FEDERAL COURT OF AUSTRALIA
Kosciuszko Thredbo Pty Limited v ThredboNet Marketing Pty Limited [2013] FCA 563
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Date of last submissions: |
30 November 2012 |
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Place: |
Sydney |
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Division: |
GENERAL DIVISION |
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Category: |
Catchwords |
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Number of paragraphs: |
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Solicitor for the Applicants: |
King & Wood Mallesons |
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Counsel for the Respondents: |
Mr KP Smark SC with Ms C Champion |
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Solicitor for the Respondents: |
Hazan Hollander |
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IN THE FEDERAL COURT OF AUSTRALIA |
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DATE OF ORDER: |
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WHERE MADE: |
THE COURT ORDERS THAT:
1. The proceeding be adjourned to Monday 17 June 2013 at 9.30 am to enable the parties to formulate by agreement orders arising from the findings contained in this judgment.
2. Costs reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
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NEW SOUTH WALES DISTRICT REGISTRY |
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GENERAL DIVISION |
NSD 611 of 2012 |
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BETWEEN: |
KOSCIUSZKO THREDBO PTY LIMITED (ACN 000 139 015) First Applicant THREDBO RESORT CENTRE PTY LIMITED (ACN 003 896 026) Second Applicant |
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AND: |
THREDBONET MARKETING PTY LIMITED (ACN 097 622 869) First Respondent GLENN SMITH Second Respondent |
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JUDGE: |
COWDROY J |
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DATE: |
11 June 2013 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
1 In this proceeding Kosciusko Thredbo Pty Limited and Thredbo Resort Centre Pty Limited (together referred to hereunder as ‘KT’) seek declarations, injunctive relief and damages against ThredboNet Marketing Pty Limited (‘ThredboNet’) and against the second respondent, Mr Glenn Smith (‘Mr Smith’), the sole director and shareholder of ThredboNet.
2 KT claims that the conduct of the respondents in registering domain names containing the word ‘Thredbo’, registering company and business names containing the word ‘Thredbo’, and controlling and operating websites whose content is similar to KT’s website, constitutes misleading or deceptive conduct contrary to ss 18(1) and 29(1)(g) and 29(1)(h) of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (‘the ACL’), and passing off of KT’s business.
3 Second, KT claims that the use of the word ‘Thredbo’ in connection with ThredboNet's business is a breach of subleases entered into between KT and Mr Smith. The respondents assert that such breaches are in relation to a clause that constitutes an unreasonable restraint of trade.
4 The respondents otherwise refute KT’s claims and submit that KT’s conduct should result in them being estopped from maintaining those claims.
5 The Court must determine the following issues:
1. Does the word ‘Thredbo’ have a secondary meaning such as to identify ‘Thredbo’ only with KT’s business?
2. Are the websites of the respondents sufficiently similar to those of KT so as to constitute misleading or deceptive conduct, or additionally to constitute passing off?
3. Do restraint provisions in the subleases between KT and Mr Smith preclude ThredboNet from using the word ‘Thredbo’ in connection with the respondents’ accommodation business?
4. If KT is successful in relation to questions 1, 2, 3 or 4, is KT estopped from obtaining the declaratory orders and relief it seeks?
6 For the reasons set out hereunder, the Court has concluded that the answers to the above questions are:
1. No.
2. No, except for the use of a hyperlink and website address known as the Genkan link.
3. No.
4. Relief is available to KT in respect of the Genkan link.
FACTS
7 KT holds an area of approximately 956 hectares under a head lease (‘the Head Lease’) in an area of the Snowy Mountains of New South Wales located within the Kosciusko National Park. The Head Lease was originally granted to a predecessor of KT on 29 June 1962 by the Minister for Lands of the State of NSW, who was then administering the Kosciusko State Park Trust.
8 On 18 February 1987 KT took an assignment of the Head Lease over the land, which includes the site of the Thredbo Village and Thredbo Resort (‘the Resort’). The Head Lease was renewed on 13 March 2007 and requires KT, as lessee, not to use the demised premises except for the purpose provided for in the Head Lease, being ‘the conduct of an Alpine and Summer tourist resort and Village’ and incidental purposes.
9 The Thredbo Village and the Resort provide year-round recreation and sporting facilities, primarily for skiing and snowboarding in winter months, and for hiking, fishing, tennis, golf, bushwalking and similar recreational activities in the summer months.
10 KT operates all the infrastructure services for the Thredbo Village and the Resort including the operation and maintenance of a sewerage system, water supply, road maintenance, sanitation services and pathways. KT also operates various recreational facilities. From 1987 to 2012 KT has expended well in excess of $150 million on several projects for equipment and infrastructure in and around the Thredbo Village and on the adjoining slopes. KT also conducts the operation and maintenance of all mountain infrastructure including ski lifts and all uphill transport, slope grooming (summer and winter), snow making, walking tracks and mountain access roads.
11 KT operates and manages the Thredbo Ski School and Thredbo Snow Sports. It employs all instructors for skiing and snowboarding lessons, whether group or private. It conducts the sale and hire of ski clothing, accessories and all ski and snowboarding equipment.
12 KT operates and manages the Thredbo Alpine Hotel (‘the hotel’), Thredbo Alpine Apartments and an accommodation complex know as Riverside Cabins. Through its affiliated company, Thredbo Resort Centre Pty Limited (‘TRC’) (the second applicant), it conducts and manages the Thredbo Reservation Centre (‘the Centre’) which arranges accommodation and hotel bookings. The Centre provides information relating to Thredbo Village, and of all the facilities available at the Resort.
13 TRC conducts a travel agency and a reservation centre for the accommodation managed by KT in Thredbo. TRC also conducts bookings for 16 other properties in Thredbo, located in Thredbo Village and its surrounds. Such properties are held by owners who have a sublease from KT. Whilst not required to do so, they have appointed KT to manage the properties.
14 TRC has an arrangement with two other booking agencies, Visit Snowy Mountains and Australian Alpine Resorts, such that in the event that a customer seeks to book accommodation which is not operated by KT, TRC will book that accommodation and obtain a commission. Accommodation bookings for the hotel and for properties managed by KT may be made by telephone, or by using KT’s website at www.thredbo.com.au or by sending an email to reservations@thredbo.com.au. Visitors may also book accommodation in person at the reservation centre.
15 The operations of KT are widely advertised in print media, by television and cinema promotions, and by the use of electronic media. KT is the registered owner of 14 business names, company names and domain names. In particular, it has used, and uses the domain name www.thredbo.com.au which it describes as the ‘official website’.
16 TRC has created a separate email address reservations@thredbo.com.au for the promotion of its accommodation services. TRC also uses the names ‘Thredbo Central Reservations’. Each of KT’s business names contains the word ‘Thredbo’. ‘Thredbo Reservations’ is registered and KT uses as its central email address reservations@thredbo.com.au.
17 KT has also developed a Facebook page for the promotion of its business. The Facebook page highlights a range of activities conducted in Thredbo Village.
18 As a result, KT claims significant goodwill and reputation in the name ‘Thredbo’ and assert that as a result of KT’s connection to Thredbo and reputation, the name ‘Thredbo has acquired a second meaning or independent reputation, or a ‘brand name’.
The Respondents’ business
19 ThredboNet and Mr Smith conduct an online business engaged in the managing and leasing of rental accommodation in Thredbo. As the respondents’ business interests are relevantly identical, they will be referred to as one, and for convenience, the respondents’ conduct will be referred to as that of Mr Smith.
20 From approximately 18 years of age Mr Smith would travel with friends from Sydney to visit the snowfields at Thredbo and Perisher Valley. When he returned to Australia from overseas in 1992 he resumed skiing in Thredbo and joined a ski lodge. He estimates that he visited Thredbo approximately 8 to 10 times per year with his wife and children.
21 Mr Smith became interested in acquiring a lodge at Thredbo and in 1997 he purchased the sublease of a property known as Mosswood 3. Such property was held by sublease from KT. It was a residential property and it was acquired as a rental investment. It was initially managed by TRC, but shortly after the 1997 ski season Mr Smith assumed management of the lodge. He received inquiries, made bookings, advertised the property and attended to a customer database.
22 In 1999 Mr Smith and his wife purchased another property known as Littleton. Mr Smith sold Mosswood 3 in approximately 2002. On 2 July 2002 Mr Smith and his wife acquired an assignment of the sublease for a property known as Fire Dreaming and these premises were used by Mr Smith for holiday rental accommodation. In early 2003 Mr Smith and his wife separated and on 15 October 2004 such sublease was transferred to Mr Smith. In 2006 Mr Smith acquired the sublease of another apartment known as Snowstreams 4 with a colleague, Wayne Donald Walgers. The property is also used for rented holiday accommodation.
