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Federal Court of Australia |
Last Updated: 9 February 2007
FEDERAL COURT OF AUSTRALIA
Miller v JLCS Pty Ltd [2007] FCA 74
CONTRACT – agreement that
applicants could operate restaurant using respondents’ intellectual
property – whether agreement
gave property rights or mere licence –
relevance of subsequent conduct to existence of agreement – whether
licence terminable
at will – whether licence repudiated
TRADEMARKS – Trade Marks
Act 1995 – registration in name of one applicant only –
whether applicants entitled to registration together with respondents –
unjustified threats
Held:
Respondents granted applicants licence to operate restaurant using
respondents’ intellectual property. Applicants had no interest
in trade
mark. Registration to be removed accordingly.
Trade Marks Act 1995 (Cth),
s 129
Partnership Act 1958 (Vict), s 28(1)
Patents,
Designs, and Trade Marks Act 1883 (UK), s 32
Patents and Designs Act
1907–1919 (UK), s 36
Trade Marks Act 1955 (Cth), s
124
Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410
cited
BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; (1977) 180
CLR 266 cited
Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539
applied
Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR
153 cited
Integrated Computer Systems Pty Ltd v Digital Equipment Corp
(Aust) Pty Ltd (1988) BPR 11,110 cited
Vroon BV v Foster’s
Brewing Group Ltd [1994] 2 VR 32 cited
Geebung Investments Pty Ltd v
Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551; (1995) Aust
Contract Reps |P90-059 cited
James Miller & Partners Ltd v Whitworth
Street Estates (Manchester) Ltd [1970] AC 583 cited
Husain v O & S
Holdings (Vic) Pty Ltd [2005] VSCA 269 approved
The Aramis [1989]
1 Lloyd’s Rep 213 cited
Pacific Brands Sports and Leisure Pty Ltd v
Underworks Pty Ltd [2005] FCA 288 cited
The Commonwealth v
Verwayen [1990] HCA 39; (1990) 170 CLR 394 applied
Challender v Royle (1987) 4
RPC 363 followed
Pittevil & Co v Brackelsberg Melting Processes
Ltd (1931) 49 RPC 23 followed
J H Coles Pty Ltd v Need [1933] HCA 48; (1933) 49
CLR 499 distinguished
Need v J H Coles Pty Ltd [1931] HCA 55; (1931) 46 CLR 470
cited
Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 applied
Shevill v
Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 applied
Progressive
Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 applied
D W
McLauchlan, "Contract Formation, Contract Interpretation, and Subsequent
Conduct" (2006) 25 University of Queensland Law Journal 77
D R
Shanahan, Australian Trade Mark Law and Practice (1982)
HAROLD
MILLER AND SAUL MILLER v JLCS PTY LTD, LIONEL MILLER AND JOEL
DISTILLER
VID 367 OF 2005
SUNDBERG J
9
FEBRUARY 2007
MELBOURNE
|
AND:
|
THE COURT ORDERS THAT:
1. Leave be granted to the applicants to amend their amended application to seek a declaration that they are entitled to operate the City restaurant under the name Squires Loft.
2. It be declared that the applicants are entitled to operate the City restaurant under the name Squires Loft.
3. The application otherwise be dismissed.
4. The Registrar of Trade Marks be directed to remove Australian Registered Trade Mark No 918180 from the Register.
5. It be declared that the applicants have no grounds for making the threats set out in par 26 of the defence and cross-claim.
6. The applicants be restrained from continuing to make such threats or any similar threats.
7. The cross-claim otherwise be dismissed.
8. The applicants pay the respondents three quarters of their costs of the claim.
9. The respondents pay the applicants one half of their costs of the cross-claim.
Note: Settlement
and entry of orders is dealt with in Order 36 of the Federal Court
Rules.
|
BETWEEN:
|
HAROLD MILLER
First Applicant SAUL MILLER Second Applicant |
|
AND:
|
JLCS PTY LTD
First Respondent LIONEL MILLER Second Respondent JOEL DISTILLER Third Respondent |
|
JUDGE:
|
SUNDBERG J
|
|
DATE:
|
9 FEBRUARY 2007
|
|
PLACE:
|
MELBOURNE
|
REASONS FOR JUDGMENT
THE PLEADINGS
Applicants’ claim
1 The first applicant (Harold) is the father of the second applicant (Saul) and the second respondent (Lionel). The third respondent (Joel) is not related to them. Since 11 November 2002 Lionel and Joel have been directors of the first respondent (JLCS). JLCS does not significantly feature in the case, and where I refer to Harold, Saul, Lionel and Joel as a group, I will call them ‘the parties’.
2 Harold and Saul claim that on or about 19 June 1997 they entered into an agreement with Lionel and Joel concerning the establishment of steak restaurants under the ‘Squires Loft’ trading name (the agreement). There were said to be the following terms of the agreement:
(a) the parties would be equal partners in any venture of establishing further steak restaurants under the Squires Loft name through licence or franchise arrangements;
(b) Harold and Saul would open the first licensed Squires Loft restaurant in the City of Melbourne (the City restaurant) which would be the flagship restaurant and would provide a centralised kitchen for preparing sauces for the City restaurant, Lionel and Joel’s Squires Loft restaurant in South Yarra (the South Yarra restaurant) and any future licensed or franchised restaurants;
(c) all licensed or franchised restaurants trading under the name Squires Loft would adopt common menus and products, pricing of products, stationery, serviettes and corporate livery;
(d) all restaurants trading under the name Squires Loft would jointly promote and market other such restaurants through advertising, references on menus, business cards and stationery;
(e) the purchasing of products for use in the licensed restaurants would be undertaken centrally to enable greater purchasing power, although each would pay for its own products used;
(f) the parties would jointly own all intellectual property related to the venture, including the name Squires Loft, and
(g) no party would make use of that intellectual property without the consent of the others.
3 The agreement is said to have been made in discussions between the parties on or about 19 June 1997, at which time they agreed on the terms in [2](a) to (f). In the alternative it is alleged that term (f) is to be implied as a matter of business efficacy. Term (g) is said to be so implied.
4 It is then alleged that the following things were done in accordance with the terms of the agreement:
(a) in or about June 1997 Harold and the manager of the South Yarra restaurant designed a logo incorporating the name Squires Loft (the logo), the cost of creating the artwork for which was paid for by the parties;
(b) on 14 October 1997 Harold and Saul, through their company Squires Loft City Steakhouse Pty Ltd (SLCS), opened the City restaurant in Goldie Place, Melbourne;
(c) on 2 November 1998 four companies controlled respectively by Harold and Lionel, Lionel and Joel, Stan Friedman and Rohan Day, entered into a joint venture arrangement pursuant to which they opened a steakhouse in St Kilda which traded under the name Squires Loft (the St Kilda restaurant);
(d) between 14 October 1997 and 16 March 2005 SLCS made the kitchen of the City restaurant available to support and supply products to the South Yarra restaurant, and, for the period during which it operated, to the St Kilda restaurant;
(e) in late 1999/early 2000 the parties paid out the other two investors in the St Kilda restaurant;
(f) the parties jointly provided operational support and assistance, training of staff, product development and the supply of sauces and condiments to the St Kilda restaurant until its closure in May/June 2001;
(g) in May 2001 Harold and Saul paid half the costs of Garry Williamson of the Franchise Centre, who advised the parties in relation to franchising the Squires Loft business;
(h) from May to September 2001 the parties shared the costs of employing a graphic artist to develop a new look and image for the menus and logos used on business cards and stationery, menus, table napkins, advertising and corporate clothing for the City and South Yarra restaurants;
(i) the logo was used on all business cards and stationery, menus, table napkins, websites, advertising and corporate clothing for the City, St Kilda and South Yarra restaurants, and
(j) Saul, with the knowledge of the other parties, registered a trade mark for Squires Loft, with effect from 28 June 2002.
5 Harold and Saul allege that in breach of the agreement Lionel, Joel and JLCS have asserted that they are the owners of the trade mark and all intellectual property rights in relation to the Squires Loft restaurants, that JLCS has licensed the mark without their consent, and that it, Lionel and Joel have threatened to grant further licences to third parties to use the mark without Harold and Saul’s consent. Particulars of these breaches assert that JLCS has granted a six month licence to The Grill Room Pty Ltd to use the trade mark and/or the logo in respect of its St Kilda restaurant and an option to open four further restaurants, and that from at least 9 March 2005 the mark has been used in connection with The Grill Room’s business.
6 Harold and Saul then plead that throughout the period from 19 June 1997 to March 2004 Lionel and Joel represented to them that the parties would
• be equal partners in a venture of opening restaurants under the Squires Loft name through licence or franchise arrangements
• be joint owners of all intellectual property related to the venture, including the name Squires Loft, and
• not make any use of such intellectual property without the consent of all the other parties.
7 Harold and Saul assert that the representations were false and misleading in that Lionel and Joel had no bona fide intention to act in accordance with them. Particulars of falsity allege that in March 2004 Lionel gave Harold a consultancy agreement between JLCS and SLCS, and told Harold that he and Joel required SLCS to sign the agreement in order to continue operating a steakhouse restaurant using sauces and meats supplied by Top Cut Industries Pty Ltd (Top Cut), and that in March 2005 Lionel and Joel caused JLCS to grant the licence to The Grill Room to trade using the name Squires Loft in its advertising and on its serviettes and stationery.
8 It is then alleged that in March 2005 JLCS represented to The Grill Room that it was the owner of the trade mark or in a position to grant licences to use the name Squires Loft in relation to restaurants in Australia, and had the authority to grant a licence to use the name without obtaining the consent of any other person, which representations were false.
9 Harold and Saul allege that they are suffering loss and damage and will continue to suffer loss and damage unless JLCS, Lionel and Joel are restrained from engaging in the conduct alleged, and that JLCS, Lionel and Joel have profited from their wrongful acts and conduct. They seek appropriate declarations and injunctions.
Defence
10 Lionel and Joel deny that the agreement pleaded was entered into. Rather, they say that in or about June 1997 they orally agreed to grant Harold and Saul a royalty free licence to use the name Squires Loft and the get up and methodology employed by Lionel and Joel in the South Yarra restaurant (the licence) in the City restaurant. The licence was granted to help Harold and Saul at a time when they were experiencing financial difficulty, and because of their family connection with Lionel. As part of the licence Lionel helped Harold and Saul set up the City restaurant, including guaranteeing loans personally, obtaining a liquor licence in his own name, permitting Harold and Saul to adopt the same menu as that used at the South Yarra restaurant, and supplying at cost the particular cuts of meat and sauces used at that restaurant in the City restaurant.
11 Lionel and Joel claim that there were terms of the licence that the City restaurant would adopt common menus and products, pricing of products, stationery, serviettes and corporate livery as that used at the South Yarra restaurant, and that the City restaurant would promote and market the South Yarra restaurant through advertising, references on menus, business cards and stationery. It is said that Harold and Saul breached these terms and thereby evinced an intention not to be bound by the licence, which repudiation Lionel and Joel by their defence accept.
12 It is then pleaded that if there were an agreement such as that alleged, Harold and Saul have been in breach from its outset in that they have never accounted to Lionel and Joel in respect of the profits of the City restaurant. This failure constitutes a refusal to be bound by the agreement, which repudiation Lionel and Joel by their defence accept.
13 As a further alternative, it is said that if there were an agreement such as that alleged, Harold and Saul are in breach in that they do not presently adopt common menus and products, pricing of products, stationery and corporate clothing, serviettes and corporate livery, and are not jointly promoting and marketing the restaurants trading under the name Squires Loft through advertising, references on menus, business cards and stationery. By that conduct Harold and Saul are said to have evinced an intention not to be bound by the terms of the agreement, thereby repudiating it, which repudiation Lionel and Joel by their defence accept.
14 The same breaches are then alleged to have constituted the abandonment of the agreement by Harold and Saul.
15 Lionel and Joel then plead that if there were an agreement as alleged, its terms are so vague and uncertain as to render it void for uncertainty.
16 As to the matters alleged by Harold and Saul to have been done in accordance with the agreement (recorded at [4]), Lionel and Joel deny that any of them was undertaken pursuant to the agreement, and add:
(a) as part of the licence, Harold and Saul were allowed to use the Squires Loft logo;
(b) Harold and Saul opened the City restaurant pursuant to the licence;
(c) the St Kilda restaurant was a separate and distinct venture involving the parties and two others, which was a failure and was wound up;
(d) a kitchen in the City restaurant was used by Lionel to make sauces used in the City and South Yarra restaurants;
(e) when one of the other parties left the St Kilda venture, the other venturers assumed its liabilities to the ANZ Bank, and when the second of the other parties left, there were no financial consequences incident upon the departure;
(f) Lionel and Joel provided the St Kilda restaurant with operational support and assistance, training of staff, product development and the supply of sauces and condiments;
(g) Lionel and Joel paid half the costs of advice from Garry Williamson on the pros and cons of franchising the Squires Loft concept;
(h) Lionel and Joel paid half the cost of work performed by a graphic artist, commissioned by Saul on his own initiative, which was never used at the South Yarra restaurant;
(i) pursuant to the licence and a further licence given to the St Kilda venture, all three businesses utilised the Squires Loft logo, and
(j) Saul applied for and obtained registration of the trade mark without Lionel and Joel’s knowledge, and gave false information in order to obtain registration, which should be cancelled.
Save to the extent recorded at (a) to (j) above, Lionel and Joel deny the comparable allegations at [4](a) to (j).
17 As to the allegations of breach of the agreement, Lionel and Joel say that they, alternatively they and JLCS:
(a) have always been the owners of the mark Squires Loft in respect of restaurants in Australia and all intellectual property rights in relation thereto, including ownership of the trade mark;
(b) have accordingly always had the right to licence their intellectual property rights in the name Squires Loft, but have never licensed the trade mark which was obtained by Saul without their knowledge, and
(c) as owners of all intellectual property in the Squires Loft name and goodwill, have the right to grant licences to third parties in respect of such intellectual property, "which includes a right to ownership of the Trade Mark".
18 Lionel and Joel deny the allegations of misleading and deceptive conduct, loss and damage, and profiting from their alleged wrongful acts.
Cross-claim
19 By their cross-claim JLCS, Lionel and Joel repeat the allegations recorded at [10] and [11]. They also claim that the trade mark Squires Loft is liable to be removed from the Register of Trade Marks on the grounds that:
(a) Saul is not the owner of the mark;
(b) the use of the mark by Harold and Saul "subject to the continuation of the licence" will be likely to deceive or cause confusion within the meaning of to ss 43 and 60 of the Trade Marks Act 1995 (Cth) (the Act);
(c) the use of the mark by Harold and Saul "subject to the continuation of the licence" is contrary to law;
(d) for the mark to remain on the Register in Saul’s name is prohibited by s 44 of the Act, and
(e) the Registrar of Trade Marks accepted Saul’s application for registration on the basis of representations that were false in material particulars.
20 JLCS, Lionel and Joel claim that Harold and Saul have made groundless threats of legal proceedings in respect of trade mark infringement against their customers.
21 In relation to the trade mark, JLCS, Lionel and Joel claim:
(a) an order directing the Registrar to remove the trade mark from the Register;
(b) a declaration that Harold and Saul have no grounds for making the unjustified threats;
(c) an injunction restraining them from continuing to make such threats, and
(d) damages for the unjustified threats.
