tried before a jury which found a verdict for the plaintiffs. The plaintiffs then returned to Chancery and obtained a final injunction.

In Farina v Silverlock, supra , Lord Cranworth LC allowed an appeal from a perpetual injunction granted by Page-Wood V-C at the suit of the originator of Eau-de-Cologne against a defendant selling a rival product with labels only colourably different from those on the genuine product. The Lord Chancellor held that the case was not "ripe" for decision in Chancery, and dissolved the injunction but with liberty to the plaintiff to bring within 12 months any action at law as he might be advised.

These cases illustrate the point made by Way CJ in Weingarten Bros v G & R Wills & Co [1906] SALR 34 at 54 , that in passing off Chancery had a jurisdiction which was ancillary to the common law action in deceit.

Further illustrations of this branch of the jurisdiction are provided by the litigation brought in England by the Collins Company of Connecticut, whose business consisted principally in the manufacture of tools used at the diggings in Australia, Cuba and California. Various episodes in the litigation are reported: Collins Company v Brown (1857) 3 K & J 423 ; 69 ER 1174 ; Collins Company v Cowen (1857) 3 K & J 428 ; 69 ER 1177 ; Collins Company v Reeves (1858) 28 LJ Ch (NS) 56 . The several English defendants were manufacturing articles in England to which they applied the trade marks of the plaintiff or those trade marks with colourable variations, for export into the plaintiff's foreign markets.

In the first two of these cases, no point was taken that there should first be a trial at law. However, it was submitted for the defendants that the persons defrauded were not the British public, "only a cosmopolitan public", and that "if foreign courts [do] not protect their own subjects, it [is] not for any court in this country to interfere": 3 K & J 428 at 429; 69 ER at 1177. To that submission, Page Wood V-C responded (3 K & J 431; 69 ER at 1178: "The question is whether these defendants have acquired a right to do that which the bill charges they are doing - a right to put the names and address of the plaintiffs, and the trade mark of the plaintiffs, on their goods, for the purpose of selling them as being the work and manufacture of the plaintiffs. That is the fraud that has been perpetrated; and it is a fraud which, I apprehend, every civilised community will arrest at the fountain head, wherever it finds it commenced and about to be perpetrated."

In the third of these cases, a decision of Stuart V-C, an interim injunction was granted and an order made that the injunction continue until further order provided that the bill would stand dismissed if the plaintiffs had not proceeded within 12 months to trial of their right at law. The Vice-Chancellor is reported as having said of the plaintiffs, supra at 60: "Though they were aliens, they were entitled to sue in this court against any fraudulent invasion of their right, and that notwithstanding the tools stamped with the marks, the fraudulent use of which was complained of, were not usually sold by them in this country. Wood V-C had so decided in The Collins Company v Brown ."

In La Société Anonyme des Anciens Établissements Panhard et Levassor v Panhard Levassor Motor Company Ltd [1901] 2 Ch 513 , the company and the seven shareholders, as Farwell J put it, arguendo, either meant "to steal the plaintiffs' business or to prevent them having any in England". And his Lordship said, "they are wrong on either alternative". The plaintiffs were a well known firm of motor car manufacturers in Paris whose reputation had extended to England for several years; they did not sell directly in England, but their cars were bought and imported into that country by private individuals. In giving judgment, Farwell J said, supra at 516: "The question of the plaintiffs' right to an injunction is covered by Collins Co v Brown 3 K & J 423 ; but, apart from that authority, I should have thought it was plain that in a case such as I have stated this court would certainly interfere to protect a foreign trader who has a market in England, in the way I have specified, from having the benefit of his name annexed by a trader in England who assumes that name without any sort of justification." In the same vein are the observations by Isaacs J in Turner v General Motors (Australia) Pty Ltd (1929) 42 CLR 352 at 364- 5 as to the protection to be given by the court to a plaintiff, with an undoubted intention to commence business in the jurisdiction, against the injury which a defendant is preparing by digging a commercial pit in advance. See also Olin Chemicals Pty Ltd v Pace Chemical & Swimming Pool Equipment Pty Ltd (SC(NSW), Needham J, 22 December 1978, unreported) pp 10- 12.

There is a strong line of cases in which the plaintiff, whilst not a foreigner in the sense of the earlier authorities and whilst conducting manufacturing operations in the forum, sold for export to other countries and did not sell into the domestic market. The result was that the reputation enjoyed by the goods of the plaintiff was to be found amongst consumers in other countries. Nevertheless, where the defendant was manufacturing in the forum rival goods for export to the same market, and doing so in fraud of the plaintiff's rights by applying to its goods the marks of the plaintiff or marks only colourably different thereto, the plaintiff obtained in the forum injunctive relief against the continuance of these activities.

Perhaps the most celebrated example is R Johnston & Co v Archibald Orr Ewing & Co (1882) 7 App Cas 219 , ; affg (1879) 13 Ch D 434 . There, the plaintiffs had for some years carried on business in the United Kingdom as dyers and merchants, their business chiefly consisting in the export of certain fabrics to the East Indies, the borders of the Red Sea and the East Coast of Africa. The plaintiffs sold their goods to merchants for export, and they also themselves consigned their goods to agents of their own in India and other countries. It was held that an injunction might be granted to restrain the export of goods by the defendant under a trade mark which might deceive the ultimate purchasers in a foreign country although it would not deceive persons in England or the dealers in the foreign market. Another example is provided by the decision of Romer J in Wilkinson v Griffith Bros & Co (1891) 8 RPC 370 . Again, both parties were English manufacturers, and the reputation of the plaintiff came from the foreign market for its goods which were exported to India, in particular to Bombay. The wholesale merchants who dealt in the defendant's goods as intermediaries were not deceived, but many of them were content in Bombay to pass off the defendant's goods as those of the plaintiff. His Lordship found that the defendant had fraudulently intended this result to come about and granted relief.

