Re Remy Martin Amerique Inc; Remy Australia Limited; Distillerie Riunite Di Liquore Spa Remy Finance Bv and Remy Blass and Associates Pty Ltd v Carlton Wines Spirits (Aust) Pty Ltd; Carlton United Breweries Limited and John Cawsey and Co (Aust) Pty [1992] FCA 52 (19 February 1992)

FEDERAL COURT OF AUSTRALIA

Re: REMY MARTIN AMERIQUE INC.; REMY AUSTRALIA LIMITED; DISTILLERIE RIUNITE DI
LIQUORE SpA REMY FINANCE BV and REMY BLASS and ASSOCIATES PTY. LTD
And: CARLTON WINES SPIRITS (AUST) PTY. LTD; CARLTON UNITED BREWERIES LIMITED
and JOHN CAWSEY AND CO (AUST) PTY. LTD.
No. V G82 of 1990
FED No. 51
Trade Practices - Contract

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
O'Loughlin J.(1)

CATCHWORDS

Trade Practices - passing off - misleading or deceptive conduct - rival traders - respondents former distributor of applicants' product - material difference in shapes of bottles - similarities in labels and get-up - state of mind of respondents.

Contract - whether "landed cost plus carrying cost" vague and unenforceable - whether the same constitutes a pricing formula.

HEARING

ADELAIDE
19:2:1992

Counsel for the Applicants : Mr N. Young and Mr G. Clarke

Solicitors for the Applicants: Mallesons Stephen Jaques

Counsel for the Respondents : Mr A.C. Archibald QC and Mr D. Shavin

Solicitors for the Respondents: Corrs Australian Solicitors

ORDER

Applicants to file and serve short minutes of order.

All parties be at liberty to speak to the minutes of order.

The matter be listed for mention at 9.30 a.m. on Wednesday 4 March 1992 in Melbourne.
NOTE Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

From about October 1989, the respondents - or one or other of them - have manufactured and distributed their "Valentino" range of three liqueurs; previously, the third named respondent, John Cawsey and Co (Aust) Pty. Ltd. ("Cawsey") had been the principle Australian distributor for the competing "Galliano" brand. The applicants, having acquired the "Galliano" range of liqueurs, have sued the respondents in these proceedings alleging (inter alia) that the respondents have passed off their "Valentino" liqueurs as and for "Galliano" products; they have also accused the respondents of breaching various provisions of the Trade Practices Act 1974 (Cth) ("the TPA") and of breaching an agreement to sell to the second named applicant Remy Australia Limited ("RAL") Cawsey's stocks of "Galliano" products that were on hand on 30 June 1989.

2. During the course of the trial, the parties agreed that initially the issues should be limited; accordingly, by consent, an order was made that the trial of questions of liability arising on the pleadings be determined separately. As a consequence, it was further agreed that issues of relief and questions relating to damages and accounts of profits would, if they arose, proceed at a later stage after publication of these reasons. The delay in publication is a matter of regret. The litigants, believing that they had settled their differences subsequent to judgment being reserved, passed a message to my associate that it would not then be necessary for a judgment to be written and published. Unfortunately, for reasons not known to me, the matter did not "settle" and a request was made that I proceed to compile and deliver my judgment. After a period of some five or six months it was a matter of some difficulty to find the time necessary to re-read all the written material and to compose my findings; I apologise to the parties and to their representatives for my delay in the matter.
2. Events Prior to 1979

3. In 1979, the third named applicant, Distillerie Riunite Di Liquore SpA ("DRL"), a corporation established in accordance with the laws of Italy, was, and had been for some time, the manufacturer of certain alcoholic liqueurs known as "Liquore Galliano", "Sambuca from Galliano" and "Amaretto from Galliano"; those three products are, in appropriate circumstances, referred to in these reasons as the "Galliano" products or the "Galliano" range. DRL was, in 1979, a subsidiary of Foremost McKesson Inc., as was "21" Brands Inc. - the latter corporation being the international distributor of the "Galliano" products.

4. It is relevant to these proceedings to explain the derivation of the word "Galliano". Literature was tendered that told the story of Major Giuseppe Galliano, an Italian soldier who was on active service in 1895 during the Italian-Abyssinian campaign. The story of the Major's defence of the fortress of Enda Jesus, near the ancient city of Makale, was and is, apparently, one of immense national pride for Italians; it is said that "against all odds" he and his small force held out for some 44 days against the advancing Abyssinians. Because of this, the Italian Army was able to regroup and gain a tremendous victory.

5. So great was this victory that Ditta Arturo Vaccari, a distiller from the Italian port of Livorno, decided to commemorate the defence of the fortress in such a way as would be remembered for generations to come. He immortalised the gallant Major by creating a special liqueur which he named "Liquore Galliano".

6. To emphasize the military and national aspects of the liqueur, the main (front) label on the bottle of "Liquore Galliano" carries a depiction of an edifice that is intended to represent the fortress of Enda Jesus whilst the rear label carries a portrait of a 19th century army officer in full ceremonial dress with a plumed headpiece in the Italian colours. The Italian colours of green, white and red also dominate the neckband of the bottle. The Italian connection is further strongly advanced by the endorsement, "Ditta Arturo Vaccari", on the front label in gold, embossed, classical print followed, on the next line, with the word "Livorno" similarly embossed. The words, "Imported from Italy", are printed in ordinary type on the neckband of the bottle and on the front label, the word "Italy" appears in ordinary type immediately after the word "Livorno"; underneath that word there are endorsements that the product is artificially coloured, that it is made and bottled in Italy and, in bolder type, that it is "Produce of Italy". Thus there is a strong and a dominating Italian influence and impact when close regard is had to the visual presentation of the labels on the bottle of "Liquore Galliano". One does not even need to know the story of Major Galliano and Enda Jesus to come to that conclusion.

7. The stories of Sambuca and of Amaretto are neither so colourful nor so interesting. It is said that both are generic names; the Oxford English Dictionary, 2nd Ed. Vol.XIV page 427 includes as one of its sundry definitions of Sambuca this description: "an Italian liqueur resembling anisette". The rear label on the "Sambuca from Galliano" bottle claims that "Galliano blends Anise from the exotic Orient and sunny Mediterranean shores to create a taste worthy of topping off a fine meal". The evidence showed that Sambuca is a popular liqueur; no less than eight sample bottles of Sambuca from different manufacturers were tendered in evidence.

8. The rear label on the bottle of "Amaretto from Galliano" claims that it has "the subtle taste of almonds glorified in an ancient recipe...". Another product, "Amaretto di Saronno", was tendered in evidence (Exhibit A61); the labelling on Exhibit A61 does not disclose the base ingredients of its contents, claiming that "(i)ts taste is so elusive it cannot be described... only enjoyed)". The label romantically claims that the particular liqueur was "created about 1525 by a poor, beautiful young widow, as a gift to the artist Bernardino Luini...". The evidence did not investigate the accuracy of this statement.

9. Although "Sambuca from Galliano" and "Amaretto from Galliano" are later additions to the range of "Galliano" products, the labelling for these two liqueurs followed the established pattern for the labelling for "Liquore Galliano". Thus the fortress is depicted on the front labels on each of these bottles; they also carry, in the same type of lettering, the name "Ditta Arturo Vaccari" and his place of origin, Livorno. The Italian colours likewise appear in the seal on the neck of each bottle and the same references to Italy as appear on the "Liquore Galliano" labels appear on the Sambuca and Amaretto labels. In fact, the labels for all three products are virtually the same save only for the individual names, the individual mix of colours and the short dissertation about each of the liqueurs on the rear label.

10. As the mix of colours is a matter of importance, it is appropriate to describe them at this stage. First, there is "Liquore Galliano". The colour of the liquid is golden; it is complimented by a white label with a gold border on which the word "Galliano" dominates. That word is preceded, in smaller but similar print, by the word "Liquore". Both words are coloured purple with a gold shadow or edging. Underneath them, in red, is the depiction of the fortress with green surrounds (presumably grassy hills); but, on the whole, the colour effect is purple and gold printing on a white label. The Sambuca liquid is colourless and the base colour of its label is dark blue with a silver border. The word "Sambuca" dominates the label in white with a silver shadow or edging and silver and white are the colours that are used for all other printing. The word "Galliano" appears immediately below but it is not quite so prominent as "Sambuca" and not as prominent as the use of the word "Galliano" on the bottle of "Liquore Galliano". The same red fortress and green hills appear in the centre of the label but its strong colour effect is white and silver printing on a dark blue label. Lastly, there is the bottle of Amaretto; it is a brown liquid and it has a matching dark brown label with a gold border. It also has the red fortress and green hills in the centre. Its dominating word is "Amaretto" in white with a gold shadow or edging; the word "Galliano", in similar colours, is underneath and replicates, in position, size and effect, the same word on the Sambuca label. The balance of the printing is either white with a gold shadow or plain gold. Its colour effect is white and gold printing on a dark brown label. All three labels are substantially rectangular.

11. The bottles used for the three "Galliano" products are identical. They come in various sizes but one size is merely a proportionate increase or decrease of another size. It is my finding that this particular bottle shape is unique and distinctive. It is circular at its base and tapers symmetrically to a thin circular neck. The bottle does not have a shoulder or a curve in its lines; it is a very tall bottle. Senior counsel for the respondents described the "Galliano" bottle, quite accurately in my opinion, as having "an eccentricity of configuration". It will be necessary, in due course, to return to bottle shapes and configurations and to labels and get-ups.

12. The respondents admitted in their defence that as at 1 February 1979, Foremost McKesson Inc. was the registered proprietor of the following Australian Trade Marks, each in class 33:
"(a) A168,149, being a representation of an old fortress

against a setting of gently undulating hills beneath
the words 'LIQUORE GALLIANO' in ornate lettering;
(b) B300,281, being the word 'GALLIANO'."

13. The respondents also admitted that on the same date, Foremost McKesson Inc. was the applicant for the registration in Australia of the following Trade Marks, each in Class 33:

"(a) No. 319,353 made on 22 June 1978 being the words 'AMARETTO
DI GALLIANO';
(b) No. 319,382 made on 23 June 1978 being the words 'SAMBUCA DI
GALLIANO'."

14. The fact that the applications referred to the Italian "DI" whereas the labels used the English "from" was not the subject of comment during the course of the trial.

15. On 1 February 1979, Foremost McKesson Inc. entered into an agreement with Cawsey. It was pleaded in paragraph 16 of the statement of claim that under that agreement ("the 1979 agreement") Foremost McKesson Inc:

"...appointed Cawsey to be the licensee in Australia of the
said marks and granted to Cawsey the right to use those
marks on or in relation to such licensed products as Cawsey
with the approval of FMI imported into Australia."

16. Thereafter, and, as I find, as a consequence of the 1979 agreement, Cawsey imported the "Galliano" products into Australia and distributed them throughout the country.
3. The events of March 1989

17. On 9 March 1989, Foremost McKesson Inc. (which had, by then, changed its name to McKesson Inc.) "sold" its interests in the "Galliano" products to the Remy Martin group. So far as it may be relevant to these proceedings, the following transactions should be noted:- first, McKesson Inc. assigned to the first applicant Remy Martin Amerique Inc. ("RMA"), an American corporation, the whole of its right, title and interest in and to the trade marks and all other intellectual property rights in the words or names "Galliano", "Liquore Galliano", "Sambuca di Galliano" and "Amaretto di Galliano"; twelve months later, on 30 March 1990, RMA assigned all its right, title and interest in and to those assets to a Dutch corporation, the fourth applicant, Remy Finance BV ("Remy Finance"). It was also pleaded (and admitted) that on 30 March 1990:

"...RMA assigned to Remy Finance all its rights and
obligations in all agency, distribution, marketing,
representation or other agreements between RMA and third
parties relating to the Galliano products."