22 In relation to the licence they claim:
(a) a declaration that Harold and Saul have repudiated it;
(b) an injunction restraining Harold and Saul from using the name Squires Loft and the get up and methodology used in running the South Yarra restaurant, and
(c) if the agreement alleged by Harold and Saul is upheld, the taking of accounts in respect of the profits generated by the City restaurant, and payment to Lionel and Joel of half those profits from the inception of the restaurant.
Reply
23 Harold and Saul respond to Lionel and Joel’s contention recorded at [17] that they have always owned the mark Squires Loft and are at liberty to grant licences to third parties to use it, by saying that:
(a) from 1997 the parties conducted the venture of operating, licensing and/or franchising restaurants under the name Squires Loft, and
(b) Lionel and Joel assigned any interest in the name to the parties, so that the parties are the beneficial owners of the name.
24 As to the licence alleged by Lionel and Joel (recorded at [10] and [11]), Harold and Saul deny that it was granted and that they have evinced an intention not to be bound by it. They also rely in this connection on their answers to Harold and Saul’s repudiation claim (see [13]) recorded at [25] to [31].
25 Harold and Saul deny the claim (recorded at [13]) that they have repudiated the agreement by no longer adopting common menus etc, though they admit that they no longer share common menus etc. In addition they say:
(a) by letter from their solicitors of 31 March 2005 Lionel and Joel advised them that as from the end of April they would no longer deal with Harold and Saul, thereby making it pointless or impossible for Harold and Saul to seek to perform their obligations under the agreement, and
(b) in the circumstances –
(i) Harold and Saul are excused from any non-performance after 31 March 2005 of any obligations under the agreement, and
(ii) Lionel and Joel are not entitled to terminate the agreement.
26 In further answer to the claim recorded at [13] Harold and Saul contend that it would be unconscionable for Lionel and Joel to be permitted to terminate the agreement and thereby forfeit their proprietary interest in the intellectual property related to the venture, and they seek relief against forfeiture.
27 In yet further answer, Harold and Saul say
(a) at the end of March 2005 Lionel and Joel ceased to supply sauces, bastes and dressings to them, thereby requiring them to produce their own;
(b) from the end of April 2005 Lionel and Joel "ensured" that they were not able to source the same stationery and corporate livery as had previously been provided, thereby requiring them to produce their own without being able to use the graphics that had been used to produce these items;
(c) in May 2005 Lionel and Joel sought to terminate their supply of meat from Top Cut by enforcing an agreement between Lionel and Joel and Top Cut;
(d) Lionel and Joel caused the Squires Loft website to be closed down in October and November 2005, and asserted that Harold and Saul had no rights in respect of it, and
(e) since the end of April 2005 Lionel and Joel have caused Top Cut no longer to supply them with the same meat cuts as had formerly been supplied.
28 It is contended that by the aforesaid conduct Lionel and Joel indicated that they would not be performing any of their obligations under the agreement, and that it was pointless or impossible for Harold and Saul to seek to perform their obligations thereunder. As a result, Harold and Saul say they are excused from any non-performance after 31 March 2005 of obligations under the agreement, and that Lionel and Joel are not entitled to terminate it.
29 In this connection Harold and Saul repeat the unconscionability claim recorded at [26].
30 Harold and Saul also claim that in the circumstances the Court should conclude that it is Lionel and Joel, and not them, who have evinced an intention not to be bound by the agreement, which repudiation Harold and Saul have not accepted.
31 Harold and Saul deny the abandonment allegation recorded at [14], and say that by reason of the matters recorded at [25] and [27], the Court should not conclude that there has been an abandonment of the agreement generally, and in particular in relation to the joint ownership of the intellectual property, especially the name Squires Loft.
32 Finally, in relation to Lionel and Joel’s licence, repudiation and abandonment claims, Harold and Saul say that:
(a) as from June 1997 the parties were joint owners of the intellectual property related to the venture, and
(b) no subsequent acts or conduct of any party has divested them of their ownership interests, whether or not Lionel and Joel’s acts or conduct (advising they would have no further dealings with Harold and Saul, would not be performing their obligations under the agreement, and thereby making it pointless or impossible for Harold and Saul to seek to perform their obligations thereunder) constituted a purported repudiation of the agreement.
Defence to cross-claim
33 Harold and Saul deny the allegations in the cross-claim save that they admit that Saul holds his interest in the registered trade mark on behalf of the parties.
34 They say that if Lionel and Joel did grant them the licence, its term was for the life of the business established pursuant to the licence or until terminated by reasonable notice.
35 Harold and Saul say that if, contrary to their contention, Lionel and Joel did not assign to them an interest in the name and the parties are not jointly the beneficial owners of the trade mark, it would be unconscionable for
(a) Lionel and Joel to be permitted to contend that they are the sole owners of the intellectual property related to the venture, and
(b) Harold and Saul to be prevented from operating the City restaurant under the name Squires Loft.
It is not necessary at this stage to record the alleged representations and conduct on the part of Lionel and Saul that are said give rise to the unconscionability.
WITNESSES
36 On behalf of the applicants, Harold and Saul made affidavits and gave oral evidence. They were cross-examined at length. Doreen Miller, Harold’s wife and Saul and Lionel’s mother, made an affidavit, gave oral evidence and was cross-examined. Eric Morgen, a director of Franchise Developments Management Consulting Pty Ltd, made affidavits, gave oral evidence and was cross-examined.
37 On behalf of the respondents, Lionel and Joel made affidavits and gave oral evidence. They were cross-examined at length. Simon Marafioti, operations manager at the South Yarra restaurant, made an affidavit, gave oral evidence and was cross-examined.
38 The main witnesses were Harold, Saul, Lionel and Joel. Much of their evidence was common ground, and was not controversial. However, on the principal issues in the case, in particular whether at a meeting on 19 June 1997 an agreement to the effect alleged in the statement of claim was made, their accounts were substantially at variance. Saul appeared to have a fair recollection of relevant events. Harold’s recall was not as good, but his evidence was essentially positive and assured. When assisted by his detailed diary notes, Lionel’s recollection was also good. But when his notes were silent, it was not so good. Joel’s evidence was more cautious than that of the others, and his recall of detail was not as good. This was probably due to the fact that he was not as much a ‘hands on’ participant in the restaurant scene as the others. He was more an accountant/business manager than a restaurateur. Nevertheless I was impressed by his demeanour, and considered he was doing his best to give a truthful account of what transpired. There were occasions, in the course of testing cross-examination, when he gave evidence that did not advance his case. Overall, I thought his account of the events that happened and the discussions at the various meetings accorded most with the probabilities. I do not accept the applicants’ submission that Joel was an evasive witness. I do not think any of the other principals was knowingly inventing an account that suited his side of the dispute. The main events took place six years before they gave their evidence, and there was thus ample opportunity for confusion as to the detail of what had been said, and perhaps for unintentional reconstruction of what had happened.
UNCONTROVERSIAL FINDINGS
39 The following findings are largely uncontroversial. Some of them constitute important contextual background to controverted issues of fact. Findings relating to the main issues in the case, especially as to whether the agreement alleged by the applicants was in fact made, are dealt with later in these reasons.
(a) The parties all came to Australia from South Africa. Lionel was the first to arrive.
(b) Squires Loft was the name of a steakhouse restaurant chain in South Africa.
(c) In 1992 Lionel opened a steakhouse in Brighton, a Melbourne suburb, under the name Squires Loft Grill House. About a year later Joel joined him in the business, taking a half interest. This was achieved by the incorporation of Squires Loft Pty Ltd of which Lionel and Joel were the directors and equal shareholders.
(d) The Brighton restaurant closed in 1995, and Squires Loft Pty Ltd opened the South Yarra restaurant under the name Squires Loft in September of that year.
(e) Saul came to Australia in late 1995, and in 1996 was employed in a casual capacity at the South Yarra restaurant.
(f) In early 1997 Lionel, Saul and Harold investigated the possibility of opening another steakhouse along the lines of the South Yarra restaurant, and located suitable premises at Goldie Place, Melbourne, where a restaurant known as QC’s had operated.
(g) On 12 June 1997 a contract for the purchase of QC’s business was executed, naming the purchaser as Lionel and/or nominee.
(h) On or about 12 June 1997 Lionel and Joel received from their solicitors a draft licence agreement "in anticipation of granting a Licence to operate a Squires Loft Franchise on the QC’s premises", which Lionel gave to Saul. The agreement, which was never executed, provided for the grant by Squires Loft Pty Ltd to an unnamed party of a licence to operate at the licensed premises a steakhouse using the methods and techniques developed by the licensor and to identify such outlet by the name set out in par 1 of the Schedule.
(i) On 19 June 1997 the parties held a meeting at which they discussed the establishment and operation of the City restaurant and its relationship with the South Yarra restaurant. It is at this meeting that Harold and Saul claim that the agreement pleaded was made.
(j) On 20 June 1997 Harold and Saul caused SLCS to be incorporated in order for it to own and operate the City restaurant. They were the directors and shareholders.
(k) The lease of the City restaurant premises was taken in Lionel’s name because he had a trading history that it was thought would be attractive to the lessor. Harold and Saul agreed with Lionel that they would discharge his obligations under the lease.
(l) The liquor licence for the premises was applied for in Lionel’s name, again because he had a trading history which it was believed would make it easier to transfer the licence, and would avoid the various steps that a new licensee would have to take.
(m) Between July and October 1997 Lionel, Harold and Saul worked on setting up the City restaurant. The cost of the refurbishment and repairs was borne by Harold and Saul. The renovated premises had two kitchens, one to service the City restaurant and the other for the production of sauces, bastes and dressings (sauces) for both restaurants. The second kitchen was sometimes called the ‘centralised kitchen’.
(n) The City restaurant opened on 14 October 1997. For the first six weeks of operations Lionel assisted with the grilling.
(o) Lionel brought from the South Yarra restaurant to the City restaurant the equipment used to produce the sauces which he prepared in the centralised kitchen. Each day he transported to the South Yarra restaurant the sauces required for its operations.
(p) Harold and Saul did not charge Lionel and Joel rent for the use of the centralised kitchen.
(q) In 1998 the parties held discussions about opening another Squires Loft restaurant, and chose 15A Fitzroy Street, St Kilda as the location. In order to finance and operate the St Kilda restaurant, two extra parties were involved, Messrs Friedman and Day.
(r) On 2 November 1998 the Squires Loft Takeaway St Kilda Joint Venture Agreement was executed by entities representing the parties, Friedman, Day and Squires Loft Takeaway St Kilda Pty Ltd, which was described as ‘the Custodian’. The purpose of the joint venture was to operate the St Kilda restaurant. The Custodian held the joint venture assets for and on behalf of ‘the Participants in the Participants Proportions’. The Participants were Friedman, Saul, Joel and Day. Their respective Proportions were 40, 25, 25 and 10. It was common ground that Saul’s Proportion was held for himself and Harold, and Joel’s for himself and Lionel. The Participants and their Proportions as appearing in the agreement were designed so as, for the sake of appearances, not to overload the agreement with too many Millers.
(s) By clause 6.5 of the joint venture agreement Friedman and Day were responsible for the day to day running of the restaurant. Joel and Saul were to be the exclusive suppliers of sauces and condiments, meat and other items that their centralised kitchen provided. These items were initially to be provided at raw material cost and thereafter as agreed.
(t) Menus, business cards and corporate livery were revised to show all three restaurants, the same sauces were used for each, staff for the St Kilda restaurant were assembled from the City and South Yarra restaurants, and gift vouchers could be used at any of the restaurants.
(u) In January 1999 Lionel gave Saul the recipes for the sauces to ensure continuity of supply.
(v) In July 1999 Joel acquired Friedman’s share in the St Kilda joint venture, which he held on trust for the parties.
(w) In June 2000 Day retired from the joint venture. Thereafter St Kilda was run by the parties.
(x) The St Kilda restaurant had not traded well, and in early 2001 the parties decided to close it.
(y) On 30 April 2001 Lionel and Saul had a meeting with Mr Morgen of Franchise Developments, who gave them a presentation on the franchising concept.
(z) On 8 May 2001 the parties met with Garry Williamson of the Franchise Centre in Sydney, whose airfare and daily fee they shared.
(aa) The St Kilda restaurant closed on 27 May 2001.
(bb) On 29 May 2001 Mr Morgen made a further presentation to the parties.
(cc) On 25 June 2001 the parties held a meeting in which they discussed the state of play and plans for the future. By agreement, the meeting was taped.
(dd) On 6 June 2002 Saul stopped working at the City restaurant.
(ee) On 28 June 2002 Saul applied for registration of the name Squires Loft Steakhouse as a trade mark, noting himself as the sole owner.
(ff) On 11 November 2002 JLCS was incorporated by Lionel and Joel.
(gg) On 16 January 2003 JLCS granted a licence to DL Keran Pty Ltd to open Embers Steakhouse in Brisbane. The licence did not include the right to use the Squires Loft name.
(hh) On 27 February 2003 Saul was registered as the owner of the trade mark Squires Loft Steakhouse.
(ii) On 29 October 2003 Embers Steakhouse opened.
(jj) On 15 September 2004 Saul returned to work at the City restaurant.
(kk) On 9 October 2004 JLCS entered into a consultancy agreement with Jodie Meyerov to provide her with advice as to the establishment and management of a steakhouse restaurant in return for a consultancy fee the amount of which has been blanked out in the copy in evidence. Clause 17(2) of the agreement provided that Ms Meyerov "will not use or allow the name ‘Squires Loft’ .... to be substantially or materially associated with the business carried on by" her.
(ll) On 10 October 2004 JLCS and Ms Meyerov signed a consultancy agreement addendum which contained these, amongst other provisions:
"Ongoing agreements
To be negotiated as and when the second phase of the four to five store roll out process is ready to begin. It has been agreed and confirmed that I [Ms Meyerov] will obtain first rights to any new Squires Loft Stores, and will be given a 60 day period to place a deposit on securing the rights for that entity if I so wish. It was also agreed that no other Squires Loft concept store would be opened within a 1 km radius of my existing stores, in City/3 km in suburbs.
Naming rights
The name to be registered for the new entity will be The Grill House. By agreement, in order to initiate the identification and boost the initial phase of the new entity brand awareness strategy, as a Squires Loft concept store, and based upon my commitment to and continuity of the integrity of the Squires Loft brand, values and standards, I will be permitted to incorporate the Squires Loft branding into the new logo, which after a period of time will be phased out. All artwork, signage, logos etc, would be subject to the consultancy approval and agreement. This is to be an exclusive arrangement between the consultancy and myself."
(mm) By letter of 11 October 2004 to Joel, Saul said he would obtain forms for the transfer of the trade mark registration of Squires Loft Steakhouse to Joel and Lionel. He did not carry out this undertaking.
(nn) In November 2004 Lionel told Harold about The Grill House consultancy agreement, and informed him and Saul that Ms Meyerov would trade under the name The Grill Room and would not be able to use the name Squires Loft.
(oo) On 9 March 2005 Harold and Saul discovered that The Grill Room was using the name Squires Loft on its windows, napkins and stationery, and that its website described itself as the latest addition to the Squires Loft Group.
(pp) On 11 March 2005 solicitors for Saul and SLCS wrote to Lionel and Joel referring to Saul’s registration of the trade mark, the licence to use the mark granted to Ms Meyerov, the use of the mark on signage at The Grill Room, and continued:
"No authority or consent from our client has been granted to you to licence the use of the Squires Loft trade mark to any third party. Accordingly no authority or consent from our client has been granted to The Grill Room to use the Squires Loft trade mark ...."