23 Mr Smith incorporated ThredboNet on 26 July 2001 to facilitate the management of the properties situated in Thredbo Village and the surrounding area. Some of these are owned by third parties, others are owned by Mr Smith. The number of properties so managed has expanded. Initially five properties were managed by ThredboNet, but this has increased to approximately 50 properties.
24 ThredboNet’s operations include the promotion of its properties under its management; taking bookings; liaising between the tenant and the owner; providing checking in and checking out information; collecting rent from the tenant and remitting the rent to the owner. In 2007 Mr Smith became a licensed real estate agent and in 2009 ThredboNet received a real estate licence enabling the respondents to hold deposits for bookings on trust.
25 Mr Smith has registered and or used numerous email addresses and domains including www.book@thredbo.com, www.thredboreservations.com.au, www.thredbo.accommodation.com; www.thredbo-accommodation.com.au, www.thredbo.com (which address has been used by Mr Smith in conjunction with slogans ‘This is Our Thredbo’, ‘My Thredbo’, ‘The Best of Thredbo’), www.thredbonet.com, and a Facebook page www.facebook.com/ThredboReservations.
26 Since late 2011 clients of ThredboNet have received a series of emails from ThredboNet providing an encrypted link to a secure page at that address which include references to ‘book@thredbo.com’, the Thredbo Reservations Facebook page, the business ‘Thredbo Reservations, PO Box 149, Thredbo Village’, and ‘Thredbo Accommodation Service’. Mr Smith has acquired the domain www.thredbo.com, and has created links using the words ‘My Thredbo’ such that the address www.thredbo.com/mythredbo.com exists.
27 In late May 2011 Mr Smith first commenced using the website www.thredbo.com. KT asserts that from late 2011 Mr Smith actively promoted his business, as is evident from changes made to his other internet names used in conjunction with his businesses. In particular, KT claims that Mr Smith, since late 2011, has made alterations to his websites www.thredbonet.com and www.thredboreservations.com.au to give them the closer appearance of KT’s website. Such alterations include the use of red and white colours similar to KT’s website, using a font in captions similar to that of KT, and by adopting slogans such as ‘This is Our Thredbo’, in contrast to KT’s slogan ‘This is My Thredbo’.
28 As part of its passing off claim, KT alleges that as a result of its business activities there is a secondary meaning in the word ‘Thredbo’ such that it distinguishes its goods and services. Therefore it is claimed that the use of the word ‘Thredbo’ by the respondents in their business constitutes misleading or deceptive conduct and or passing off.
Basis of the secondary meaning claim
29 The Court will first consider whether a secondary meaning exists in the word ‘Thredbo’ as claimed by KT.
30 KT relies on the historical evidence concerning the foundation of the Resort, the existence of the Head Lease and of the power of KT to enter into sub-leases in support of its claim that it now has a secondary reputation in the name Thredbo. KT also relies upon the fact that its predecessor in title, Lend Lease, had continuously operated Thredbo Village since 1957; that in 1987 the business was sold to KT; that since 1987 KT has spent very substantial sums of money on the Village and Resort, and that KT has continuously used the name Thredbo in promoting its business and services as detailed earlier in this decision.
31 KT also relies upon the claim that it has, and at all material times has had, substantial goodwill and reputation in the Thredbo domain name and website. KT has been awarded numerous tourism awards. For example, in 1997, 1998 and 1999 KT was awarded the Best Year Round Alpine Resort Award. In 1999 KT was awarded the Major Tourist Attraction of the Decade Award. Its goodwill is claimed to have been developed through the use of media in print, online and ‘on the ground’ advertising.
Geographic origins of Thredbo
32 The Court has received evidence from KT concerning the history of Thredbo Village. Of particular assistance is a book entitled ‘Starting Thredbo’ by Geoffrey Hughes who is stated to be one of the founders of KT. The Court has also been assisted by the evidence contained in the affidavit of Rebecca Richardson, a town and urban planner, concerning the origins of the location in which the Thredbo Village is now located.
33 Ms Richardson’s investigations reveal that the Yaitmathang, the Wolgalu, the Waradgery and the Ngarigo Aborigines occupied the Snowy Mountains. The earliest evidence of Aboriginal occupation dates back approximately 8,700 years. The Southern Alps became a place for the aboriginal people for hunting, for congregation and for ceremonies. Summer visits to the peaks of the Snowy Mountains by local Aboriginal tribes and even those from further afield are well documented. European discovery commenced in 1823 when a party led by Captain Currie and Major Owens viewed the Snowy Mountains. Thereafter graziers began to use the grasslands. Pastoral leases have existed since approximately 1820, along the Crackenback River (now known as the Thredbo River) and continued until the mid-1900s when environmental impacts caused pastoral leases to be revised or revoked. Gold mining took place in Kiandra between 1860 and 1872, during which time prospectors converged on the Crackenback River in the hope of collecting gold. The publication of the Thredbo Historical Society entitled ‘Accordions in the Snow Gums: Thredbo’s Early Years’ by Helen Swinbourne refers to cattle droving in the area known as the ‘Thredbo Valley’.
34 Between 1906 and 1909 the then Premier of New South Wales introduced tourism to the Snowy Mountains with the establishment of Hotel Kosciuszko, Yarrangobilly Caves House and The Creel-at-Thredbo. The latter, which was a fishing lodge, was located at the junction of the Crackenback and Snowy Rivers. A photograph of the lodge displays its name ‘The Creel-at-Thredbo’. It was located several kilometres distant from the site of the current Thredbo Village. In 1976 the name of the Crackenback River was changed to its current name, the Thredbo River.
35 The name Thredbo has been attributed to the Aboriginal inhabitants of the Snowy Mountains. The earliest maps (prepared in 1881) held by the Surveyor-General’s office in Sydney include a map of the County of Wallace. Within that county there is a parish known as Thredbo Parish. A text written by Alan Andrews in 1998 refers, inter alia, to an account of an expedition which took place between 3 and 19 February 1840 by Stewart Ryrie. There is reference to the fact that Ryrie followed the ‘Little Thredbo River’ and that even though Ryrie had no Aborigine with him to help him with names, that location was known as ‘Thredbo’.
36 The evidence also suggests that ‘Thredbo’ was used in newspaper articles contained in the Sydney Morning Herald as early as 1852. In 1907 following the introduction of tourism to the area, reports referring to ‘Thredbo’, the geographic locality, were common.
37 The date of the preparation of the first detailed map of the Parish of Thredbo is not known. A plan of the Parish dated 1898 held by the NSW Division of Land and Property Information of the Parish of Thredbo shows the Crackenback River and its junction with the Snowy River. A 1940 map of the County of Wallace showing its parishes, including the Parish of Thredbo, shows the same features. It is apparent that there was no settlement indicated on any of the maps at the site of the current Thredbo Village. The Thredbo Village lies to the south of the Thredbo River (as it is now named) within the Parish of Thredbo.
38 The name ‘Thredbo’ is registered as a geographic location by the Geographical Names Board of New South Wales, a department of the New South Wales Government. The Board was established under s 3 of the Geographical Names Act 1966 (NSW) and is responsible for standardising the names of geographic locations. The record held by the Board for Thredbo Village states ‘Thredbo’ to be of Aboriginal origin.
Origins of Thredbo Village
39 ‘Starting Thredbo’ records numerous facts relevant to the establishment of the Village. Its origins resulted from the interest of European skiers and Australian skiers which developed from about 1947. In 1946 Elyne Mitchell toured extensively across the Kosciuszko snowfields and wrote a book entitled ‘Australia’s Alps’. In it she wrote:
The valley of the Crackenback, below Dead Horse (Gap) is one of the few places in our hills where a small alpine village would not be incongruous. The slopes of Rams Head Range are like many of the ski runs above the smaller European villages; there are plenty of rides and valleys descending from the main peaks and it is well tucked away from the wind - the curse of Australian skiing. There is a feeling of peace rather than the constant sense of wilderness.
40 In the Australian and New Zealand Ski Year Book of 1947, Venn Wesche wrote:
One day, there will of course, be a road up the (Thredbo or Crackenback) river from Jindabyne, and a lift up to the top from a tourist hotel at Friday Flat.