18. Although not admitted on the pleadings, it is clear that at some time in March 1989 the second applicant, RAL, was appointed "to be the Australian importer of the Galliano products": (paragraph 22 of the statement of claim). That was to become the first step towards supplanting Cawsey who had, until then, enjoyed the role of principle distributor of "Galliano" products in Australia since 1979. The last of the March 1989 transactions to which reference need be made is that dealing with the fate of DRL. It was pleaded and admitted that, with effect from 9 March 1989, DRL became a subsidiary of a French corporation, Remy and Associes S.A.. The exact relationship between Remy and Associes S.A. and the other corporations in the Remy Martin group is somewhat blurred; it is probably sufficient to think of it as something akin to a holding company (in paragraph 4 of the Statement of Claim it is described as "the principal (sic) shareholder" in each of the first four named applicants). The fifth applicant, Remy Blass and Associates Pty. Ltd., an Australian company, is a subsidiary of the second applicant, RAL, another Australian company.
4. The activities of the respondents in early 1989

19. The sale by McKesson Inc. of the "Galliano" products did not take Cawsey by surprise. Mr Greig, who in 1989 was Cawsey's National Sales and Marketing Manager, deposed in his affidavit of 28 June 1990 that "there were strong rumours in the Australian liquor market place" in early 1989 that "the world wide business relating to 'Galliano' products was to be sold to the Remy Martin organisation". Mr Greig went on to say in paragraph 6 of his affidavit:-

"I realised that if the Galliano business was sold to the Remy
Martin organisation then, because Remy Martin had its own
Australian distributor, Remy Martin Limited, that company would
become the Australian distributor of Galliano products."

20. This view was shared by the respondents' witness, Mr Walker who in 1989 was Cawsey's Finance Manager; it was also conveyed by Mr Greig to the respondents' witness, Mr Martin, Cawsey's Product Manager. Cawsey's reaction to the threat of the Remy Martin group entering the market is best summarised in Mr Martin's affidavit of 28 June 1990.

"Mr Greig told me that he believed that if the company lost
the distribution rights to these products, there would be a
gap in the company's product range which it should take
steps to fill. Accordingly, he instructed me to work upon
the launch of a range of Italian style liqueurs that would
suitably replace the three products then being sourced from
Galliano."
Later in the same affidavit, Mr Martin went on to say -
"Mr Greig told me that the company had narrowed down the
name by which the range was to be promoted to one of two,
namely, 'Gallanto' or 'Valentino'. Of these, I preferred
the name 'Valentino' because, in my opinion, it was both
more readily distinguished from the Galliano names and, as
well, opened greater marketing possibilities to exploit a
'romantic' and 'Italian' theme. In about April or May 1989,
the company decided that the new range of products would be
released under the name 'Valentino'."

21. In his affidavit of the same date, Mr Greig referred to these and other passages from Mr Martin's affidavit and confirmed that they accurately recorded the events to which they related.

22. Mr Greig stated Cawsey's objectives quite clearly. In paragraph 9 of his affidavit, he said:-

"I could see that there would be a gap in the product range
of John Cawsey and Company if the Galliano products were to be
distributed by another company and, as a result, it was
determined that we should produce products equivalent to the
Galliano range namely Liquore Galliano, Galliano Sambuca and
Galliano Amaretto."

23. To this end, he had given instructions to a technician to formulate a product that tasted like "Liquore Galliano; he received a satisfactory sample as early as February 1989.

24. Mr Greig also said in the same affidavit (paragraph 12) that it was his opinion that:-

"... the Galliano range of products had a substantial
Italian influence and I believed that the new range of
products to be produced by John Cawsey and Company would also
need to reflect that Italian influence. This is
particularly so because the Sambuca product was growing in
popularity in Australia and Sambuca and Amaretto are
distinctly Italian products. If the merchandising and
get-up surrounding the new products was not Italian I believed
that the new product range would not get anywhere."

25. According to Mr Greig (paragraph 10 of his affidavit) he wanted "a bottle and package that would be different from that of the Galliano products". It was his belief that the tall elongated "Galliano" bottle was the most distinctive feature of the "Galliano" range; he expressed the belief that "most people identify Galliano products by the bottle shape".

26. Mr Martin's task was to develop the labelling and marketing of Cawsey's new products ("the 'Valentino' products"). It will be necessary to return to the subject of labelling in due course but it is convenient, at this stage, to address and dispose of the subject of the bottle used by Cawsey for the "Valentino" products; it is completely different from the "Galliano" bottle. It is as fat and squat as the other is tall and elegant. It has a pronounced "shoulder" and a neck that is, when compared with its body, thin. I find that no one could possibly confuse the two bottles in any circumstances.

27. Just as it was relevant to explain the history of the word "Galliano", so also something should be said of the evidence relating to the name "Valentino"; it came from the applicants' witness, Mr John Hinde, the well known journalist and film critic. In his affidavit that was sworn on 29 March 1990, Mr Hinde told briefly of the story of Rudolph Valentino. It appears that Valentino was born in Italy in 1895 and that he went to the United States at the age of 18. After spending a short time as a dancer on Broadway, Valentino ultimately settled in Hollywood where he quickly achieved stardom in the silent film "The Four Horsemen of the Apocalypse". This film was followed with the release of the film called "The Sheik". According to Mr Hinde that film is the one for which Valentino is best remembered. Mr Hinde then quoted the following extract from the International Film Encyclopedia by Ephraim Katz:

"Darkly handsome and solidly built yet lithe, Valentino
moved gracefully and gazed at his heroines with a mixture of
passion and melancholy that sent chills down female spines.
To the American woman he represented a symbol of mysterious,
forbidden eroticism, a vicarious fullfilment of dreams of
illicit love and inhibited (sic) passions. But male
audiences found his acting ludicrous, his manner foppish,
and his screen character effeminate. Nevertheless, the
Valentino craze reached new heights with The Sheik (1921),
at Paramount. During the film's exhibition woman fainted in
the aisles and Arab motifs began to infiltrate fashions and
interior design."

28. The respondents sought to create a relationship between Valentino, the actor, and their products in several ways. In addition to the choice of the name, the rear label on each bottle contained a head and shoulders portrait of a man with an Arabian headdress - the so called "Sheik" - whilst the advertising and promotional material for the new range of liqueurs referred, heavily and constantly to "The Great Latin Lover"; (see, for example, Exs.A17, A21, A22 and A28).

29. The case for the respondents was to the effect that their choice of name - "Valentino" - and their method of presentation - e.g. "The Great Latin Lover" - were intended to give their products an association or connection with Italy. This, of course, was literally untrue: there was nothing whatsoever "Italian" about the "Valentino" range of products. In addition, even though much of the respondents' promotional and advertising material was tendered in evidence, the applicants' attack has been directed to the labelling on and the get-up of the respondents' bottles - and the term "The Great Latin Lover" does not appear anywhere on the bottles.

30. Thus it can be seen that long before their distributorship was cancelled, and while they were still representing the "Galliano" products in Australia, Cawsey was using its knowledge and resources to prepare a range of products for ultimate competition in the market place with their principal. In fact, their marketing plan for the "Valentino" products, which was compiled prior to the termination of their distributorship, called for a so-called "hit-list" of the 100 largest Cawsey's customers of "Galliano" products.
5. The events of April 1989

31. Having acquired the "Galliano" products, the Remy Martin group decided, predictably, to have its own Australian distributor. It was the case for the applicants that on 6 April 1989 a meeting took place involving Messrs Terrio and Church who represented the applicants and Messrs Brady and Walker who represented the respondents. I find that this meeting was convened by the applicants; I also find that the representatives of the respondents did not tell the applicants at the meeting or at any relevant time thereafter that they were working towards the production of a competing range of liqueurs. The applicants claimed that at that meeting a notice was given to the respondents' representatives that had the effect of cancelling the 1979 Agreement upon the expiration of 30 days. Whether the notice had that effect or not is unimportant because of the applicants' further claim that an oral agreement ("the 1989 agreement") was made at that same meeting. As pleaded in paragraph 24 of the statement of claim, the applicants' case was that it was agreed that -

"(a) RAL would not commence to distribute the Galliano products
in Australia until 1 July 1989;
(b) Cawsey would continue to distribute the Galliano products in
Australia, and to do so making use of the said marks, until
30 June 1989 only, and only for the purpose of disposing of
its existing inventory;
(c) any remaining inventory as at 30 June 1989 would then be
sold by Cawsey to RAL at landed cost plus carrying cost, and
RAL would purchase that inventory accordingly;
(d) Cawsey would supply to RAL -
(i) 'full depletion', that is to say, details of
sales actually made into the Australian market;
(ii) point of sales data;
(iii) details of past promotions of the Galliano brand;
(iv) sales contest data; and
(e) Cawsey would not, after 30 June 1989, distribute or (save to
RAL as provided above) sell any of the Galliano products,
nor use any of the said marks."

32. The respondents denied that any such agreement was made; they admitted that on or about 6 April "discussions were held between representatives of Cawsey on the one part and RMA and RAL of the other part" but it was their case that those discussions "did not result in a final agreement": (paragraph 24 of the defence). It will be necessary, in due course, to make a close examination of the evidence for the purpose of determining what (if any) bargains were struck at that meeting.
6. The events of June-October 1989

33. It was pleaded and admitted that on or about 15 June 1989, the second respondent Carlton and United Breweries Limited ("CUB") applied to register in Australia various trade marks in Class 33 of the Register in respect of alcoholic beverages, including liqueurs. They were described in paragraph 30 of the statement of claim as follows:

"App. No. 512901 A label in respect of 'Amaretto Liqueur
from Valentino' including a representation
of an old fortress;
App. No. 512902 A label in respect of 'Sambuca Liqueur
from Valentino' including a representation
of an old fortress;
App. No. 512904 'Rudolph Valentino';
App. No. 512905 A label in respect of 'Valentino Liqueur'
including a representation of an old
fortress; and
App. No. 522634 'The Harvey Wallbanger Liqueur'."

34. It was further claimed by the applicants that, as from about October 1989, the respondents "in concert" commenced to manufacture, promote, advertise, market, distribute, sell and supply three liqueurs called "Valentino Liqueur", "Sambuca Liqueur from Valentino" and "Amaretto Liqueur from Valentino"; these three products are the "Valentino" products to which reference has already been made. The respondents have admitted these allegations, save that they have identified the first respondent, Carlton Wine and Spirits (Aust) Pty. Ltd. ("Carlton Wine and Spirits") as the party who sold and supplied the new range of liqueurs.
7. The claims of the Applicants

35. The applicants mounted five separate, but closely connected, claims against the respondents in their statement of claim. First, it was said that, in breach of the 1989 agreement, Cawsey refused to sell to RAL its inventory of "Galliano" stock that remained on hand at 30 June 1989 and that Cawsey, instead, continued thereafter to distribute and sell "Galliano" products from its inventory in Australia. Secondly, it was claimed that the continuing conduct of Cawsey, in selling and distributing the "Galliano" products after 30 June 1989, amounted to infringements of the applicants' trade marks; however that allegation was withdrawn at trial.

36. The remaining three claims were claims of passing off, misleading and deceptive conduct and unconscionable conduct; they were based on numerous allegations, the general effect of which was that the respondents had falsely represented that the "Valentino" products had the sponsorship or approval of the manufacturers of the "Galliano" products, that they came from a source or origin that was connected or associated with, or related to, the source or origin of "Galliano" products, that they were manufactured by and had emanated from a long established manufacturer of liqueurs, that they were Italian in origin or otherwise closely associated with Italy and that they were also closely associated with the late Rudolph Valentino and the fashion house of Valentino.