The letter concluded by demanding that within four days Lionel and Joel undertake to provide details of the licence agreement and cease dealing with or seeking to licence the use of the trade mark in relation to the provision by a third party of restaurant or catering service without the consent of Saul and SLCS. In default, proceedings would be instituted.
(qq) A similar letter was sent to Ms Meyerov, a copy of which accompanied the letter to Lionel and Joel.
(rr) By letter of 31 March 2005 JLCS’s solicitors informed Harold and Saul’s solicitors that after the expiration of 30 days it would no longer be dealing with them "in any capacity whatsoever". JLCS hoped that 30 days would be sufficient time for Harold and Saul to find alternative suppliers. If not, consideration would be given to extending the time.
(ss) After the expiration of the 30 day period Harold and Saul had to make their own arrangements for the supply of business cards, menus, napkins, food dockets and drink dockets.
(tt) After the expiration of the 30 day period Lionel and Joel instructed Top Cut no longer to supply to the City restaurant Squires Loft sauces, which it was then making according to Lionel’s recipes, or Squires Loft specification meats. Top Cut complied with the instruction. Thereafter Saul made all sauces at the City restaurant.
(uu) On 5 May 2005 Top Cut agreed to supply the City restaurant with meat products according to Top Cut’s own specification.
(vv) At some time after the expiration of the 30 day period, when the South Yarra restaurant’s supply of cards was running out, reference to the City restaurant was removed from the card and reference to Embers and The Grill Room was added.
ALLEGED AGREEMENT OF 19 JUNE 1997
Equal partners, the City restaurant and franchising
40 The first question that arises on the agreement pleaded in par 3 of the statement of claim concerns the relationship between the terms alleged in sub-pars (a) and (b). The former claims that the parties would be equal partners in any venture of opening further steak restaurants under the Squires Loft name through licence or franchise arrangements. The latter contends that Harold and Saul would operate the first licensed restaurant to be located in the City. That restaurant would have a kitchen in which the sauces would be made for use in Harold and Saul’s City restaurant and Lionel and Joel’s South Yarra restaurant and any future licensed or franchised restaurants. The terms do not sit happily together. A restaurant falling within the pleaded description "the Applicants’ Squires Loft restaurant in the City" cannot be the first of the licensed restaurants referred to in (a). The parties are not alleged to be equal partners in that. According to sub-par (b) the City restaurant is Harold and Saul’s and the South Yarra restaurant is Lionel and Joel’s. As Lionel and Joel point out, if the parties were equal partners in the City restaurant, they (Lionel and Joel) would be entitled to half its profits. See also par 29 of the cross-claim. Obviously Harold and Saul did not embrace this view of their pleading.
41 This is not a mere pleading point. Saul’s evidence purports to verify sub-pars (a) and (b). In his first affidavit, which was adopted by Harold, Saul deposed that the parties would be partners in the business of opening further restaurants under the Squires Loft name through licensing or franchising arrangements. He does not say equal partners, though in the absence of any indication to the contrary, the partnership shares would be taken to be equal: Partnership Act 1958 (Vict), s 28(1). In any event, in other parts of his evidence he asserts the partners’ equality. Saul goes on to say that the City restaurant would be operated by a company to be set up by him and Harold, which would own and operate the business, be responsible for all costs and expenses and receive all the profits. Plainly a restaurant owned by a company controlled by Harold and Saul, and from which they received all the profits, is not one in respect of which they are equal partners with Lionel and Joel, any more than they are equal partners with Lionel and Joel in the South Yarra restaurant.
42 Despite the parties’ divergent evidence on many points, two things were not in dispute. One was that the City restaurant was, through their company, Harold and Saul’s. The other was that the South Yarra restaurant was, through their company, Lionel and Joel’s.
43 Saul’s subsequent evidence that the City restaurant would be "in effect the second licensed restaurant, with South Yarra being the first", cannot be accepted. Whatever be the position with the former, there is no support in the evidence for the view that the South Yarra restaurant was licensed as opposed to owned by Lionel and Joel through their company.
44 For the avoidance of doubt I note that when the parties spoke of a restaurant being "licensed" in the context of "licensed or franchised" they meant licensed as opposed to franchised, and not licensed to serve liquor.
45 A great deal of time was taken in the cross-examination of Lionel and Joel in seeking to establish that in the discussions leading up to and on 19 January 1997 the parties agreed that they would franchise the Squires Loft concept. Lionel and Joel denied that any such agreement was made. More importantly, Harold’s evidence does not support it. Speaking of the period May/June 1997, he said he didn’t quite understand the concept of franchising. He knew that Joel wasn’t keen about it. Harold’s own concern was to get the City restaurant up and going. He and Joel did not support franchising "at this time".
46 Given that Harold did not support franchising in May/June 1997, it is highly unlikely that he would on 19 June 1997 have entered into an agreement to expand the Squires Loft concept through franchising. That is the more so when, as he said, he knew that Joel was not keen about it. As I have said, Lionel and Joel denied that there was any such agreement. In the circumstances I am not satisfied that there was any such agreement.
47 Further, certain parts of the taped meeting of 25 June 2001 are inconsistent with an agreement having been reached in June 1997 to implement the franchise concept. Thus Lionel says "Let’s just say we’re talking about are we going to franchise".
48 The applicants sought to derive assistance from what was said at the 25 June 2001 meeting. They say the transcript shows that Lionel and Joel accepted that they had been in an equal partnership, presumably since June 1997. On a fair reading, the transcript does not support this submission. The passages relied on are set out in Saul’s first affidavit. The context in which these passages occur is Lionel’s concern that in the parties’ dealings to date they have not had a mechanism for resolving deadlocks. He said:
"But it’s time to be able to format a decision making program. So, what I’m proposing is this between the four of us we saying we’re holding a partnership that is going to be an equal one. So within the frame of that there should be each member having a vote of their own. So everyone gets a vote on every issue, okay?
Once those votes are cast if there’s a deadlock I believe I’m going to get the overriding vote, so the fifth vote will come to me okay?
...
So that’s my proposal."
The emphasis is mine.
49 The St Kilda restaurant closed about a month before the 25 June 2001 meeting. Harold and Saul had the City restaurant. Lionel and Joel had the South Yarra restaurant. With the St Kilda restaurant gone there was no business or venture subsisting between the parties that could be described as a partnership. What Lionel was proposing was a structure that could be put in place "going forward", to use his expression. It was, as he twice said, a proposal. More importantly, one element of the proposal was that there would be a partnership that was "going to be an equal one". His was not simply a proposal that an existing equal partnership contain a deadlock-breaking mechanism. The whole proposal was entirely futuristic. Lionel later reinforced this by saying "I’ve said quite clearly so has Joel that there will be a four way partnership of what we are talking about here".
50 Joel was cross examined about the taped conversation. He was taken to the passage set out above, and it was put to him that Lionel was saying "there is a partnership between the four of you". Joel’s response was that Lionel was just putting forward a proposal as to what could happen in the future.
51 It is of course for me, and not for a witness, to determine whether the conversation supports the view that the alleged partnership agreement was made. I share Joel’s view. In my opinion a dispassionate observer reading the transcript of the conversation in the context of the events that had happened could not find in the discussions it records an acknowledgment by Lionel and Joel that there was at that time a subsisting equal partnership in existence, let alone an agreement of the type alleged to have been made in June 1997.
52 In support of their claim that par 3(a) of the statement of claim was sustained by the evidence, the applicants relied on Lionel’s acceptance that Harold and Saul would be given the opportunity of being involved in any future Squires Loft venture that he and Joel might contemplate. Joel’s evidence was to much the same effect – that if the "right opportunity" arose, they would be given the chance to be involved. Lionel in fact offered Harold the opportunity to be involved in the Embers restaurant, though that was not truly a Squires Loft venture, but Harold declined. In my view this evidence does not assist the applicants to establish that at the 19 June 1997 meeting the parties in fact agreed to be equal partners in any future venture of opening steak restaurants under the Squires Loft name through licence or franchise arrangements. As put by Joel, whose evidence I accept, if the right opportunity arose, it would be discussed with Harold and Saul. Neither Lionel nor Joel was speaking in terms of an existing obligation to include Harold and Saul. Until relations broke down the parties were involved in common aspects of the City and South Yarra restaurants, and Lionel and Joel were saying no more than that they would talk to Harold and Saul about any future opportunity. Obviously, for the parties to proceed together in some new venture would depend upon them all agreeing as to the basis of their respective participations.
53 The applicants attached much importance to the evidence of Eric Morgen. He said his understanding of what he was told by Saul, possibly in Lionel’s presence, was that the four of them were "partners in a company called Squires Loft Pty Ltd that operated from 12 Goldie Place". His 29 May 2001 presentation to the parties was headed "The Partners Squires Loft Pty Ltd" and was addressed "Dear Saul, Lionel, Harold & Joel". This is said to provide compelling evidence that all four considered themselves part of a partnership group.
54 Lionel accepted that either he or Saul said the parties were all four partners in the business, though it would have been more accurate to say there were two partners in the City restaurant and two in the South Yarra restaurant. In any event, he said "we all four were partners in the business".
55 As Lionel acknowledged, it would have been more accurate for the parties to have been described as two partners in the City restaurant and two in the South Yarra restaurant. However it was not inaccurate to describe them, in a loose sense, as partners in the business. As Lionel said, they were in a sense partners. There were aspects of the two restaurants that were conducted in common: the sauces, joint promotion, common meat supplier of specified cuts of meat for example. All four did work together. Having regard to this, there was nothing inappropriate in Saul or perhaps Lionel describing the parties as partners. There was certainly no occasion at either meeting with Mr Morgen for the parties to engage in an argument about their status as a group. They were there to hear about franchising.
56 In his written and oral evidence Mr Morgen described the parties as partners in Squires Loft Pty Ltd. His presentation was so headed. Whatever they were, the parties were not partners in Lionel and Joel’s company, in which they had no interest at all. But again there was no occasion at the second meeting to tell Mr Morgen that he did not understand the difference between a partnership and a company structure, a matter that was entirely peripheral to franchising.
57 I do not agree that Mr Morgen’s evidence provided significant support for the applicants’ contention that the parties were then equal partners let alone equal partners in any venture of opening further steak restaurants under the Squires Loft name through licence or franchise arrangements in terms of par 3(a) of the statement of claim. Apart from any other difficulties, the point of the meeting with Mr Morgen, more than four years after an agreement in those terms was alleged to have been made, was to find out more about franchising so the parties could decide whether to go down that path, not to explore with him the detail of their complicated business relationship.
58 The applicants contended that the fact that in various documents the parties referred to the City and South Yarra restaurants as parts of the "Squires Loft Group" supported the allegation in par 3(b) of the statement of claim. Both Lionel and Joel said this was a marketing tool to promote both restaurants. The fact is, as Joel pointed out in this connection, that while the two restaurants (and later St Kilda) co-operated in certain respects, the ownership structure of each was different. The City restaurant belonged to Harold and Saul through their company. It was neither licensed nor franchised. The South Yarra restaurant was owned by Lionel and Joel through their company. It too was neither licensed nor franchised. St Kilda was a joint venture. When established it had two additional investors, who were not otherwise involved with the parties. It was not a partnership, and it was not licensed or franchised. I do not consider that the promotional reference to the Squires Loft Group points to an agreement in terms of in par 3(b) that the City restaurant was a licensed restaurant of the variety contemplated by sub-par (a) or that its centralised kitchen would service any future licensed or franchised restaurants.
59 Nor do I accept that it was agreed at the 19 June 1997 meeting that the City restaurant would be the "flagship" restaurant. The South Yarra restaurant was first in time. It was an established institution. Its concept was to be used in the City restaurant. The City restaurant might not be a success. It was, as the parties acknowledged, in an out of the way location. In order to attract custom Harold and Saul, or their employees, had to distribute steak portions in a nearby busy thoroughfare. In those circumstances, the probabilities are strongly against the yet to be established City restaurant being identified as the flagship. I accept Lionel’s evidence that, though ‘flagship’ was part of his vocabulary, he did not use it in connection with the establishment of the City restaurant.
60 The applicants have not persuaded me that on or about 19 June 1997 an agreement was made in terms of par 3(a) of the statement of claim, or that the City restaurant would be "the first licensed Squires Loft restaurant" and the flagship restaurant. To the extent that the other terms in par 3 are predicated on sub-par (a) – "through licence or franchise arrangements" – they have not been established.
Intellectual property – the Squires Loft name
Oral agreement?
61 I turn now to the terms alleged in sub-pars (f) and (g) in par 3 of the statement of claim. Sub-paragraph (f) alleges that it was orally agreed that the parties would be joint owners of the intellectual property related to the venture, including the name Squires Loft. The applicants have not persuaded me that an agreement to this effect was made. First, in his initial affidavit Saul purports to verify others of the oral terms alleged (ie (a) to (e)) in par 3), but says nothing about sub-par (f). In latter affidavits he supplements the relevant part of the first dealing with the June agreement in certain respects, but again does not mention sub-par (f).
62 Second, in the taped discussions of 25 June 2001 Saul says:
"Dad wake up. At this point in time if we get knocked over in the street they are left with no problem whatsoever in their lives. We are talking about a company that we authentically have no real value over the intellectual property. Now if you can’t see that that is you. I can ....
Lionel then asks "What right do you have over that intellectual property?", and Saul responds:
"None. So if it is to go forward then let’s give me a right to it or otherwise say no Lionel .... What right do I have to it? Absolutely none Dad so can’t you see that?"
63 Third, Harold’s evidence about this term was unsatisfactory. In cross-examination he agreed that the starting point was that he knew that the name Squires Loft was owned by Squires Loft Pty Ltd, the company owned by Joel and Lionel. (I interpolate that Squires Loft Pty Ltd is not a party to the proceeding.) It was put to him that his case was that at the meeting Lionel and Joel gave/transferred to him an ownership interest in the name Squires Loft. He answered "By virtue of the formation of our company, yes". It was then put to him that Lionel never said that he was giving him an ownership interest in the name. He replied "In the company that would be going forward, yes, he did say so". It was then put to him that Joel had not said that he was giving him any ownership interest in the name. He accepted that Joel had not done so in "those exact words".
64 It seems to me to be unlikely that both Harold’s answers as to how his company acquired an ownership interest in the Squires Loft name can be correct. That is to say, the company must either have acquired an interest by virtue of an agreement that it could use Squires Loft in the company name ("By virtue of the formation of our company") or because Lionel and/or Joel orally gave it to the company.
65 His initial answer to the question whether on 19 June 1997 Lionel and Joel gave/transferred an ownership interest in the name was not "Yes", but "By virtue of the formation of our company". It was only when it was put to him that Lionel said "I’m giving you an ownership interest ..." that Harold, in my view opportunistically, assented. His later affirmative answer to the same puttage was equally opportunistic. If it was true that Lionel and/or Joel had expressly given the company an ownership interest in the name, then it was not true that he and Saul acquired that interest by virtue of the formation of their company.
66 The true position in my view appears later in Harold’s cross-examination. It was put to him that at the meeting there was no mention of a transfer of the ownership of the rights in the name Squires Loft to him or Saul. He replied:
"There was no legal transfer ... – it was implied that there would be ... a company or shares divided into the four partners. Units, shares, whatever the term was at the time."
