Re Greg Cotton Motors Pty Ltd v Neil & Ross Neilson Pty Ltd [1984] FCA 42; 2 IPR 214 (6 March 1984)

FEDERAL COURT OF AUSTRALIA

Re: GREG COTTON MOTORS PTY. LTD.
And: NEIL & ROSS NEILSON PTY. LTD.
No. VG225 of 1983
Trade Practices
(1984) ATPR para 40-443 / [1984] FCA 42; 2 IPR 214

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Woodward J.

CATCHWORDS

Trade practices - consumer protection - conduct likely to mislead or deceive - representation as to affiliation - passing off - purchaser succeeding to business name - vendor continuing in similar business - confusion but no deception.

Trade Practices Act 1974 ss.52(1) and 53(c) and (d)

HEARING

MELBOURNE
6:3:1984

ORDER

The application for interlocutory injunctions be dismissed with costs.

DECISION

This is an application for interlocutory injunctions restraining the respondent from using certain names in the carrying out of that part of its car sales business concerned with General Motors Holden ('GMH') vehicles. The application was heard in November 1983 and I reserved my decision. I was then informed that certain discussions were going forward which might make it unnecessary for me to deliver judgment. Just before the end of the legal year I was asked to proceed to judgment and this I now do.

2. The statement of claim in this matter alleges in effect (though not in terms) breaches of ss.52(1) and 53(c) and (d) of the Trade Practices Act 1974. An allegation of passing-off is also made. The following interlocutory orders are sought:

"That until further order the Respondent NEIL AND

ROSS NEILSON PTY. LTD. by itself, its servants or
agents be restrained from

Advertising, offering for sale or selling
GENERAL MOTORS PRODUCTS under the name of or
by reference to the name of
"Neil Neilson", or
"Neilson", or
"Neil and Ross Neilson", or
"Ross Neilson".

Using in and about the conduct of the business
known as ROSS HOLDEN, the words:
"Neil Neilson"
"Neilson"
"Neil and Ross Neilson"
"Ross Neilson"

Representing in the course of its business
that its business is:
a branch of,
the Head Office of, or
a Division of,
the business conducted by the Applicant at 980
Burwood Highway, Ferntree Gully or at any
other place of business from where it shall
from time to time conduct its operations."

3. The facts are in a fairly short compass. The respondent company is controlled by Neil Neilson and his son Ross. The applicant company is controlled by Gregory Cotton. In 1978 Gregory Cotton began to work for Neil Neilson as general manager of the successful business which Mr. Neilson had been conducting for ten years in Ferntree Gully under the name "Neilson Motors Pty. Ltd." That business was effectively in two parts on two adjacent pieces of land. The first part was a GMH dealership and the second part was a dealership in several imported vehicles, particularly Mazda and Honda.

4. After negotiations spread over a number of months, Mr. Neilson agreed early in 1981 to sell the GMH part of his business to Mr. Cotton. This case requires some detailed consideration of the agreement reached as to the future use of the name "Neilson" by the respective parties.

5. It is clear that Mr. Neilson agreed to allow Mr. Cotton to continue to use his surname in connexion with the business which was being sold. Mr. Cotton registered the business name "Neilson Holden Ferntree Gully" and has continued to use it and develop his business ever since, to a point where he claims the second-largest Holden dealership in Victoria. He advertises extensively in that name.

6. It is equally clear that Mr. Neilson was entitled to continue the use of his own name in the next-door business. He changed the name of his company to Neil Neilson Auto Imports Pty. Ltd. and used the business names "Neil Neilson Mazda" and "Neil Neilson Honda". Late in 1981 the name of the Neilson company was changed again to its present form - Neil and Ross Neilson Pty. Ltd.

7. The applicant concedes that the respondent is generally entitled to carry on business in the sale of motor vehicles under its present name. It did so next door to the applicant until it sold that business in 1982. When Mr. Neilson purchased a GMH dealership in Berwick, some 20 kms from Ferntree Gully, in September 1981, Mr. Cotton conceded (and still concedes) his right to describe that business as "Ross Holden, a division of Neil and Ross Neilson Pty. Ltd." However he had earlier protested successfully to GMH about the use of either of the names "Ross Neilson Holden" or "Ross Neilson Motors" in connexion with that business. The precise part played in this matter by GMH is not clear, but the Neilson family did not press the issue and adopted the wording I have set out.

8. What the applicant objects to now is the current use by the respondent of the name "Neil and Ross Neilson", with or without the word "Berwick", as the primary name for use in the sale of GMH vehicles. In other words, the name "Ross Holden" has been dropped, and the personal names of the proprietors of the company emphasized, by the respondent. There is no objection to the respondent emphasising the name "Neil and Ross Neilson" when selling other vehicles. The application is concerned only with the sale of GMH vehicles.

9. Thus the difference which the applicant regards as vital is between the use of the words "Neil and Ross Neilson" in small print as an adjunct to the main title of "Ross Holden", and the use of the same names as the primary description of the business, when GMH vehicles are being sold.