More recently, in Franklin International Export Ltd v Wattie Exports Ltd (1988) 12 IPR 358 , the New Zealand High Court dealt with an application (unsuccessful in the event) for interlocutory relief to restrain alleged passing off where the New Zealand plaintiff had for 10 years sold frozen vegetables in Kuwait under a particular name, and had discovered that the defendants (who were also New Zealand producers) had been selling their frozen vegetables in Kuwait using allegedly deceptively similar packaging.

The present significance of these cases is that those with whom the plaintiff enjoyed the reputation upon which the action is based are not to be found in the jurisdiction in which the action is brought, and that the fraudulent intentions of the defendant are seen as an important element in the case made out by the plaintiff. But the conduct of the defendant will lead to the deception of customers in the jurisdiction where the plaintiff's reputation exists. Thus, these cases are consistent with the propositions (i) that the presence of fraud cannot overcome the absence of reputation and (ii) the plaintiff must demonstrate a misrepresentation by the defendant to the public in a jurisdiction where the plaintiff enjoys a reputation that his goods or services are those of the plaintiff; cf Reckitt & Colman Products Ltd v Borden Inc (1990) 17 IPR 1 ; [1990] RPC 341 at 406 , per Lord Oliver of Aylmerton. (Of course, if the activity complained of is wrongful in the foreign market, then there may be action brought in the forum, but on a different basis, namely that concerned with the actionability of foreign torts, pursuant to the rule in Phillips v Eyre (1870) LR 6 QB 1 ; see John Walker & Sons Ltd v Henry Ost and Co Ltd [1970] RPC 489 , where the law of Ecuador had to be considered by the English court, and James Burrough Distillers plc v Speymalt Whisky Distributors Ltd [1991] RPC 130 , where Italian law was in question.)

So it was that in Weingarten Bros v G & R Wills & Co, supra at 54-5 , Way CJ, in referring to the ancillary jurisdiction in equity to prevent fraudulent passing off, (described by him as the third class of remedies), said:

The cases relied on by the plaintiffs for relief independently of local user come under the third class of the remedies which I have mentioned, and I agree that if they can be made applicable to the plaintiff's case it is unnecessary to show that they had vendible goods upon the market. It is sufficient if their business or business reputation is injured. The cases cited were Collins Co v Brown Collins Co v Cowen, 3 K & J 423 and 428 ; Panhard v Panhard [1901] 2 Ch 513 . In neither of these cases had the plaintiffs, who were both foreign companies, any direct business in England.

In the Collins Company's cases their goods, which were made in America, had a high reputation there, and in Cuba and Australia; and were being imitated, and forgeries of their marks were being placed upon goods of an inferior quality and lower price made in England, and exported to the same countries as the company's genuine goods. In the second case the plaintiffs were motor car makers, and motors purchased from them in France were often imported into England. Farwell J held that the second company meant either to steal the plaintiffs' business or to prevent them from having any in England. In all three cases express fraud was alleged and proved.

Way CJ then went on to deal with a further category of case, that where the original jurisdiction of Chancery was invoked to restrain an invasion of property, in such cases it being unnecessary to show fraud.

The foundation case in this branch of the jurisdiction is usually taken as Millington v Fox, (1838) 3 My & Cr 338 ; 40 ER 956 , a decision of Lord Cottenham LC. In that case, 2 days after the filing of the bill, the plaintiffs had obtained an ex parte injunction without disclosing to the court that in correspondence the defendants had already agreed to give the plaintiffs everything they would be entitled to in the suit. It was agreed that the injunction should be made perpetual and the main debate was as to what was to be done with costs. In that setting it is not surprising that no issue arose as to the need to refer any issue for determination by trial at law. However, the Lord Chancellor said that the circumstance that there was no fraudulent intention in the use of the marks did not deprive the plaintiffs of their right to exclusive use of those names.

Then came Welch v Knott (1857) 4 K & J 747 ; 70 ER 310 , a decision of Page-Wood V-C. The plaintiffs carried on the trade of manufacturers and vendors of soda water and other aerated and mineral waters under the name "Jacob Schweppe & Co". The Vice-Chancellor dissolved an ex parte injunction which had been obtained by the plaintiffs, but gave them liberty to bring an action at law. The plaintiff's leading counsel was Mr Cairns QC. In the course of his judgment, the Vice-Chancellor referred to Milligton v Fox and said that it was not material to consider how far the doctrine there laid down was capable of being reconciled with cases at law in which the scienter has been held to be essential in order to enable the plaintiff to recover. His Honour said "in this court the rule is clear as laid down in Millington v Fox". These remarks were later referred to with approval by Lord Cairns LC in The "Singer" Machine Manufacturers v Wilson (1877) 3 App Cas 376 at 391-2 , an appeal in a suit which had been instituted to restrain use by the respondents of the name "Singer" in connection with sewing machines.

Millington v Fox was further discussd in Edelsten v Edelsten (1863) 1 De GJ & Sm 185 ; 46 ER 72 , another case in which Lord Cairns had appeared. The case was an unsuccessful petition of rehearing by Lord Westbury LC in respect of a decree made by the Vice-Chancellor. It had been held that fraud was clearly established on the part of the defendants. The Lord Chancellor, in dismissing the petition, said:

The questions are whether the plaintiff had property in the trade mark claimed by him before the adoption of it by the defendants, and if so, whether the mark of the defendants is substantially the same as the trade mark of the plaintiff, and therefore an invasion of his property; and thirdly, whether the defendants have used the plaintiff's trade mark with knowledge of the right of the plaintiff.

The last question is material with reference to the extent of the relief to be granted. For although it is well founded in reason, and also settled by decision, that if A has acquired property in a trade mark, which is afterwards adopted and used by B in ignorance of A's right, A is entitled to an injuncton; yet he is not entitled to any account of profits or compensation, except in respect of any user by B after he became aware of the prior ownership.