He went on to say that no such entity was ever formed. In other words, there was no oral gift or transfer. The existence of ownership rights was either to be implied from the permission granted to use the name as part of SLCS’s name or from the establishment of an entity in which all four would have shares or units.
67 Fourth, Saul’s evidence was also unsatisfactory. I have already mentioned that his affidavit material does not purport to verify the gift or transfer of the name Squires Loft. Like Harold, Saul knew that the name Squires Loft was owned by Squires Loft Pty Ltd. In the course of cross-examination it became clear that he did not understand the difference between being given the right to use a name owned by the donee (ie a licence) and the grant of an ownership interest in the name (ie an assignment). When it was put to him that no interest in the name was ever given to him, he said
"That is entirely incorrect. It was at the meeting on 19 June 1997 by virtue of the fact that we registered our company the next day in Squires Loft’s name."
Later, when it was put to him that he was never given an ownership interest in the name, he replied
"It was by virtue of the fact that I traded under that name. It was given to me to use and trade under, and grow my business under."
Then it was put to him that Lionel and Joel gave him permission to use the name, to which he responded
"No, it was agreed that we would all use the name to better grow the business."
He went on to say that the ownership of the name or mark was not in the forefront of his mind in June 1997. It later assumed importance when the four began researching franchising.
68 Although he denied that ownership of the name or mark at all times remained with Squires Loft Pty Ltd or Lionel and Joel, he ultimately fastened on his and Harold’s use of the name in their business, and not on any actual grant of an ownership interest in the name. Thus he said
"we were in the business, trading under the name, and had all mapped out a future where we were going to use and exploit this name to grow the business further. And, as I say, I was trading under the name – the name my company’s registered in the name."
The tenor of Saul’s evidence is that SLCS’s entitlement to use the name Squires Loft arose from the use he and Harold made of it with the concurrence of Lionel and Joel. As is apparent from what I have said, I am influenced in my assessment of Saul’s evidence by the fact that in his extensive affidavit material (five in all) he did not verify the term in par 3(f) of the statement of claim relating to ownership of the name.
69 Fifth, the draft licence agreement proposed by Lionel and Joel’s solicitors tells against any agreement to confer ownership rights in relation to the name. The agreement was never executed. However, it was handed to Saul with Lionel’s annotations in the margins. One annotation drew attention to clause 3.32 dealing with the licensee’s obligations in relation to intellectual property. Clause 3.32.2 provided
"If the Licensee is a corporation, the Licensee shall not use the term or words ‘Squires Loft’ in its corporation name."
In the margin appear three question marks and the words "Saul SQL City Steak P/L". At the end of clause 3.32.2 Joel has added the words "unless with the licensor’s permission". In his evidence Lionel drew attention to these annotations and said that it was never his intention that the printed words of clause 3.32.2 would apply to Harold and Saul.
70 Clause 3.32.3 provided in part:
"All rights in and to the business names set out in Schedule 2 ... and the service marks and trade names and marks used in connection therewith shall be and remain the property of the Licensor and the Licensee shall not acquire any right, title or interest therein except as provided in this Agreement ...."
71 Clause 3.32.4 provided:
"The Licensee shall neither interfere in any manner, nor attempt to prohibit the use of or registration of the name ‘Squires Loft’ by any other Licensee or the Licensor."
72 Clause 6.1 is in part as follows:
"The Licensee acknowledges and recognises the exclusive ownership of the Licensor’s business and trade names and marks set out in paragraphs 2 and 6 of the Schedule as well as the Licensor’s exclusive ownership of insignia, logograms, designs and other industrial property associated with the Licensor’s business as aforesaid ..."
Paragraph 2 of the Schedule, under the heading "Business and Trade Names and Marks of the Licensor", contains the name "Squires Loft Steak House".
73 There is no indication in the evidence that Saul, to whom Harold left the detail of the document, ever disputed the import of these provisions. Although, as I have said, the licence agreement was never executed, it is clear that it was Lionel and Joel’s intention that what was to be given to Harold and Saul was a licence to use the Squires Loft name and not the grant of ownership rights in the name, and that this was made known to Saul, who had the carriage of this aspect of the matter for the applicants.
74 Sixth, Saul’s letter to Joel of 11 October 2004, in which he undertook to obtain forms for the transfer of the trademark registration to Lionel and Joel, is inconsistent with an agreement having been reached in June 1997 giving Harold and Saul an ownership interest in the name.
75 Finally, I accept the respondents’ submission that in the context of licensing and franchising, business people do not "give away" their intellectual property. The very core of licensing and franchising is the owner’s retention of ownership and the grant to the licensee or franchisee of the right to use the property.
76 It follows from what I have said at [61] to [75] that I do not accept the applicants’ submission that the Court "can readily find an express agreement upon the common ownership of the ‘Squires Loft’ name ... in accordance with the evidence of Saul and Harold". Nor do I accept that Lionel and Joel’s evidence that Harold and Saul could use the name in the City restaurant for as long as they wished, though there was no agreement that the parties would be joint owners of the name, was "tailored".
Agreement to be inferred?
77 The applicants also point to various matters that they contend should lead the Court to infer that an agreement in terms of par 3(f) was made. I will assess them one by one, though I will need eventually to view them as a whole.
78 The fact that no value was placed upon any goodwill of the Squires Loft business in the balance sheet for the financial year leading up to the June 1997 agreement does not to my mind suggest that the inference should be drawn. The point was not explained, but would seem to be that because the name had no value, there was likely to have been an agreement that it was owned in common, whereas such an agreement would be less likely, or unlikely, if it did have some value. I find this unpersuasive. In any event, the accounts in question were for internal use, and there was no need in this connection for the goodwill to be valued. Lionel’s evidence was he placed great value on the name Squires Loft at the time these accounts were prepared. Joel agreed that if a value were to be attributed to the name Squires Loft it would be recorded as a non-current asset. But he said there was no reason to value the name. He denied that he had put no value on the name because it had no value in 1996.
79 The fact that no restrictions were placed by Lionel and Joel upon Harold and Saul’s use of the name merely means that they were at liberty to use it, unconditionally, in the City restaurant for as long as they wished. It indicates the amplitude of the agreement that was undoubtedly made, but provides no occasion for expanding it. I refer in this connection to the comments I have made about the confused nature of Harold’s and Saul’s evidence on this point.
80 How the fact that at meetings after 25 June 2001 Joel said to Saul words to the effect that "you are secure and a part of the future growth" points to an agreement that the parties were joint owners of the name was not explained. I do not see that it does. Presumably the security referred to is Saul and Harold’s City restaurant. That was their security, and one of the things that constituted it was their ability to use the name in the running of the business. We know from Joel’s evidence as a whole, that when he used the word "secure" in this connection he did not mean that Harold and Saul had ownership rights in the name.
81 The fact that at the time the Goldie Place premises were being renovated Harold and the manager of the South Yarra restaurant designed a new logo which was then used in the two restaurants, is consistent with undisputed evidence that Harold and Saul were entitled to use the name in the conduct of the City restaurant. It does not lead to the conclusion that the parties jointly owned the name.
82 The next matter relied on is that Saul often raised with Lionel and Joel the question of registering the name as a trade mark. It is said that Lionel and Joel’s response was that it was unnecessary to register it, and not that Saul had no interest in the name. The transcript passage relied on exposes a less clear cut position. While Joel initially assented to the suggestion that Saul said "you should all" register the name, it later became clear that his assent was not to "you" meaning the parties, but to "you and Lionel" as its owners. The following exchange occurred:
"Is that what you said? --- We were sitting in a meeting and Saul proposed that we should – well, we should – Lionel and myself should register the trade mark. And we just felt that because we were fine and we owned the companies, there was no real external threat of somebody taking our names, so we thought it we felt it wasn’t necessary at that time.
But --- Mr Distiller. What Saul is saying is that all four of you should register Squires Loft as a trade mark? --- Because he didn’t own it.
... I am suggesting to you on the facts of what happened that Saul said to you on a number of occasions that the four of you should register the Squires Loft name as a trade mark? --- I would have to say that Saul was saying, we should register – when I say register, the name should be registered. ... We should protect the trade mark, Squires Loft.
And you said it was not necessary? --- We didn’t believe – Lionel and myself didn’t believe it was necessary.
And Saul said to you in these meetings that if you didn’t apply for the registration of the Squires Loft trade mark, that he would do it himself? --- We never gave permission.
No. But I am suggesting to you that he said that to you? --- He might have ....
And I suggest to you that the response you gave was that you didn’t care if he did? --- Well, it wasn’t for his to register.
...
Was your response to him that you didn’t care if he did? --- I don’t believe I would have said it like that.
Well, do you have any ...? --- We just said, we are not going to register it.
...
what I will suggest to you in these meetings, he is saying to you that if you don’t, the four of you, register it, then he, Saul, will go ahead and register it himself? --- He might have said that.
Yes. And will suggest to you, in these meetings, you said to him, words to the effect, you didn’t care if he did? --- I couldn’t say I don’t care, because it is my company. Of course I care.
... I am suggesting to you at these meetings that you said to him, when he said that to you, that you didn’t care if he did go ahead and register it himself? --- We, I do care, because it is my name. I own the name."
83 What is clear from this exchange is the insistence that Saul did not have an ownership interest in the name. The reason Joel gave for denying that Saul had said that "all four" should register the name was that "he didn’t own it" and "it wasn’t ... his to register", and "it is my name. I own the name". In connection with Joel’s apparent claim to personal ownership, as in both "my name" and "my company", it was a feature of his evidence that he often used "I" and "my" without thereby meaning to exclude Lionel. The applicants say that Lionel and Joel’s response to Saul’s demand that the name be registered was not that Saul had no interest in the name. It is apparent from the foregoing that the passage from Joel’s evidence relied on by the applicants to establish this, does not do so.
84 Furthermore, in the taped discussion of 25 June 2001 Saul used the fact that he and Harold had no interest in the Squires Loft intellectual property to bolster his case for obtaining something in writing. See [62].
85 It is to be remembered that when Saul raised the question of registration, it was always that the name should be registered, not that he alone or as one of the parties was entitled to be registered. His later threat that he would register the name if "you" would not has as its very basis that those who owned the name should register it. As Lionel pointed out, Saul’s claim was that the name should be registered, not that it should be registered in the parties’ names. Registration in Lionel and Joel’s names would protect the interests of all four as against third parties, which is where the risk of non-registration was thought to lie. I accept Lionel’s evidence, both written and oral, that Saul wanted him and Joel to register the name to protect their rights in the South Yarra restaurant and Harold and Saul’s in the City restaurant.
86 The fact that in January 1999 Lionel gave Saul the sauce recipes without demanding any payment or imposing any conditions does not seem to me to say anything about the ownership of the name Squires Loft.
87 When Lionel and Joel discovered that Saul had obtained registration of the mark, the fact that they did not immediately challenge it is said to show a total lack of interest on their part. That overstates the position. Lionel’s evidence was that Harold was the first to find out about the registration. Harold told him he had been to see Mark Dobbie of Middletons about it. Lionel told Harold that he and Joel had decided not to rock the boat by disputing Saul’s registration, in light of the circumstances that existed between Harold and Saul at that time, and because of Harold’s assurances that he was going to seek advice as to how the registration could be overturned. Joel’s evidence was that he didn’t pursue the matter with Harold because Lionel had told him that Harold was looking into the matter with Middletons who were going to investigate the matter and have the registration set aside.
88 It is also to be remembered that at this stage the parties were not at war. It appears to have been common ground that registration of the mark in anyone’s name would protect the parties from the risk of third parties using it.
89 When Lionel and Joel’s reaction to Saul’s registration is seen in the above context, it does not seem to me to point towards the existence of an agreement that the parties were joint owners of the name.
90 Lionel’s statement to Harold that the Embers restaurant would not be using the Squires Loft name may suggest that Harold had a concern about a third party using the name. However, it does not to my mind point to an argument that the parties jointly owned it.
91 The applicants contend that the fact that Lionel told Harold and Saul that Ms Meyerov had not been given the right to use the name for The Grill Room points to an agreement as to ownership of the name. The evidence upon which they rely in this regard does not support the contention. What Lionel agreed he said to Saul was that Ms Meyerov was not going to trade as a Squires Loft restaurant, but was going to use the name in support of her business.
92 The applicants then rely on what they describe as an admission by Lionel and Joel that there were difficulties perceived by them in using or licensing the name without reference to Harold and Saul. The passage in Joel’s evidence to which they point does not sustain this contention. Joel denied that the agreement recorded in the addendum to the agreement with Ms Meyerov would be of great concern to Harold. She was trading as The Grill Room. As a marketing tool she was allowed to use the Squires Loft name in connection with her logo so that people would see that "it is a Squires Loft product". He pointed out that The Grill Room was closer to the South Yarra restaurant than to the City restaurant, and that he did not look on Ms Meyerov’s use of the name as a risk but as a positive in bringing more people to the area. There is no admission to the effect asserted. Lionel denied the suggestion that there would be an extremely adverse reaction from Harold and Saul if anyone else (including Ms Meyerov) was granted any rights in respect of the name.
93 In April 2004 Joel discussed with Harold the possibility of someone buying out Saul’s interest in the City restaurant if he was looking to sell it. The applicants say this is only explicable if it were Joel’s understanding that Harold and Saul had an interest in the name "as otherwise there would be little to no goodwill for a purchaser to buy into". I find this unpersuasive. Harold and Saul had a licence to use the name. The respondents correctly respond that if this contention were correct, a McDonalds franchisee would have trouble selling its restaurant because it had no intellectual property rights in the trade mark ‘McDonalds’.
94 The applicants contend that there was motivation for Lionel and Joel to involve Harold and Saul in "a wider enterprise". The South Yarra restaurant was not making good money, and both their wives were receiving Centrelink payments. Even if these matters provide some motivation as suggested, they do not to my mind point to joint ownership of the name. It is not even contended that they do.
95 The applicants claim that having the lease and liquor licence in the name of Squires Loft Pty Ltd for both the City and St Kilda restaurants demonstrates the commercial interest of Lionel and Joel in growing the business. That may be so, but it throws no light on the ownership of the name. The contention does not even purport to do so.
96 Finally, it is said that the common marketing of the restaurants as part of the Squires Loft Group demonstrates Lionel and Joel’s "understanding of the positioning of the restaurants as part of a common purpose". As with the two preceding matters, this one does not even pretend to point to joint ownership of the name. It is as if, at the end of this lengthy list of matters, the draftsman has forgotten that they are matters from which it is said that an agreement about the common ownership of the name was reached; not that they indicate some wider enterprise, an interest in growing the business, or an understanding of the positioning of the restaurants.
97 Of necessity I have examined the matters in the list one at a time. I have also viewed them as a whole. Either way they do not come near to persuading me that it is appropriate to infer from them that an agreement was reached as to the common ownership of the name Squires Loft.
Agreement to be implied?
98 I will defer consideration of whether the term in par 3(f) is to be implied until I have ascertained what was agreed at the 19 July 1997 meeting. I will also defer consideration of the implication of the term in par 3(g) – the parties would not make any use of the intellectual property related to the venture (including the name) without the consent of all of them. It will be recalled that the latter term is not alleged to have been orally agreed to at the meeting, but only to be implied as a matter of business efficacy. The par 3(f) term is alleged to have been oral and in the alternative to be implied as a matter of business efficacy.
What was agreed at the meeting?