41 In the early 1950’s, a European worker engaged in the Snowy Mountains Hydro-Electric Scheme, Tony Sponar, became aware of the Snowy Mountains Electricity Authority’s proposal to construct the Alpine Way. Mr Sponar had set up a downhill skiing course for downhill races at an area known as the George Chisholm course located close to the current site of the present village. Mr Sponar believed that if access was provided from a proposed roadway known as the Alpine Way to a site suitable for the bottom station of a chairlift to the top of the escarpment on the Rams Head Range, the possibilities for future skiing would be viable.
42 In September 1954 at the request of Mr Sponar, Sydney architect Eric Nicholls made enquiries of various chairlift manufacturers in Europe and in the United States for an installation at Thredbo. Mr Sponar, Mr Charles Anton, Mr Nicholls and Mr Geoffrey Hughes then considered the possibility of commencing a resort in the Thredbo Valley and they created a registered business name entitled ‘Kosciuszko Chair Lift and Thredbo Hotel Syndicate’ (‘the syndicate’).
43 In the winters of 1955 and 1956 Messrs Sponar, Anton and Hughes made exploratory trips to and in the Thredbo Valley to identify the most suitable site for a resort. They made extensive investigations of the Rams Head Range escarpment, and of the area known as Dead Horse Gap. Finally they located a site at the bottom of the slopes, with a substantial water supply, being the site around which Thredbo Village has been developed.
44 The syndicate then entered into an option for a 99 year lease with the Kosciusko State Park Trust. From this lease, subleases were to be offered for a 25-year lease term with an option to renew for a further 25 years. Early in August 1958 a chairlift was opened, and the Thredbo Ski School commenced.
45 In 1960 the financial affairs of the company improved as skiing became more popular in the Village. Under the Option for Lease, the syndicate was required to build a 100 guest bed hotel by 13 November 1962 to obtain its 99-year lease. The cost of such development was prohibitive for the syndicate. Accordingly, following negotiations, Lend Lease became the operator of the Thredbo Resort.
Has KT established a secondary meaning in ‘Thredbo’?
46 Ms Suzan Elizabeth Diver is the Communications Manager of KT. She has held the position for 17 years and previously was the Media Manager of KT. Ms Diver provided evidence relating to KT’s use of the word ‘Thredbo’ in its marketing.
47 From 1955 until present day, KT has used a variety of logos, all of which contained either the words ‘Thredbo’ or ‘Thredbo Alpine Village’. Ms Diver has provided an affidavit which exhibits voluminous printed material, all of which prominently feature the word ‘Thredbo’. Her affidavit asserts that KT ‘is the owner of the ‘Thredbo Brand’’.
48 Two logos have predominantly been used by KT in promotional material since 1987. The first, used from 1987, depicts a sphere with a mountaintop divided in two. On the left side there is the appearance of a mountaintop with green and the outline of vegetation. The right hand side depicts the mountaintop with a skier, in white with a blue background. Beneath the sphere is the words ‘Thredbo Alpine Village’.
49 From 2003, KT has used the ‘Thredbo Mountain logo’. It depicts a red mountain top with the word ‘Thredbo’ written in crayon font as shown below. This logo, as depicted immediately hereunder, has predominantly been used in red, however it has also being depicted in white or blue on a red background.
50 The Thredbo Mountain logo was accepted for registration as a trademark (1409243) by IP Australia on 15 December 2011, but is subject to opposition proceedings filed by the first respondent on 20 March 2012.
51 Since 2012, KT has adopted a further logo (the ‘new logo’) as set out below. It was red colour for the printed text and the lower left triangle, with shades of blue for the background mountain scenery.
52 Ms Diver has been involved in drafting the text and content for the winter and summer catalogues or planners since the early 1990s. Such brochures are distributed by either KT or TRC. KT maintains a mailing list. There are approximately 22,000 customers on the mailing list, who all received the 2012 Thredbo Winter Brochure.
53 Many of the promotional brochures published by KT have been relied upon in support of KT’s proposition that ‘Thredbo’ has acquired a secondary meaning. Ms Diver provided evidence of typical Thredbo Winter Brochures. The 1998 Planner referred to Thredbo as ‘Australia’s Ultimate Winter Resort’, providing the Thredbo Resort Centre as the place of contact to make a reservation. The 1994 Planner described Thredbo as ‘More than Simply the Best Place to Ski’, and provided details of KT’s accommodation, ski schools, lifts and a Village guide.
54 The 2004 Planner prominently displayed on its first page the www.thredbo.com.au website, and KTs Thredbo Mountain logo. The third page displays a central telephone number, the web address www.thredbo.com.au, and the contact email address: reservations@thredbo.com.au.
55 KT advertises its facilities as year round, and publishes a Thredbo Summer Brochure to advertise a range of summer activities. Its website www.thredbo.com.au, and its Mountain logo are prominently displayed, with the words ‘year round reservations’ on the last page giving details of accommodation options.
56 The 2012 Thredbo Winter Brochure identified a range of products and services available, including a ‘My Thredbo’ online service, operated via www.thredbo.com.au. Such service allows visitors to the Resort to arrange their lift passes and skiing requirements online before arriving in Thredbo. The Brochure also displays on the front page the Thredbo Mountain logo, and the address of the KT website.
57 www.thredbo.com.au has been in operation for 15 years. Such website is referred to in brochures published since 1997, and in cinema and television advertising since winter 1998. The website was visited close to two million times in the period 23 July 2011 to 23 July 2012. It also promotes the ‘Thredbo e-store’ which allows visitors to purchase online products such as lift passes and ski hire, children’s programs and gift cards. The information also includes details for the Thredbo Snow Sports School which offers a range of ski lessons and training programs at Thredbo. Also promoted is ‘Thredbo MyMoney’, a system similar to paid coupons which can be used throughout outlets operated by KT in Thredbo.
58 Ms Diver has also been involved in ancillary advertising materials such as postcards that feature the Thredbo logos, as well as bumper stickers which may feature Thredbo logos and tag lines from Thredbo’s advertising campaigns such as ‘What goes on in Thredbo stays in Thredbo.’
59 Social media is also used to promote KT’s activities. Ms Diver regularly updates the Thredbo Facebook and Twitter accounts. The Facebook page of Thredbo Resort contains images of the slopes in Thredbo, the Thredbo logo and comments from its patrons. An extract from KT’s Twitter account produced in evidence displays the Thredbo logo. KT relies upon a measure of its popularity as being reflected in 48,900 ‘likes’ on its Facebook page, compared to only 100 on the respondents’ Facebook page entitled ‘Thredbo Reservations’.
60 KT also advertises locally and Ms Diver is responsible for scripting advertisements. Advertisements are edited and provided to local television stations in Canberra, the south coast of New South Wales and Wollongong. Such advertisements usually contain videos identifying activities on offer at the relevant period of the year, and portray one of KT’s advertising slogan or logo ‘My Thredbo’, as depicted immediately below.
61 Christopher Joseph McGlinn, the Director of Marketing at Amalgamated Holdings Ltd (the parent company of KT and TRC), provided evidence of the extensive marketing of KT’s operations in cinema and film advertising, and of the often humorous or risquÉ tone used to promote Thredbo as a place of fun and recreation through the available sporting and social facilities available in Thredbo. The facilities are referred to as those in ‘Thredbo’, with KT’s website www.thredbo.com.au being displayed.
62 KT organises ‘staff presentations’ for the benefit of its employees. A video of the staff presentation in 2012 contained on a DVD has been made available to the Court. It contains interviews with employees who work in various departments in KT, including bars and restaurants, reservations, ticket sales, ski instructors, equipment hire, and elsewhere. The video demonstrates that the ‘branding’ of Thredbo is prominent in KT's operations. All KT employees wear uniforms that bear contemporary versions of the Thredbo mountain logo or the My Thredbo logo. Vehicles owned by KT display the Thredbo mountain logo. Ski instructors employed by KT wear red and white ski suits, being colours associated with KT's advertising for the last decade. Children participating at the Thredbo ski school also wear Thredbo branded vests bearing the KT logo.
63 Photographs, as attached to the affidavit of Benjamin Paul Arnall, show some extent of the advertising by KT at Thredbo. The logo of KT including the name ‘Thredbo’ is shown on maps, posters, souvenirs, uniforms, official cars, signs, lockers and skis.
64 KT operates seven snow cameras (also known as ‘snow cams’ or ‘live cams’) at Thredbo. These have been placed in permanent positions and capture the levels of snow at various times and various locations across the Resort. The cameras are regularly checked and maintained to provide a good image, which is uploaded to www.thredbo.com.au. The new Thredbo logo is superimposed on to the snow camera footage so that viewers will be aware that it is KT’s product.
