Re Tiheti Pty Limited (Trading As "Cosmopolitan Protection") v Guard Dog Patrol and Security Services Pty Limited (Trading As "Cosmopolitan Security Services") [1990] FCA 359; 19 IPR 251 (14 September 1990)

FEDERAL COURT OF AUSTRALIA

Re: TIHETI PTY LIMITED (trading as "Cosmopolitan Protection")
And: GUARD DOG PATROL AND SECURITY SERVICES PTY LIMITED (trading as
"Cosmopolitan Security Services") No. G488 of 1990
FED No. 500
Trade Practices
[1990] FCA 359; 19 IPR 251

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Wilcox J.(1)

CATCHWORDS

Trade Practices - Misleading conduct - Respondent trading under name similar to trading name of applicant - Form of appropriate orders - Telephone directory entries inserted by respondent - Application for order requiring respondent to install recorded message on telephone service notifying callers of applicant's telephone number - Effect of such an order on respondent's businesses - Relevance of circumstances under which problem arose.

Trade Practices Act 1974, S.52

HEARING

SYDNEY
14:9:1990

Counsel for the Applicant : D K Catterns

Solicitors for the Applicant: Baker and McKenzie

Counsel for the Respondent : J M Ireland

Solicitors for the Respondent: Weaver and Rugless

ORDER

1. Within seven days the respondent take all steps necessary to be taken by it to cancel the registration of the registered business name "Cosmopolitan Security Services"; and
2. Within one month the respondent take all steps necessary to be taken by it to arrange for either:
(a) the cancellation of the telephone service Sydney

358-5000, or
(b) the connection to the said service of a recorded
message stating words to the following effect:
"The telephone number of Cosmopolitan
Protection is 360-2888".

3. If the respondent chooses to take the course referred to in para.(b) of order 2, the respondent shall maintain that recorded message until the end of the year 1991; but nothing in that paragraph shall preclude the respondent using service 358-5000 also for its own purposes, if this be technically possible, or from adding to the recording a reference to any new telephone number or numbers which it might obtain for its own purposes.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. (See also Order 37 rule 2(3)).

DECISION

No doubt it is a reflection of changing social mores that the provision of private security services has become a thriving business. The present case is an action in which the applicant, Tiheti Pty Limited, which trades as "Cosmopolitan Protection", seeks orders against a competitor, Guard Dog Patrol and Security Services Pty Limited, which has recently commenced trading as "Cosmopolitan Security Services".

2. The Application was filed on 23 August 1990. Pursuant to leave granted by me, it was made returnable on 27 August 1990. On that day counsel for the respondent informed the Court that he had instructions to offer permanent undertakings to the Court, these undertakings being designed to meet the applicant's claim and terminate the litigation. After some discussion, undertakings were given in the following form:

"The respondent undertakes to the Court permanently as follows:
1. that it will not use the name 'Cosmopolitan
Security Services' or any other name which
includes the word 'Cosmopolitan' to promote or
advertise its security business provided that the
existence of entries in the 1990 Sydney White
Pages and Yellow Pages Telephone Directories shall
not constitute a breach of this undertaking;
2. that it will cancel any future entry in the
Sydney White Pages Telephone Directory or the
Sydney Yellow Pages Telephone Directory for a
listing which includes the name 'Cosmopolitan
Security Services' or any other name which
includes the word 'Cosmopolitan'."

3. However, the applicant was not satisfied with the sufficiency of these undertakings. In particular, it was concerned that, notwithstanding the undertakings, the respondent's business would continue to be advertised in both the Sydney telephone directories, the White Pages and the Yellow Pages, for a considerable period. The 1990 Sydney White Pages had just been published, and would be current for a period of about 12 months. The 1990 Yellow Pages had not yet been published but the solicitor for the applicant had ascertained that it was too late to amend the entries in that directory. According to information obtained from a representative of the publisher, the listing had closed on 20 July 1990. The Yellow Pages was expected to be published within about two months and would remain current until the same time in 1991.