99 There was a measure of agreement about the topic the subject of par 3(b) of the statement of claim. Lionel and Joel accepted that it had been agreed that Harold and Saul would establish the City restaurant, that it would trade under the name Squires Loft, and that its kitchen would be used to prepare sauces for the two restaurants. They denied that the City restaurant would be the flagship, that any agreement was reached as to any future licensed or franchised restaurants or that the City restaurant would be a licensed restaurant, except to the extent that they agreed that Harold and Saul could use the Squires Loft name and logo. I have accepted their evidence in these respects.
100 There is also some agreement about the topics in par 3(c), (d) and (e). Asked in cross-examination what agreement was reached in May 1997 as to the common operation of the City and South Yarra restaurants, Joel said:
"the Squires Loft Pty Ltd company in South Yarra ... would supply them with sauces at our cost, which was a cost without any labour content. They could get meats from our supplier, which was our specifications. We let them use the name and we did try, I suppose, to get stores running fairly similar. Similar type wine lists, similar type foods."
101 Joel said it was agreed at meetings in mid 1997 that the City and South Yarra restaurants would have common menus and products, there would be common pricing of products, and common stationery, serviettes and corporate livery. He also said it was agreed that there would be common presentation and marketing through advertising, references on menus, business cards and stationery.
102 He did not accept that it had been agreed that the purchasing of products would be undertaken centrally. Each restaurant was to, and did, buy its own products. He accepted that the meat purchased by the two restaurants from Top Cut gave better purchasing power. South Yarra purchased the serviettes and stationery, and the City restaurant bought its requirements from South Yarra at cost.
103 It can thus be seen that although Joel’s evidence was directed to an agreement as to the way in which the two restaurants would work together, he essentially accepted the terms in par 3(c) to (e), with the qualification as to (e) that there was no central purchasing of products. It was common ground in the evidence that there was no central purchasing.
104 Lionel’s evidence was to the same effect. At meetings leading up to the one on 19 June 1997 agreement was reached that there would be common pricing of products, stationery, corporate clothing, serviettes and livery. It was also agreed that the two restaurants would jointly promote and market each other. South Yarra allowed the City restaurant to purchase its meat from Top Cut under South Yarra’s contract.
105 The applicants have not satisfied me that the agreement alleged in par 3 was entered into on or about 19 June 1997 or at any other time. What was agreed at the meetings leading up to and including that of 19 June 1997 was that
• Harold and Saul, through a company to be called SLCS, would open a restaurant in the City using the name Squires Loft
• the City restaurant’s second kitchen would be devoted to the production of sauces for use in the restaurant and the South Yarra restaurant
• the two restaurants would adopt common menus and products, pricing of products, stationery, serviettes and corporate livery
• the two restaurants would promote and market each other under the name Squires Loft through advertising, references on menus, business cards and stationery, and
• the City restaurant could order South Yarra’s special meat cuts from Top Cut under South Yarra’s contract.
106 That is in substance what is alleged in the defence and cross-claim, namely
(a) in or about June 1997 Lionel and Joel agreed to grant Harold and Saul a royalty free licence to use the mark Squires Loft and the get up and methodology used by Lionel and Joel in running a restaurant in South Yarra under the name Squires Loft;
(b) as part of the licence, Lionel and Joel granted Harold and Saul permission to adopt the same menu as used at South Yarra, purchase from South Yarra’s meat supplier the special South Yarra cuts, and use the same sauces as those used at South Yarra, and
(c) there were terms of the licence that
(i) the City restaurant would adopt common menus and products, pricing of products, stationery, serviettes and corporate livery as that used at South Yarra, and
(ii) the City restaurant would promote and market the South Yarra restaurant through advertising, references on menus, business cards and stationery.
Paragraph (c) above is expressed as imposing obligations on the City restaurant alone. I find that the agreement was that the South Yarra restaurant had corresponding obligations.
107 The applicants took exception to the respondents’ use of the word "licence". It was said that the language of the discussions in June 1997 was not about a licence. I agree that the parties did not use that word. As Joel said – "we let them use the name" – which is consistent with the development of an understanding that Harold and Saul could use the name, even if Lionel and Joel did not expressly say they could. The word "licence" is a pleader’s attempt to fit their laymen’s understanding or language into a lawyer’s pigeonhole. Lionel and Joel’s language, or the understanding they allowed to develop, was to the effect that Harold and Saul could use the name Squires Loft in running their restaurant. The question is what this amounted to in law. Was it a grant of ownership rights in the name or merely a permission to use the name? As I have already found, it was the latter, and the appropriate designation to confer on it is a licence to Harold and Saul to use the name in the City restaurant for as long as they wished to do so.
108 The applicants also contend that once it is accepted that Lionel and Joel were happy to let Harold and Saul be involved in any future venture, as they said they were, "the language of licence becomes inappropriate in considering the grant of the right to the Applicants to use the name in respect of the City Steakhouse". Why this is so was not explained, and I do not accept it.
109 In the course of coming to my conclusion that there was no agreement such as that alleged by the applicants I have taken into account the background considerations referred to in Part A of the applicants’ written submissions. Those considerations, though part of the matrix to which it is proper to have regard, have not enabled me to reach the conclusions the applicants advance, in particular as to what transpired at the crucial 19 June 1997 meeting. My conclusion is essentially based on my assessment of the evidence about that meeting, my acceptance of Lionel’s and especially Joel’s evidence in preference to that of Harold and Saul, the probabilities of the case, and the confused nature of the central part of the applicants’ pleading and evidence.
110 In their amended defence Lionel and Joel plead that the licence granted to Harold and Saul to use the name Squires Loft is terminable at will. In their cross-claim they purport to revoke the licence. The evidence does not establish that the licence is terminable at will. Joel said the agreement reached was that Harold and Saul could use the name for as long as they wanted. At the date of Joel’s cross-examination they were still using the name, and were entitled to do so. Lionel’s evidence was to the same effect. He had no problem with Harold and Saul using the name Squires Loft in registering SLCS because it had been agreed that they could use the name. Although he did not accept that it had been agreed that Harold and Saul could use the name as long as their restaurant operated, because the parties’ discussions did not get into any "definitive terms", he agreed that no time limit was put on the City restaurant's use of the name. As appears from earlier examination of Saul’s and Harold’s evidence on this point, although at times they asserted more than the grant of permission to use the name, they were not alert to the difference between a right to use the name and having part ownership of it. I accept Joel’s evidence, largely supported by Lionel’s, that what was agreed was that Harold and Saul could use the name Squires Loft as long as they operated the City restaurant.
Implied terms
111 I indicated earlier that I would defer consideration of the question whether the terms alleged in par 3(f) and (g) can be implied until after I had determined what it was that the parties had in fact agreed in their discussions. Since I have decided that the crucial term alleged in par 3(a) and the ensuing terms in so far as they relate to any future licensed or franchised restaurants are not made out, it is strictly unnecessary to determine whether the par 3(f) and (g) terms can be implied. Nevertheless, since the topic was the subject of serious argument, and sub-par (f) was said by the applicants’ counsel to be the central plank of their case, I will briefly deal with it.
112 In Byrne v Australian Airlines Ltd [1995] HCA 24; (1995) 185 CLR 410 at 422 Brennan CJ, Dawson and Toohey JJ, after referring to the criteria listed in BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40; (1977) 180 CLR 266 at 283, said:
"as Deane J has observed [in Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 at 121], the cases in which the criteria ... have been applied in this Court are cases in which there was a formal contract, complete on its face. He pointed out that a rigid approach should be avoided in cases, such as the present, where there is no formal contract. In those cases the actual terms of the contract must first be inferred before any question of implication arises. That is to say, it is necessary to arrive at some conclusion as to the actual intention of the parties before considering any presumed or imputed intention."
113 Their Honours then quoted the observations of Deane J in Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539 at 573 as to the test to be applied in cases where the parties have not spelt out the full terms of their contract:
"a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case."
114 Given what was agreed between the parties (as to which see [105]), the term in par 3(f) cannot be implied. Harold and Saul are entitled to use the name as long as they operate the City restaurant. It is accordingly not necessary for the reasonable or effective operation of the contract that they have ownership rights in the name. For them to have such rights would be inconsistent with the agreement that was in fact made. I note that in the applicants’ written submissions the implication of this term is predicated on "the express agreement" of the parties upon the terms pleaded in par 3(a) to (e) of the statement of claim. Of course essential parts of that agreement have not been upheld.
115 It is clear from alleged terms 3(f) and (g) that the latter is dependent on the former. That is to say, it is because the parties are joint owners of the intellectual property that none of them can use the name Squires Loft without the consent of all of them. Even if sub-par (g) were independent of (f), I do not consider that it is to be implied. In determining whether it is necessary for the reasonable or effective operation of the contract to imply such a term, it is appropriate to take into account that the draft licence prepared in June 1997, given by Lionel to Saul for his consideration, contained in clause 3.32, to which Lionel’s marginal notes drew Saul’s attention, a provision that the licensee was not entitled to prevent the use of the name Squires Loft by any other licensee. Saul expressed no concern about this provision, though another provision in that clause did not accord with the arrangements between the parties and was to be corrected. Further, the whole tenor of Harold and Saul’s case is that there would be other licensees or franchisees who would be entitled to use the name. In these circumstances I am not satisfied that it is necessary to imply the term in par 3(g). I note that in their written submissions the applicants did not seek to support the implication of this term.
ACTING IN ACCORDANCE WITH THE AGREEMENT
116 Paragraph 4 of the Statement of Claim is headed "Actions in Accordance with the Agreement". Here it is pleaded that acting in accordance with the terms of the 19 July Agreement various things were done by the parties and others. In view of my finding that no such agreement was made, it would appear to be unnecessary to deal with par 4. However, in closing written submissions the case was put rather differently. It was said that in determining whether the agreement alleged existed and what its terms were, it was appropriate for the Court to have regard to the fact that after June 1997 the parties conducted themselves as if there were an agreement. Such conduct was said to be admissible, not only as to the fact of agreement being reached, but as to the terms of that agreement. In this connection, reliance was placed on various matters, only some of which are contained in par 4. Those relied upon in final submissions were:
• Lionel’s assistance to Harold and Saul in establishing the City restaurant
• Lionel’s establishment of the centralised kitchen in the City restaurant
• the adoption of common menus etc in the two restaurants
• the joint marketing and promotion of the two restaurants
• the ordering of stationery and ingredients for the sauces through the South Yarra restaurant, with each then paying at cost for what they purchased, and
• the training of staff in one restaurant and their working in the other.
117 Traditionally, contract formation is analysed in terms of offer and acceptance. However, as Heydon JA recognised in Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at 179, offer and acceptance are neither necessary nor sufficient to explain every case. While it is an error to assume that because something has been done, there must be a contract pursuant to which it has been done, a contract may nevertheless be inferred from the acts and conduct of the parties: Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117 per McHugh JA (Hope and Mahoney JJA concurring); Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32 at 80–83; Geebung Investments Pty Ltd v Varga Group Investments No 8 Pty Ltd (1995) 7 BPR 14,551 at 14,569; (1995) Aust Contract Reps |P90-059 at 90,322. The relevant conduct of the parties must be capable of proving all the essential elements of the alleged contract, so that if the conduct is too ambiguous or vague to establish a contract with legal certainty, no contract will be inferred.
118 It has generally been accepted since the House of Lords decision in James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 that while evidence of subsequent conduct is admissible to determine the existence of a contract, it is not admissible to determine the terms of a contract: see D W McLauchlan, "Contract Formation, Contract Interpretation, and Subsequent Conduct" (2006) 25 University of Queensland Law Journal 77. This rule must be understood in its context. Subsequent conduct is not admissible to resolve ambiguities in a contract the existence of which is not disputed. But such a rule would be nonsensical in the case of contracts the existence of which is only ascertained or confirmed by subsequent conduct. In such cases, the subsequent conduct does not resolve ambiguities but rather discloses whether the parties reached agreement and the content of such agreement. Without evidence of subsequent conduct relevant to the terms of the contract, all that could be said is that the parties reached agreement; it could not be said about what. I therefore agree with the following passage from the judgment of Nettle JA (with which Chernov and Ashley JJA concurred) in Husain v O & S Holdings (Vic) Pty Ltd [2005] VSCA 269 at [51]:
"a manifestation of mutual assent may be made even though neither offer or acceptance can be identified and even though the moment of formation cannot be determined. In point of principle I see no reason why that sort of analysis should not apply as much to an aspect or term of a contractual relationship as to the existence of the relationship itself."
I was not taken to any detailed judicial analysis of this question and nor was it addressed at any length by the parties. It is therefore not appropriate to say anything more other than that there are many unresolved questions in this area. There is a world of grey between the two clear extremes of a written contract and a contract "drifted into" by subsequent conduct. This case is not the vehicle in which to determine the extent to which subsequent conduct is relevant to ascertaining the terms of these grey area contracts.
119 A court will not lightly infer a contract from the conduct of the parties. In The Aramis [1989] 1 Lloyd’s Rep 213, Bingham LJ said the relevant questions in that case were whether the conduct of each party would be reasonably understood by the other as being either an offer or the acceptance of that offer, on the terms contended for. His Lordship said, at [1989] 1 Lloyd’s Rep 224:
"I do not think it is enough for the party seeking the implication of a contract to obtain ‘it might’ as an answer to these questions, for it would, in my view, be contrary to principle to countenance the implication of a contract from conduct if the conduct relied upon is no more consistent with an intention to contract than with an intention not to contract. It must, surely, be necessary to identify conduct referable to the contract contended for or, at the very least, conduct inconsistent with there being no contract made between the parties to the effect contended for. Put another way, I think it must be fatal to the implication of a contract if the parties would or might have acted exactly as they did in the absence of a contract."
Similarly in Pacific Brands Sports and Leisure Pty Ltd v Underworks Pty Ltd [2005] FCA 288 at [47], Finkelstein J said: "If the conduct in question is consistent with an intention not to contract, for example, if the conduct is referable to some other obligation, a contract by conduct will not arise."
120 The conduct subsequent to what they describe as the critical meeting on 19 June 1997 does not to my mind assist the applicants to establish the contract alleged. The City restaurant was not franchised, nor was it licensed in the ordinary use of that word. I refer in this connection to what I have said at [40] to [44]. It was owned by Harold and Saul, through SLCS. I accept Lionel’s evidence that he helped with the establishment of the City restaurant in order to assist his father and brother to have a business of their own to run. Joel acquiesced in Lionel spending "South Yarra" time on his relations’ project. The production of the sauces in the centralised kitchen, and their use in the two restaurants, the adoption of common menus etc, the joint marketing, the ordering of stationery and ingredients, and the use of staff between the two establishments, is no more than conduct in conformity with what I have found to be the agreement in fact made. See [105]. It is not conduct that in any way points to the parties being equal partners in any venture of opening further steak restaurants under the Squires Loft name through licence or franchise arrangements. Cf par 3(a) of the statement of claim. They were not equal partners, or indeed partners at all, in the City restaurant. There was no suggestion that Harold and Saul had any proprietary interest in the South Yarra restaurant. Although the St Kilda joint venture was prayed in aid by the applicants, there is no doubt that that was a joint venture between the parties and two others. It was not a licence or a franchise arrangement.
121 Paragraph 4 of the statement of claim, apart from referring to the establishment, operation and closure of the St Kilda restaurant, and some of the matters listed at [116], refers to
(a) Harold and a South Yarra employee designing a logo incorporating the name Squires Loft, the cost of which was borne by the parties, which was used in all three restaurants;
(b) Harold and Saul paying half the cost of Mr Williamson’s advice on franchising the Squires Loft business;
(c) the parties sharing the costs of a graphic artist to develop new images for the menus etc for the City and South Yarra restaurants, and
(d) Saul registering the Squires Loft trade mark, with the knowledge of the other parties.