At law the property remedy is by an action on the case for deceit: and proof of fraud on the part of the defendant is the essence of the action: but this court will act on the principle of protecting property alone, and it is not necessary for the injunction to prove fraud in the defendant, or that the credit of the plaintiff is injured by the sale of an inferior article. The injury done to the plaintiff in his trade by loss of custom is sufficient to support his title to relief.

It remains the law that although an account of profits is an equitable remedy, it is for a plaintiff who seeks an account to establish that the profits were made by the defendant at a time when he knew he was transgressing the plaintiff's rights or, at least, when on notice of the plaintiff's claims against him: Colbeam Palmer Ltd v Stock Affiliates Pty Ltd (1968) 122 CLR 25 at 34- 5 , per Windeyer J; My Kinda Town Ltd v Soll [1982] FSR 147 at 148 per Slade J. In that sense, there has been established a correspondence between the pre-condition for the common law remedy of damages and the equitable remedy of an account of profits.

A defendant originally may have adopted a mark honestly and innocently, either in ignorance of the existence of the plaintiff's mark or in the belief that his mark was so different from that of the plaintiff as not to be calculated to mislead purchasers. But the authorities establish that in such a case, the continuing use of the mark after awareness that its use does cause the goods of the defendants to be mistaken for those of the plaintiff, is no less fraudulent in the eye of the court than user with an original fraudulent intent. In Mitchell v Henry (1880) 15 Ch D 181 at 191 , James LJ said: "The defendants must bear in mind that the original honesty of intention does not protect the continued user, if the user is found practically to have the result of deceiving, or is calculated to deceive purchasers, because it is very easy for manufacturers to avoid any possibility of misleading purchasers if they are minded to avoid it."

The principle was expressed as follows by Lord du Parcq in Marengo v Daily Sketch and Sunday Graphic Ltd (1948) 65 RPC 242 at 253-4 : "The honest man who finds that, through mere ignorance or inadvertence, he has done innocently that which, if done with wrongful intent, would have given a right of action for damages, will be anxious, when the facts are made clear to him, to take such steps as will prevent any misunderstanding in the future. If the Court of Equity is convinced that there has been such an innocent misrepresentation, and an honest defendant, not being himself so convinced, has refused to take proper steps of his own motion, the Court, acting upon the defendant's conscience, will compel him by injunction to act as an honest man ought to act when he has learned all the facts and has considered them impartially." See also Ronson Products Ltd v James Ronson Pty Ltd (No 2) [1957] VR 731 at 738 .

It has been said that this concept of fraud as constituted by persistence after notice is not necessarily such as would support an action of deceit: Turner v General Motors (Australia) Pty Ltd (1929) 42 CLR 352 at 362 ; BM Auto Sales Pty Ltd v Budget Rent A Car System Pty Ltd (1976) 12 ALR 363 ; 51 ALJR 254 at 258 . It may be that even after notice of the plaintiff's rights the defendant does not intend to deceive purchasers of his goods by representing those goods to be the goods of the plaintiff. Nevertheless, if the defendant shuts his eyes as to the reasonable consequences, upon facts known to him, of what he is doing, then there would be grounds upon which a jury might make a finding of fraud in the full sense: Hendriks v Montagu (1881) 17 Ch D 638 at 651-2 ; English and Scottish Mercantile Investment Co Ltd v Brunton [1892] 2 QB 700 at 707- 8 ; Edward Young & Coy Ltd v Stanley Silverwood Holt (1948) 65 RPC 25 at 30 ; 10th Cantanae Pty Ltd v Shoshana Pty Ltd (1987) 79 ALR 299 at 322 ; 10 IPR 289 ; Star Micronics Pty Ltd v Five Star Computers Pty Ltd (Davies J, Fed C of A, 26 November 1991, unreported) .

Hence, the force of the statement in Ashburner's Principles of Equity, 2nd ed, 1933, p 378, that, although a trade mark has some characteristics of a proprietary right, the better opinion is that the jurisdiction of the court to interfere by injunction, in passing off cases, is based upon the prevention of fraud.

I have referred to the evolution in the 19th century of the doctrine that in a passing off case equity would intervene by injunction in aid of the plaintiff's proprietary rights. At that time and thereafter, it was generally accepted that where legal (as distinct from equitable) rights were at stake, "the foundation of the jurisdiction to grant an injunction is the existence of some civil right of a proprietary nature proper to be protected": Cameron v Hogan (1934) 51 CLR 358 at 377 Accordingly, there were some torts, the apprehended commission or repetition of which would not be restrained by injunction. The lack of a proprietary right in one's personal reputation as a citizen, was one reason why an injunction ordinarily would not go to restrain commission or repetition of libel or slander; see also Earl Cowley v Countess Cowley [1901] AC 450 at 460 Du Boulay v Boulay (1869) LR 2 PC 430 at 441-2 . So it is not surprising that as regards the passing off action which at law was a variant of a claim in deceit, Chancery strove to put its intervention on a proprietary basis. As Windeyer J pointed out, there was an element of circularity in the reasoning employed in the cases: Colbeam Palmer Ltd v Stock Affiliates Pty Ltd, supra, at 34 ; see also Cohen, "Transcendental Nonsense and the Functional Approach", (1935) 35 Col L Rev 809 at 814-17.

What also is curious is that in a case of tort, relief might be given in equity, not confined to quia timet relief, in cases where there might be thought to be and to remain an incomplete action at law by reason of the absence of fraud. That, in its turn, may be the explanation for the subsequent treatment of persistence after notice as sufficient to constitute fraud. The result would be that however neutral in character the initial conduct of the defendant, persistence after notice of the plaintiff's rights entitled the court to treat him thereafter as fraudulent.

The result of these developments in the law is that in a passing off suit a successful plaintiff may elect for his pecuniary remedy between an account of profits and an inquiry as to damages; if the defendant embarked upon his activities fraudulently, these remedies run from that time. But in any event, even if the defendant was at that stage innocent, pecuniary remedies will be available for the period of the defendant's persistence after notice of the plaintiff's rights, in the manner described in the authorities.