4. Under these circumstances, counsel for the applicant indicated that his client pressed for orders as set out in sub-paras (c) and (e) of para.2 of the Application. These sub-paras read:

"2. An order that within seven days the Respondent
take all steps necessary to be taken by it
...
(c) to arrange with Telecom Australia for a recorded
telephone message to be placed on the line of Sydney
telephone service number 3585000 for a period of 12
months from the date of such order in words to the
following effect:
'the telephone number of Cosmopolitan Protection is
Sydney 360 2888';
...
(e) to effect the cancellation of the
registered business name 'Cosmopolitan Security
Services; and ..."

5. Counsel for the respondent informed the Court that his client would oppose such orders because of their adverse effects upon their own business and the matter was set down for trial on the question whether these orders ought to be made.

6. At the commencement of the hearing on 12 September, counsel for the respondent indicated that his client was prepared to consent to an order in terms of sub-para (e). This left, as the only live issue between the parties, the matter of a recorded telephone message on telephone service number 358-5000.

7. The name "Cosmopolitan Protection" was registered as a business name, pursuant to the Business Names Act 1962 (NSW), by Alan David Kilgour on 9 March 1982. Mr Kilgour commenced trading under this name on 1 April 1982, principally in the eastern suburbs of Sydney. Initially, the firm used only one motor vehicle for its patrol service. In addition, it supplied the services of security guards. From the beginning, it appears, extensive use was made of the name "Cosmopolitan Protection". All employees were supplied with a uniform upon which was placed a badge with the company logo and the words "Cosmopolitan Protection-Security" embroidered thereon. The name "Cosmopolitan Protection" was also used for advertising, T-shirts and display warning signs. The business has expanded over the years but this pattern has continued. The business now operates four motor vehicles, each of which bears the name "Cosmopolitan Protection".

8. The applicant, Tiheti Pty Limited, was incorporated on 13 December 1985. Apparently it was a shelf company. The first directors, an accountant and a solicitor, resigned on 18 February 1986. Mr Kilgour and Lillian Medina were appointed as directors in their place. In 1988 Glenn James Vigar became a director of the company and in 1989 he and Mr Kilgour purchased Ms Medina's shares. At the present time the company is run jointly by Mr Kilgour and Mr Vigar.

9. Shortly after the incorporation of the applicant, Mr Kilgour transferred to it the entitlement to the business name "Cosmopolitan Protection". The company has maintained registration of that business name up to the present time.

10. In recent years, the scale of activities of the applicant has significantly increased. The company now provides a security service for thousands of clients, scattered throughout the Sydney metropolitan area; but with an emphasis on the eastern suburbs. The premises of each of the clients are connected, by an alarm system, to the premises of a monitoring company; there being nine monitoring companies in all. The arrangement is that, if there is a disturbance in the client's premises, an alarm will sound at the office of the relevant monitoring company. An employee of that monitoring company will contact the office of the applicant. An employee of the applicant then gives a direction, by radio or telephone, to the crew of one of the applicant's vehicles, instructing that vehicle to go to the disturbed premises. Of the nine monitoring companies, eight rely on the telephone for contact with the applicant. The other company, which has the largest number of clients under its supervision, uses a radio link.

11. The respondent, Guard Dog Patrol and Security Services Pty Limited, is controlled by two directors, Donald Kennedy Macmillan and Brian Chapple. The company was formed following a discussion between these two gentlemen in November 1988 concerning the establishment of a business to offer security services in the King's Cross area. According to Mr Macmillan, it was also envisaged at that time that the business might eventually be expanded into other parts of the eastern suburbs of Sydney. On 19 December 1988, Mr Macmillan and Mr Chapple made application to the Corporate Affairs Commission for the registration of a number of business names viz. King's Cross Security, Oxford Street Security, Guard Dog Patrol Security Services and Sydney City Dog Patrol Security.

12. In February 1989, Mr Macmillan and Mr Chapple acquired the respondent company as a shelf company. On 6 March 1989 its name was changed to the present name. At about that time the company commenced business from a small office at 37 Darlinghurst Road, King's Cross. It obtained the telephone number 358-5000 at about that time.

13. When the business commenced it was limited to the provision of foot patrol security services in the King's Cross area. However, it expanded and in March 1990 the business was relocated within the King's Cross car park in Ward Avenue, King's Cross. At about that time, King's Cross Parking Stations Pty Limited, another company of which Mr Macmillan and Mr Chapple were directors, obtained a lease of the car park.