122 What I have said at [120] deals with (a) and (c). Item (b) really works against the applicants’ present case. The agreement they rely on is said to have been made in June 1997. The fact that four years later (May 2001) the parties are receiving advice about whether to pursue franchising rather confirms that in June 1997 they had not agreed to franchise the Squires Loft concept. Indeed, even in May 2001, two of them (Harold and Saul) were not interested in the concept. In any event, they did not, four years after the crucial meeting, proceed with franchising. Even franchising’s chief proponent, Saul, said that the concept was not in his mind in June 1997, and was not an issue until much later, presumably when Mr Williamson and Mr Morgen (April/May 2001) gave their presentations. I have referred at [47] to Lionel’s remark at the 25 June 2001 meeting "Let’s just say we’re talking about are we going to franchise".
123 Reliance on item (d) is disingenuous. After all, the applicants rely on ss 88(1)(b) and 88(2)(c) of the Act to have the Register of Trade Marks rectified so that Saul no longer appears as sole owner of the mark. Section 88(1)(b) empowers the Court to remove or amend an entry "wrongly made" on the Register. Section 88(2) specifies the circumstances in which such an order may be made. One, in par (c), is where the use of the mark is likely to deceive or cause confusion. In their written submissions the applicants contend that the Register should be rectified on the ground that "the registration solely in Saul’s name is likely to cause confusion". In any event the item does not in any way point to the alleged agreement having been entered into.
ESTOPPEL
The pleaded case
124 The applicants plead that Lionel and Joel represented to them, and conducted themselves so as to encourage them to assume, that the parties would be the joint owners of all intellectual property related to the venture of operating, licensing and/or franchising steak restaurants under the name Squires Loft, including the name. The representations are those set out in par 6 of the statement of claim. They are that
(a) the parties would be equal partners in the venture of opening restaurants under the Squires Loft name through licence or franchise arrangements;
(b) the parties would be joint owners of all intellectual property related to the venture, and
(c) none of the parties would make any use of the intellectual property without the consent of the others.
These are the representations relied on to found the applicants’ case of misleading and deceptive conduct. It follows from the rejection of the applicants’ contract case that to the extent that their estoppel case relies on the same foundation, it too must fail.
125 The conduct relied on for the estoppel is that described in pars 3 and 4 of the statement of claim. I have concluded that the parties did not on or about 19 June 1997 enter into an agreement containing the terms set out in par 3(a) to (g). It follows that the conduct of Lionel and Joel that is implicit in par 3 cannot found the estoppel.
126 The only other conduct pleaded is that in par 4, namely the list of acts done in accordance with the agreement. No such agreement was entered into. Nevertheless I will treat sub-pars (a) to (j) of par 4 as if they are independent of the alleged agreement.
127 So far as sub- pars (a) to (j) relate to conduct of Lionel and Joel, they can be rendered as follows:
(a) they paid part of the cost of creating the artwork for the logo designed by Harold and the manager of the South Yarra restaurant;
(c) through a corporate entity they entered into the St Kilda joint venture agreement pursuant to which the joint venture parties opened and operated the St Kilda restaurant;
(e) in late 1999/early 2000 they contributed to paying out Messrs Friedman and Day as members of the St Kilda joint venture;
(f) together with Harold and Saul, they provided operational support and assistance, training of staff, product development and the supply of sauces and condiments to the St Kilda restaurant until its closure in May/June 2001;
(g) they paid half the costs of Mr Williamson’s advice in relation to franchising the Squires Loft business;
(h) they paid half the costs of a graphic artist who developed a new look and image for the menus and logos used on business cards and stationery, menus, table napkins, advertising and corporate clothing for the City and South Yarra restaurants;
(i) the logo in (a) was used on all business cards and stationery, menus, table napkins, websites, advertising and corporate clothing for all three restaurants, and
(j) they were aware that in June 2002 Saul had registered Squires Loft as a trade mark.
Paragraph 4(b) and (d) do not relate to conduct by Lionel and Saul.
128 In The Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394 at 444 Deane J said:
"Since an estoppel will not arise unless the party claiming the benefit of it has adopted the assumption as the basis of action or inaction and thereby placed himself in a position of significant disadvantage if departure from the assumption be permitted, the resolution of an issue of estoppel by conduct will involve an examination of the relevant belief, actions and position of that party."
129 I have examined the evidence of Harold and Saul about the ownership of the name Squires Loft at [63] to [68]. As there indicated, I am not persuaded that either of them was alert to the difference between a permission to use Lionel and Joel’s intellectual property, in particular the name, and a conferring of ownership rights in that property or name. Notwithstanding the stance they have since taken, namely that they became joint owners of the intellectual property, I am satisfied that all they thought they were getting was a right to use the name in the conduct of the City restaurant. The same applies to the other items of intellectual property: the recipes for the sauces for example.
130 Even if I had concluded that Harold and Saul believed they were being given ownership rights in the intellectual property, in particular the name, I would not have upheld the estoppel. In Verwayen at 444-445 Deane J said:
"The question whether such a departure would be unconscionable relates to the conduct of the allegedly estopped party in all the circumstances. That party must have played such a part in the adoption of, or persistence in, the assumption that he would be guilty of unjust and oppressive conduct if he were now to depart from it. The cases indicate four main, but not exhaustive, categories in which an affirmative answer to that question may be justified, namely, where that party: (a) has induced the assumption by express or implied representation; (b) has entered into contractual or other material relations with the other party on the conventional basis of the assumption; (c) has exercised against the other party rights which would exist only if the assumption were correct; (d) knew that the other party laboured under the assumption and refrained from correcting him when it was his duty in conscience to do so.
...
In cases falling within category (a), a critical consideration will commonly be that the allegedly estopped party knew or intended or clearly ought to have known that the other party would be induced by his conduct to adopt, and act on the basis of, the assumption."
131 Did Lionel and Joel play such a part in the adoption of the pleaded assumption that they would be guilty of unjust or oppressive conduct if they were now to depart from it? In my view they did not play such a part. I do not regard any of the matters listed in [126] as constituting conduct by them that they would have thought would lead Harold and Saul to assume that the parties were joint owners of the intellectual property, in particular the name. In relation to matter (c) in [127], the tenor of the St Kilda joint venture agreement is inconsistent with the Squires Loft name being owned by the parties rather than Squires Loft Pty Ltd. At the time of the conduct in [127] I am satisfied that Lionel and Joel did not know or intend that Harold and Saul would be induced by it or any of it to adopt, and act on the basis of, the assumption that the parties were joint owners of the intellectual property, in particular the name. Nor do I consider that Lionel and Joel clearly ought to have known that they would.
132 The second assumption pleaded by the applicants is not a live issue. Lionel and Joel accept, in my view correctly, that Harold and Saul have the right to operate the City restaurant under the name Squires Loft. Had they not accepted that position, I would have upheld the second assumption, and held that they were not at liberty to depart from it by preventing Harold and Saul from so operating the City restaurant. I will deal later with whether the right has been lost.
Non-pleaded matters
133 The applicants’ pleaded estoppel case is dealt with at [124] to [132]. In their written submissions they rely on 21 additional matters, two of which are partly covered by particulars in par 4 of the statement of claim. I deal with each of the additional matters in turn.
134 Lionel’s agreement in cross-examination that he represented to the applicants that they could be involved in any venture involving the Squires Loft name.
This overstates Lionel’s agreement. What he accepted was that prior to Saul’s departure from the business on 6 June 2002 it was agreed that Harold and Saul had the option of being involved in any expansion of the Squires Loft concept. This falls short of a representation that the parties would be joint owners of the name, let alone of all the intellectual property related to the venture of operating, licensing and/or franchising steak restaurants under the name Squires Loft (see pars 1 and 26 of the reply and defence to cross-claim).
135 Lionel gave Saul the sauce recipes in January 1999.
In my view this does not amount to a representation that the parties would be joint owners of all the intellectual property related to the venture, including the name. As with the name which Harold and Saul were permitted to use in the City restaurant for the benefit of both that and the South Yarra restaurants, Harold and Saul were to be at liberty to use the recipes, created by Lionel, for the benefit of the two restaurants.
136 Lionel and Saul pursued the prospect of purchasing Marcel Food’s Kitchen.
I do not regard this as constituting conduct calculated to encourage Harold and Saul to assume that they would be joint owners of the intellectual property. It is to be remembered that the estoppel pleaded is not framed as an alternative way of establishing the par 3 agreement. It is only directed to establishing the assumption that the parties would be joint owners of the intellectual property related to the venture. Many of the matters now relied on, including this one, do not seem relevant to the intellectual property assumption.
137 The parties had regular meetings.
Lionel agreed that this was the case in the period 1999 to 2000. Joel agreed that in the period from October 1997 there were numerous meetings between the City and South Yarra representatives concerning the operation of the two restaurants intended to make them run "fairly similar, and to be successful". The matters discussed included staffing, food preparation and having the same salads at each location. In my view this involves no representation or conduct on Lionel or Joel’s part calculated to give rise to an assumption that the parties were joint owners of the intellectual property. I refer to what I have said in [136] about the extent of the estoppel.
138 Saul and Mr Marafioti developed manuals for the common operation of the restaurants.
Mr Marafioti agreed that these documents were available for use in both stores, but only some of them were in fact used at South Yarra. It is a curious feature of the case that nowhere do the applicants define what items other than the name are covered by the intellectual property they claim in their reply. The overwhelming emphasis is on the Squires Loft name, which the applicants’ counsel called "the central plank" of their case. The development of the manuals may suggest that they, or some of them, are jointly owned. However there is no live dispute about their ownership. The parties have simply not crossed swords as to them, and the applicants have not identified them as relevant intellectual property. In any event, whatever the position with the manuals, their development cannot constitute a representation as to intellectual property generally (whatever it may be). Nor does it bear on the ownership of the name, which, unlike the manuals, was not a joint creation.
139 Harold and Joel visited the National Australia Bank and enquired about obtaining finance for, amongst other things, expanding the Squires Loft concept and purchasing Marcel Food’s Kitchen.
In my view this says nothing as to the ownership of the intellectual property. I refer to what I have said in [136] about the extent of the estoppel.
140 Lionel and Joel never imposed any time limit on Harold and Saul’s use of the name.
I repeat my finding that Lionel and Joel agreed that Harold and Saul could use the name for as long as they liked in their operation of the City restaurant. There was no agreement to confer on Harold and Saul an ownership interest in the name.
141 Lionel and Saul provided Mr Morgen with the information he later put in his presentation to the parties on 29 May 2001. Why have Harold and Saul at that presentation "if they had no stake in the subject of franchising"?
Harold and Saul’s presence at the second meeting with Mr Morgen does not point to any conduct on Lionel and Joel’s part calculated to cause Harold and Saul to make the assumption relied on. I refer again to what I have said at [136].
142 Clause 6.5 of the St Kilda joint venture agreement groups together the parties’ obligations to provide consultancy services and supply products to the St Kilda restaurant.
In my view this does not bear on the assumption as to ownership of the intellectual property. I refer to what I have said at [136]. Again I observe that the tenor of the joint venture agreement is that at that time (late 1998) Squires Loft Pty Ltd was still the owner of the name.
143 After Messrs Friedman and Day left the St Kilda restaurant, the parties ran it as a partnership, marketing it as part of the Squires Loft Group.
The tendency of the marketing of the three restaurants was that they were members of a "group", though that word was not always used. In cross-examination Lionel said that St Kilda was run as a partnership. Of course a lawyer would call it a joint venture. Even if it were a true partnership that would not assist the applicants any more than the references to the restaurants as being part of a group. There is nothing about the running of one restaurant in a particular way that affects the running of the other restaurants. In any event, the St Kilda restaurant did not come into operation until a number of years after the alleged agreements sued upon. How language employed in relation to the St Kilda restaurant in 1999 could endow language used two years earlier with a quality it did not then possess was never explained. The reference to "group" would be equally apt to describe a franchise arrangement as a partnership.
144 The parties jointly explored the prospect of franchising in 2001. Joel prepared franchising projections and Lionel prepared a background document.
Joel said this about his projection documents:
"Having a look to see really what do we have to do to make money if we licensed or franchised or consulted a store, and my mind – my answer to – and this, I actually think might have even been with Harold, Saul and Lionel having a look at different type projections, was that it is just too risky. You just can’t do it."
He added that once St Kilda was no longer trading
"we were still having a look at can we move forward and ... Saul was throwing around the franchising concept. Harold and myself were totally against it and this [projection] was just pretty much having a look at to see – to justify why franchising won’t work ... with our concept."
He then explained by reference to his projection why franchising wouldn’t work. Based on his figures, his conclusion was "we can’t afford it, we can’t do it". I accept his evidence. Lionel’s evidence was that after Mr Morgen’s presentation of 29 May 2001
"We made the decision ... that franchising was not going to be our style of moving forward and we had prepared figures that indicated that a business such as ours could not support a royalty fee of 10 or 11 per cent and we had agreed that franchising was not going to be the way forward."
He said the "decision" was reached in discussions between the parties. Harold, Joel and he were agreed that franchising was not on. Saul disagreed. Later Lionel said that the problem with franchising for the parties’ business was that
"the royalty fee was not sustainable for somebody to pay 11 per cent of their turnover and then make a decent living out of the business as Joel’s predictions showed."
Lionel said that until late May 2001 he believed that franchising was "possibly a suitable vehicle for expansion". It is apparent for the foregoing that after the end of May 2001 three of the parties were not interested in franchising. It is true that Lionel and Joel prepared documents. But Joel’s projections led him and Lionel to conclude that franchising was not the way forward. It is to me quite unreal to see in these discussions a representation by Lionel and Joel that franchising was still a live issue when both the so called representors and one of the so called representees were not interested in adopting the concept. The mere fact that Lionel and Joel were discussing franchising with Harold and Saul (though by majority rejecting it), could not reasonably be seen to lay a foundation for an assumption on the part of Harold and Saul that they would acquire ownership interests in the intellectual property. I refer to what I have said at [136].
145 On 8 May 2001 Saul and Lionel met Mr Williamson and discussed franchising with him. Why involve Saul if "the position of Lionel and Joel [was] that Saul had no relevant interest" in franchising?
This meeting was on 8 May 2001, three weeks before the second meeting with Mr Morgen. There is no doubt that Saul was always the chief propounder of franchising as the way forward. Harold was opposed to the concept. At this stage Lionel was still open minded. He had yet to see Joel’s projections which would lead him to discard franchising as the expansion model. It may be accepted that Saul had a relevant interest in franchising and in being at the meeting with Mr Williamson. But this does not point to Lionel and Joel having caused him to make the assumption that he had an ownership interest in the intellectual property. In fact the meeting with Mr Williamson involved the parties and not just Lionel and Saul. But nothing turns on that.
146 Lionel’s stated reason for holding the meeting on 25 June 2001 was to agree upon a deadlock breaking mechanism. This assumes the existence of an equal partnership.