37. The applicants also pleaded (inter alia) that the respondents falsely represented that "Valentino" liqueur was "the well-known Harvey Wallbanger liqueur". As to this, the respondents replied positively in paragraph 35 of their defence:

"Valentino Liqueur has characteristics and is of a quality,
standard and composition that makes it the ideal liqueur for
Harvey Wallbanger cocktails and in advertising, promoting,
marketing, distributing, selling and supplying the Valentino
products, Carlton Wines and Spirits so represented it. Save
as aforesaid, they deny each and every allegation contained
in paragraph 35 thereof."

8. The witnesses for the applicants and the evidence adduced on behalf of the applicants

38. Three witnesses were called on behalf of the applicants. They were Mr Terrio the Managing Director of the second applicant, RAL, and Mr Church, the Financial Controller of the fifth applicant, Remy Blass and Associates Pty. Ltd. (a wholly owned subsidiary of RAL). The evidence of both men was directed, in the main, to the matters that were discussed at the meeting of 6 April 1989 with Messrs Brady and Walker and to their respective understandings of some of the terms allegedly used at that meeting. The third and final witness called on behalf of the applicants was Mr Druse who, since January 1990, has been the Director of Marketing for RAL. The purpose of his evidence was to give general background information about the liquor trade, the history of "Galliano" products and his observations about the "Valentino" products. In addition, promotional, advertising and other materials dealing with "Valentino" products were tendered through Mr Druse.

39. Each of these men impressed me as a witness of truth. I believe that each of them gave his evidence to the best of his ability and to the best of his recollection. Where their evidence or the evidence of one of them is in conflict with the evidence of a witness for the respondents, I accept their evidence in preference to that proferred on behalf of the respondents; my reasons for coming to that conclusion will, I believe, become apparent when I discuss the evidence that was led on behalf of the respondents.

40. In addition to the affidavits and oral evidence of the three witnesses to whom I have just referred, affidavits from other parties were read as part of the applicants' case. I have already made reference to the affidavit of Mr Hinde; in addition other deponents referred to observations made by them with respect to the location of "Galliano" products and "Valentino" products in liquor stores, to various purchases that they made and to particulars of comparative prices. Through those deponents, photographs of liquor stores were tendered in evidence showing how "Galliano" and "Valentino" products were displayed for sale to the buying public.

41. The applicants read the affidavit of Mr Van Beemen a director of a company that claimed ownership of the mark "Valentino" in its application to ladies' fashions. Mr Van Beemen said that his company had no association with Cawsey and that it had not agreed to support the use of the name "Valentino" with respect to the supply of liqueurs. There was no other evidence to suggest any association or, indeed, any confusion between the use by Cawsey of the name "Valentino" and its usage in the ladies' fashion market and I put to one side the affidavit of Mr Van Beemen. I did not obtain any assistance from the affidavit evidence of Dr. Baxter, a chemist who analysed the various "Galliano" and "Valentino" products, nor from the evidence of Mr Vitali, a Restaurantuer who deposed to an occasion when, having ordered a stock of "Liquore Galliano" from Cawsey, he was supplied with "Valentino" liqueur.
9. The witnesses for the respondents and the evidence adduced on behalf of the respondents.

42. In his opening address (p 227) senior counsel for the respondents submitted that the respondents, as was their right, set out to put into the market place a range of three liqueurs in competition with the "Galliano" range. I agree that they were entitled to compete; but this case deals not with their right to compete but with the consequences of the manner in which the respondents chose to compete. The respondents denied that they set out to duplicate the "Galliano" range; their claim was that they were aiming "to market products in the three best-known categories of Italian products": (the evidence of Mr Greig at p 254).

43. In addition to some affidavit material which, as events transpired, was of no great significance, four witnesses gave evidence on behalf of the respondents. The first of them was Mr P.B. Sampson, a freelance graphic designer; then followed Mr Martin, Cawsey's Product Manager, who had been given the task of working upon the launch of the "Valentino" products and who had the responsibility for label design, Mr Greig who appeared to be Mr Martin's immediate superior and Mr Walker who had attended with Mr Brady at the meeting with Messrs Terrio and Church on 6 April 1989. Mr Brady was not called by the respondents. I know nothing of him other than his employment with the respondents ceased on the next day. As the applicants made no point about his absence as a witness, I take the matter no further.

44. I refer first to the evidence of Mr Sampson. In his affidavit of 12 November 1990 he said that he received a telephone call from Mr Martin "during the early part of 1989". They met and Mr Martin gave him a "brief" to "come up with a product label design that would be consistent with the appeal of the Galliano range of products": (paragraph 3). When questioned about "the brief" that Mr Martin had given him, Mr Sampson agreed in cross-examination, that at an early stage, Mr Martin had given him some labelled "Galliano" bottles "relating to each of the three Galliano products" (p 162). He also agreed that Mr Martin gave him a sample of the proposed "Valentino" bottle and told him that Cawsey believed that "they would soon lose the distributorship" (p 162). He was then asked:

"Yes. And, did he tell you that they wished to produce an
equivalent range of liqueurs to retain the consumer base
that they had formerly sold Galliano to?... Yes, he did.
And he told you that they wanted to produce the same three
range of liqueurs as Galliano had produced?... Yes, he did.
...
Yes. Did he tell you that he wanted the labelling and get
up for the new range to be identifiable with the Galliano
range of products?... Not in those words, no.
But words to that effect?... Yes." (pp 162-163)

45. Mr Sampson also said in evidence that Mr Martin told him that the "Valentino" labels were to be consistent "across the range". This meant that each of the three "Valentino" bottles - like the three "Galliano" bottles, - "was to be a variation on a theme in terms of labelling". According to Mr Sampson, not only did Mr Martin say that the labelling was to be "distinctly Italian", he wanted the labelling to suggest that the product was Italian: he wanted it "to look like it is an imported product": (p 166).

46. Nevertheless, Mr Sampson maintained that he had not been instructed by Cawsey to copy any of the "Galliano" labels and he further claimed that he had not copied any such labels. Mr Sampson denied that his objective "was to create the same overall impression", claiming that he set out to obtain "a similar feel" (p 173).

47. In paragraph 5 of his affidavit Mr Sampson said that "rough mock-up labels" were delivered to Cawsey within 48 hours of his original instructions and that those first mock-up labels included the graphic design of two rolling hills with a sun rising. According to Mr Sampson, Mr Martin was "not particularly pleased" with this design. Mr Martin wanted something "a little more creative", something that was "more Italian in style and feel".

48. Mr Sampson then continued in paragraph 6 of his affidavit in these terms:

"He '(Mr Martin)' referred to the graphic on the Galliano
labels and observed that the graphic on those labels was
supposed to be a fort of some kind although most consumers
would not recognise it as such. He therefore suggested to
me that what we should consider putting on the label was
something which a consumer would readily regard as having
some meaning and he suggested that we have a castle forming
the centrepiece of the graphic design on the label."

49. In cross-examination, counsel for the applicants referred to this passage asking Mr Sampson these questions:

"Well, what is the meaning that the castle has if
incorporated on the label that makes it preferable to having
a design of rolling hills and a rising sun on the label?...
Possibly making it more Italian.
Yes?... And giving it more individuality.
Yes, and how does it make it more Italian other than
mimicking the fort on the Galliano labels?... Well,
Australia is not renowned for its forts and castles, and it
is a European tradition, is it not? So that was the line of
thinking.
Yes, and in suggesting a castle, Mr Martin drew your
attention to the fort that appeared on the Galliano labels,
did he not?... No. No, we were trying to have an individual
graphic.
Yes, well, what I have just put to you was the substance of
what you put in the paragraph, is it not? Mr Martin
referred to the graphic on the Galliano labels, observed
that the graphic on those labels was supposed to be a fort
of some kind, skipping a few words:
He therefore suggested to me that what we should
consider putting on the label was something
which a consumer would readily regard as having
some meaning, and he suggested that we have a castle.
?...Yes, that is right.
He was suggesting that you adopt a graphic that, in a
general way, resembles that which appeared on the Galliano,
was it not?... No, it was to make it more Italian. Not to
make it like the Galliano label.
Yes. Well, to make it more Italian because a well known
Italian product was marketed with a fort on its label?...
No, no. It was because castles and things like that are -
as I said before, they are in the European tradition. They
are from the European background. It gives it that
authenticity, if you like, or trying to get that authenticity.
Trying to suggest the product originates in Europe?...Yes,
in Italy.
Yes?... Yes.
Specifically in Italy in this case?... Yes." (pp 169-170)

50. I reject this passage of Mr Sampson's evidence. On most subjects I believe that he gave his evidence to the best of his ability; but on this subject, I have come to the conclusion that he felt, notwithstanding his protestations to the contrary, that the insertion of the fortress on the "Valentino" labels would either constitute copying the "Galliano" labels or, at least, amount to an attempt to create an association or connection between the "Valentino" labels and products and the "Galliano" labels and products. I will return to this subject at a later stage.

51. Mr Sampson prepared a second design for the mock-up labels; he replaced the rolling hills and rising sun with a castle graphic. He also included, at Mr Martin's suggestion, the "coat of arms" that Cawsey had, from time to time, used on other of its products. But Mr Martin was still not satisfied; he next wanted an endorsement on the "Valentino Liquor" label to the effect that it was "Ideal for Harvey Wallbangers".

52. Evidence was led and documents were tendered that established that a "Harvey Wallbanger" was a cocktail that had traditionally been made with "Liquore Galliano"; but it was not suggested that the applicants had any proprietary or other rights to the name "Harvey Wallbanger" or to its recipe. On the other hand it was argued, and I accept, that there was a well established connection between that name and "Liquore Galliano". I also find that the respondents were well aware of that connection and I regard the deliberate insertion of this endorsement as another example of the respondents' attempts to create an association or connection between their products and the "Galliano" range.

53. According to Mr Sampson, Mr Martin was still not satisfied with the labels. He next said that the neckband of the bottle should be "evocative of the Italian flag", and suggested at a later stage, the insertion of the words "In the Italian Tradition" within the neckband. In addition to the many other matters that were the subject of specific directions by Mr Martin, Mr Sampson also agreed that the colours to be used on the labels were dictated by Mr Martin. Finally, it was specifically put to Mr Sampson:-

"Q. Well, as near as you can achieve, the original
conception which was implemented was that the colours
on each of the three Valentino labels should, as
nearly as you could, match the colours on the
corresponding Galliano label?... Yes." (p 172)

54. I turn next to the evidence of Mr Martin. On the subjects of motivation and intention, I have no faith in what he said. I have formed the opinion that his approach to his task was to devise a range of products and so promote them that they would not merely compete with, but would copy, the "Galliano" range and be passed off as, or as connected or associated with, the "Galliano" products. To do this, he was prepared to go as far as he thought might be legally safe in copying the "Galliano" range.

55. On the subject of the composition of the "Valentino" labels, he sought in evidence to distance himself from the end result, saying:

"I cannot recall exactly what directions I gave Mr Sampson,
I try to avoid giving too many to creative people at that
stage other than the broad parameters of which they have to
operate in." (p 308)

56. That passage was quite untruthful; it was not only contrary to the evidence of Mr Sampson, it was also contrary to Mr Martin's own answers to a series of questions that were then put to him. He was forced to concede, for example, that the colours of the Italian flag and the endorsement "In the Italian tradition" were incorporated on his instructions. He agreed that he gave Mr Sampson the caption that appears in each of the rear labels - "Capture the essence of Italy in this fine Valentino liqueur...." On the other hand he refused to acknowledge that he directed Mr Sampson to include a fort on the label and he denied that he dictated the colour schemes. On the subject of colours, he said that he knew that Mr Sampson was producing labels that were "extremely close in colour background to the Galliano product" (p 310). When asked whether that was what he wanted, he replied:

"No, that is not what I originally wanted but it satisfied
the parameters of the brief."