14. In his affidavit Mr Macmillan said that, since the commencement of the business, the respondent has promoted its security business under the name "King's Cross Security". The telephone number 358-5000 has been continuously and prominently used in all promotional material; including on window stickers, refrigerator magnets, telephone stickers and promotional leaflets. The respondent is paid a monthly fee by clients to maintain a security patrol of their premises. In the case of a security problem or alert, the client telephones the number 358-5000. This number has four lines and is manned 24 hours per day. The company's employees who answer the telephone are in constant touch, by two-way radio, with mobile and foot patrolmen. The company has approximately 120 regular clients in the King's Cross area. It has advertised extensively, and on an increasing scale, in and around that area.

15. The telephone number 358-5000 is also used as the telephone number for the car park and for a private business conducted by Mr Macmillan known as Macmillan Consulting Services.

16. There is evidence as to the circumstances under which the respondent came to use the name "Cosmopolitan Security Services". It appears that this name was registered under the Business Names Act in November 1988 by one John Bedak. Since about 1980 Mr Bedak had been employed as a security guard at the Cosmopolitan Motor Inn in Double Bay. His duties involved security work, both in the hotel building itself and in its associated car park. He displayed the name "Cosmopolitan Security Services" on his uniform. In 1988 Mr Bedak obtained a contract with the Manly Lodge Private Hotel to provide cleaning, maintenance and security services and he did so in the name "Cosmopolitan Security Services". About the end of 1988 Mr Bedak's association with the Cosmopolitan Motor Inn came to an end but he continued with his contract for the Manly Lodge Private Hotel until it expired at the beginning of 1990.

17. At about Christmas 1989, Mr Bedak opened a delicatessen business in Potts Point. He called the shop "Cosmopolitan Delicatessen". From time to time, according to Mr Bedak, Mr Macmillan called in for coffee or breakfast. Mr Bedak had known Mr Macmillan for some 20 years, although not well. According to both Mr Bedak and Mr Macmillan there was a conversation early in 1990 during which Mr Macmillan enquired how the business was going. Mr Bedak replied: "Not so good. I'm losing money here. I'm thinking of getting back into security work". Mr Macmillan asked Mr Bedak whether he would go back to the Cosmopolitan at Double Bay and Mr Bedak explained that he could not do this because the hotel was closing in July for renovation. However, he added that he would like to start up again in Double Bay and that he had a registered business name, "Cosmopolitan Security Services". Again, according to both men, Mr Macmillan asked: "What about Cosmopolitan Protection? Is there any problem with them?" Mr Bedak replied: "No. Alan Kilgour knows that I have got the name registered. I might be interested in going into partnership with you people". Mr Macmillan indicated that he would have to discuss this with his partner, Mr Chapple.

18. About a week later Mr Macmillan had a further conversation with Mr Bedak in which he indicated that he had discussed the matter with Mr Chapple and that they had decided that they did not want another partner. However, Mr Macmillan added that he and Mr Chapple would be interested in "starting up in Double Bay using your contacts there to get established". Mr Bedak said that he would be interested in some arrangement because he needed the money. There was then a discussion about the possible purchase of "Cosmopolitan Security Services". These discussions resulted in an agreement being executed on 27 February 1990 whereby Mr Bedak sold to the respondent the business known as "Cosmopolitan Security Services" for $2,000.00. As Mr Bedak said in evidence, at that time the only asset of the business was its name. He was not then carrying on any security business. He had no premises, telephone or goodwill.

19. Both Mr Macmillan and Mr Bedak said that it was a part of the arrangement that Mr Bedak's contacts would be used to assist in the establishment of a business in Double Bay. He apparently knows many of the shopkeepers in that area and the idea was that he would recruit clients in return for a commission. However, to date nothing has been done in this regard. Asked the reason, Mr Macmillan referred to his own ill health and absences abroad by both himself and Mr Kilgour.

20. On 14 March 1990, Mr Macmillan made application for the listing in the White Pages directory of telephone service 358-5000 under the names of five different businesses, one of them "Cosmopolitan Security". On 1 May 1990 he made a similar application in respect of the Yellow Pages. In the recent White Pages directory there appear, in close proximity to each other, the name "Cosmopolitan Protection", with an address at Darlinghurst and the telephone number 360-2888, and the name "Cosmopolitan Security" with an address at King's Cross and the number 358-5000.