As appears from [48] to [51], the transcript of the meeting does not disclose that the parties were an equal partnership. St Kilda was gone. Harold and Saul had their restaurant and Lionel and Joel theirs. They had joint arrangements as to ways in which the restaurants would work together. They were discussing "going forward". They had no joint enterprise, and the question was whether they would find an appropriate opportunity. Lionel wanted to be sure that if they went forward together in some project, the difficulties they had experienced in St Kilda (and perhaps in their relations in connection with the surviving restaurants) would not continue. Hence the discussion about deadlock. The focus then shifted to Saul’s demand for a written agreement. This was not to be a document recording an existing agreement, but one to contain the elements Saul thought were necessary (from his perspective) in an agreement that would govern a future commercial opportunity, if it arose. That was why he was asked to present a draft. Accordingly, the assumption of an existing equal partnership is unfounded. In any event, there is nothing in the transcript that contributes to an assumption as to the joint ownership of the intellectual property. I refer to what I have said at [62] about Saul’s perception of his rights to the intellectual property at the 25 June 2001 meeting.
147 There were representations by Lionel and Joel at the 25 June 2001 meeting that
(i) the parties were in partnership together;
(ii) they would proceed with a franchising venture, and
(iii) if Saul wanted a written agreement as to (i) and (ii) he should present a draft to Lionel and Joel for their review.
As appears from my rejection of the contract case, there was no representation to the effect of (i). There was no representation to the effect of (ii). This discussion was after Lionel and Joel had decided not to proceed with franchising. See the discussion at [144]. Item (iii) is not a representation in either terms or effect. In any event, as I have found, the discussion about Saul presenting a draft was not about a document recording any existing arrangement between the parties, but a proposal as to a future venture in which they might participate if an opportunity presented itself. In any event, it is difficult to discern what these alleged representations have to do with the ownership of the intellectual property. This item in particular seeks to prove too much, namely that the contract claim in par 3 of the statement of claim is made out.
148 Although Lionel knew from 15 April 2003 of Saul’s registration of the trade mark, Lionel and Joel took no steps to contest it.
This rather overstates their inactivity. When on or about 15 April 2003 Lionel heard from Harold about the registration, he told him that he and Joel would "let it go at this particular point". Harold told Lionel he would seek advice as to what could be done. Lionel said Harold was the one who was in dispute with Saul at that time, and he and Joel were "quite comfortable with not disrupting the balance". Joel learnt from Lionel that Saul had registered the mark. He did not directly raise it with Harold, because Lionel had told him not to worry about it since Harold had spoken to one of the lawyers at Middletons, who was going to investigate the matter and have the registration set aside. Harold said he was "surprised" that Saul had registered the mark in his sole name, because that was contrary to the June 1997 agreement under which the parties all had an interest in the name. There is thus no reason to doubt Lionel’s evidence that Harold was going to speak to his solicitors about what could be done to regularise the position. It was suggested by the applicants that it was odd that Middletons should be consulted about this, because it was they who had arranged for Saul’s registration. I do not think it at all odd that Harold should consult them. They were his solicitors too, and he had a grievance he wanted sorted out because, as he claimed, he had an interest in the name. Accordingly it is not correct to say that Lionel and Joel took no steps to contest Saul’s registration. Harold was concerned about it, and was going to talk to his solicitors, who happened to be Saul’s as well, to sort the matter out.
149 Lionel and Joel’s alleged failure to take steps to contest the registration is put forward in support of the applicants’ claim that they conducted themselves so as to cause Harold and Saul to assume that the parties would be the joint owners of the name. The alleged failure cannot have caused Harold and Saul to make that assumption. The failure to act, if that were established, could only indicate that Lionel and Joel were not troubled by Saul’s registration as owner of the mark. It could not be taken as an indication to Harold and Saul that the parties were the joint owners. Of course Lionel and Joel were troubled by Saul’s registration, as was Harold.
150 Lionel represented to Harold and Saul that Embers had no right to use the Squires Loft name. Why do that if Harold and Saul had no rights to the name?
Lionel accepted that Harold and Saul had the right to use the name. He would have treated Harold’s question as a legitimate enquiry: was someone else to be at liberty to use it? In that context his answer cannot be seen as a representation that Harold and Saul had ownership interests in the name.
151 Lionel represented to Harold and Saul that Ms Meyerov had no rights to use the name. Why do that if Harold and Saul had no "rights to the use of the Squires Loft name"?
I refer to what I have said at [150].
152 On the Squires Loft website the City restaurant is advertised as being part of the Squires Loft Group.
The website does not use the expression "Squires Loft Group" or the word "Group", though it does indicate an association of some sort between the two restaurants. However this is not conduct by Lionel and Saul that is calculated to cause Harold and Saul to assume that they have ownership rights in the name. The website includes these passages:
"we believe that the time is opportune to expand the Squires Loft concept by servicing further locations in the primary markets and as such we are now inviting expressions of interest to be part of our continued growth and success.
...
If you are interested in gaining further information regarding our unique consultancy and supply opportunities, please feel free to contact the owners of Squires Loft Steakhouse,
Lionel Miller Joel Distiller
+61 403 023 214 +61 408 492 283"
(The emphasis is mine.) The bulk of the website is occupied with the Squires Loft menu (with prices) and photographs of the interior and exterior of the City and South Yarra restaurants. If the website contains any representation of the ownership of the restaurants, including their intellectual property, it is that Lionel and Joel are the owners.
153 In December 2004 Lionel asked Saul to research a possible site in Perth with a view to Saul "maybe taking up the opportunity".
Lionel said he had been approached by the Centro Property Group who wanted to know whether "we" would be interested in taking space in one of their centres. Lionel asked Saul to speak to a friend of his in Perth to assess whether the site had any merit. The friend reported back that the centre was a good one. Lionel had discussions with Centro, but chose not to pursue the matter. He agreed that he may have said to Saul that the site might be of interest to him. He and Saul did not discuss the use of the name Squires Loft in relation to the site. In my view this does not amount to conduct calculated to cause Harold and Saul to assume that they had ownership interests in the intellectual property.
154 In December 2004 Lionel included Saul in discussions with Steven Webber about opening a steakhouse. Why include Saul if he had "no legitimate interest"?
Lionel agreed that he met Mr Webber and an associate, Hugh Kerry, in company with Saul, to discuss the possibility of Mr Webber opening a consultancy store in Melton. Asked in cross-examination why he had included Saul in the discussion, Lionel said:
"Saul had worked with both Steven and Hugh previously and it was merely an icebreaker for him to join us. I had no contact with these guys. I didn’t know them. They were familiar with Saul and they sat and talked about the past for some time before we got down to the nitty gritty. Saul was reluctant to join the meeting.
But you saw that Saul had an interest at being at that meeting? --- He was reluctant to join that meeting but it just evolved that he remained at the table after the introductions were made."
Nothing came of the discussion because after Lionel had looked at the Melton site, he was unable to contact Mr Webber. In my view this event is not capable of constituting conduct calculated to cause Harold and Saul to assume that they had ownership interests in the intellectual property.
155 There were ongoing discussions between the parties about franchising and expanding the group. Joel repeatedly referred to his willingness to have a look at any proposal for expansion, "yet he never told Harold and Saul that the [ownership assumption] was incorrect".
This assumes what it seeks to prove, namely that the assumption of joint ownership is established.
156 The non-pleaded matters, whether taken individually or together, do not support the claim that Lionel and Joel represented to the applicants or conducted themselves so as to encourage them to assume that the parties would be the joint owners of all intellectual property related to the venture of operating, licensing and/or franchising steak restaurants under the name Squires Loft.
MISLEADING AND DECEPTIVE CONDUCT
Representations to applicants
157 It follows from what I have said in rejecting the applicants’ contract case that I do not accept that Lionel and Joel represented to them that
• the parties would be equal partners in a venture of opening restaurants under the Squires Loft name through license or franchise arrangements
• the parties would be joint owners of all intellectual property related to the venture, including the name Squires Loft, and
• the parties would not make any use of intellectual property related to the venture, including the name Squires Loft, without the consent of all other parties.
Representations to The Grill Room
158 The applicants allege that JLCS represented to The Grill Room that
• it was the owner of the trade mark or in a position to grant licences to use the name Squires Loft in relation to restaurants in Australia, and
• it had the authority to grant a licence to use the name without the agreement, approval or consent of any other party.
159 These representations are said to be misleading and untrue in that
• Lionel and Joel, JLCS’s directors, had entered into an agreement with the applicants that precludes them from unilaterally granting licences to use the name without the consent of the applicants
• the parties are joint owners of the name, and
• JLCS does not have the authority to grant a licence to use the name without the agreement, approval or consent of the parties.
It follows from my rejection of the applicants’ contract case that these claims of misleading and untrue conduct are not established.
TRADE MARK CROSS-CLAIM
Removal from Register
160 The respondents claim that the trade mark should be removed from the Register of Trade Marks or that its registration should be cancelled on the grounds set out at [19]. It is also alleged that Saul’s registration is an entry wrongfully made, and/or an entry wrongly remaining, in the Register and is liable to and should be cancelled.
161 The respondents also contend that the applicants have made groundless threats of legal proceedings in respect of trade mark infringement against the respondents’ customers. Reference is made to three letters from Middletons threatening trade mark infringement: one of 11 March 2005 to Lionel and Joel, another of the same date to Ms Meyerov, and one to the respondents’ solicitors of 4 May 2005. Reference is also made to a phone call Saul is said to have made to Top Cut on 5 May 2005 threatening Mr Robert Rowe with infringement if Top Cut continued to supply meat and sauces to Embers and The Grill Room.
162 In their Defence to Cross-Claim the applicants admit that Saul is the registered proprietor of the mark, but say that he holds his interest on behalf of the parties. Otherwise they deny the allegations set out above.
163 The dispute is thus whether Saul holds his registered interest on behalf of the parties or has no interest in the mark at all, as opposed to a right to use it in the City restaurant. It follows from what I have said at [76], [97] and [105] that the latter is the case. I add that Saul’s letter to Joel of 11 October 2004, in which he says he will obtain the forms for the transfer of the trade mark to Lionel and Joel, is inconsistent with Saul and Harold being part owners of the mark. I will direct the Registrar of Trade Marks pursuant to s 88 of the Act to remove the mark from the Register on the grounds in pars (a) and (e) of sub-s (2).
Unjustified threats
164 Section 129 of the Act provides in part as follows:
"(1) If a person threatens to bring an action against another person (threatened person) on the ground that the threatened person has infringed:
(a) a registered trade mark; or
(b) a trade mark alleged by the person to be registered;
any person aggrieved by the threat (plaintiff) may bring an action ... against the person making the threat (defendant).
(2) The purpose of the action is to obtain from the court:
(a) a declaration that the defendant has no grounds for making the threat; and
(b) an injunction restraining the defendant from continuing to make the threat.
The plaintiff may also recover any damages that he or she has sustained because of the defendant’s conduct.
(3) The action may be brought whether or not the defendant is the registered owner, or an authorised user, of the trade mark alleged to have been infringed.
(4) The court may not find in favour of the plaintiff if the defendant satisfies the court that:
(a) the trade mark is registered; and
(b) the acts of the threatened person in respect of which the defendant threatened to bring an action constitute an infringement of the trade mark."
165 The elements of s 129(1) are made out. The only issue arises under sub-s (4). Paragraph (a) of sub-s (4) requires the trade mark in question to be registered, however it is silent as to whether the registration must be a valid registration or whether an invalid registration will suffice. This issue was considered by the Court of Appeal in Challender v Royle (1887) 4 RPC 363. That case concerned the Patents, Designs, and Trade Marks Act 1883 (UK), s 32 of which has become s 129 of the present Act. Section 32 provided as follows:
"Where any person claiming to be the patentee of an invention, by circulars advertisements or otherwise threatens any other person with any legal proceedings or liability in respect of any alleged manufacture use sale or purchase of the invention, any person or persons aggrieved thereby may bring an action against him, and may obtain an injunction against the continuance of such threats, and may recover such damages (if any) as may have been sustained thereby, if the alleged manufacture, use, sale, or purchase to which the threats related was not in fact an infringement of any legal rights of the person making such threats: Provided that this section shall not apply if the person making such threats with due diligence commences and prosecutes an action for infringement of his patent."
166 The question in that case was whether the defendant, in the course of defending the claim that he had made a threat to which s 32 applied, was entitled to attack the validity of the plaintiff’s patent. Cotton LJ said, at 371, that:
"the Court must be satisfied ‘that the act complained of is not in fact an infringement of any legal right of the person making such threats’ ... the question whether the patent of the person making the threats is a valid patent must come into consideration if the plaintiff in the action seeks it, because I cannot see how, if a patent is invalid, there can be any act done in infringement of a legal right when the legal right depends only on the validity of that patent."
167 The issue arose again in Pittevil & Co v Brackelsberg Melting Processes Ltd (1931) 49 RPC 23. At this time the relevant act was the Patents and Designs Act 1907–1919 (UK), s 36 of which had been s 32 of the 1907 Act. The only relevant amendment to that section was that the words "any legal rights of the person making such threats" had been replaced by "the patent". It was argued that Challender v Royle did not apply since the term "patent" encompassed both inventions and alleged inventions. Thus, it was argued, the section applied even if the patent was invalid and so the validity of a patent could not be challenged in a threats case. The Court of Appeal did not accept this argument, holding that amendments otherwise having the effect of broadening the scope of the section should not be read as cutting down a right established by judicial authority, particularly since the amendment was contained only in the schedule to the amending act. Challender v Royle was therefore applied.
168 Section 36 of the 1907–1919 Act became s 124 of the Trade Marks Act 1955 (Cth). Sub-section (1) adopted similar language but with an important addition. It read:
"Where a person, by means of circulars, advertisements or otherwise, threatens a person with an action or proceeding for infringement of a trade mark which is registered, or alleged by the first-mentioned person to be registered, or some other like proceeding, a person aggrieved may, whether the person making the threats is or is not the registered proprietor or the registered user of the trade mark, bring an action against the first-mentioned person and may obtain a declaration to the effect that the threats are unjustifiable, and an injunction against the continuance of the threats, and may recover such damages (if any) as he has sustained, unless the first-mentioned person satisfies the court that the trade mark is registered and that the acts in respect of which the proceedings were threatened constitute or, if done, would constitute, an infringement of the trade mark." (emphasis added)
169 No cases have considered whether what had been said in Challender and Pittevil applied to the 1955 Act. However the first edition of D R Shanahan, Australian Trade Mark Law and Practice (1982) at 383 cited Pittevil, and concluded that "it is necessary that the registration be valid and it appears to be open to the plaintiff to plead the invalidity of the registration without actually seeking revocation". The present Act continued, in sub-s (4), the highlighted requirements of s 124 of the 1955 Act cited above.
170 The position established by Challender v Royle, that a defendant in a threat case may argue invalidity of the registration, is supported by sound policy considerations, as the passage from Cotton LJ cited at [166] demonstrates. It seems unlikely that subsequent re-workings of the original legislative provision, which have expanded and clarified the right to bring a proceeding where a threat is made, would have displaced what was said in Challender v Royle without clear words. Both the report of the Attorney-General’s committee into the 1955 Act ("Report of the Committee Appointed by the Attorney-General of the Commonwealth to Consider what Alterations are Desirable in the Trade Marks Law of the Commonwealth (1954)" and the Explanatory Memorandum for the current Act are silent on the question. On their face, the meaning of the words in s 129(4)(a) - "the trade mark is registered" - is clear. However, when the history of the threat provision is examined, there is no basis for saying that any version of the trade mark legislation has changed the position set out in Challender v Royle and Pittevil. Further, the words in the emphasis in [168] – "the acts ... constitute ... an infringement of the trade mark" – seem to pick up the concept in the passage from Cotton LJ’s reasons set out at [166]. In those circumstances the words should be understood as meaning "the trade mark is validly registered". It follows that the applicants have failed to make out par (a) of sub-s (4), since the trade mark is invalid.