57. I reject Mr Martin's evidence on these two subjects. I accept Mr Sampson when he says that the idea of a fortress or a castle was Mr Martin's. I am also satisfied that Mr Martin had a direct involvement in the colour schemes of the labels. I accept Mr Sampson's evidence on this subject in preference to Mr Martin.

58. The next witness to be considered is Mr Greig. In his affidavit sworn on 28 June 1990, Mr Greig challenged certain of the opinions expressed by Mr Druse about the principal characteristics of the "Galliano" get-up. For example, Mr Druse thought that "the colour and colour separation of the labels" and "the logo of the castle which appears on each label" were two such characteristics (paragraph 12 of his affidavit sworn 28 March 1990). As to this, Mr Greig said in paragraph 30 of his affidavit:

"... the colours and get up of the Galliano labels are not
distinctive..."

59. He reaffirmed this view in his evidence. When cross-examined on the subject he said that he believed that the label was "virtually immaterial" (p 246). When pressed in cross-examination to explain why then Mr Martin would have submitted sample "Galliano" labels to Mr Sampson Mr Greig said, in effect, that labels, as such, had not been produced to Mr Sampson. Rather, so he said, Mr Martin would have produced bottles of the "Galliano" range so that Mr Sampson would be aware of the colour of the liquids in the bottles. Mr Greig asked facetiously -

"Should we have steamed the labels off?" (p 246)

60. This answer was one of the few occasions when Mr Greig let down his guard. It was contrary to Mr Martin's evidence who had conceded that when he gave the "Galliano" bottles to Mr Sampson, he told him to produce something "which had a feel, a connection... with the Galliano labels". (p 310)

61. When questioned about the presence of a castle on the "Valentino" labels Mr Greig said that the "Galliano" labels, carried "a fortress from Abyssinia" and that there was a distinction between a castle and a fortress. He said that the two buildings were "vastly dissimilar" and that he failed to see any association between them (p 254). Whilst I agree that the two buildings are dissimilar I reject the proposition that there is no association between them. As I have earlier stated, I regard Mr Martin's instruction to Mr Sampson to include the castle as evidence of an attempt by Cawsey to copy the "Galliano" labels. It is also a matter of no small significance to note that just as the edifice in the "Galliano" labels is set off by green hills, so also is the edifice in the "Valentino" labels set off by green trees.

62. Mr Greig denied that an attempt had been made to copy the "Galliano" labels. He was then pressed for his comments about the artwork (Ex.A48) for the competing Amaretto labels; on this subject his answers were confusing and unconvincing. At first he said that "(t)here are certainly noticeable differences..." (p 250), asserting in answer to subsequent questions, that the difference was "substantial in nature" and that "the overall impression (was) different". He took the position that his company's labels were "different and noticeably so". However, in an apparent contradiction to those answers, he stated, shortly afterwards, that with respect to the "overall impression between the Valentino Amaretto lettering and the Galliano Amaretto lettering" there was "a reasonable degree of similarity". (p 251). The plain truth of the matter is that, on a casual glance, when not viewed side by side, the three "Valentino" labels bear striking resemblances to the three "Galliano" labels. I find that Mr Greig was well aware of this and his attempts to avoid this issue did not impress me.

63. There was another area in Mr Greig's evidence where he seriously contradicted himself. In his marketing plan Ex.A3, Mr Martin had advocated retention by Cawsey of sufficient "Galliano" stock so that Cawsey could continue supplying its customers with liqueurs until such time as it was ready to launch the "Valentino range". By this means there would be no hiatus in supply and hence it would be to Cawsey's commercial advantage. In evidence Mr Martin said that Mr Greig had seen and approved his marketing plan and Mr Greig confirmed this. Yet under cross-examination Mr Greig shied away from this particular topic saying -

"... from a marketing point of view it is disadvantageous..."
(p 245)

64. That was not true. Cawsey increased its holdings of "Galliano" stock in the first half of 1989. Aware of the fact, early in that year, that it might lose its franchise, one is entitled to wonder why it would be that stock on hand in May 1989 was about 15% higher than at February 1989. (See Ex.A75). It is true that there was a need for forward orders to be placed overseas well in advance but the evidence suggests that the increases in the orders were made after the rumours began to circulate that McKesson Inc. was about to sell the "Galliano" range. It was an essential part of the marketing plan that "Galliano" stocks should be built up to a size that would permit the respondents, for their commercial benefit, to continue marketing "Galliano" until they were ready to launch "Valentino".

65. The final witness for the respondents was Mr Walker.

66. His evidence was that at the meeting of 6 April 1989 there had been some discussion about a hand-over of stock but nothing firm had been agreed: rather it had been left for him and Mr Church to discuss the matter further. He agreed that Mr Terrio had referred to 30 June 1989 as the proposed date of transfer and that Mr Terrio was the person "who made the statement concerning the price (at) which the stock was to be transferred..." (pp 355-6). Asked to recount what Mr Terrio had said, he replied:

"The words would have included landed costs and holding or
handling charges."

It was put to him -

"... (Did) he '(Mr Brady)' say to Mr Terrio - I accept the
formula - landed cost plus holding charges as the price at
which the goods are to be transferred?... No, I do not
recollect him saying that?" (p 356)

67. He maintained that Mr Brady's reaction was to "leave it for the financial people to work out" (p 356). He said that the arrangement was that Mr Church would contact him; as Mr Church did not, Mr Walker assumed that RAL had changed its mind about acquiring the stock.

68. In cross-examination (p 358) Mr Walker claimed that the arrangement that had existed between Cawsey and McKesson Inc. since 1979 was not, "a distribution arrangement"; instead, it was, so he said, "a registered user agreement of the trade mark". He was then asked whether this distinction was the basis for him saying that the industry practice (on termination of distribution agreements) was inappropriate to the facts of this case. He replied: "that is correct", acknowledging, as I find, that there is an industry practice that applies on the termination of distribution agreements. Indeed Mr Walker acknowledged as much in paragraph 14 of his affidavit of 13 November 1990 wherein he said:-

"I do not agree that industry practice on termination of
distribution agreements and arrangements was appropriate or
relevant in the circumstances if we were not strictly
dealing with such a termination in this case."

But Mr Walker, when pressed, was unable or unwilling to identify the relevant industry practice that applied on the termination of distribution agreements, claiming that each case had to be treated on its merits. Later he contradicted his statement in his affidavit and his earlier evidence by saying "In my experience there was no common industry practice."

69. When it was put to him that, effectively, he had contradicted the contents of his affidavit his reply was that he was "merely trying to put (his) view of Mr Terrio's contention that there was such a common industry practice." (p 358). I reject these sections of Mr Walker's evidence. No matter the correct legal classification of the 1979 agreement, the evidence was quite clear that a distribution arrangement had existed between McKesson Inc. and Cawsey for 10 years; in refusing to acknowledge the existance of such an arrangement, Mr Walker contradicted his fellow witnesses and the obvious truth of the matter.

70. In paragraph 20 of his affidavit of 28 June 1990 Mr Walker acknowledged that the Remy Martin group had asked at the meeting of 6 April 1989 "for 'depletion' information from John Cawsey and Co. in relation to Galliano products, namely monthly sales by brand, by State in the 12 twelve month period prior to 30 June 1989". When this subject was addressed in cross-examination Mr Walker first acknowledged that he understood what was meant by the request for "full depletion information"; then it was put to him:

"And you knew it meant monthly sales by brand, by State, in
the 12 month period prior to 30 June 1989?"

The words in that question were the exact words taken from paragraph 20 of Mr Walker's affidavit. Nevertheless he could not bring himself to give a simple affirmative answer. Instead he said -

"It meant the sales history by brands, possibly by State - I
was not aware of the full detail of it. I was aware of the
conceptual nature of it." (p 359)

When his attention was drawn to his apparent understanding of the term in paragraph 20 of his affidavit, he replied, weakly,

"Yes I was trying, in that paragraph, to define the word
'depletion' - my concept of it."

I am at a loss to understand this example of needless equivocation.

71. In the same paragraph of his affidavit Mr Walker said:-

"I do not recall Mr Terrio asking for past promotional
material, sales contest data or any other similar material."

72. In paragraph 7 of his second affidavit of 13 November 1990 he said -

"I do recall that Mr Terrio made a general request for
point of sale material, information on past promotions,
sales contests and the like."

This contradiction in the contents of his two affidavits was put to him in cross-examination. He was forced ultimately to confess that he had "difficulty" in recalling precisely what Mr Terrio said about those matters. (p 360)

73. Mr Walker acknowledged that Mr Terrio ultimately contacted him about the stock transfer and he also acknowledged that he then told Mr Terrio, for the first time, that Cawsey would not be selling any surplus stock to RAL. Pressed to explain why Cawsey had changed its stand he said -

"The things that changed my mind were that (there) were no
minutes of the meeting of 6 April, there was no follow up by
letter or phone call, there was no visit by Mr Church,
there was absolutely no indication of any intention to go
ahead with the proposition." (p 362)

74. He agreed that he could have pursued the matter but, when asked why he did not do that, he said -

"I did not feel it was my position to do so."

75. It is obvious that Mr Walker could have contacted Mr Church, Mr Terrio and any one else at RAL if he had wanted to - and it is equally obvious that he would have contacted them if it had suited him. But it did not suit him. Consider Cawsey's position. They had decided, probably by February or March 1989, to launch their own product in the market place but it would not be ready until at least September. Meanwhile they had customers to service - customers who they hoped would become customers of their new products. It would be bad for business if there was a gap in supplies - hence the build up of "Galliano" stocks to carry them through until "Valentino" was ready. It is a matter of regret that a business house, which is part of such a well known national group, would engage in such subterfuge but the clear inference - indeed the only inference - is that Cawsey did not intend to sell its "Galliano" stock to RAL. The only matter of doubt is whether Cawsey ever did have that intention. In fairness to the absent Mr Brady, who was the senior Cawsey representative at the meeting and to whom Mr Terrio attributed a willingness to sell, I will limit my finding to a change of intention on the part of Cawsey on a date subsequent to 6 April 1989.

76. In paragraph 18 of his affidavit of 13 November 1990 Mr Walker recounted his version of one aspect of his conversation with Mr Terrio at the meeting of 6 April. The following is extracted from his affidavit:

"What was said was to the following effect:
Terrio: 'What stock is likely to be transferred as at 30
June 1989?'
Walker: 'I cannot predict what amount of stock would be
left at that time'."
Mr Walker then went on to depose in the same paragraph:
"There was simply no way of predicting what, if any, stock
of Galliano branded products would be left as at (30 June
1989)." (Emphasis added)

77. This last statement was not read as part of the respondents' case but it still formed part of the witness' statement on oath. It was patently misleading. Mr Walker was forced to concede in cross-examination that he could have made "a reasonably accurate estimate" (p 367) because he had access to the figures for stock-on-hand, goods on order, past sales and sales projections. To depose on oath in November 1990 in terms that used the phrase "if any", thereby suggesting, the possibility at least, that there might not be any stock on hand in June 1989 rests most uneasily with his admission in cross-examination that in May 1989 he knew that Cawsey "had no hope" of selling its accumulated stock by the end of the financial year (p 364). I have come to the conclusion that Mr Walker was not a truthful witness.

78. I have no hesitation in deciding therefore that where there is any conflict in the evidence between Messrs Terrio and Church on the one hand and Mr Walker on the other hand I reject Mr Walker's evidence and prefer that of Messrs Terrio and Church.
10. Findings of fact with respect to the meeting on 6 April 1989

79. The case for the applicants in contract, as pleaded in paragraph 24 of the statement of claim, has already been set out; I will not repeat it save to comment that in the statement of claim the terminology used was "landed cost plus carrying cost".