This has the consequence that in circumstances where damages would be available for contravention of s 52 of the Trade Practices Act 1974 (Cth), nevertheless in passing off no pecuniary remedy may be available. Section 82 of the statute operates to give a remedy in damages for what in substance may be an innocent and non-negligent misrepresentation. As Gibbs CJ pointed out in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197 ; 42 ALR 1 , the statutory liability is unrelated to fault. An appreciation of this may underlie some essays into restrictive interpretations of s 52. In any event, the more limited liability in passing off should not be a cause of concern.

Fraud today

What then is the present significance of fraud in the passing off action? There are various categories of case in which it will be significant if the defendant has embarked upon his activities fraudulently in the sense of the old common law cases. These categories are in addition to the class of case where there is some evidentiary assistance to be derived from those circumstances.

First, the absence or presence of fraud in the common law sense will be determinative of the plaintiff's equitable rights in cases where a charge of unclean hands is made out against the plaintiff; this is because whilst the plaintiff's unclean hands ordinarily would disentitle him to relief in equity, the existence of the fraud on the part of the defendant would give the plaintiff a right to damages at law. In that action the equitable defence would be of no effect. The plaintiff may then have an injunction to avoid the necessity of repeated actions at law, notwithstanding the plaintiff's unclean hands. That is what is established in Kettles and Gas Appliances Ltd v Anthony Hordern & Sons Ltd (1935) 35 SR(NSW) 108 , with reference to the analysis of Ford v Foster (1872) LR 7 Ch App 611 , by Isaacs ACJ in Angelides v James Stedman Hendersons Sweets Ltd, supra at 65-6 .

Secondly, whilst there is some authority for the view that there is no passing off where the defendant does no more than carry on business under his own name, such user must be bona fide: Clayton v Vincent's Products Ltd (1934) 34 SR(NSW) 214 ; Parker Knoll Ltd v Knoll International Ltd [1962] RPC 265 ; Parker & Son (Reading) Ltd v Parker [1965] RPC 323 .

Thirdly, in my view, in the ordinary passing off case (where the whole of the dispute is centred in the one jurisdiction) the failure of the plaintiff to show the existence of his reputation cannot be overcome merely by proof of a fraudulent design on the part of the defendant. The authorities bearing upon the question are collected in Telmak Teleproducts (Australia) Pty Ltd v Coles Myer Ltd (1988) 84 ALR 437 at 444-5 ; 12 IPR 297 . However, fraudulent conduct is important in the line of cases which I have described where the plaintiff and the defendant export their goods for sale in a foreign market and the plaintiff has no reputation with consumers in the jurisdiction in which the action is brought, although he does have a reputation in the foreign market where the goods of the defendant are sold.

The present case is concerned with a variant of this third situation. The complaint of the appellant is not that the respondent is manufacturing in Australia goods for export to the appellant's markets in the United States where the appellant has conducted activities on a large scale, but that the respondent seeks to pre-empt the entry of the appellant into the Australian market. In such a case is it necessary that the appellant establish a case of the existence in Australia of a reputation among consumers, or is it sufficient that the respondent is acting in the manner described by "digging a pit" in the path of the entry by the appellant into the Australian market? In my view, the appellant cannot succeed in such a case, even if fraud be shown, unless the plaintiff can show a reputation in that market. Only if this be so will the activities of the defendant convey a misrepresentation to the public and the misrepresentation is the gist of the action.

Before returning to this issue, it is appropriate first to consider whether, in any event, the existence of such a reputation would be sufficient, or whether the appellant would also have to show (as it cannot do on the facts) the existence of a reputation attached to the present conduct of a business in Australia.

The answer to that question requires some further consideration of the development of the notion of the proprietary right which is said to be protected by the passing off action.

The property right

Having found that equity intervened in passing off cases to protect proprietary rights, it remained for the courts further to describe, if not define, the constituents of those rights. Unless copyright subsisted in the trade mark in question, it would be anomalous to describe the plaintiff as having proprietary rights in the name or mark per se. The point was dealt with authoritatively by Lord Parker in A G Spalding & Bros v A W Gamage Ltd (1915) 32 RPC 273 at 283-4 . His Lordship noted that in equity liability might arise whether or not the defendant had acted fraudulently although the innocence of the defendant might be a reason for limiting the account of profits to the period subsequent to the date at which he became aware of the true facts. Lord Parker said that the view taken by the common law courts was somewhat different.

What is of significance for present purposes is the statement by Lord Parker in Spalding's case at 284 that if the nature of the right, the invasion of which is the subject of passing off actions, is a right of property, what is referred to is "property in the business or goodwill likely to be injured by the misrepresentation". In Norman Kark Publications Ltd v Odhams Press Ltd [1962] RPC 163 at 167 , Wilberforce J said: "The basis of the action, as shown in Spalding v Gamage (1915) 32 RPC 273 , is a proprietary right, not so much in the name itself, but in the goodwill established through use of the name in connection with the plaintiff's goods. I draw, of course, from Lord Parker of Waddington's well known opinion in that case. The plaintiff must show that the name has become distinctive of his goods, and that a reputation has attached to them under the name in question, and that use by the defendant of the name is likely to cause confusion resulting in damage to the goodwill of the plaintiff."

The notion of a trade mark, in the common law sense, is now wide enough to encompass slogans and visual images which radio and television or other means of advertising leads the market to associate with the goods or business of the plaintiff. The Privy Council so declared in Cadbury Schweppes Pty Ltd v Pub Squash Co Pty Ltd 32 ALR 387 ; [1981] RPC 429 at 490 .

What has given rise to difficulty in some of the recent decisions is the notion that the plaintiff is entitled to have protection only for a business reputation acquired in the forum, and that this only can be generated by some sort of business activity by the plaintiff in the forum.