171 The applicants also fail to make out par (b) of sub-s (4). This paragraph requires them to satisfy the Court that the acts of the respondents which were the subject of the letter from Middletons to Lionel and Joel on 11 March 2005 constituted an infringement of the trade mark. No attempt was made by the applicants to so satisfy the Court, and in light of my findings, I would in any event not have been so satisfied.
172 There will be a declaration that the applicants have no grounds for making the unjustified threats set out in par 26 of the cross-claim, and an injunction restraining them from continuing to make those or similar threats. The respondents’ counsel informed the Court that no evidence of damage would be called in connection with the claim to unjustified threats.
TERMINATION OF LICENCE
Breakdown of relationship
173 The respondents first contend that the applicants’ licence to use the Squires Loft name was terminable upon the breakdown of the business relationship between the parties. They say that the breakdown began with the applicants’ solicitors’ letter to Lionel and Joel of 11 March 2005, the substance of which is set out at [39(pp)], and continued with the initiation of the proceeding. There is no doubt that the relationship has broken down.
174 In this connection the respondents rely on J H Coles Pty Ltd v Need [1933] HCA 48; (1933) 49 CLR 499. There the appellant (Coles) and Need entered into an agreement that Need would open a shop and conduct a business therefrom under Coles’ trade name, the business being similar to that conducted by Coles. Need was to buy all his stock from Coles at a concession price. No time was fixed for the duration of the agreement. Coles’ name was affixed to the shop front. Initially Need purchased all his stock from Coles, but after a while Coles was unable to supply the whole of Need’s requirements, and he obtained some of his stock elsewhere. After about three years, his purchases from Coles were negligible. Coles was then in voluntary liquidation. Its liquidator required Need to remove the Coles trade name from his shop, and on his refusal, brought an action to restrain him from continuing to use the name.
175 Irvine CJ granted the injunction. His Honour found that Coles had granted Need a licence to use its name, that no period had been fixed for the grant, that the licence had been duly determined by notice, the implied term of the licence being that it should last as long as the buying and selling on the terms and prices arranged should go on, and that these matters having ceased, Coles was entitled to revoke the licence.
176 The Full Court upheld the Chief Justice’s decision. Before the Full Court Need contended that he had acquired by assignment of Coles’ goodwill a right to use its trade name permanently or indefinitely. This is the Court rejected, confirming the Chief Justice’s conclusion that Need had no more than a licence to use the name, which had been revoked.
177 The High Court, by majority, allowed Need’s appeal: Need v J H Coles Pty Ltd [1931] HCA 55; (1931) 46 CLR 470. The Privy Council allowed Coles’ appeal. The Board agreed with the reasoning of the Chief Justice, the Full Court and the dissenting judges in the High Court, Starke and Dixon JJ. Their Lordships said, at 46 CLR 503:
"all the right that the respondent ever had in regard to the user of the appellant’s trade names was a revocable licence to use these names so long as the business arrangement continued between the appellant and respondent. From these conclusions it follows that prima facie the appellant is entitled on well-recognized principles to an order restraining the respondent from the unauthorized use of the appellant’s trade names after the licence was revoked, since the continuance thereafter of such user necessarily involves a passing off by the respondent of his business as being a business for the sale of the appellant’s goods and as being a business in which the appellant has at least an interest, and in this way there would be practised a deception of the public to the prejudice of the appellant’s business reputation and goodwill."
178 Their Lordships went on to consider whether the appellant’s conduct had disentitled it to relief, and decided that it had not.
179 In the Supreme Court Irvine CJ and two members of the Full Court (Macfarlan and Mann JJ) thought the licence revocable at will, and that no question of reasonable notice arose. In the High Court Starke J was of the same view. The other members of the High Court did not consider the question. Dixon J said, at 46 CLR 483:
"I agree with the view that the agreement was brought to an end and that it had ceased before the suit was commenced to confer upon the appellant a contractual right or licence to the use of the trade names. I think that, if the agreement had not already ended, it terminated when the winding-up commenced. The arrangement made between the appellant and the Company created a business relation in which the advantages reciprocally enjoyed and conferred depended on each continuing to carry on his or her trade. The shopkeeper for his profit sold with the help of the Company’s trade names and methods the goods with which the Company supplied him. The remuneration of the Company for the use of its names and for whatever other service it gave was obtained from the profitable supply of the goods which the shopkeeper sold. Such an arrangement could not survive the termination of the business existence of either party. I do not think that a contractual intention should be imputed to the Company and the appellant to confer upon the appellant a right to the use of the trade names on the termination of the agreement. The parties did not, I think, consider what was to happen if the agreement was brought to an end, and the Company at least meant to do no more than allow its name to be used so long as the shop was a means of selling its goods."
At [110] I have rejected the respondents’ submission that the applicants’ licence to use the name was revocable at will. Harold and Saul were at liberty to use the Squires Loft name in the City restaurant as long as they wanted to.
180 In my view Coles is distinguishable. It concerned an arms length commercial arrangement. The passage from Dixon J’s judgment set out at [179] makes clear why it was that no intention should be imputed to the parties that Need should be at liberty to use Coles’ name after the agreement had come to an end. In particular, it could not reasonably be thought that Coles intended that its name would be used by Need when its goods were no longer being sold at his shop.
181 The present case is different. Lionel wanted to assist his father and brother establish a business. He spent a lot of time on the project. He took the lease and licence in his own name to facilitate the matter. He assisted with the opening of the City restaurant, and attended to the grill for some time after the opening. Joel went along with this, because he respected Lionel’s concern to help Harold and Saul. He said he agreed to Lionel taking time away from the South Yarra restaurant because he was helping members of his family.
182 The clear intention of Lionel and Joel in mid-1997 was that Harold and Saul were to have their own restaurant. Although their agreement that Harold and Saul could use the name Squires Loft in the City restaurant has, for the purpose of distinguishing between a mere permission to use it and a grant of ownership rights, been dubbed a licence, the discussions between the parties were at a quite informal level. No more than "You can use the Squires Loft name". As in Coles, the parties are unlikely to have considered what was to happen if they fell out. But whereas the appropriate intention to impute to the parties in Coles was that Need’s liberty to use the Coles name would come to an end when Coles ceased to derive any advantage from Need’s shop, the appropriate intention to impute to the parties here is that Harold and Saul were to be at liberty to use the name in the City restaurant as long as they wanted to; that is to say, the use was not conditional on a continuation of the business relationship between the two restaurants. Lionel and Joel had ample opportunity in the course of their cross-examination to say that Harold and Saul’s use of the name was in some way qualified or conditional, but both were happy to leave it that Harold and Saul could use the name as long as they wanted to. Although the respondents overstate the position by submitting that Lionel and Joel accepted that Harold and Saul could use the name for as long as they wanted "without any conditions being imposed upon its use by them", that is in my view the proper inference to draw from what they actually said, namely that Harold and Saul could use the name for as long as they wanted to.
183 It is to be remembered that Squires Loft was part of SLCS’s name. It is, I think, an unlikely intention to impute to the parties that Harold and Saul would have to change their company’s name if the parties fell out. In my view it is not realistic to distinguish between the name as it appears in SLCS and as it is used in the business operated by SLCS.
184 I note in passing that Joel did not consider that Harold and Saul’s right to use the name had terminated once the parties’ business relationship broke down. See [110].
"The agreement reached between Lionel and yourself and Harold and Saul was that Harold and Saul could use the name Squires Loft in the company name Squires Loft City Steakhouse Pty Ltd for as long as they wanted? --- I believe, yes. We ... let them use the name for as long as they wanted, yes.
And that remains the case as of today, doesn’t it? That they can use that name pursuant to that agreement? --- They are still using the name today.
And they are entitled to, according to your version of the agreement? --- Yes."
Lionel and Joel’s version of the agreement was that Harold and Saul had a licence to use the name in the conduct of the City restaurant and in the name SLCS. Their version is described at [106].
Breach of licence terms
185 The respondents then contend that the licence to use the Squires Loft name was terminable on breach by Harold and Saul of the licence agreement. The breach relied on is their failure any longer to adopt common menus etc or promote and market the South Yarra restaurant.
186 As appears from [105] and [106], Lionel and Joel’s defence that they granted Harold and Saul a licence to use the name Squires Loft in the City restaurant upon the terms referred to has been upheld. However the respondents claim that the City restaurant no longer adopts common menus etc and does not promote and market the South Yarra restaurant. They say that the applicants have thereby evinced an intention not to be bound by the terms of the licence and have thereby repudiated it, which repudiation they accept.
187 In Foran v Wight [1989] HCA 51; (1989) 168 CLR 385 at 417 Brennan J said:
"Where the respective obligations of parties to a contract are mutually dependent and concurrent, the primary rule is that neither party who fails to perform his obligation when the time for performance arrives can rescind for the other party’s failure at that time to perform his obligation. Each party’s obligation is conditional on performance by the other; neither can complain of non-performance by the other when the condition governing the other’s obligation goes unfulfilled. But if one party intimates to the other that it is useless for the other to fulfil his obligation and the other acts on the intimation, the party to whom the intimation is given is dispensed from a nugatory tender of performance."
188 It is common ground that the respondents
• by their solicitors’ letter of 31 March 2005 stated that the respondents would no longer be dealing with the applicants in any capacity
• terminated the supplies of sauces and Squires Loft cuts of meat from Top Cut to the applicants
• refused to supply any further stationery to them
• changed their business cards, menus and marketing material to exclude any reference to the applicants, and
• did not have a website operating for October and December 2005, and by their solicitors’ letter of 9 November 2005 refused to acknowledge any interest of the applicants in having the website up and running.
189 In these circumstances the respondents have intimated to the applicants that it was useless for them to perform their part of the licence. The prima facie obligation on the applicants to perform their part was thus dispensed with. Accordingly the applicants have not by their conduct evinced an intention not to be bound by the licence. It was not open to the respondents to treat them as if they had, and thereby bring it to an end. The steps taken by the applicants, namely obtaining their own sauces and stationery, were forced on them by the respondents.
190 The respondents seek to avoid this result by contending that it was the appellants’ solicitors’ letter of demand of 11 March 2005 asserting that Lionel and Joel had infringed Saul’s trade mark that constituted a repudiation of the agreement by Harold and Saul. It was said that the appellants "forced the issue" and brought about the disintegration of the relationship between the parties and not the other way around.
191 The question is whether the 11 March 2005 letter, summarised at [39(pp)], evinces an intention on Harold and Saul’s part no longer to be bound by the agreement or to fulfil the agreement only in a manner substantially inconsistent with their obligations and not in any other way: Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620 at 625-627 and Progressive Mailing House Pty Ltd v Tabali Pty Ltd [1985] HCA 14; (1985) 157 CLR 17 at 33. The letter was not about any agreement between the parties, whether that asserted by the applicants or the more limited agreement that Harold and Saul could use the Squires Loft name. It was a complaint that Lionel and Joel had engaged in conduct that infringed Saul’s trade mark. It demanded that they refrain from dealing with or seeking to licence the mark in relation to the provision by a third party of restaurant or catering services without their consent. It may have been a bold letter written on the dubious basis of Saul’s registration of the mark. But it was not a repudiation or renunciation of whatever agreement existed between the parties.
192 The letter was of course written by solicitors purporting to act for Saul and SLCS. Those solicitors would shortly contend, on behalf of Harold and Saul, that there was an agreement in the terms pleaded in par 3 of the statement of claim. No such agreement existed. All that existed was an agreement that Harold and Saul could use the name Squires Loft in SLCS’s name and in the operation of the City restaurant, on terms relating to co-operation between that and the South Yarra restaurant. The letter did not impugn that limited agreement. Indeed it sought to protect it from competition from third parties’ use of the name.
193 In my view it was the respondents’ solicitors’ letter of 31 March 2005 and the ensuing conduct set out at [188] that constituted the breach and activated the principle in Foran v Wight.
194 As at November 2006 Joel did not think that Harold and Saul’s right to use the name had terminated as a result of his and Lionel’s acceptance of their repudiation of the licence. I refer in this connection to what I have said at [184].
Intellectual property other than the name
195 In their submissions the parties dealt exhaustively with the name Squires Loft: the applicants claiming an ownership interest and the respondents contending for a mere licence. They also dealt fully with the registration of the name, and what should be done to correct the erroneous impression created by Saul’s appearance as its proprietor. Apart from the name, the applicants did not identify the components of "all intellectual property related to the venture". This is doubtless to be explained by the fact that the respondents’ case was that they had granted the applicants a licence to use in the City restaurant the name and "the get-up and methodology used by the Respondents in running a restaurant in South Yarra under the name ‘Squires Loft’": par 3(b) of the defence. Of course the applicants claimed that the agreement was that the parties would jointly own all intellectual property related to the venture, including the name. However, their fall back position, in the defence to cross-claim, was that if Lionel and Joel had granted them the licence alleged in par 3(b) of the defence, it was for the life of the City restaurant business established pursuant to the licence. The applicants’ main case having failed, and the respondents’ licence case having succeeded, all that remained for decision was whether the licence of the name and the get up and methodology employed by the respondents in running the South Yarra restaurant was a licence
• terminable at will
• terminable for breach
• which came to an end upon the dissolution of the parties’ business relationship, or
• for the life of the City restaurant.
I have decided that the licence was not terminable at will, had not been terminated for breach, did not come to an end when the parties fell apart, but was for the life of the City restaurant.
196 Whatever the nature and term of the licence, because of the respondents’ claim and the applicants’ fall back position, the subject matter of the licence was common ground – the name and the get-up and methodology used in the running of the South Yarra restaurant. All the items I can envisage as falling within that description will also fall within the description in par 3(f) of the statement of claim, modified for the purposes of the fall back position so as to refer not to the par 3 venture ("any venture of opening further steak restaurants under the Squires Loft name") but to the venture in par 3(b) of the defence.
CONCLUSION
197 I will give leave to the applicants to amend their amended application to seek a declaration that they are entitled to operate the City restaurant under the name Squires Loft. I will grant that declaration, but otherwise dismiss the application.
198 On the cross-claim I will order that the Registrar remove Australian Registered Trade Mark No 918180 from the Register. The respondents are entitled to a declaration that the applicants have no grounds for making the threats set out in par 26 of the defence and cross-claim, and an injunction restraining the applicants from continuing to make such threats or any similar threats. Otherwise the cross-claim should be dismissed.
199 On an important part of their claim, namely their right to use the name
Squires Loft, the applicants have had partial success.
Their principal claim,
that there was an agreement as alleged, and the related non-contractual causes
of action, have failed. The
respondents have succeeded in establishing that all
they had granted the applicants was a licence to use the name Squires Loft. The
respondents have succeeded in their trade mark claims but have failed in their
breach of licence contentions. In these circumstances
the respondents are
entitled to three-quarters of their costs of the claim. The respondents should
pay one half of the applicants’
costs of the cross-claim.
Associate:
Dated: 9
February 2007
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Solicitors for the Applicants:
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Counsel for the Respondents:
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Solicitors for the Respondents:
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Date of Hearing:
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Date of last written submissions:
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22 January 2007
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Date of Judgment:
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/2007/74.html