65 In June 2011 KT launched its ‘My Thredbo’ advertising campaign in conjunction with the commencement of the Winter 2011 season. The advertising was displayed in and around Thredbo, and on KT’s website www.thredbo.com.au. The website, as referred to previously, www.thredbo.com.au/mythredbo enables a person to pre-arrange their ski passes and obtain exclusive concessions. The ‘My Thredbo’ slogan was promoted prominently in KT’s electronic newsletter from early June 2011.
66 Reginald Douglas Searle Bryson, the Chief Executive Officer of Brand Council Pty Ltd (‘Brand Council’), which is a strategic consultancy business specialising in brand creation, testified that he was involved in the development of the ‘Thredbo Brand’ from 1984 to 2004. Mr Bryson was involved in many of the advertising campaigns and conducted research to assess consumers’ beliefs and attitudes towards skiing holidays and consumers’ perception of Thredbo.
67 Mr Bryson stated that in the early period of his involvement, Thredbo was considered to be an elitist resort and that many Australian consumers did not identify with the ‘Thredbo Brand’. Mr Bryson worked closely with colleagues to create a 32 page booklet entitled ‘Thredbo Alpine Village, the First Resort for First Time Skiers’. The concept of the book was to promote the ‘Thredbo Brand’ as a friendly resort which was affordable. Mr Bryson states that the booklet was an advertising success.
68 Mr Bryson testified that based upon his 40 years experience in the advertising industry and advising clients on brand enrichment and image positioning, he considered that ‘notional values or dimensions associated with the Thredbo Brand’ distinguish it as one of the few ‘resort brands in Australia’. The other resort brands he suggested were Hamilton Island, Uluru and internationally, Disneyland.
69 KT is the proprietor of numerous businesses in Thredbo including Thredbo Card, Thredbo Newsagency, Thredbo Snowsports, Thredbo Sports, Thredbo Alpine Village, Thredbo Alpine Hotel, Thredbo Childcare Centre, Thredbo Club Card, Thredbo Leisure Centre, Thredbo Resort Centre, Thredbo Ski Resort, Thredbo Ski School, Theredbo Central Reservations, Thredbo Alpine Village Resort.
70 KT submits that the secondary meaning or reputation of the word ‘Thredbo’ need not be exclusive of the word's geographic meaning; the secondary meaning or reputation that KT relies upon can exist with its geographic name. KT argues that the word Thredbo’s secondary meaning distinguishes its goods or services even though the word carries a geographic descriptive meaning: Clark Equipment Company v Registrar of Trademarks (1964) 111 CLR 511 (‘Clark Equipment’) at 514.
71 KT submits that the brand name ‘Thredbo’ is, by all of the above evidence, established in KT, thus giving KT an exclusive right to use ‘Thredbo’. It submits that it is immaterial that a consumer may not know the identity of the entity who is the owner of the name, as considered in Powell v Birmingham Vinegar Brewery Co Ltd (1897) RPC 720 by Lord Herschell at 715 and by Lord Halsbury at 729.
Principles relating to secondary meanings
72 Generally, a secondary meaning or ‘independent reputation’ can be acquired in a word or mark which has a generic or descriptive meaning, as discussed in Peter Bodum A/S v DKSH Australia Pty Ltd (2011) 92 IPR 222 (‘Peter Bodum’), where Greenwood J, in reference to the shape of a Coca-Cola bottle said at [9]:
Whether a secondary meaning or independent reputation exists in the features or shape of a particular product or its get-up is, it is said, a question of fact to be determined having regard to all the relevant contextual circumstances.
73 The more descriptive a word or mark is however, the greater the difficulty a claimant has in demonstrating distinctiveness in such mark: see McCain International Ltd v Country Fair Foods Ltd [1981] RPC 69 (CA); Yarra Valley Dairy Pty Ltd v Lemnos Foods Pty Ltd (2010) 191 FCR 297; Johnson & Johnson Australia Pty Ltd v Sterling Pharmaceuticals Pty Ltd (1991) 30 FCR 326 at [335]-[336]; connect.com.au Pty Ltd v Goconnect Australia Pty Ltd (2000) 178 ALR 348 (‘Goconnect’) at [58]-[60].
74 It is a well established principle that a generalised descriptive name ensures that it is not distinctive of any particular business: see Office Cleaning Services Ltd v Westminster Window and General Cleaners Ltd (1946) 63 RPG 39.
Principles relating to secondary meanings involving geographic names
75 It has been long accepted that significant hurdles exist for a claimant who seeks to establish a secondary meaning in a geographic name. In Clark Equipment, the High Court considered whether the word ‘MICHIGAN’, which had been used as a mark for 20 years in Australia was capable of distinguishing the applicant's products. At 513 Kitto J said:
That ultimate question must not be misunderstood. It is not whether the mark will be adapted to distinguish the registered owner’s goods if it be registered and other persons consequently find themselves precluded from using it. The question is whether the mark, considered quite apart from the effects of registration, is such that by its use the applicant is likely to attain his object of thereby distinguishing his goods from the goods of others.
76 At [514]-[515] his Honour said:
It is well settled that a geographical name, when used as a trade mark for a particular category of goods, may be saved by the nature of the goods or by some other circumstances from carrying its prima facie geographical signification, and that for that reason it may be held to be adapted to distinguish the applicant’s goods. Where that is so it is because to an honest competitor the idea of using that name in relation to such goods or in such circumstances would simply not occur: see per Lord Simonds in the Yorkshire Copper Works Case (3). This is the case, for example, where the word as applied to the relevant goods in effect a fancy name, such as “North Pole” in connexion with bananas: A. Bailey & Co. Ltd v. Clark, Son & Morland Ltd. (the Glastonbury Case (1)) (see also the Livron Case (2)), or where by reason of user or other circumstances it has come to possess, when used in respect of the relevant goods, a distinctiveness in fact which eclipses its primary signification. Cf. in the case of a descriptive word: Dunlop Rubber Co.’s Application (3). But the probability that some competitor, without impropriety, may want to use the name of a place on his goods must ordinarily increase in proportion to the likelihood that goods of the relevant kind will in fact emanate from that place. A descriptive word is in the like case: the more apt a word is to describe the goods, the less inherently apt it is to distinguish them as the goods of a particular manufacturer.
77 His Honour concluded by observing at [515]:
The consequence that the name of a place or of an area, whether it be a district or a county, a state or a country, can hardly ever be adapted to distinguish one person’s goods from the goods of others when used simpliciter or with no addition or save a description or designation of the goods, if goods of the kind are produced at the place or in the area or if it is reasonable to suppose that such goods may in the future be produced there.
78 The principle in Clark Equipment has been followed repeatedly. Courts have shown a distinct reluctance to find that a geographic name has developed distinctiveness such that other traders or persons are prevented from using the name. In Weitmann v Katies Ltd (1977) 29 FLR 336, Franki J said at 342 in relation to the claim for protection of clothing labelled ‘Saint Germain’:
Since “Saint Germain” is applied to an area in Paris, to some extent it falls within the category of geographical words. The origin of the words “Saint Germain” in my opinion makes it rather difficult for these words to acquire a secondary meaning.
79 In Colorado Group Ltd v Strand Bags Group Pty Ltd (2007) 164 FCR 506, the Full Court found that the word ‘COLORADO’ as used by the first appellant on items such as backpacks, handbags, purses (even though registered as a trade mark) was not inherently adapted to the appellant’s goods from the goods of other persons. At [29] Kenny J said:
I agree in substance with Allsop J that it is likely that another trader will want to use the word “Colorado”, legitimately, with regard to his goods, for the sake of the geographical reference which it is inherently adapted to make or the connotations that that geographic reference invokes. Accordingly, I agree in the conclusion of Gyles and Allsop JJ that the word “Colorado” alone is not inherently adapted to distinguish the designated goods or services of the first appellant from the goods or services of other persons.
80 At [128] Allsop J (as he then was) said:
I have difficulty in accepting that the word “Colorado” is inherently adapted to distinguish backpacks, or even bags, wallets and purses. It is not a fancy or made up word. It is the use of a name being a State of the United States of America which has well-known mountains and is a rugged holiday area. In my view, the honest trader could well wish to make use of the signification of the word for geographic reasons – especially in relation to backpacks, or to raise a connotation from the geographic attributes of that State. In my view, the primary judge was wrong to conclude that the word was inherently adapted to distinguish.
81 In Bavaria NV v Bayerischer Brauerbund eV (2009) 177 FCR 300, Bennett J referred to the observations of Kitto J in Clark Equipment Co, observing at [66]:
The question whether a trade mark is adapted to distinguish a party’s goods is:
tested by reference to the likelihood that other persons, trading in goods of the relevant kind and being actuated only by proper motives – in the exercise, that is to say, of the common right of the public to make honest use of words forming part of the common heritage, for the sake of the signification which they ordinarily possess – will think of the word and want to use it in connexion with similar goods in any manner which would infringe a registered trade mark granted in respect of it.