80. In evidence, the terminology was inexact; different witnesses referred to "carrying costs", "handling costs" and "holding costs" and at times the word "charges" replaced the word "costs". I do not however understand the respondents to rely on such variations in terminology. Their attack is more fundamental. Their case was simply put: no concluded and binding contract was ever achieved between the representatives of the litigants because what took place at the meeting of 6 April was incomplete and was not intended to be complete - the most that could be said of the discussions at the meeting was that they amounted to an agreement to make an agreement.

81. For ease of convenience I will hereafter refer to the case for the applicants in the language used by the draftsman of the statement of claim - that the agreement for sale and purchase was concluded upon the premise that RAL would pay to Cawsey an amount equal to "landed cost plus carrying cost" relative to stock that Cawsey had on hand at the close of business on 30 June 1989.

82. It was Mr Terrio's evidence that a concluded agreement had been reached by the parties on 6 April 1989. His evidence at page 102 was -

"The concept that we would pick up all inventory and pick up
Cawsey's handling costs, carrying costs, was stated, and
that Denis Church and Ken Walker would work out what that
was to be."

83. In his affidavit that was sworn on 28 March 1990, Mr Terrio deposed:

"15. I then said 'I will buy back inventory which you were
holding now or in 30 days time' and Mr Walker
responded 'that does not help with our profit for this
year' or words to that effect.
16. Mr Brady then said 'our financial year ends 30 June
and we would like to be able to sell exclusively until
then and to retain profit' or words to that effect.
17. I said 'I have no problem with that - you can sell
your existing inventory until 30 June at normal
trading prices if you let us buy whatever inventory is
not sold by then at land(ed) cost plus carrying cost'
or words to that effect.
18. We then discussed this proposal and I said 'at 30 June
I will also want to have full depletion, p.o.s.
manufacturing, past promotions, sales contest data and
any similar material' or words to that effect.
19. I also said 'at that date there are to be no
outstanding invoices' or words to that effect.
20. One of the Cawsey representatives then said 'what
about accounts that trade exclusively with us - will
we still be able to buy Galliano from you at
"wholesale" price to service those accounts?' or words
to that effect and I indicated that I foresaw no
difficulty with that."

84. Mr Walker answered those assertions in his affidavit that was sworn on 28 June 1990. The relevant sections were:

"14. The meeting discussed the future of the stock. Mr Brady
told Mr Terrio that he would like the opportunity to sell all of
the stock on hand because the profit from the stock was required
to meet the John Cawsey and Co. budget for 1989.
15. On being asked by Mr Terrio what that meant, Mr Brady
told him that he would like until 30 June 1989 to sell off
the remaining stock of Galliano products.
16. I recall that Mr Brady said 'I would like it if you gave
me until 30 June 1989 to sell the stock, that would be
sufficient', or words to that effect.
...
21. In return, Mr Terrio said that RAL would not sell any
competing brands in the market place until 30 June 1989."

85. Although Mr Walker did not expressly state anywhere in his affidavit that Mr Terrio agreed to Mr Brady's request (as summarised in paras 14-16) the clear inference is that he did so agree and that he thereafter volunteered, as stated in paragraph 21, that RAL would not sell "Galliano" products while Cawsey was quitting its stock.

86. Based only on the affidavit evidence of Mr Walker, and putting to one side questions of legal rights and obligations, it is abundantly clear from this evidence that RAL would have left that meeting with a belief, honestly and reasonably held, that a commercial transaction had been concluded. That transaction, shortly expressed, allowed Cawsey until 30 June to quit its stock and restrained RAL from entering the market until 1 July. But, of course, RAL says that there was more; it says that a further bargain was struck whereby Cawsey would sell and RAL would buy all unsold stock on hand at the close of business on 30 June but that in breach of that bargasin Cawsey continued to sell. The subject of when sales by Cawsey actually ceased is a matter that need not be investigated at this stage. It is sufficient to note that they continued to sell "Galliano" products until they were able to launch their "Valentino" products in about October 1989 and that other smaller sales continued for some months hereafter.

87. Mr Walker said that Mr Terrio contacted him at Cawsey's in late June or early July 1989, but it was Mr Terrio's evidence that he placed the call "in June, mid to late June ..." (p 102). I accept the evidence of Mr Terrio in preference to that of Mr Walker for the following reasons. First, RAL stayed out of the market place until 1 July because it had acceded to Cawsey's wish that it have the opportunity of maximising its profits for the financial year ending 30 June 1989. Secondly, it was consistent with such an agreement having been struck in April that RAL did not have, as Mr Terrio pointed out, any stock on hand prior to 1 July (p 103). Therefore the probabilities strongly favour the conclusion that RAL made an approach to Cawsey prior to 30 June with a view to completing the transfer of surplus stock as at that date.

88. The failure by Cawsey to hand over stock as at 30 June meant that Remy Martin had minimal stock to sell in the month of July. I find that RAL acted in the belief that there would be a handover of stock by Cawsey on 30 June 1989. Otherwise, it could have, and in my opinion would have, placed orders in April or May for the delivery of stock in July and thereafter. There is evidence that RAL was able to effect some sales in July but I find that its sales would have been greater if Cawsey had made the handover of stock as anticipated or, alternatively, if Cawsey had made it clear at the meeting of 6 April - or indeed at any time thereafter - that it did not intend to transfer the stock to RAL.

89. I find that Cawsey and RAL struck a commercial bargain as a result of the meeting of their representatives on 6 April 1989. It was in terms as pleaded in the statement of claim and, in particular it included, by necessary implication, a term for the transfer of surplus stock at landed cost plus charges that have variously been referred to as "carrying", "holding" and "handling". I further find that Mr Walker well knew and understood that such a commercial arrangement had been struck. Unfortunately I am compelled to find that, well knowing that such a commercial arrangement had been struck, for reasons best known to himself, he thought it in Cawsey's best interests to deny the making of such an arrangement.

11. Do the findings of fact constitute a concluded contract?
"It is a first principle of the law of contracts that there
can be no binding and enforceable obligation unless the
terms of the bargain, or at least its essential or critical
terms, have been agreed upon. So, there is no concluded
contract where an essential or critical term is expressly
left to be settled by future agreement of the parties.
Again, there is no binding contract where the language used
is so obscure and incapable of any precise or definite
meaning that the court is unable to attribute to the parties
any particular contractual intention".

(Thorby v Goldberg [1964] HCA 41; (1964) 112 CLR 597 at 607 per Menzies J. quoting from the dissenting judgment of Sugerman J. in the Court below).

90. Senior counsel for the respondents relied on this and other authorities in similar terms to argue that the undoubted differences in the evidence of the witnesses meant that there was no concluded bargain. I have already rejected the respondents' primary contention which was to the effect that the parties had merely had general discussions and had delegated to Messrs Walker and Church the responsibility of identifying and reaching agreement on all material matters. The respondents' secondary submission was that the expression "landed cost plus carrying cost" was vague, uncertain and not capable of precise definition. It is not necessary to examine the evidence in detail; it is sufficient to note that no two witnesses had a common view on what would, and what would not, be included in the expression "landed cost plus carrying cost". This led the respondents to rely on remarks such as those of Viscount Dunedin in May and Butcher Ltd v The King, reported as a note to Foley v Classique Coaches Ltd (1934) 2 KB 17 at 21:

"To be a good contract there must be a concluded bargain,
and a concluded contract is one which settles everything
that is necessary to be settled and leaves nothing to be
settled by agreement between the parties. Of course it may
leave something which still has to be determined, but then
that determination must be a determination which does not
depend upon the agreement between the parties."

91. The reports are littered with examples of contracts that have been held to be unenforceable because of vagueness or uncertainty. In Hall v Busst [1960] HCA 84; (1960) 104 CLR 206 the High Court concluded that the grantee of an option could not enforce it because the option price was too indefinite; the contract had specified a fixed sum to which should be added "the value of all additions and improvements to the said property since" (a particular date) from which there was to be subtracted "the value of all deficiencies of chattel property and a reasonable sum to cover depreciation of all buildings and other property on the land". In Stocks and Holdings (Constructors) Pty. Ltd. v Arrowsmith [1964] HCA 74; (1964) 112 CLR 646, the High Court had to consider a contract involving the intended sale and purchase of broad-acre land when the purchase price was to be calculated by multiplying an agreed sum by the number of allotments in the approved plan of sub-division. As the contract contained no provision requiring the vendor to give his approval to the purchaser's subdivisional plans for the land, the High Court concluded that no price had been agreed which was either certain or capable of being rendered certain; accordingly, the document was not binding as a contract of sale.

92. But the applicants maintained that these authorities did not fairly represent the circumstances of this case because, so it was argued, the facts of this case established the existence of a "pricing formula"; acceptance of this proposition would mean that there was no uncertainty about the price that RAL would have had to pay to Cawsey for the "Galliano" stock that Cawsey had on hand at the close of business on 30 June 1989. As counsel for the applicants pointed out, correctly, no-one suggested any uncertainty about the formula: the adumbrated difficulties related to questions surrounding the application of the formula to the circumstances of the case. In support of his proposition that a concluded "pricing formula" applied, counsel referred to and relied upon the decision of the High Court in The Council of the Upper Hunter County District v Australian Chilling and Freezing Co. Ltd [1968] HCA 8; (1967) 118 CLR 429. That case dealt with an agreement for the supply of bulk electricity. One of the provisions of the agreement was in these terms:-

"It is agreed that during the term of this agreement if the
supplier's costs shall vary in other respects than as has
been hereinbefore provided the supplier shall have the right
to vary the maximum demand charge and energy charge by
notice in writing to the purchaser."

The argument centred on whether the expression 'supplier's costs' was so ambiguous as to strike down the contract as void for uncertainty. In upholding the enforceability of the contract, Barwick C.J. said -

"I do not think there is any uncertainty or for that matter
ambiguity in the expression "supplier's costs" in cl.5,
however wide may be the area of possible disagreement as to
its denotation in a particular case. A contract to build a
bridge at cost could not, in my opinion, be held void for
uncertainty: it could not properly, in my opinion, be said
to be meaningless: nor is it, in my opinion, ambiguous.
Endless might be the arguments pro and con as to whether or
not in marginal cases some item of expenditure is as claimed
a cost, or as to how much of an expenditure is a cost, of
the particular activity. But to my mind, generally
speaking, the concept of a cost of doing something is
certain in the sense that it provides a criterion by
reference to which the rights of the parties may ultimately
and logically be worked out, if not by the parties then by
the courts. There are no elements in the circumstances of
this contract to deprive the concept of that certainty."
(p 437)

93. Earlier his Honour had pointed out (p 436) that a contract of which there can be more than one possible meaning or which, when construed, can produce in its application, more than one result is not therefore void for uncertainty. With respect, this seems highly appropriate to the facts of this case as I have found them. Businessmen had met and struck a bargain; the Court should strive to maintain and enforce that bargian wheresoever possible. Acknowledging, as I do, that there may be some difficulties in arriving at the final decision, it nevertheless seems to me to be abundantly clear that the parties intended by their bargain that Cawsey was not to be out of pocket when it transferred over its surplus stock; it was to be paid all the costs that it had incurred in acquiring and carrying that stock. It was not to make a profit but it was not to suffer a loss.