21. In his affidavit, Mr Bedak deposed to a conversation which he claimed to have had with Mr Kilgour in 1986. He said that, at that time, he saw Mr Kilgour casually near the Cosmopolitan Motel. He had known Mr Kilgour since about 1980. During this conversation Mr Kilgour said that he was calling his business "Cosmopolitan Protection Services". Mr Bedak said: "I am Cosmopolitan Security Services, that's my business". Mr Kilgour replied: "That's alright, as long as you don't call yourself Cosmopolitan Protection Services, because that's my business".

22. In the affidavit Mr Bedak made no reference to any subsequent conversation. However, during the course of cross-examination, he said that he had had a subsequent conversation with Mr Kilgour in 1988, during which time he mentioned he had registered the name "Cosmopolitan Security Services".

23. No evidence was adduced from Mr Kilgour by affidavit or by his being called in reply at the normal stage of the hearing. But when counsel for the applicant put his submissions, he invited me to proceed on the basis that what Mr Bedak had said was untrue. I pointed out to him that the conversation had not been denied and he then sought leave to reopen his case in order to call Mr Kilgour. Mr Kilgour entered the witness box and denied the substance of both conversations.

24. In pressing for an order concerning the telephone service, counsel for the applicant recognises that its effect would be to cause disruption to the business being operated by the respondent and the two other businesses which currently use that number. However, he submits that the Court ought nevertheless to make the order. He points out that the respondent has conceded that the use by it of the name "Cosmopolitan Security Services" constitutes misleading conduct, contrary to s.52 of the Trade Practices Act 1974, and that the Court ought to take whatever steps are available to avoid the consequences of such conduct. It is not possible for the Court to do anything about the current telephone directory listings; but, says counsel, it would be possible to mitigate the effect of the listings by requiring a suitable recorded message. It is not suggested that the conduct of the respondent affects the satisfactory operation of the applicant's system of monitoring and answering alarms. But it is suggested that the consequence of the telephone directory advertisements is that people who are looking for the applicant may be caused to telephone the respondent. The evidence is that the respondent's telephone number 358-5000 is answered by the word "security" and, it is submitted, people may enter into some commercial arrangement with the person answering the telephone without realising that they have not reached the applicant, as they had intended. In the nature of things, of course, the applicant would rarely find out about such a mistake.

25. In answer to the suggestion that the affect of an order is to cause undue disruption to the respondent, counsel for the applicant puts two separate submissions. First, he submits that the evidence discloses a deliberate plan to steal some of the applicant's business by the use of a deceptively similar name. Counsel argues that the only reason for the transaction with Mr Bedak was to obtain the benefit of the name which he had registered, but was not using, and which was closely similar to that of the applicant. Secondly, or alternatively, counsel points out that Mr Macmillan acknowledged in the course of his evidence that, when he applied for the listing of the number 358-5000 under the name "Cosmopolitan Security", amongst other names, he was aware of the existence of the applicant's business and the nature of its activities. Mr Macmillan said in evidence that he had made a search of business names at the offices of the Corporate Affairs Commission, during which he had discovered the registration of both the names "Cosmopolitan Protection" and "Cosmopolitan Security Services". Mr Macmillan conceded that he was aware of the identity of the owner of the first of the names, that is the applicant, and that he was well aware of the applicant's business activities. Mr Macmillan said he did not recognise the name "John Bedak" as the name of the person whom he had known for many years as "John", the security man at the Cosmopolitan Motor Inn. Mr Bedak said in evidence that, to his knowledge, Mr Macmillan had known his surname for many years prior to 1989. Even if there was no sharp practice, says counsel, Mr Macmillan knowingly took a risk of creating a situation of conflict; his company should not be allowed to escape the necessary consequences of preventing the applicant suffering from his actions.