[Clark Equipment Company v Registrar of Trade Marks (1964) 111 CLR 511 at 514 per Kitto J].
This has led to the rejection of a word of prima facie geographical signification, particularly when it is used simpliciter and where goods of the kind for which it is sought to be registered are produced at the place or in the area (Clark Equipment at 515-516), or if it is reasonable to suppose that such goods in the future would be produced there (Chancellor, Masters and Scholars of the University of Oxford (Trading as Oxford University Press) v Registrar of Trade Marks (1990) 24 FCR 1 at 23 per Gummow J). This is because other traders have a legitimate interest in using the geographical name to identify their goods and it is this interest which is not to be supplanted by permitting any one trader to effect trade mark registration (Clark Equipment at 514-515). Justice Gummow in University of Oxford came to the view that, if a court is in doubt as to the likelihood of another trader legitimately wishing to use a mark, the application should be refused (at 25). In Clark Equipment, Kitto J held that the word MICHIGAN was not adapted and was not capable of becoming adapted to distinguish earth-moving and other equipment. Similarly, OXFORD was refused for printed publications (University of Oxford) and COLORADO refused for bags (Colorado Group Ltd v Strandbags Group Pty Ltd (2007) 164 FCR 506). In each case, the registration sought was of a word mark that connoted a geographical location.
82 The case concerned Bavaria as a trademark for beer and other beverages. At [67] Bennett J said that Bavaria NV ‘appears to accept that there are difficulties with the word ‘Bavaria’ being adapted to distinguish its beer’ on the basis of Kitto J’s reasoning in Clark Equipment but found that because the trademark contained the reference to ‘Holland’ and included individual heraldic and declarative elements, the trademark was distinguishable and therefore registration was permissible: see [74]-[75].
83 In Kenman Kandy Australia Pty Limited v Registrar of Trade Marks (2002) 122 FCR 494, Stone J said at [145]:
Signs that are descriptive of the character or quality of the relevant goods or which use a geographical name in connection with them cannot be inherently distinctive because the words have significations or associations that invite confusion and because registration of a trade mark using such words would preclude the use by others whose goods have similar qualities or which have a connection with the relevant areas.
84 Stone J also said at [156]:
… trade marks were held to be inherently adapted not because of any positive content but because they had no associations or significations that prevented them from being inherently adapted to distinguish a trader's goods.
85 Certainly the evidence of Mr Bryson establishes that Thredbo is promoted as being a resort and a place of fun and excitement. However, in the absence of a registered trademark, promotion of a name does not by itself give rise to an exclusive use of that name or badge of origin. In British Sugar PLC v James Robertson and Sons Limited [1996] RPC 281, Jacob J referred to this fact at 302:
There is an unspoken and illogical assumption that “use equals distinctiveness”. The illogicality can be seen from an example; no matter how much use a manufacturer made of the word “Soap” as an unsupported trade mark for soap the word would not be distinctive of his goods.
86 In rare instances, such as those considered in J. Bollinger v Costa Brave Wine Co Ltd (No 2) [1961] 1 WLR 277 (‘Bollinger’) it may be possible to establish a brand name in a geographic region. However the circumstances in Bollinger are entirely different to those now under consideration. In that decision, the House of Lords found that the wine producers from the location known as ‘Champagne’ in France had developed such a unique reputation as to warrant protection of their goodwill from trades of other areas using the name ‘Champagne’: see summary in Erven Warnink BV v J Townend & Sons (Hull) Ltd (No 1)) [1979] AC 731 at 745, 747. Lord Diplock referring to the Bollinger decision, observed in Warnink at 747 that it was essential that the product have ‘recognisable and distinctive qualities’ and have generated the necessary goodwill to warrant protection.
Finding: Secondary meaning
87 There is no question that KT has been responsible for the expenditure of many millions of dollars in developing the Resort and Thredbo Village. However there was no evidence adduced from members of the public concerning a distinction which they might have drawn between Thredbo, namely the geographic location, and the Thredbo Resort. Further, there is no evidence from the public to suggest that the public identifies ‘Thredbo’ as equating to the Thredbo Resort or Village. Further, the evidence of Mr Bryson, the evidence of the publications and media publicity of KT, and of the infrastructure organised by KT and of the Village and the Resort, do not fulfil the special requirements to establish exclusivity in the geographic name, such that ‘Thredbo’ has assumed such a reputation that it only applies to the undertaking of KT.
88 No clear picture emerges from the promotional material that Thredbo, namely the geographic place, should be treated as distinct from Thredbo Village or Resort. The use of Thredbo in connection with the ‘Village’ and Thredbo ‘Resort’ defines the location of the Village or Resort as being at the geographic place, Thredbo.
89 The 1994 brochure promotes the Thredbo Village and its facilities but the word ‘Resort’ does not appear. The word ‘Resort’ is mentioned, briefly, in the 1996 brochure, and in the 1997 brochure but rarely mentioned until 2000 when there is a reference to ‘in the Resort’.
90 The 2001 brochure states: ‘THREDBO is a fully self-contained resort…’ and subsequently states ‘THREDBO is around a 6 hour drive from Sydney or Melbourne…’. The 2002 brochure refers to Thredbo as a ‘world class year round holiday destination’ and refers to Thredbo as a self contained resort. In the introduction under the heading ‘Welcome to Thredbo’ it states:
From the moment you arrive in THREDBO you’ll be taken with the unique village atmosphere…
Whatever you need you’ll find it all in THREDBO.
91 The 2003 brochure states:
THREDBO is a mountain for everyone…
92 Subsequently it refers to:
You’ll certainly get a lot out of your day in THREDBO, Australia’s ultimate winter resort.
93 The examples above do not draw a significant distinction between the geographic place and KT’s Resort.
94 The Court has considered the logos, but concludes that none of them have depicted KT’s Resort such as to create a secondary signification. The word ‘Thredbo’ does not necessarily connote solely the Resort. The Thredbo Valley, the Thredbo River, and commercial and residential activities with which KT is not connected exist at Thredbo. KT’s chosen business name is synonymous with the geographic location, but there are no features of the word ‘Thredbo’ which distinguish the geographic place name from KT’s name. Similarly, the use of the word ‘Thredbo’ in KT’s website at www.thredbo.com.au does not give rise to a secondary meaning.
95 Having reviewed all the evidence, and the principles embodied in Clark Equipment, the Court is unable to conclude that the applicant has discharged the burden of proof that the word ‘Thredbo’ has acquired a secondary meaning, namely that the use of the word ‘Thredbo’ in its business names, internet names and logos has become so distinctive such that KT has a right to use it to the exclusion of all others. Thredbo is a recognised geographic place, and the locality has been known as Thredbo well before the Resort was developed.
96 The authorities referred to above provide a salutary reminder of the difficulties encountered when exclusivity is claimed in respect of a geographic name. The fact that ‘Thredbo’ is known as a place, and not merely the Village or KT’s Resort, disentitles KT’s claim that it has established a secondary meaning in the word ‘Thredbo’ so that it has the exclusive right to use such word.
MISLEADING OR DECEPTIVE CONDUCT
97 There are three broad issues for the Court to consider with respect to KT’s claim that the respondents have engaged in misleading or deceptive conduct. The first is the alleged similarities between the appearance and content of the websites of the respondents as compared to that of KT. This includes the overall get-up of the respondents’ websites, the use of ‘Thredbo’ in the domain names of the respondents, and the use of the slogan ‘This is our Thredbo’. The second issue is the incorporation of KT’s slogan ‘My Thredbo’ by the respondents into a hyperlink for accommodation reservations. Finally, the Court will consider the alleged similarities between KT’s Facebook page and that of the respondents.
98 Before addressing these issues however, a background to KT’s claim for misleading or deceptive conduct will be considered.
Background to KT’s claim for misleading or deceptive conduct
99 The Court was provided with electronic copies of KT’s website www.thredbo.com.au as well as the various websites operated by the respondents of which KT complains. Each of the websites will be briefly described in order to assess the conduct of the respondents which allegedly breaches ss 18, 29(1)(g) and 29(1)(h) of the ACL.
KT’s website: www.thredbo.com.au
100 www.thredbo.com.au is described by KT on its website as ‘the official Thredbo website’. The website has been live since 1997, and was in cinema and television advertising, brochures, signage and other material soon afterwards. Since 2003 the website has utilised colours in red, white and blue. The Thredbo Mountain logo then used has already been referred to above, and is repeated hereunder.