94. The remainder of the terms of the agreement as pleaded in paragraph 24 of the statement of claim were not seriously disputed. I hold that the parties entered into a valid and enforceable contract on 6 April 1989 and that the contract was still on foot on 30 June 1989; the material terms of that contract are set out in paragraph 24 of the statement of claim. I further hold that, in breach of its obligations as contained in that agreement, Cawsey refused to transfer over to RAL its remaining inventory as at 30 June 1989; it also failed to supply to RAL the "full depletion" details and the other information that it had promised. I further hold that Cawsey, in breach of the agreement, continued to sell and distribute the "Galliano" range of products after 30 June 1989.
12. Passing off

95. The characteristics of the tort of passing off are stated in the decision of the House of Lords in Erven Warnink Besloten Vennootschap v J. Townend and Sons (Hull) Ltd. (1979) AC 731. At p 742, Lord Diplock said:

"... later cases make it possible to identify five
characteristics which must be present in order to create a
valid cause of action for passing off: (1) a
misrepresentation (2) made by a trader in the course of
trade, (3) to prospective customers of his or ultimate
consumers of goods or services supplied by him, (4) which is
calculated to injure the business or goodwill of another
trader (in the sense that this is a reasonably foreseeable
consequence) and (5) which causes actual damage to a
business or goodwill of the trader by whom the action is
brought or (in a quia timet action) will probably do so."

96. A year later, the Privy Council addressed the subject of passing-off in Cadbury Schweppes Pty. Ltd. v Pub Squash Co. Pty. Ltd. (1980) 2 NSWLR 851. Lord Scarman, in delivering the judgment of the Privy Council referred to various United Kingdom authorities, including Warnink v Townend (supra) and the decision of the High Court in Hornsby Building Information Centre Pty. Ltd. v Sydney Building Information Centre Pty. Ltd. [1978] HCA 11; (1978) 140 CLR 216. His Lordship then said:-

"The width of the principle now authoritatively recognized
by the High Court of Australia and the House of Lords is,
therefore, such that the tort is no longer anchored, as in
its early 19th century formulation, to the name or trade-mark
of a product or business. It is wide enough to
encompass other descriptive material, such as slogans or
visual images, which radio, television or newspaper
advertising campaigns can lead the market to associate with
a plaintiff's product, provided always that such descriptive
material has become part of the goodwill of the product."
(p 858)

Later his Lordship added at p 859:

"As always in a 'passing-off' action the ultimately critical
question was one of fact. The critical question in this
case proved to be: were customers or potential customers
led, by the similarities in the get-up and advertising of
the two products, into believing that 'Pub Squash' was the
Cadbury-Schweppes product. Or, if no deception be proved,
was there a real probability of deception?"

97. In the particular circumstances of the "Pub Squash" case, the trial Judge had concluded that the public was not deceived. Bearing in mind that in this present case there was evidence, including photographs, of the location of "Valentino" and "Galliano" products on the shelves of liquor stores in close proximity to each other, it is of some interest to note the following findings of fact of the trial Judge that are recorded at p 859 in the judgment of Lord Scarman and separately, in edited form, at p 867-8 of the same report:

"There is no doubt that if the two cans (or two bottles) are
placed side by side, it can readily be seen that they are
different. This, however, is not necessarily enough, for
one must take into account the nature of the market-place
and the habits of ordinary purchasers: (see e.g. Saville
Perfumery Ltd v June Perfect Ltd (1941) 58 RPC 147, at
pp 174, 175; Tavener Rutledge Ltd v Specters Ltd (1959)
RPC 83 at pp 88, 89). As I have pointed out earlier, it
is not uncommon, albeit that it is not the universal
practice, both in supermarkets, and in mixed businesses and
milk-bars which have self-selection display refrigerators
for products such as 'Solo' and 'Pub Squash' to be displayed
alongside each other; and in those cases in which they are
not, they are, nonetheless displayed in close proximity to
each other. Further, as I have pointed out, the purchase of
a soft drink is often a casual transaction. These two
features of the market seem to explain most, if not all, of
the cases of incorrect selection of which evidence has been
given.... But even accepting, as I do, that by reason of the
nature of the market-place and of the habits of purchasers,
mistakes are likely to, and do, in fact, occur, the evidence
would seem to demonstrate that in most, although not all,
cases in which there has initially been a wrong selection by
a customer, or the wrong product has been offered by the
shopkeeper, the error has been recognized before the
purchase has been completed.... This being so, it seems to
me that the defendant has sufficiently differentiated its
product from that of the plaintiffs'."

98. Unlike the "Pub Squash" case, consumer evidence (for or against) deception or confusion was not led in this case. However, such evidence, whilst it might be of assistance, is not essential, for it can never be conclusive: Hogan v Pacific Dunlop Ltd (1988) 83 ALR 403 at 415 per Gummow J. and, on appeal, sub.nom. Pacific Dunlop Ltd v Hogan [1989] FCA 185; (1989) 87 ALR 14 at 22 per Shepherd J. The explanation for this is to be found in the speech of Lord Diplock in General Electric Co (of U.S.A) v General Electric Co. Ltd. (1972) 1 WLR 729 at 738:

"But where goods are sold to the general public for
consumption or domestic use, the question whether such
buyers would be likely to be deceived or confused by the use
of the trade mark is a 'jury question.' By that I mean:
that if the issue had now, as formerly, to be tried by a
jury, who as members of the general public would themselves
be potential buyers of the goods, they would be required not
only to consider any evidence of other members of the public
which had been adduced but also to use their own common
sense and to consider whether they would themselves be
likely to be deceived or confused.
The question does not cease to be a 'jury question' when the
issue is tried by a judge alone or on appeal by a plurality
of judges. The judge's approach to the question should be
the same as that of a jury. He, too, would be a potential
buyer of the goods. He should, of course, be alert to the
danger of allowing his own idiosyncratic knowledge or
temperament to influence his decision, but the whole of his
training in the practice of the law should have accustomed
him to this, and this should provide the safety which in the
case of a jury is provided by their number. That in issues
of this kind judges are entitled to give effect to their own
opinions as to the likelihood of deception or confusion and,
in doing so, are not confined to the evidence of witnesses
called at the trial is well established by decisions of this
House itself."

99. It is not essential for the applicants to prove that the respondents misrepresented the "Valentino" products as being the applicants "Galliano" liqueurs. As Lord Jauncey explained in Reckitt and Colman Products Ltd v Borden Inc. (1990) 17 IPR 1 at 18:

"It is sufficient that he misrepresents his goods in such a
way that it is a reasonably foreseeable consequence of the
misrepresentation that the plaintiff's business or goodwill
will be damaged."

100. Thus the facts in Hogan v Pacific Dunlop (supra), which dealt, in the main, with a television advertisement for shoes and a claimed relationship to the lead character in the film "Crocodile Dundee", led Gummow J. to emphasise that the passing-off action -

"...is concerned with misrepresentation, and with a
particular type of misrepresentation involving use of the
image or indicium in question to convey a representation of
a commercial connection between the plaintiff and the goods
or services of the defendant, which connection does not
exist." (p 426)

This emphasis upon a commercial connection can be traced back, indirectly, to the remarks of Goff L.J. in H.P. Bulmer Ltd and Showerings Ltd v J. Bollinger SA and Champagne Lanson Pere et Fils (1978) 95 RPC 79 at 117 -

"Not every kind of connection claimed will amount to passing
off; for example if one says that one's goods are very
suitable to be used in connection with the plaintiff's. On
the other hand in my view there can be a passing off of
goods without representing that they are actually the
well-known goods which the plaintiff produces or a new line which
he is supposed to have started. It is sufficient in my view
if what is done represents the defendant's goods to be
connected with the plaintiffs in such a way as would lead
people to accept them on the faith of the plaintiff's
reputation...
Of course, in order to found a case in passing off the
plaintiff must prove that the name or get-up on which he
relies has acquired a reputation with the public, or some
appreciable section or part of the public, as denoting his
goods or business, though it is not necessary that they
should know who he is or who carries on the business, or
even where...."

101. There is no doubt in my mind - indeed, the respondents did not argue to the contrary - but that each of the "Galliano" products, that is "Liquore Galliano", "Sambuca from Galliano" and "Amaretto from Galliano" had acquired, well before 1989, a reputation with an appreciable section of the public; eschewing any idiosyncratic knowledge on the subject, the oral evidence and the literature that was tendered established that each of the three products had an established place in the liqueur market. "Liquore Galliano" was, the most popular but "Sambuca from Galliano" was the fastest growing. Sales information suggested that, in comparative terms, "Amaretto from Galliano" was not quite as popular - a factor that was used against the respondents by posing the question why did they produce an Amaretto if not to copy the "Galliano" range and thereby deceive intending purchasers?

102. Reverting back then to the five characteristics of a passing-off action, it would seem to me that it is only the first which requires a detailed consideration - that is, have the respondents engage in a course of conduct that relevantly amounts to a "misrepresentation"? Referring to their conduct in neutral terms, it can be said to be that of a trader operating in the course of trade; it can also be said, in neutral terms, that the conduct was directed towards prospective customers or ultimate consumers. Thus the second and third tests have been met.

103. It was the case for the respondents that they were competing lawfully with the applicants; even so, it was a reasonably foreseeable consequence that, as a competetor, because of their previous involvement in the liquor industry as the distributor of "Galliano" products, their entry into the market would injure the business or goodwill of the applicants; this was a strong commercial connection. I hold therefore that the fourth test has been met. There is evidence about the extent of the sales of "Valentino" products since they entered the market; coupled with the evidence that Cawsey made use of its knowledge about its former "Galliano" customers, I find that there was a probability that the distribution by the respondents in about October 1989 and thereafter of the "Valentino" products with their labelling and get-up would have had a deleterious effect on the applicants' reputation, goodwill or business. Notwithstanding that their acquisition of the "Galliano" range was recent, the applicants were entitled to protect the substantial reputation and goodwill then enjoyed by the name "Galliano" and its products. The fact that Cawsey, in its ten years as the leading Australian distributor, may have played a major part in the establishment of that reputation and goodwill in this country may be ironic but it is not otherwise to the point. I am prepared to find, on the balance of probabilities that the fifth test has been met in that the respondents' entry into the market caused actual damage to the business or goodwill of the applicants. The evidence quantifying that damage was, by arrangement between the parties and with the consent of the Court, deferred pending the publication of these reasons.

104. There remains then the first question which has now become the critical question - did the conduct of the respondents amount to a misrepresentation? I have already described the "Galliano" bottle and the "Galliano" labels. Their combination is distinctive but so also is the individual bottle. The respondents conceded that the "Galliano" bottle was distinctive but argued that there was nothing special, unique or distinctive about the labelling. In my opinion, the "Galliano" labelling is synonymous with the "Galliano" products and has been so for at least 40 years. The perception by the respondents of the "Galliano" range of liqueurs is best identified by quoting from one of their own documents, the Marketing plan, Ex.A3:-

"Liqueur Galliano is a branded product which virtually
'owns' its niche within the liqueur market (similar in a way
one might say Cointreau, for example, 'owns' a particular
area). There are products in the market of a similar type
(e.g, Strego) but because of a strongly established
positioning and reason-for-being for the Galliano product
(due solely to the efforts of JCC over some years) the brand
has become synonymous with particular usages, especially
within certain cocktails. This is to say that Liqueur
Galliano does not have much in the way of direct and/or
'active' competition.
The contrary applies to Galliano's Sambuca and Amaretto.
The establishment of these products has revolved around
'piggy-backing' upon the success of liqueur Galliano and the
efforts of JCC in offering additional support for the
products above a below-the-line, particularly in on-premise
situations.
This, in conjunction with the fact that there are a number
of alternative brands on the market, would suggest that
Galliano's Sambuca and Amaretto are more vulnerable to
competitor activity."

105. Despite the concession that is contained in the first sentence of the quoted passage, some attempt was made by the respondents to diminish the distinctiveness of "Liquore Galliano" by tendering a variety of liqueurs, including a bottle of "Strega", all of which had, in common, the same golden colour of "Liquore Galliano". But in my opinion that is all that the tenders proved: - that is, that a variety of named liqueurs possessed the same colour as "Liquore Galliano". What, one might ask, is achieved by proving that some whiskys and brandys have the same colour? No detailed evidence was led on the subject of taste: I therefore have no evidence, other than colour, that would enable me to find that they or any of them were similar. I see no reason why I should not make findings in terms that are consistent with the contents of the respondents' Marketing plan.