26. In relation to the first submission, I am not satisfied that there was a deliberate plan to steal some part of the applicant's business or goodwill. It is true that Mr Bedak had nothing to sell other than the registered business name. At first blush, it seems extraordinary that the respondent would have paid money merely for the business name, but Mr Macmillan explained he had in mind extending the business into the Double Bay area and that he thought that the name "Cosmopolitan" was a good name for that area. He referred to the fact that there were several businesses which used that name in the Double Bay area including, notably, the Cosmopolitan Hotel Motel. He further said that he wanted to make an arrangement with Mr Bedak because of his extensive contacts in the Double Bay area and his utility in recruiting clients. Mr Bedak urgently needed money and this was one way of satisfying his need and cementing the relationship for the future. I think that this evidence is not inherently incredible, as also is the explanation for the respondent's delay in actually establishing a Double Bay business.

27. On the other hand, the second submission of counsel has considerable force. Mr Macmillan was aware of the registration of the two names and their potential to mislead or confuse. It would have been easy for him to contact the applicant and ascertain its attitude to the use of the name "Cosmopolitan Security" by his business before applying for the listing of this name against the telephone service 358-5000. It is true that Mr Macmillan gave evidence that Mr Bedak had told him that Mr Kilgour was aware of the registration of the business name. Mr Bedak also deposed to such a conversation but I am not satisfied that there was such a conversation. It is notable that this evidence emerged only during the course of oral evidence, despite the fact that Mr Bedak had dealt in his affidavit with the history of his contact with Mr Kilgour. But even if Mr Bedak had told Mr Kilgour that the name was registered, and that Mr Kilgour had raised no objection, this would not necessarily indicate there would be no objection to the use of that name by the respondent in connection with a much more extensive business in direct competition with the applicant. To put the matter bluntly, Mr Bedak represented no threat to the applicant. He used the name in connection with only two clients, with whom he had an extensive relationship. He had no premises and he did not list the registered name in any telephone directory. There was no likelihood of his use of the name diverting business away from the applicant. But the effect of registration of the name became quite different in the hands of a substantial company, in the security services market, such as the respondent and with the name listed in both telephone directories. Even if Mr Macmillan had believed that Mr Kilgour expressed no objection to the registration of the name by Mr Bedak, it would not have been reasonable for him to assume that there would be no problem if his company took the name and actively used it by advertising in the telephone directory.

28. Having regard to these circumstances, I am of the opinion that the orders sought by the applicant should be granted. I accept that this will cause a measure of disruption and inconvenience to the respondent and to the other companies which use the telephone service. But one or other of the parties has to bear the burden of the fact that the telephone directories cannot immediately be amended. It is more appropriate for that burden to be borne by the party which has caused the problem rather than by the party which is innocent of any wrong doing.

29. However, I think that the respondent should be given some option as to the way in which the problem is addressed. The respondent may prefer to arrange for Telecom to disconnect the service 358-5000 and to allocate to it a new number. If this course is taken, the risk of potential customers of the applicant being unwittingly diverted to the respondent will disappear.

30. I do not know whether it is technically practicable for a recorded message to be installed on telephone service 358-5000, as requested, and yet the service remain useable by the respondent and the other businesses. This would involve a scheme whereby there was delay in answering the service until after the recorded message had been delivered to the caller. If this is technically possible, I see no reason why that course should not be taken. It would achieve the objectives sought by the applicant, but minimise disruption to the respondent and the other businesses. But if, as I think more likely, this course is not technically practicable, the respondent would almost certainly wish to add to the recorded message a reference to one or more new telephone numbers to be allocated to it by Telecom. There could be no reasonable objection to this course being taken.

31. As I have indicated, the respondent now consents to an order that it take all steps necessary to cancel the registration of the business name "Cosmopolitan Security Services". I propose to so order. I propose also to order that within one month the respondent take all steps necessary to be taken by it to arrange for either the cancellation of the telephone service Sydney 358-5000 or the connection to the service of a recorded message stating words to the following effect: "The telephone number of Cosmopolitan Protection is 360-2888". I will add an order that, if the respondent chooses to take the second option, it shall maintain that recorded message until the end of the year 1991, but that this course shall not preclude the respondent using service 358-5000 also for its own purposes or from adding to the recording a reference to any new telephone number or numbers which it might obtain for its own purposes.

32. Counsel asked for the opportunity of considering my orders and reasons before dealing with costs. Accordingly, I reserve the matter of costs and I will hear counsel on that matter in due course.