10. It will be apparent immediately that the distinction is a narrow one. The applicant seeks to justify it by reference to the agreement reached at the time of the sale of the Ferntree Gully GMH dealership.

11. The first point to be noted about that agreement is that, although the total sale price was approximately $800,000 (which one might have thought would call for a careful reduction to writing of the full agreement between the parties), there is not a word said in the contract documents about the use of the name. There is not even a reference to goodwill; but the applicant informed me that one of the contract documents, purporting to grant an option for the sale, at valuation, of the land on which the business was carried on, represented in reality a payment for goodwill - in the sum of $250,000. The reason for the subterfuge is not relevant for present purposes but, in the result, the applicant's case is not assisted.

12. In support of the application for interlocutory injunctions Mr. Cotton has sworn that, in the course of negotiations leading up to the purchase of the Ferntree Gully business,

"Neilson indicated that whilst he would not permit
me to acquire the name "Neil Neilson" he would
permit the use of the name "Neilson". It was
agreed that if I purchased the business I would
have the exclusive use of that name."

In a later affidavit he says,

"... it was agreed between Neil Neilson and myself
that I would have the exclusive use of the name
NEILSON insofar as it was associated with
General
Motors products."

13. Mr. Neil Neilson, on the other hand, has sworn that, after agreement for the sale of the business had been reached, and after first refusing, he had agreed to the use of the name "Neilson" by the applicant, as part of the firm name "Neilson Holden Ferntree Gully". He denies any agreement for the applicant to have the exclusive use of the name "Neilson" in relation to GMH vehicles.

14. There is some evidence of discussions in 1982 and 1983 concerning the purchase back by the respondent of the applicant's right to use the Neilson name. The details of these conversations are disputed, but in any event the evidence is equivocal. An attempt by Mr. Neilson to regain the exclusive use of his own name does not necessarily involve any concession on his part of legal limitations on his own ability to use it.

15. Although counsel for the applicant relied heavily on what he alleged was a breach of agreement in the use of the name "Neilson" by the respondent, he was unable to formulate for me the terms in which any such agreement was expressed or to be implied. He conceded that there could be no restriction on the respondent using the words "Neilson Holden" in other states of Australia or in distant parts of Victoria. He relied on the close proximity, amounting to contiguity, of the two dealership areas based on Ferntree Gully and Berwick and said, in effect, that any geographic limit to the agreement must at least have extended that far. But the written agreement contained no restrictive covenant, relying perhaps on GMH practices in authorising dealerships. No implied term is necessary to give the agreement business efficacy.

16. I would sum up the effect of the evidence concerning the alleged agreement, for exclusive use by the applicant of the name "Neilson" in connexion with GMH products, as follows:

(a) It was not included in the written contracts
entered into at the time.

(b) There is no evidence before me of any conversation
in which the "exlusive use" of the name in any
particular area or any particular context was discussed.
In my view, the passages which I have quoted from
Mr. Cotton's affidavits amount to no more than an
assertion of his understanding of the legal effect of
the agreement reached between Mr. Neilson and himself.

(c) The attempt by counsel to argue for the implication
of such a condition founders on the two tests that "it
must be necessary to give business efficacy to the
contract", and "it must be capable of clear expression"
(See BP Refinery v Shire of Hastings (1977) 16 ALR 363
at 376.)

(d) By its concession that the applicant was entitled
to use the description "Ross Holden, a division of Neil
and Ross Neilson Pty. Ltd." the respondent has admitted
the reality of the legal position - that it has no
contractual entitlement to the exclusive use of
the name
"Neilson" in relation to GMH products beyond the
confines of its Ferntree Gully business.

17. It is significant that no such contract or understanding, let alone any implied term, is pleaded in the statement of claim. So although a great deal of attention was given to the issue by counsel for the applicant, in the final analysis it was only an important part of the background to the applicant's case.

18. Before concluding this recital of the facts, I should say that Mr. Neilson has sworn that the respondent's sales of GMH vehicles at Berwick have been deliberately decreased in recent years as more attention has been given to a number of other makes of vehicles. Holden sales have decreased from a rate of 44 per month in 1981 to 27 per month in 1983. On the other hand it seems that the applicant's monthly sales of GMH vehicles have been increasing steadily over the same period from 86 in 1981 to 140 in 1983. Although there is some evidence of misunderstanding and inconvenience caused by the two businesses each using the name "Neilson", there is no evidence of a single sale being lost to the applicant or gained by the respondent by reason of the latter's use of the family name in connexion with the sale of GMH vehicles. A degree of misunderstanding and confusion has of course been inevitable ever since Mr. Neilson permitted Mr. Cotton to continue to use the name "Neilson" after the sale of part of the Ferntree Gully business.

19. On the basis of the pleadings and the uncontradicted facts I am unable to conclude that there is a serious question to be tried in this case (The Australian Coarse Grain Pool Pty. Ltd. v. The Barley Marketing Board of Queensland (1982) 57 ALJR 425), or that the applicant has a fair chance of success (World Cricket v. Parish 1977 16 ALR 181 at 186). It has certainly not made out a probability of entitlement to relief, as the evidence now stands, (Beecham Group Ltd. v. Bristol Laboratories Pty. Ltd. [1968] HCA 1; (1968) 118 CLR 618.)