101 Prior to 2012, each page of KT’s website displayed the Thredbo Mountain logo prominently. This changed in 2012 when the new logo was adopted. It too is displayed on each page of KT’s website prominently.
102 Ms Robin Mary Maes, Director of Digital Media at Amalgamated Holdings Ltd stated that electronic direct marketing and social media, including the Thredbo Resort Facebook page, are important for the promotion of Thredbo and that it is important to maintain ‘the richness of the content’ of www.thredbo.com.au to ensure it ranks highly in search engine rankings.
103 Since 2012, KT’s redesigned website continues to use many of the features used by its former website. Its tag line is red on blue ‘MY THREDBO’. Prominent imagery and scenery of Thredbo also appears. Similar imagery appears on KT’s Facebook page.
104 The background of the homepage of the website features a variety of seasonal images of people enjoying activities such as mountain biking, hiking, skiing and relaxing, as well as landscape photographs of the Thredbo area. The website is divided into seven broad categories of subpages: ‘weather and conditions’; ‘on the mountain’; ‘in the village’; ‘accommodation’; ‘bookings and tickets’; ‘activities and events’; and ‘about Thredbo.’ When a viewer clicks on one of these categories, further subpages drop down to provide information relevant to the category.
105 The website provides comprehensive information about Thredbo Village and the Resort. The website also contains links to an ‘e-store’, where one can buy lift passes and other products for their vacation. The ‘Accommodation’ category displays a webpage where one can insert the proposed dates of their travel and see what accommodation is available at what prices.
Development of the respondents’ websites
106 In 2000 Mr Smith, who has extensive experience with electronic media, created a website, www.thredbonet.com, to promote the properties he owned in Thredbo. To maximise tenancy rates for the properties managed by ThredboNet, Mr Smith developed websites for Thredbo properties managed by ThredboNet. The evidence shows that the website appearances have been updated from time to time. From 2004 to 2010 Mr Smith registered more than 20 different domain names.
107 ThredboNet uses an automated booking system, called Genkan, designed by a software developer especially for holiday rental properties. A company search of Genkan Pty Ltd records that Mr Smith is a director of that company. Genkan Pty Ltd is advertised as having the ability to ‘build and edit email or SMS marketing campaigns personalised directly from your Genkan database’. In this way, the system was developed to respond to email requests for accommodation, take deposits, send payment reminders to customers and send the customer booking information. Arrival information is forwarded to the customer together with an SMS which provides the access code to the property and check-in information.
108 The system also sends an email to the client which contains a link to a website where the client can review all details of their booking. This facility avoids the use of password and username by the client. From 2009 until late May 2011, the link sent to the clients had the domain name www.thredboreservations.com. However, following the acquisition by Mr Smith of the domain name www.thredbo.com, that address was used in substitution. A link was provided to enable the client to readily access the booking and to enable any alterations to be made on a web page entitled ‘My Thredbo Booking’. An example of such link was provided in evidence as follows: http://www.thredbo.com/mythredbo.htm?action=booking_manager&edit=1&agent=THRE&bl=db1f83fb5fe9218e92ec696c283904e1d7d5b66a.
Description of www.thredbonet.com and www.thredboreservations.com.au
109 In early 2001 Mr Smith launched www.thredbonet.com and it did not change significantly in appearance until 2011. The original version which was tendered to the Court had a homepage with a predominantly blue background. In 2011, the website was revised. At the time of the hearing, a banner appeared at the top of the page and the word ‘Thredbo’ was written in red lower case letters. Immediately below, the phrase ‘accommodation specialists’ appears in black writing on a white background. In the bottom right hand corner in a different font is the slogan ‘The Best of Thredbo…’. The background image for the banner changes each time the page is entered or refreshed, but an example appears immediately below. The main body of the homepage contains a list of accommodation available for hire. The homepage also contains snow cam images of the Thredbo area. KT’s logo appears on the snow cam images.
110 Subpages of www.thredbonet.com provide a calendar of availability for various properties, more information about self-contained chalets and properties for sale.
111 www.thredboreservations.com.au was launched in 2009. In 2011, the website was altered to be substantially the same as www.thredbonet.com. However, different properties are advertised and www.thredboreservations.com.au does not contain snow cams.
Description of www.thredbo.com
112 In May 2011, Mr Smith purchased the domain name www.thredbo.com in an online auction for $10,000.00. KT was aware of the auction, but formed the opinion that the vendor was attempting to inflate the price of the domain name, and was seeking an extravagant price. Accordingly KT decided not to bid.
113 The version of www.thredbo.com which was tendered to the Court has a homepage which has a predominantly white background. In a banner on the top of the page the word ‘Thredbo’ is written in the same red font as on www.thredbonet.com. The words ‘accommodation specialists’ are written in white. The banner contains rotating images of the Snowy Mountains, an example of which is shown below:
114 One version of the website tendered in evidence contained the slogan ‘This is our Thredbo’ in a script font in the lower right hand corner of the top banner. The main body of the webpage provides basic information about Thredbo. That section of the website states:
Thredbo is Australia's premier ski and alpine resort, Thredbo is open all year round. The ski season opens on the queens birthday [sic] weekend in June and closes early October. Thredbo has 13 ski lifts rising from 1380 metres in the valley to over 2000 metres at the top of Karels. Over the summer months Thredbo is transformed from white to green, from skiers to walkers venturing to Australia's highest peak, Mt Kosciuszko.
115 Below that, the webpage displays further information about accommodation and real estate available in Thredbo. The bottom portion of the webpage contains a list of properties available for rent in a manner similar to www.thredbonet.com.
116 A navigation menu is shown on the left side of the webpage. The navigation menu contains links to pages which provide more information about the accommodation availability and pricing, as well as last minute specials available. The website also contains terms and conditions for booking of accommodation through the website. In the first line of the terms and conditions, the following is stated:
In providing booking services Thredbonet Marketing Pty Limited ABN 44 097 622 869 (“Thredbonet Marketing”) acts as an agent for various property owners and Thredbonet Marketing does not accept or undertake any personal liability when acting in this capacity.
117 The webpage also contains information about activities which can be enjoyed in Thredbo, including activities which are operated by KT. Further the webpage contains information about dining options in Thredbo.
Description of www.accommodationthredbo.com.au
118 www.accommodationthredbo.com.au has a homepage which is on a predominantly blue background. The website provides information about accommodation available in Thredbo in a format similar to www.thredbonet.com. There is no additional information about the other features of the Thredbo area other than the accommodation available within it. The individual pages for the accommodation on offer describe the features of the Thredbo Village and Thredbo Resort (e.g. the nearby slopes at Friday Flats).
Description of www.realestatethredbo.com.au
119 This is the homepage for ‘Discover Thredbo Real Estate’. The homepage is on a predominantly blue background. It provides more in depth information, such as valuations, upcoming inspections and property management about owning (more correctly, subleasing) property in Thredbo Village. In addition, the homepage contains this statement:
The National Parks and Wildlife Service administers the lease area on behalf of the State Government, the landlord to Kosciuszko Thredbo P/L, KT, who is the head lessee. You, the individual property owner are therefore a sub lessee of KT. KT are your “local council”, and provide all municipal services including water and sewage for an annual “bed license” [sic] payment.
Description of www.thredbo-accommodation.com
120 At the top of this website’s homepage, the address is written in a plain blue font. The background of the website is primarily white. The majority of the webpage is taken up by advertisements for properties available for rent in a similar fashion to www.thredbonet.com.
Description of www.discoverthredbo.com
121 This website’s homepage features a predominantly dark blue background. It appears to be designed as a sort of ‘gateway’ to other websites operated by the respondents. For example, there are links to the respondents’ specific accommodation and real estate websites. There are also links to employment opportunities with the respondent.
122 One of the pages within the website does provide information about ski lift prices and dates and prices for activities coordinated by KT. However, this page does not appear to have been updated since 2007.
Other websites
123 There are other websites that KT has referred the Court to. However, the primary complaint with the remaining websites is that the domain name contains the word ‘Thredbo’. Due to the finding above regarding use of the word ‘Thredbo’, the Court does not need to consider these websites further.