In Pinto v Badman (1891) 8 RPC 181 at 194 , Lord Esher MR described the legal profession as having been surprised by Lord Westbury's assertion in cases such as Edelsten v Edelsten, supra , that there might be property in a trade mark; the Master of the Rolls pointed out that the question then arose as to how that property could be dealt with and whether it was assignable property. The position was reached that the common law mark might not be assigned independently of the business with which it was associated: Hospital Products Ltd v United States Surgical Corp (1984) 55 ALR 417 ; 156 CLR 41 at 144-5 per Dawson J. Further, in Commissioner of Taxes (Qld) v Ford Motor Company of Australia Pty Ltd (1942) 66 CLR 261 , it was held that, for the purposes of the Queensland revenue law relating to allowances in respect of "goodwill", a foreign company which did not at any time carry on business in Australia had no "goodwill" in relation to certain trade marks which it might transfer to the taxpayer. However, as Mason J pointed out in Hospital Products Ltd v United States Surgical Corp, CLR at 100- 1 , the circumstance that goodwill cannot be assigned independently of the business with which it is associated does not deny the existence of a local product of goodwill enjoyed in the jurisdiction by the foreign manufacturer of the goods in question.

The term "goodwill" assumes a significance in various areas of the law and for various purposes. It is notoriously difficult to define: Hepples v FCT (1991) 102 ALR 497 at 516 . But the concept certainly extends beyond the likelihood of customers returning to the same business. In Re Jacobson (dec'd) [1970] VR 180 , the court was required to construe the expression "the goodwill of my business" as it appeared in the will of the testator who had conducted a business as a bottle merchant. In Ranoa Pty Ltd v BP Oil Distribution Ltd (1989) 91 ALR 251 , the meaning of "goodwill", as between landlord and tenant, arose in the consideration of the regulatory regime imposed by the Petroleum Retail Marketing Franchise Act 1980 (Cth). I have already referred to one authority concerned with the revenue law. Another is the decision of Rich J in FCT v Williamson (1943) 67 CLR 561 , which was concerned with the question of whether a payment for goodwill, upon the sale of a chemist business, was a premium within the meaning of the Income Tax Assessment Act 1936 (Cth) s 88. The decision which is most often referred to in treatments of the expression "goodwill" is that of the House of Lords in IRC v Muller & Co's Margarine Ltd [1901] AC 217 . Their Lordships were concerned to construe the expression "property locally situate out of the United Kingdom" as it appeared in the Stamp Act 1891 (UK). They held that an agreement in writing to sell the premises of a wholesale margarine manufacturing business carried on in Germany, together with the goodwill of that business, fell within an exception to liability for stamp duty because not only the premises but also the goodwill was property locally situate out of the United Kingdom, within the meaning of the legislation.

What is of present significance for this appeal is that in considering the constituent elements of the action for passing off and the concept of injury or apprehended injury to a right in the nature of property, caution is necessary against importing into this field observations made elsewhere as to the nature of "goodwill". The result of undiscriminating adoption of those remarks may be the subversion of the basic nature of the passing off action.

Reputation and present business operations

It is perhaps significant that in the law of registered trade marks, a mark may be refused registration, as being likely to deceive or cause confusion, having regard to the knowledge obtained by the relevant section of the Australian public, and that this knowledge is not confined to that obtained from experience in an Australian market for the goods or services in question: The Kendall Co v Mulsyn Paint and Chemicals (1963) 109 CLR 300 at 305 ; see also Radio Corp Pty Ltd v Disney (1937) 57 CLR 448 .

In the 9th edition of Kerly's Law of Trade Marks and Trade Names, edited by Mr Blanco White QC and published in 1966, it was stated, s719, that: "... if in fact the plaintiff has the necessary reputation in this country, it does not matter whether it was acquired by user here or in any other way." Stated in this way, the principle was in accordance with case law in this country. I have referred to the statement by Way CJ in Weingarten Bros v G & R Wills & Co [1906] SALR 34 at 54 , where his Honour said that it was not always necessary for the plaintiff to have vendible goods upon the local market, and that it was sufficient if the business reputation of the plaintiff would be injured. Further, in Ramsay v Nicol [1939] VLR 330 at 342 , O'Bryan A-J said:

Plaintiff's counsel further contended that the only business or goods which were protected were businesses carried on within the jurisdiction or goods which have a market in the jurisdiction. In my opinion, that is not the true test, but the test to be applied in such a case is: Has the person acquired a reputation under that name in the jurisdiction, is that reputation subsisting at the relevant time, will the use of the same or a similar name by the other person in all the circumstances be calculated to deceive the public into thinking that that other person is the former, and is there a real likelihood of such deception in all the circumstances causing damage to the former? If all those circumstances subsist, then, in my opinion, it is immaterial that the plaintiff is, for the time being, not within the jurisdiction, or has no business being conducted at the relevant time within the jurisdiction (as in the case of La Société Anonyme des Anciens Établissements Panhard et Levassor v Panhard Levassor Motor Co Ltd [1901] 2 Ch 513 ), or has for some time been outside the jurisdiction (as in Poiret v Jules Poiret Ltd (1920) 37 RPC 177 ).

His Honour was dealing with a claim by a party who had acquired a reputation in Victoria as a magician and illusionist under an assumed name, but, at the time of the acts complained of, was carrying on no business on his own account in that State.

This decision, and that of Hudson J in Ballarat Products Ltd v Farmers Smallgoods Co Pty Ltd [1957] VR 104 , are authority for the proposition that an action for passing off may lie despite the cessation of business operations from which the reputation has been derived, provided the reputation still subsisted and perhaps, that the plaintiff still intended to resume trading operations. Accordingly, in Australia, there was a body of authority which indicated that a passing off action might lie even though the plaintiff was not presently engaged in business operations in the jurisdiction. See also Westinghouse Electric Corp v Thermopart Pty Ltd [1968] WAR 39 at 49-50 .