106. First, I find that "Liquore Galliano" is a product that virtually "owns" its niche within the liqueur market; the supplementary findings that follow are that it is thereby unique and that its unchanged labelling and get-up have become distinctive and synonomous with its uniqueness. The second finding is that "Sambuca from Galliano" and "Amaretto from Galliano" have "piggy-backed" upon the success of "Liquore Galliano". Notwithstanding the existence of competing brands, the supplementary finding is that the "piggy-backing" has had the effect of making their labelling and get-up also distinctive - independently of the shape of the bottle.

107. It is now necessary to assess the respondents "Valentino" products together with their labelling and get-up. First, it should be repeated that the bottles are very different; it would be impossible for any person to pick up one bottle thinking that it was the other. Secondly, the name "Valentino" is prominently displayed on the front label of each bottle. Thirdly, there is the depiction of the "Sheik" on the rear label (in place of the 19th century soldier). This difference is of less importance because the rear labels cannot be seen by a casual observer who is looking at products on the shelves in a liquor store; however, it is of greater prominence in some of the respondents' advertising and promotional material. There are, of course, other differences; for example, there is no reference on the front label to Ditta Arturo Vaccari, to Livorno or to Italy (except on the neckband where there appears the endorsement "In the Italian Tradition"). Indeed, there is a endorsement at the base of each label "Produce of Australia". On the small rear label of each of the three "Valentino" bottles, there is this endorsement:

"Capture the essence of Italy in this fine Valentino
liqueur. Sipped neat, over ice, within a favourite
cocktail, or even as part of a special recipe this unique
blend of flavours suits any occasion."

108. No such endorsement appears on the back of the "Galliano" bottles. There then follows, on the back of each "Valentino" bottle the name "John Cawsey and Company" with its address but without an explanation about the role (if any) that it plays in the manufacture or distribution of the liqueur.

109. I turn then to consider the similarities in the competing products and their labels; first, there are the colours of the "Galliano" products: "Liquore Galliano" and "Amaretto from Galliano" are respectively golden and brown, but both are artificially coloured. "Sambuca from Galliano" is colourless; the three competing "Valentino" lines appear to the untrained eye to have the same colours. Originally the base colour for each competing label also appeared to be identical. Hence, "Liquore Galliano" and "Valentino Liqueur" were white, both Sambucas were dark blue and both Amarettos were dark brown. The respondents changed the Sambuca label to black and the Amaretto label to red late in 1989, following complaints from the applicants but I regard those changes of colour as being insubstantial and having no weight in the determination of the final issues in this case.

110. Just as the "Galliano" bottle has a neckband of the Italian colours of banded green, white and red so also does the "Valentino" bottle. However, its colour pattern reaches upwards diagonally, from left to right whereas the "Galliano" colours are banded horizontally. In the white section of the neckband, the "Galliano" seal contains the words "Imported from Italy"; in the white section of the "Valentino" neckband are the words "In the Italian Tradition".

111. The most striking similarity is the combination of the colours on each of the three competing labels. Just as the "Liquore Galliano" label has purple and gold printing on a white background so also has the label of "Valentino Liqueur" purple and gold printing on a white background. The word "Valentino", printed in purple and edged in gold matches the word "Galliano" which is likewise printed in purple and edged in gold. This striking similarity permeates through to the two Sambucas and the two Amarettos. Even the subsequent change in colours of the "Valentino" labels for the Sambuca and the Amaretto was insufficient to remove this similarity. The coloured reproductions of the labels in the schedule to these reasons give some indication of the similarities but the photographic process was unable to reproduce the gold shadow or edging of the "Valentino" labels. The reproductions contradict therefore some of the actual colour similarities.

112. The next issue that must be addressed was the decision of the respondents to incorporate a castle or a fortress on the front of each label. Whether the depiction should properly be described as a "castle" or a "fortress" makes little difference for it is a fact that when the "Galliano" edifice is viewed side by side against the "Valentino" edifice they are quite different. The matter of importance rests, rather, in the explanation offered by the respondents' witnesses for the presence of such an edifice on their labels. The respondents have claimed that the presence of the fortress emphasised the Italian look that they were endeavouring to achieve in the project.

113. However, no witness pointed to any aspect of the edifice as Italian in concept or design. If then the fortress was not included in the label to give it an Italian look, what was the true explanation for its inclusion? The answer, in my opinion, is not difficult to find. The respondents were very annoyed at the loss of the "Galliano" franchise. They felt (and perhaps rightly so) that they had built up the range of "Galliano" products in Australia and that they were being unfairly treated. I accept the evidence of Messrs Terrio and Church that initially Mr Brady and Mr Walker were hostile at the meeting of 6 April 1989 and were threatening legal action against the Remy Martin group. It was in that atmosphere - one of pique and anger - that the respondents conceived the idea of entering the market in headlong competition with and opposition to the "Galliano" range of products. They were determined to do anything that they could to promote "Valentino" at the expense of "Galliano".

114. But they were not fools; they knew, for example, that it would be impossible to use the same uniquely shaped bottle; they also knew that their labels could not be exact copies of the "Galliano" labels. I find that the respondents set about the task of filching as much of the "Galliano" label and get-up as they thought would be safe to withstand legal challenge. I further find that the use of an edifice on the labels of the "Valentino" products with its green surrounds was a practical manifestation of the respondents' attempt to establish a connection or an association with the "Galliano" range. The changes that they made were limited to those that were obvious and necessary; they could not use the shape of the bottle or the name "Galliano". Nevertheless, it was their deliberate intention to make use of as many elements in the "Galliano" range as they thought might be done with safety. The respondents were intent on using their prior knowledge about the "Galliano" products and the purchasers and consumers of the "Galliano" liqueurs to establish a connection between "Valentino" and "Galliano". Indeed, in the case of "Liquore Galliano", the respondents well knew that it dominated its market and that the only way in which they could establish "Valentino Liqueur" would be to connect it with or associate it with "Liquore Galliano".

115. If the respondents were so intent on capturing an Italian "feel" for their products one is entitled to wonder why did they not choose some obviously recognizable Italian scene or concept such as a Venetian Gondolier or the Ponte Vecchio or Romulus and Remus and the wolf or the Trevi Fountain - the choice is endless - yet they choose a castle which might have come from any part of medieval Europe or England. I reject the proposition: I note that the most that counsel for the respondents could say of it was that it had a European look. I find that the insertion by the respondents of a castle or a fortress on their labels was an attempt by them to attract the eye of the intending purchaser in the hope that he or she would mistake the respondents' product for the "Galliano" range; it was a poorly disguised attempt to establish an association or connection with the applicants' products.

116. The insertion of the fortress was a serious mistake; not only did it fail to achieve the Italian look, but also its presence destroyed the bona fides of the respondents' case.

117. The respondents made a further mistake when they inserted on the "Valentino Liqueur" label the caption "Ideal for Harvey Wallbangers". As I have already said, the applicants had no proprietary rights to this cocktail, to its name or to its recipe and it is always a possibility that "Valentino Liqueur" might be used "ideally" in the recipe for "Harvey Wallbangers"; in another context, on another label, there would have been nothing wrong with this caption. But when one stands back, ignoring minutiae, there is an overwhelming sense of association - as if the proprietors of "Liquore Galliano" might have decided to market their product in a different bottle with a different name. That is the context in which the reference to "Harvey Wallbangers", combined with the colour combination on the label and the presence of the fortress, achieves a marked degree of importance and reacts adversely upon the respondents.

118. I therefore find that the respondents embarked upon the manufacture and distribution of their "Valentino" range with improper motives and lacking good faith. Although such findings do not prove, simpliciter, passing-off, they offer, at least, a firm indication that it was the respondents' expectation that the passing-off would be successful. This point was discussed and explained in the joint judgment of Dixon J. (as he then was) and McTiernan J. in Australian Woollen Mills Ltd v F.S. Walton and Co. Ltd. [1937] HCA 51; (1937) 58 CLR 641 at 657:

"The rule that if a mark or get-up for goods is adopted for
the purpose of appropriating part of the trade or reputation
of a rival, it should be presumed to be fitted for the
purpose and therefore likely to deceive or confuse, no
doubt, is as just in principle as it is wholesome in
tendency. In a question how possible or prospective buyers
will be impressed by a given picture, word or appearance,
the instinct and judgment of traders is not to be lightly
rejected, and when a dishonest trader fashions an implement
or weapon for the purpose of misleading potential customers
he at least provides a reliable and expert opinion on the
question whether what he has done is in fact likely to
deceive. Moreover, he can blame no one but himself, even if
the conclusion be mistaken that his trade mark or the get-up
of his goods will confuse and mislead the public."

119. Lord Simonds expressed himself more positively on this subject in Office Cleaning Services Ltd v Westminster Window and General Cleaners Ltd. (1946) 63 RPC 39 at 42:

"Confusion innocently caused will yet be restrained. But if
the intention to deceive is found, it will be readily
inferred that deception will result. Who knows better than
the trader the mysteries of his trade."

120. In Telmak Teleproducts (Australia) Pty. Ltd. v Coles Myer Ltd. [1989] FCA 272; (1989) 89 ALR 48 Wilcox and Einfeld JJ. explained the position in these terms:

"... proof of the fact that a trader has deliberately copied
the name or "get-up" of a rival does not itself establish a
contravention of s.52 "(of the TPA)" or a passing off of
goods. The proof has evidentiary value only. But the
evidentiary value is significant. The courts have long
recognised that traders best know their trade." (p 69)

Their Honours then referred to and relied upon certain passages from the judgments in Australian Woollen Mills v Walton and Office Cleaning Services v Westminster Window, which included the sections therefrom set out above.

121. Unfair completion is not an actionable tort in Australia; that led Deane J., with whom the other members of the Court agreed, to refer, in Moorgate Tobacco Co. Ltd v Philip Morris Ltd. [1984] HCA 73; (1984) 156 CLR 414, to the -

"... adaptation of the traditional doctrine of passing off
to meet new circumstances involving the deceptive or
confusing use of names, descriptive terms of other indicia
to persuade purchasers or customers to believe that goods or
services have an association, quality or endorsement which
belongs or would belong to goods or services of, or
associated with, another or others." (p 445)

122. In this present case the relevant "indicia" is the combination of first, the range of three products, secondly the respective colours of each product, thirdly, the dominant colours of the three labels (including the neckbands) and fourthly, the incongruous fortress with its green surrounds; to these can be added, in the case of "Liquore Galliano", the addition of the endorsement "Ideal for Harvey Wallbangers" on the label of "Valentino Liqueur". I find that this labelling and get-up as used by the respondents would induce or persuade ordinary members of the public (as distinct from business houses that may have been wholesale or retail purchasers) to believe that the "Valentino" products have an association, quality or endorsement which belongs to or is associated with the "Galliano" products.

123. The evidence and my own observations satisfies me that it is a real probability that a significant number of uninformed members of the public would be deceived and confused. It is not necessary to prove that substantially all persons would be deceived nor is it a defence to a passing-off action to prove that some were not deceived: Saville Perfumery Ltd v June Perfect Ltd and F.W. Woolworth and Co. Ltd (1941) 58 RPC 147 at 175-6; Norman Kark Publications Ltd v Odhams Press Ltd (1962) 79 RPC 163 at 168. Such conduct amounted, in my opinion, to a misrepresentation. The degree of confusion exceeds that which might occur in the casual act of initially choosing one brand and then noticing the mistake: c.f. the "Pub Squash" case. The facts in this case can also be distinguished from those in Stuart Alexander and Co (Interstate) Pty. Ltd. v Blenders Pty. Ltd. (1981) 37 ALR 161. There the brand names of the two competing lines of coffeee, "Moccona" and "Andronicus", were held to be well known; they were "prominently displayed" on every label (p 167 per Lockhart J.). Here the name "Valentino" was prominently displayed but it was an unknown name in the market place for liqueurs.