20. The respondent has continued to use a name which it has the best possible right to use. The law permits a man to carry on business in his own name, even if it gives rise to confusion with another, perhaps better known, enterprise, provided that he does so honestly and it does not result in deception as distinct from confusion. See Parker Knoll Ltd. v. Knoll International Ltd. 1962 RPC 265. I have no reason to doubt the evidence of Mr. Neilson that it was decided to drop the name "Ross Holden" and concentrate on the alternative name "Neil and Ross Neilson" at Berwick simply for greater convenience as the non-GMH side of the business grew larger.

21. The respondent is now using that name in connexion with the sale of GMH vehicles (but not, be it noted, in immediate conjunction with the name "Holden"). But there is no evidence that it is doing so dishonestly, in the sense that it hopes or intends to benefit from the applicant's advertising, or otherwise increase its sales, by doing so. Nor is there any evidence to persuade me that the applicant or any member of the public has suffered, or is likely to suffer, any damage as a result. Obviously some people will think that the two businesses are connected - and indeed they are, historically. But there is no evidence to suggest that the applicant will suffer in sales or reputation from any such misunderstanding. The family business represented by the respondent is of much longer standing and of good repute.

22. The inevitable misunderstandings resulting from two well-known businesses in the same industry both using the same surname could only be marginally increased, if at all, by the fact that the respondent includes Holden vehicles among those it sells, or by the precise context in which the name "Neilson" is used by the respondent. I think it is highly unlikely that any person on behalf of the respondent has sought to make profit from or encourage that confusion. As to this, there was some evidence that staff members employed by the respondent had replied to queries, put by people seeking to obtain information for the applicant, in such a way as to suggest a relationship between the applicant and respondent companies. This evidence was thin, much of it ambiguous, and it disclosed no positive action by the respondent to claim such an association. The respondent has instructed its staff to answer such queries more carefully in future. I attach no importance to this material.

23. Dealing with the applicant's three alleged causes of action separately, it is clear that, for conduct to be misleading or deceptive within the meaning of s.52(1) of the Trade Practices Act 1974, it must be more than merely confusing. It must mislead or deceive consumers of goods or service in a commercial sense. That is to say they must make (or be likely to make) commercial decisions - such as to buy a particular product, or to patronize one business rather than another - as a result of the respondent's conduct. I think this is consistent with the decisions of the Full Court of this Court in McWilliam's Wines Pty. Ltd. v McDonald's System of Australia Pty. Ltd. [1980] FCA 159; (1980) 33 ALR 394 and Lego Australia Pty. Ltd. v Paul's (Merchants) Pty. Ltd. [1982] FCA 135; (1982) 42 ALR 344, and of the High Court in Parkdale Custom Built Furniture Pty. Ltd. v Puxu Pty. Ltd. [1982] HCA 44; (1982) 42 ALR 1, and Hornsby Building Information Centre Pty. Ltd. v Sydney Building Information Centre Ltd. [1978] HCA 11; 1978 140 CLR 216. As Stephen J. said in that case at p.228, it is "of particular importance to identify the respect in which there is said to be any misleading or deception". In this case it is said that the use of the name "Neilson" in connexion with the sale of GMH vehicles is likely to mislead people into thinking that there is some connexion or affiliation between the applicant's and the respondent's businesses.

24. Even if this were so, bearing in mind that we are concerned here with the sale of standard products by two reputable and well-established businesses 20 kms apart, I can find no evidence that any persons have been, or would be likely to be, deceived by the respondent's conduct in such a way as to lead them to make commercial decisions they would not otherwise have made. And even if such decisions were made, it would be my view that they resulted from the applicant's decision to retain the name "Neilson" in its business, when it purchased part only of the Neilson family's car sales business, rather than from any conduct of the respondent. There is thus no serious question to be tried in relation to s.52(1) of the Trade Practices Act 1974.

25. Nor, in my opinion, is there any dependable evidence of representations by the respondent that it has a sponsorship from, or affiliation with, the applicant's business. There is thus no serious question to be tried in relation to s.53 of the Act.

26. Finally, the absence of evidence of damage, actual or to be inferred, is fatal to the passing-off claim. As the evidence stands, the defence of an independent and concurrent right to the use of the name "Neilson" in the relevant context is also made out.

27. Since the evidence as it stands discloses no serious issue to be tried, the application for interlocutory injunctions must fail. If I had found it necessary to consider also the balance of convenience, I would still have found firmly in favour of the respondent, relying on the absence of any apparent advantage to the applicant, together with the damage which such an injunction as is sought could conceivably do to the respondent's reputation, because of the implications that might be drawn from it by the general public, and the cost and confusion of having either to change its business name completely or to use two different names in overlapping parts of its business - for example, used car sales.

28. The application for interlocutory injunctions is dismissed with costs.