It should also be borne in mind that the authorities establish that a plaintiff may have a sufficient economic interest in the use of his trade mark outside the field of his own exploitation of it to justify interference by the court. Thus, the plaintiff may complain not of the risk of diversion of sales, the parties not being in direct competition, but that the goodwill of the plaintiff suffers from an injurious association with the goods or services of the defendant. Three examples will suffice. Harrods Ltd v R Harrod Ltd (1923) 41 RPC 74 concerned a complaint by the London department store that its name was being used for a moneylending business; Totalizator Agency Board v Turf News Pty Ltd [1967] VR 605 concerned a complaint as to a false connection between a government established betting service and a tipster's newspaper. In Annabel's (Berkeley Square) Ltd v G Schock [1972] RPC 838 , the famous London nightclub complained of the use of its name for what the defendant, perhaps euphemistically, described as an "escort service".

An earlier example is provided by Eastman Photographic Materials Co Ltd v John Griffiths Cycle Corp Ltd (1898) 15 RPC 105 where Romer J held it would injure the plaintiff, which had used "Kodak" for its cameras, if the defendant were not restrained from using "Kodak" to identify their bicycles. This case has been used in the United States as a foundation for the trade mark "dilution" doctrine; see Hogan v Pacific Dunlop Ltd (1988) 83 ALR 403 at 428-9 ; 12 IPR 225 . Indeed, the "franchising" cases display characteristics in common with those of the above authorities; see Shanahan, " 'Image Filching' in Australia: The Legal Provenance and Aftermath of the 'Crocodile Dundee' Decisions" (1991) 81 TMR 351 at 355-7.

It was of cases such as those I have described that in Yale Electric Corp v Robertson 26 F 2d 972 (1928) , Learned Hand J said, at 974: "If another uses [the plaintiff's mark], he borrows the owner's reputation, whose quality no longer lies within his own control. This is an injury, even though the borrower does not tarnish it, or divert any sales by its use; for a reputation, like a face, is the symbol of its possessor and creator, and another can use it only as a mask. And so it has come to be recognised that, unless the borrower's use is so foreign to the owner's as to insure against any identification of the two, it is unlawful."

The English cases

However, in BM Auto Sales Pty Ltd v Budget Rent A Car System Pty Ltd (1976) 12 ALR 363 ; 51 ALJR 254 at 258 , Gibbs CJ, with whose judgment the other members of the High Court agreed, referred to Alain Bernardin et Compagnie v Pavilion Properties Ltd [1967] RPC 581 (the Crazy Horse case) as having held that in order for a plaintiff to succeed in maintaining in the English courts an action for passing off, the plaintiff must have acquired a business reputation in the United Kingdom which was entitled to be protected, that this could only be acquired by some sort of user in the United Kingdom, and that some knowledge of the name of the plaintiff, without any business activities of the plaintiff in the United Kingdom, would not be sufficient. His Honour left open the question whether this should be the law in Australia.

It should be noted that the Crazy Horse case was a decision dismissing an application for an interlocutory injunction. Pennycuick J said (at 584) that the factors which make out an action in passing off are normally considered under two heads, reputation and likelihood of confusion, and that the case for the plaintiff ran into very great difficulty on the first question, namely reputation. However, his Lordship also said that the foundation for the action of passing off was "the protection of goodwill" and referred to the discussion in the House of Lords in IRC v Muller & Co's Margarine Ltd, supra at 223-4, 235 , as indicative of what was required of a passing off action. It will be recalled that the House of Lords held that stamp duty was not payable because the goodwill sold by the instrument in question was situated not in the United Kingdom but out of the United Kingdom with the tangible assets situated in Germany. Thus, it will be seen that the reasoning of Pennycuick J moved from consideration of "reputation" to "goodwill" as expounded in the earlier decision which, of course, had nothing to do with passing off or the interests protected by that action.

Although this decision has been followed in some subsequent English decisions, in others it has been criticised or followed without enthusiasm. In Baskin-Robbins Ice Cream Co v Gutman [1977] FSR 545 Graham J had expressed the view that goodwill should not automatically be limited to the boundaries of the particular country where the business in question is established, it being a question of fact in each case. In Maxim's Ltd v Dye [1978] 2 All ER 55 , the same judge enjoined the conduct by the defendant of a restaurant in Norwich under the name "Maxim's" on the footing that the English public understood the name "Maxim's" to refer to the restaurant of the plaintiff in Paris. His Lordship declined to follow the Crazy Horse case on the footing that a plaintiff could establish goodwill in England in respect of a foreign business which the courts would protect without it having to be shown that the plaintiff had carried on business in England. Megarry V-C took a similar view in Metric Resources Corp v Leasemetrix Ltd [1979] FSR 571 at 577 , saying:

... I do not at present see why the filching of a reputation acquired in England should not be regarded as an injury to a business carried on in France, and in France alone. In H P Bulmer Ltd v J Bollinger SA [1978] RPC 79 at 95 , Buckley LJ referred to Lord Macnaghten's definition of goodwill as being the attractive force which brings in custom, and suggested that that force, which may be due to many and diverse circumstances, could be said 'to embrace every circumstance which contributes to the success and value of the business to which it relates'. If a business is carried on in one country alone, a reputation which extends beyond the borders of that country and brings purchasers into that country certainly seems to be contributory to the success and value of the business.

Further, in Globelegance BV v Sarkissian [1974] RPC 603 Templeman J granted an interlocutory injunction to restrain the defendant from passing off his business and goods as those of a Roman fashion house, by the use of the name "Valentino". His Lordship said, at 615: "One knows that in practice the trade in high fashion is becoming more and more international, and it does seem to me, in general, that it would be a very great pity if the straight jacket of the Crazy Horse decision was found to constrain me from preventing Valentino from keeping the name which he has so well publicised."

On the other hand, in Athlete's Foot Marketing Associates Inc v Cobra Sports Ltd [1980] RPC 343 (an unsuccessful application for an interlocutory injunction), Walton J, at 357, expressed the law as being relatively clear and to the following effect: "That is to say, it does not matter that the plaintiffs are not at present actually carrying on business in this country, provided they have customers here. Equally, it is of no moment, if they have no customers here, that they have a reputation in the general sense of the word in this country."