124. This is a case of "deceptive similarity", a term used by Windeyer J. in The Shell Co of Australia Ltd. v Esso Standard Oil (Australia) Ltd. [1963] HCA 66; (1963-1964) 109 CLR 407, a trade mark case. Although that decision was reversed on appeal, the authority of his Honour's statement of principle as set out below was not questioned. His Honour observed at p 415:

"On the question of deceptive similarity a different
comparison must be made from that which is necessary when
substantial identity is in question. The marks are not now
to be looked at side by side. The issue is not abstract
similarity, but deceptive similarity. Therefore the
comparison is the familiar one of trade mark law. It is
between, on the one hand, the impression based on
recollection of the plaintiff's mark that persons of
ordinary intelligence and memory would have; and, on the
other hand, the impressions that such persons would get from
the defendant's television exhibitions. To quote Lord
Radcliffe again: 'The likelihood of confusion or deception
in such cases is not disproved by placing the two marks side
by side and demonstrating how small is the chance of error
in any customer who places his order for goods with both the
marks clearly before him.... It is more useful to observe
that in most persons the eye is not an accurate recorder of
visual detail, and that marks are remembered rather by
general impressions or by some significant detail than by
any photographic recollection of the whole': de Cordova v
Vick Chemical Co (1951) 68 RPC at p 106. And in Australian
Woollen Mills Ltd v F.S. Walton and Co. Ltd. [1937] HCA 51; (1937) 58 CLR
641 Dixon and McTiernan JJ. said (at p 658): 'In deciding
this question, the marks ought not, of course, to be
compared side by side. An attempt should be made to
estimate the effect or impression produced on the mind of
potential customers by the mark or device for which the
protection of an injunction is sought. The impression or
recollection which is carried away and retained is
necessarily the basis of any mistaken belief that the
challenged mark or device is the same'."

125. In considering this question of deceptive similarity and the likely reaction of buying members of the public one must further bear in mind the problems attendant upon imperfect recollection. As Gummow J. said in 10th Cantanae Pty. Ltd v Shoshana Pty. Ltd. (1987) 79 ALR 299 at 315:

"Plainly, his Honour was correct in bearing in mind that one
answers these questions not by close ex post facto analysis,
but more by a perception of the usual manner in which
ordinary people behave, bringing with them but an imperfect
recollection of the appearance of Sue Smith in 1983 or her
appearance at an earlier date."

126. The approach with respect to deceptively similar trade marks that was favoured by Windeyer J. in Shell v Esso was adopted by Wilcox J. in Dial An Angel Pty. Ltd. v Sagitaur Services Systems Pty. Ltd. (1990) AIPC 90-687 in respect of a claim under ss.52 and 53 of the Trade Practices Act. In my opinion, it applies with equal force in a passing-off action. I therefore conclude, for the reasons set out above that a cause of action in passing off has been established.
12. Section 52 Trade Practices Act

127. The authorities have made it clear that the purposes and objects of s.52 do not always coincide with the law of passing off; the former serves to protect the public from conduct that is misleading or deceptive or that is likely to mislead or deceive whilst the latter protects the rights of the individual. Thus the scope and effect of s.52 extends far beyond the right of one trader to protect his proprietary interests. On the other hand, there are numerous instances of a trader enlisting the aid of the section and obtaining injunctive and other relief against his rival because of his ability to satisfy the Court that his rival's conduct has failed to meet the standards required by s.52. Hornsby Building Information Centre v Sydney Building Information Centre (supra).

128. In Taco Company of Australia Inc. v Taco Bell Pty. Ltd. [1982] FCA 136; (1982) 42 ALR 177 at 202 it was said that conduct could not be categorised as misleading or deceptive "unless it contains or conveys, in all the circumstances of the case, a misrepresentation". However, recent authorities have explained that this may not always be the case. For example, Lockhart J. as a member of the Full Court in Bridge Stockbrokers Ltd. v Bridges [1984] FCA 391; (1984) 4 FCR 460 said:-

"It is obvious that mere confusion or uncertainty is not the
same as misleading or deceptive conduct; but, in some cases
a corporation's conduct which causes confusion or
uncertainty in the mind of the public may, I suggest,
constitute misleading or deceptive conduct within s 52
notwithstanding that the conduct does not constitute a
misrepresentation in the sense in which that expression is
understood at this stage in the development of s 52."
(p 474)

129. Let it be assumed for example, that contrary to my earlier finding, the conduct of the respondents in this case did not amount to a representation; should that be the case, then the applicants would fail in their passing-off action as the making of a representation is an essential element of that tort. But even if the applicants' action for passing-off were to fail, it would not follow, as a matter of course, that the respondents' conduct was not misleading or deceptive or likely to mislead to deceive. There are no formal boundaries to the interpretation of the word "conduct". Lockhart J. (with whom Burchett and Foster JJ. agreed) pointed out in Henjo Investments Pty. Ltd. v Collins Marrickville Pty. Ltd. [1988] FCA 40; (1988) 79 ALR 83 at 93:-

"Misleading or deceptive conduct generally consists of
representations, whether express or by silence; but it is
erroneous to approach s52 on the assumption that its
application is confined exclusively to circumstances which
constitute some form of representation."

130. In Murray Goulbourn Co-operative Co. Ltd. v New South Wales Dairy Corporation [1990] FCA 32; (1990) 92 ALR 239 the Full Court explained the remarks of Lockhart J. in Bridge's case in these terms:-

"The circumstance postulated by Lockhart J which could
contravene s 52 was the intentional element of the conduct
which rendered it deceptive conduct, even though the conduct
viewed objectively would only be confusing. The extension
to the generally accepted notion of misleading and deceptive
conduct encompassed by his Honour's remarks had as the
essential element the ingredient of intentional conduct,
conduct designed to cheat, ensnare or mislead." (p 258)

131. In the Murray Goulbourn case, the trial judge had expressly rejected the allegation that the challenged party's conduct was of that character; in the present case I have reached the opposite conclusion; the relevant conduct was the manner in which the respondents prepared and presented the labels and the get-up on the "Valentino" bottles. Those labels and that get-up were intentionally used; it was intended that the "Valentino" range would be directed at the customers and consumers, being members of the buying public, to whom Cawsey had earlier promoted the "Galliano" products; the respondents had no compunction about using information, confidentially acquired by them in their capacity as representatives of the former "Galliano" owners, against the interests of the new owners; they set about presenting a line of products in such a way as to pass them off as connected or associated with the applicants' products.

132. But if, contrary to my findings, their conduct did not achieve, as a matter of law, the hallmarks of a passing-off, it did, at the least, cause confusion and it was the respondents' intention to do so. I find that the respondents set out to "cash in" on "Galliano's" reputation intending, so they hoped, to sail as close to the wind as they might without attracting legal liability. In this regard they failed. Either through need or greed - or both - they went too far; no complaint could have been made of the bottle shape that they adopted; the applicants complained about the use of the name "Valentino" but failed to substantiate their complaint (the existence of a ladies fashion house of the same name was not seriously pursued as a basis for complaint and neither the evidence nor my own observations could seriously lead to a finding that it has been represented that the late film actor favoured or supported the respondents' range of liqueurs). On the other hand, the respondents could have, with ease, devised colour combinations for labels and pictorial scenes and printing far removed from the labels and get-up that had been used on the "Galliano" products for so many years and still achieve their desired Italian feel. Instead, they deliberately set out to use as much of the opposition's labelling and get-up as they thought safe - intending thereby to confuse a substantial part of the market. Standing back and viewing the matter objectively, I have concluded that they went too far. Their conduct was, at the least, misleading or deceptive. In the words of the Full Court in the Murray Goulbourn case there was, in this case "the ingredient of intentional conduct, conduct designed to cheat, ensnare or mislead."

133. The applicants pleaded the existence of numerous false representations in paragraph 35 of the Statement of Claim; they withdrew some and the evidence did not support others. However, I am satisfied that each of the following was made out, that is to say: in advertising, promoting, marketing, distributing, selling and supplying "Valentino Liqueur", "Sambuca from Valentino" and "Valentino Amaretto" the respondents have represented to the general buying public in Australia (a) that each of the "Valentino" products comes from a source or origin that is connected or associated with, or related to, the source or origin of the "Galliano" products and (b) that each of the "Valentino" products is manufactured by and emanates from a long established manufacturer of liqueurs. (See paragraphs 35(b) and (c) of the Statement of Claim). However, I fall short of extending those representations to the cans of "Harvey Wallbangers" that are sold by the respondents and I do not consider that the representations would have had the same adverse effect upon retail and wholesale business houses.

134. Some specific comment should be made about the applicants' complaints concerning the use by the respondents of the name "Harvey Wallbangers". Exhibit A.62 is a 375 ml can of "Valentino Harvey Wallbanger". The applicants do not market a similar product, but as Exs.R9 and R10 establish, a New Zealand manufacturer produces products called "Harvey Wallbanger Cruisers" and "Harvey Wallbanger". The can, Ex.A62 makes no reference, either to "Valentino Liqueur" or to "Liquore Galliano" and none can be inferred. There was no evidence to suggest that the respondents (as was alleged in sub-paragraph 35(k) and 35(ll) of the statement of claim) represented that -

"(k) Valentino Liqueur is the well known "Harvey Wallbanger" liqueur;
...
(ll) The canned product "Valentino Harvey Wallbanger"
is a genuine Harvey Wallbanger cocktail or
liqueur made by using Liquore Galliano."

135. The applicant further complained that the respondents falsely represented that:

"Valentino Liqueur has characteristics, and is of a quality,
standard and composition, that makes it the ideal liqueur
for 'Harvey Wallbanger' cocktails."

136. Neither side led any evidence on that subject. There were a few incidental remarks about quality but counsel made it clear that the question of "taste" would not be litigated. I am therefore unable to say whether "Valentino Liqueur" has the characteristics attributed to it. The applicants have not made out their complaints about the cocktail.
13. Sections 52A, 53 and 55 - Trade Practices Act

137. The applicants, in addition to their charge of misleading or deceptive conduct, levelled a series of six specific accusations against the respondents. I do not intend to address them in any detail. If I am correct in my finding that the respondents engaged in conduct that was misleading or deceptive, no useful purpose will be served by dissecting that conduct into one or more of the six "compartments" that are referred to in paragraphs 37 and 39 of the statement of claim. On the other hand, if I am wrong, then those six allegations would automatically fall. For completeness however, I note that the applicants abandoned their claim under s.55 and did not pursue their claim under sub-s.53(eb) (c.f. sub-paras 37 (f) and (e) of the Statement of Claim).
14. Conclusions

138. It is clear that the findings that I have made justify judgment being entered for one or more of the applicants; the question of the specific identity of the successful party or parties has not been addressed by counsel and will now have to be considered; likewise, neither counsel addressed the subject of the particular respondent or respondents against whom judgment and orders should be entered and made. That question can also be addressed on the resumed hearing of these proceedings which I now list for mention in Melbourne on Wednesday 4 March 1992 at 9.30 a.m. I direct the applicants to file and serve by Monday 2 March 1992 short minutes of order to reflect the findings that I have made and I reserve to all parties liberty to speak to the minutes. On 4 March I will also hear submissions from the parties about the nature and extent of the continued prosecution of these proceedings; in addition; I will, on that date if required, fix dates for the resumed hearing.