Similarities relied upon by KT
124 The similarities of the respondents’ websites to www.thredbo.com.au which KT relies upon for injunctive relief are:
that the respondents’ domain names include the word ‘Thredbo’;
that the respondents’ websites www.thredbonet.com and www.thredboreservations.com.au contain text essentially in red colour on a white background in shades virtually identical to that of KT’s website;
that www.thredbonet.com and www.thredboreservations.com.au use script font (similar to the crayon font used by KT in its My Thredbo logo, adopted in about April 2011), in respect of the slogan ‘The Best of Thredbo’ and again in respect of the slogan ‘This is our Thredbo’ on www.thredbo.com;
that the respondents' websites contain information on activities in Thredbo which is similar to the information contained in KT's website;
that www.thredbo.com shows scenery of Thredbo similar to that used by KT in its website; and
that the respondents use a link that incorporates the words ‘My Thredbo’ in relation to accommodation reservations.
125 Prior to 2005 KT has used the colour red in association with their services. In 1994 the Thredbo ski school information leaflet showed a ski instructor wearing red uniform. The Thredbo summer planner for 2004 and winter planner for 2005 both prominently show the Thredbo mountain logo in red on the front cover and throughout the publication. A book entitled ‘Thredbo 50, 1957 to 2007’ by Jim Darby shows red being the predominant colour used by KT.
126 Mr Bryson compared www.thredbo.com.au with the respondents’ website www.thredbo.com. Mr Bryson said of the respondents’ website:
(a) the website has an “official” or “legitimate” imprint, creating the overall impression that “Thredbo Accommodation Reservations” is connected with KT and the official Thredbo Brand. This is particularly due to the use of the domain name www.thredbo.com to advertise precisely the same or very similar services as that advertised on the Official Thredbo Website;
(b) it utilises the colours red and white which as noted above I associate with the Thredbo Brand;
(c) it goes well beyond the “booking agent’s” website as it provides the consumer with much more information than mere accommodation options at Thredbo, for example it contains pages with respect to “Last Minute Specials” and “Thredbo Winter Weekends” (analogous to the packages available through the Official Thredbo Website), pages with respect to “Eating Out in Thredbo” (analogous to the section of the Official Thredbo Website concerning Restaurants and Retail in Thredbo) and the section entitled “Thredbo Weather” (analogous to the “Live Cams” section in the Official Thredbo Website which depicts the weather in Thredbo through live feed from seven different snow cameras).
127 Finally KT submits that the respondents actively encourage the belief that their business is that of KT because the www.thredbo.com page title contains the words ‘Resort Information’.
Evidence of Confusion
128 KT has relied upon evidence which it submits establishes confusion in the mind of the public and therefore evidence of passing off. Michael Damien Brooks gave evidence that during November 2011 he had booked accommodation for himself and his family in premises known as ‘Elevation 5’, following receipt of an email from Mr Smith. The email relevantly stated:
Thredbo Reservations and www.thredbo.com are pleased to announce a new fresh, new and easy approach to paying for your Thredbo ski accommodation. What we had endeavoured to achieve is to remove the two large payments, (deposit and final payment) and offer you the option of spreading the load and making 7-8 monthly interest fee payments between now and ski season to secure your accommodation for 2012.
…
5 simple steps
1. Visit www.thredbo.com
2. Check availability and pricing
3. Select your accommodation
4. At checkout select “Winter Payment plan”
5. Pay 10% deposit with your credit card.
…
Guests taking up this option will on arrival at the property receive a www.thredbo.com “welcome pack” and be privy to other special offers throughout the 2012 ski season.
…
For more information visit www.thredbo.com or www.lastminute.com
THREDBO RESERVATIONS
PO Box 149 Thredbo Village
Ph: 02 64 576281 email book@thredbo.com web: www.thredbo.com
129 Having received such email, Mr Brooks visited the www.thredbo.com website and formed the impression that it was the website of, or was associated with KT. Mr Brooks testified that he formed such opinion because the domain name of the website contained the word ‘Thredbo’ which he had associated with KT; the use of the page title ‘Thredbo accommodation reservations’; the phrase ‘Thredbo reservations’ in the email; the colour red being used on the website and in the email; and the content of the website which contained the menu of activities in Thredbo.
130 As a result, Mr Brooks made a booking on 19 November 2011 at ‘Elevation 5’ for the period from 8 July 2012 to 15 July 2012 at a cost of $7,081.13. Upon arrival for the holiday on 8 July 2012, Mr Brooks and his family were disappointed to find that the accommodation had been double booked with the result that he was obliged to make alternative arrangements. Mr Brooks believed that KT was responsible and he inquired at KT’s office to find out what had caused the booking to be dishonoured. Only then did he ascertain that KT did not make the booking. In a letter of complaint dated 20 July 2012 to ThredboNet, Mr Brooks testified to the unsatisfactory response he received when he attempted to make contact with the respondents’ booking service.
131 A further example of claimed confusion is contained in the evidence of Nicole Louise Thrum who works as a consultant at TRC. In October 2011, Ms Thrum received an email of the same type sent by Mr Smith to Mr Brooks promoting payment by instalments for accommodation. The email had been forwarded to her by a person seeking accommodation in Thredbo who sought more information about the promotion. Ms Thrum informed the inquirer that the website used for the booking did not belong to KT.
132 Another example relied upon to show confusion is the evidence of Ms Jessica Elsie Christiansen, who is also a consultant at TRC. On 23 July 2012 a female guest telephoned her to complain about the accommodation at a lodge known as Mitta Mitta. Upon further investigation it became apparent that the booking was made through the respondents and not through KT.
133 Further, on 8 July 2012 Ms Christiansen received a complaint from a male guest seeking access to Snowman Apartment. This guest could not obtain access to the property because the door code was not operative. Again upon inquiry it was discovered that the accommodation was booked through the respondents and not KT.
134 Evidence of a similar kind was provided by Susan Elizabeth Ward who is the manager of TRC. Ms Ward confirmed that she had seen the emails referred to in the evidence of Ms Thrum. She also testified that on 20 July 2012 two women visited the TRC to complain about the standard of cleanliness at their accommodation located at Snowstream 4. The women believed that they had made the booking through KT. On investigation it was established that the respondents had made the booking. A diary note of that incident was tendered to the Court.
135 Lastly, KT relies upon the fact that a letter sent by the Consumer, Trader and Tenancy Tribunal (‘CTTT’) to KT’s post office box at Thredbo Village was addressed to Thredbo Reservations. Such letter relates to a complaint between a consumer and the respondents’ business. KT relies upon the wrong address as demonstrating confusion either at the instance of the consumer or of the Tribunal.
136 Mr Smith provided evidence to show that the double booking of the property the subject of Mr Brooks’ reservation occurred as a result of a misunderstanding between him and the property owner of ‘Elevation 3’ and denied responsibility for the mistake. Mr Smith stated that he had no knowledge of complaints received from any other person who may have booked accommodation through his company.
Principles applicable to misleading or deceptive conduct claims
137 The principles applicable to s 52 of the Trade Practices Act 1974 (Cth) (now repealed) also apply to the considerations under ss 18, 29(1)(g) and 29(1)(h) of the ACL. Those principles are well established: see Hornsby Building Information Centre Proprietary Limited v Sydney Information Centre Limited (1978) 140 CLR 216 (‘Hornsby Building Information Centre’); Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177; Equity Access Pty Ltd v Westpac Banking Corp (1989) 16 IPR 431. The relevant authorities have been conveniently referred to in S&I Publishing Pty Ltd v Australian Surf Life Saver Pty Ltd (1998) 88 FCR 354 at 361-363.
138 In summary, the principles to be applied are as follows:
(1) There will be no contravention of s 52 unless the error or misconception which occurs results from the conduct of the corporation and not from other circumstances for which the corporation is not responsible: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 42 ALR 1; 149 CLR 191 at 199–200 per Gibbs CJ and at 209–11 per Mason J; Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 91; 55 ALR 25; Tobacco Institute of Australia v Australian Federation of Consumer Organisations (1993) ATPR 41–199 and cf Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 132 ; 94 ALR 719.
(2) Conduct will be misleading and deceptive if it leads into error: Parkdale at CLR 198.
(3) Conduct will be likely to mislead or deceive if there is a “real or not remote chance or possibility” of misleading or deceiving regardless of whether it is less or more than 50%: Global Sportsman at FCR 87.
(4) Conduct causing confusion or uncertainty in the sense that members of the public might have cause to wonder whether the two products or services might have come from the same source is not necessarily misleading and deceptive conduct: Parkdale at CLR 200; Bridge Stockbrokers Ltd v Bridges (1984) 57 ALR 401 at 413 per Lockhart J; Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177.
(5) In a case such as the present an applicant must establish that it has acquired the relevant reputation in the name or get up such that the name or get up has become distinctive of the applicant's business or products: Sheraton Corp of America v Sheraton Motels Ltd [1964] RPC 202; BM Auto Sales Pty Ltd v Budget Rent A Car System Pty Ltd (1976) 12 ALR 363.