Finally, in Anheuser-Busch Inc v Budejovicky Budvar (1984) 4 IPR 260 ; [1984] FSR 413 at 465 , (the Budweiser case), the English Court of Appeal approved what had been said by Walton J in the earlier case. Further, at IPR 282; FSR 470, Oliver LJ said: "Mr Kentridge argues that once a goodwill exists it is for the owner of the goodwill to choose when and how he will go into the market with his product. But this, with respect, begs the question, because it assumes the existence of the goodwill apart from the market, and that, as it seems to me, is to confuse goodwill, which cannot exist in a vacuum, with mere reputation which may, no doubt, and frequently does, exist without any supporting local business, but which does not by itself constitute a property which the law protects."

The question for the court is whether in this divided state of English authority we should adopt the approach that was accepted by the English Court of Appeal in the Budweiser case, at the expense of the earlier Australian authorities.

Other jurisdictions

What is the position in other jurisdictions? C & A Modes v C & A (Waterford) Ltd [1978] FSR 126 is a decision of the High Court of Ireland. The plaintiff had 65 shops in the United Kingdom, including one in Belfast, which received much custom from residents of the Irish Republic visiting Belfast on shopping excursions. The plaintiff had no shop in the Republic. In dismissing an appeal by the defendants, Henchy J said, at 138-9:

Can it be said in these circumstances that, because the plaintiffs have no direct retailing outlet in the Republic, they have no protectable goodwill in the Republic? In my opinion, the answer is 'No'. Goodwill does not necessarily stop at a frontier. Whether in a particular area a plaintiff has a goodwill which is liable to be damaged by the unlawful competition resulting from passing off is a question of fact and of degree. What has to be established for the success of a plaintiff's claim in an action such as this is that by his business activities - be they by direct selling within the State or otherwise - he has generated within the State a property right in a goodwill which will be violated by the passing off. It is true that there is authority for the proposition that a plaintiff's reputation which owes nothing to user in this State is not sufficient to support a passing off action: Alain Bernardin et Cie v Pavilion Properties Ltd [1967] RPC 581 . But, as is stated in Kerly's Law of Trade Marks and Trade Names, 10th ed, p 386), it is difficult to see any rational basis for this distinction. If there are in this State sufficient customers of a plaintiff's business to justify his claim to have a vested right to retain and expand that custom, then there is ample authority in principle and in the decided cases for the conclusion that, no matter where the plaintiff's business is based, he is entitled to be protected against it being taken away or dissipated by someone whose deceptive conduct is calculated to create a confusion of identity in the minds of existing or potential customers.

However, the existence, on the facts of this case, of the body of customers who travelled outside the jurisdiction to do business with the plaintiffs, puts this decision in a somewhat special position.

In Dominion Rent A Car Ltd v Budget Rent A Car Systems (1970) Ltd [1987] 2 NZLR 395 at 405-6 ; (1987) 9 IPR 367 , Cooke P said that the treatment of the tort of passing off as dependent on damage to business goodwill led to problems where the business for which protection is claimed is carried on outside the jurisdiction. His Honour continued: "No doubt these stem partly from a sense that unless a trader has already entered or at least is clearly about to enter the local market, and thus contributes to the local economy or is about to do so, the local law should not allow him to stifle local enterprise. Whatever the underlying reasons may be, some form of business connection with the jurisdiction is generally thought to be necessary to enable a successful suit."

On the other hand, in their article "Protection of Trademark Rights Acquired by International Reputation Without Use or Registration", (1981) 71 TMR 1 at 2, Thomas Hoffman and Susan Brownstone said: "Trade mark protection based upon reputation alone is in the interest of fairness to the trade mark owner. It prohibits others from pirating well known marks which have benefited from the creative efforts and financial nurturing of the trade mark owner. Encouragement of international trade and the peaceful interaction between countries is a further benefit. Finally, protection serves the interests of consumers for it protects them against deception in the marketplace. More and more countries are recognising the benefits of discouraging the growth of a local industry that relies upon the misappropriation of trade marks."

The preferred position

In my view, where the plaintiff, by reason of business operations conducted outside the jurisdiction, has acquired a reputation with a substantial number of persons who would be potential customers were it to commence business within the jurisdiction, the plaintiff has in a real sense a commercial position or advantage which it may turn to account. Its position may be compared with that of a plaintiff who formerly conducted business within the jurisdiction and has retained a reputation among its erstwhile customers, and with that of a plaintiff with a reputation which arises from its trade in the jurisdiction, but extends to goods or services which are not presently marketed by him. If the defendant moves to annex to itself the benefit of such a reputation by attracting custom under false colours, then the defendant diminishes the business advantage of the plaintiff flowing to it from the existence of his reputation.

This is so whether the plaintiff is a party which may expand into a new field of business or resume a former business conducted in the jurisdiction, or a party which may enter the jurisdiction to establish a business for the first time. The immediacy and intensity of the intention of the plaintiff to commence or resume business is, in my view, a question going not so much to the invasion of the plaintiff's rights as to the imminence of a threat sufficient to justify an injunction. The bad faith of the defendant will not be sufficient to confer rights upon a plaintiff where the necessary reputation in the jurisdiction is lacking. Further, in my view, in these cases the presence of bad faith on the part of the defendant is not an additional requirement which is to be satisfied by the plaintiff; fraud in the sense of persistence after notice of the plaintiff's rights will suffice.

In Ballarat Products Ltd v Farmers Smallgoods Co Pty Ltd [1957] VR 104 at 108 , Hudson J said: "On behalf of the defendant it was contended that, as no business is being carried on by the plaintiff, there can be no goodwill of which the name can form part. I cannot accept this proposition. In my opinion goodwill may continue to exist despite the cessation of the business operations that have given rise to it. If a trader by his personality, skill or method of trading has acquired a reputation in a particular class of business and thereby established an extensive connection in that business, to say that upon his ceasing to trade his reputation will immediately disappear is contrary to fact. It remains as something of value which he can turn to account whenever he chooses."

To the same effect, but the setting of a claim based upon foreign reputation, is the decision of the Ontario Court of Appeal in Orkin Exterminating Co Inc v Pestco Co of Canada Ltd (1985) 19 DLR (4th) 90 ; (noted (1986) 75 TMR 173 ; (1986) 2 IPJ 375) .

The plaintiff was an American company which had begun its operations in Georgia in 1901 and had built up one of the largest pest control businesses in the world. It did not carry on business in Ontario or elsewhere in Canada, but had a reputation there. This was held to be sufficient to support an action for passing off against a Canadian company which began using the plaintiff's name in the business it conducted in metropolitan Toronto. The judgment of the Court of Appeal was delivered by Morden JA. The decision has since been applied, at the interlocutory level, in HIT Factory Inc v HIT Factory Inc (1986) 12 CPR (3d) 287 .

Morden JA made the following points which are of significance on the present appeal. First, he referred to Harrods Ltd v R Harrod Ltd, supra , and Yale Electric Corp v Robertson, supra , together with Stork Restaurant Inc v Sahati 166 F 2d 348 (1948) in relation to the proposition (at 101-2): "... a plaintiff does not have to be in direct competition with the defendant to suffer injury from the use of its trade name by the defendant. If the plaintiff's trade name has a reputation in the defendant's jurisdiction, such that the public associates it with services provided by the plaintiff, then the defendant's use of it means that the plaintiff has lost control over the impact of its trade name in the defendant's jurisdiction. The practical consequence of this is that the plaintiff is then vulnerable to losing the Ontario customers it now has as well as prospective Ontario customers, with respect to services provided in the United States. Also, it can result in Orkin being prevented from using its trade name in Ontario when it expands its business into Ontario."

Secondly, at 103-4, his Lordship referred to the significance attached in some of the English decisions to very slight business activities in the jurisdiction as "purely symbolic" rather than illustrative of the true principle, namely that the plaintiff was entitled to retain the possibility of exploiting its goodwill in England. Thirdly, he did not see it as imposing an unreasonable restrain on the defendant to enjoin it from using the name of the plaintiff, saying at 105: "The public are entitled to be protected from such deliberate deception and Orkin, which has laboured long and hard and made substantial expenditures to create the reputation which it now has, which reputation has spread to Ontario, is entitled to the protection of its name from misappropriation. The spectre of Orkin having a monopoly in Ontario in its name and distinctive logo, even though it is not now carrying on business here, is considerably less troubling than the deceptive use of its name and symbol by another."

Fourthly, in response to the submission by the defendant that the circumstance that it had embarked upon deliberate deception was irrelevant, Morden JA said (at 106-7) that whilst the defendant's bad faith alone did not confer a cause of action on a foreign plaintiff, it was a relevant factor to take into account in framing the law so as to adjust the competing interests, the interests of a dishonest defendant being entitled to less weight than those of one which had acted bona fide.

Finally, with reference to the meaning attached to the term "goodwill" in such English cases as the Budweiser case, his Lordship observed (at 107-8) that this meaning appeared to be based on definitions assigned to "goodwill" in a tax case, namely Muller's case, and continued: "Virtually no words have a single fixed meaning, particularly goodwill, and, with respect, I do not think that the meaning appropriate in the Muller case is necessarily appropriate in a passing off case which involves issues of remote territorial use. In this kind of case I think the main consideration should be the likelihood of confusion with consequential injury to the plaintiff. Generally, where there is such confusion there is goodwill deserving of protection."

I would, with respect, accept all that was said for the Ontario Court of Appeal in those five propositions, save only that I would regard the dishonesty of the defendant as going more to the remedy than the right of the plaintiff.

What is said in the Canadian decision is consistent with an Australian decision, Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd [1981] 1 NSWLR 196 Powell J (at 205) stated the relevant question as being "does the plaintiff have the necessary reputation?", rather than "does the plaintiff itself carry on business here?"

Where the intention of the defendant is to cause harm to the plaintiff by pre-empting the plaintiff's exploitation in the jurisdiction of its goodwill there, then, in my view, the charge of fraud is made out. In an otherwise appropriate case, damages may be awarded in addition to equitable relief. This is so even if, as in the present case, there may be insufficient grounds for holding that the defendant also had the objective of building up its goodwill in the jurisdiction by misleading the customers who dealt with it into believing they were getting the goods of the plaintiff.

In the present case, the primary judge (101 ALR at 487) held that it was likely, in the sense of more probable than not, that the appellant would commence, at some time in the future, the manufacture and marketing in Australia of its Healthy Choice product; should it do so, then it was clear that the appellant would suffer damage by there being on the market another product with the name "Healthy Choice", and the probability of that damage was sufficient to found a passing off action, subject to the need to show a sufficient reputation in the jurisdiction.

However, whilst I would not disturb the finding of the primary judge as to fraud, I should add that, like Lockhart J, my impression from the evidence is that there is much to be said for the view that the respondent acted as it did, not to filch the appellant's market or prospective market in Australia, but because it was impressed by the success of the appellant's product in the United States and thought that a similar product was likely to succeed here. That would not amount to fraud in the required sense. Deliberate copying does not necessarily indicate fraud. A notable example is provided by Cadbury Schweppes Pty Ltd v The Pub Squash Co Pty Ltd (1980) 32 ALR 387 ; [1981] RPC 429 at 493-4 . See also, in the field of registered trade marks Aston v Harlee Manufacturing Co (1960) 103 CLR 391 at 400- 2 ; Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457 at 477 ; 31 ALR 161 .

Trade Practices Act

I agree with what has been said by Lockhart J as to the issues arising under this legislation.