(6) Conduct may be misleading or deceptive or likely to mislead or deceive notwithstanding that the corporation said to engage in that conduct acted honestly and reasonably and did not intend to mislead or deceive: Parkdale at CLR 197 per Gibbs CJ; Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 223 ; 18 ALR 639 per Stephen J; Global Sportsman at FCR 88. Logically, a finding that conduct had been intentionally engaged upon will be irrelevant in determining whether that conduct is misleading or deceptive. It may perhaps be imagined that conduct engaged upon with the intent to mislead or deceive may fail in its purpose and not be found misleading or deceptive. Nevertheless, where the intention to mislead or deceive is found, it logically would be likely that a court would more easily find that the conduct was misleading or deceptive: cf Australian Home Loans Ltd v Phillips (1998) ATPR 41–626 and New South Wales Dairy Corp v Murray Goulburn Co-operative Co Ltd (1989) 86 ALR 549 at 558.
(7) In many cases it will be necessary to consider the class of persons to whom the representation was directed: Parkdale at CLR 199 and Taco Bell at 202.
(8) There is no proposition of law to the effect that intervention from erroneous assumption between conduct and misconception destroys the necessary chain of causation with the consequence that the conduct cannot be regarded as likely to mislead or deceive: Taco at 200; Campomar Sociedad Limitada v Nike International Ltd (1998) 156 ALR 316 at 344–5.
(9) The test of whether conduct is misleading or deceptive or likely to mislead or deceive is an objective one for the court to determine. It is ultimately a question of fact.
139 It is important to observe that in respect of the fourth principle above mere confusion in the mind of a consumer does not equate to conduct which is misleading or deceptive. In Hornsby Building Information Centre, Stephen J relevantly stated at 228-229:
When, as in s. 52(1), the focus is upon the misleading of others rather than upon the injury to a competitor, it becomes of particular importance to identify the respect in which there is said to be any misleading or deception. The particular feature of the Hornsby Centre's conduct of which the Sydney Centre complains as being misleading and deceptive is not simply the use of its corporate name, so similar in part to its own name, but rather that by that use others are led to believe that the Hornsby Centre is a branch of, or is otherwise associated with, the Sydney Centre.
The Sydney Centre tendered some evidence that persons had been misled in this way and for present purposes I will assume that this has occurred. But to determine whether there has been any contravention of s. 52 (1) [Trade Practices Act 1974] it is necessary to inquire why this misconception has arisen in the minds of others. This necessarily leads one to examine the name of the Sydney Centre. The name which it adopted as its own consists of three descriptive words, prefixed by a word of locality, the whole of which it uses as its trade and corporate name. Having done so it cannot, as it acknowledges, claim any monopoly in the descriptive words; yet it does in fact seek to impose conditions upon another's use of those words, the condition being that an explanatory disclaimer should accompany that use.
…
The use by the Sydney Centre of the three descriptive words was no doubt convenient. It thereby acquired a name which at the same time very clearly described its activities.
…
There is a price to be paid for the advantages flowing from the possession of an eloquently descriptive trade name. Because it is descriptive it is equally applicable to any business of a like kind, its very descriptiveness ensures that it is not distinctive of any particular business and hence its application to other like businesses will not ordinarily mislead the public. In cases of passing off, where it is the wrongful appropriation of the reputation of another or that of his goods that is in question, a plaintiff which uses descriptive words in its trade name will find that quite small differences in a competitor's trade name will render the latter immune from action Office Cleaning Services Ltd. v. Westminster Window and General Cleaners Ltd., per Lord Simonds). As his Lordship said (37), the possibility of blunders by members of the public will always be present when names consist of descriptive words-
"So long as descriptive words are used by two traders as part of their respective trade names, it is possible that some members of the public will be confused whatever the differentiating words may be."
The risk of confusion must be accepted, to do otherwise is to give to one who appropriates to himself descriptive words an unfair monopoly in those words and might even deter others from pursuing the occupation which the words describe.
Consideration of the use of ‘Thredbo’ in the respondents’ websites
140 The Court finds it to be likely that a person seeking to book a holiday will use the internet as the first source for information. The Court also accepts that www.thredbo.com.au, and other electronic means such as the Resort Facebook page are important for a person seeking to arrange a holiday.
141 The Court accepts the evidence of Miss Maes that, to ensure that KT ranks highly in the Google search engine ranking, KT must maintain ‘richness of content’. This is achieved by the use of logos, colours, the navigation bar providing information on services and facilities in Thredbo. That is, the ‘quality score’ is vital.
142 KT submits that where the ‘quality score’ in the winter season for www.thredbo.com creates such a proximity between that website and KT’s www.thredbo.com.au, or where the respondents’ website www.thredbo.com achieves the ‘AdWords bid’ on the search term ‘Thredbo’, by which the respondents’ website features ahead of KT’s in a Google search for Thredbo, there exists the potential for consumers being misled or deceived, or are likely to be misled or deceived.
143 The Court has found above that KT has failed in its claim that it has developed an exclusive right to use the word ‘Thredbo’. It follows that, subject to one circumstance considered later relating to the Genkan Link, the use of ’Thredbo’ by the respondents is unexceptional. Both KT and the respondents are entitled to use the word Thredbo. The operation of websites with domain names such as www.thredboreservations.com.au or www.thredbo.com does not give rise to any misrepresentation.
144 Stephen J’s reasoning in Hornsby Building Information Centre, set out at 228-229, also applies to the circumstances in this proceeding. KT has chosen to primarily market its ski resort as ‘Thredbo’, which is a ‘word of locality’. Occasionally, it uses the word in conjunction with descriptive words, such as ‘Thredbo Resort’ or ‘Thredbo Reservations Centre’. When another company, which also conducts business in Thredbo, decides to use a similar arrangement of the ‘word of locality’ plus descriptive or generic words, e.g. ‘Thredbo Accommodation Reservations’, then KT cannot be heard to complain that such conduct is misleading or deceptive.
145 The facts in this proceeding can be distinguished from ‘cybersquatting’ cases such as CSR Ltd v Resource Capital Australia Pty Ltd (2003) 128 FCR 408. In that proceeding, the respondent, who had absolutely no connection with the sugar refiner CSR and who had no intent to enter the Australian sugar market, registered a domain name www.csrsugar.com.au and then attempted to sell it to CSR. Hill J found that the respondent had engaged in misleading or deceptive conduct by representing that they would be engaged in the Australian sugar market, when in fact they had no such intent. In contrast, there is no doubt that the respondents in the present proceeding use domain names containing the word ‘Thredbo’ in order to promote accommodation in the Thredbo area.
146 Rather the use of ‘Thredbo’ in domain names by the respondents is similar to the circumstances in Goconnect. In such case, Emmett J considered whether misleading or deceptive conduct existed in respect of a registered trade mark ‘Connect’ and ‘connect.com.au’ and the respondents’ web addresses ‘goconnect.net.au’ and ‘goconnect.net.’ His Honour found that the word ‘connect’, because it was a common English word, could probably never become distinctive: see [57]. Significantly, his Honour continued:
[57] …Of course, the word might be distinctive where it forms part of a trade style or get-up or trade dress. However, in those circumstances, it is the whole of the style, get-up or dress that becomes distinctive, not the mere use of the word. It is the combination of the word with the particular get-up that would have any consequences so far as section 52 of the Trade Practices Act is concerned and so far as the common law tort of passing off is concerned.
[58] In any event, where an ordinary word acquires a secondary meaning, very little differentiation is required in order to distinguish its use for the purposes of section 52. No doubt it is correct to say that where a descriptive trade name is used there will always be the possibility of confusion. It is also true to say that where a descriptive trade name is used it will be difficult for that name to become distinctive of a particular business. Application to like businesses would not ordinarily mislead the public: see Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd [1978] HCA 11; (1978) 140 CLR 216 at 229 ("Hornsby Building").
[59] There may, of course, be cases where usage of a descriptive name may bring about the result that it acquires a secondary meaning equating it with the products of an applicant. Such a case would be Opals Australia Pty Ltd v Opals Australiana Pty Ltd (1993) ATPR 41556. Even there, however, Lockhart J acknowledged that where the name of a business consists of words descriptive of that business and which have not acquired a secondary meaning, a slight difference between the plaintiff's and defendant's title will in the absence of fraud be a sufficient distinction: at page 41563 referring to the House of Lords in Office Cleaning Services Ltd v Westminster Window and General Cleaners Ltd (1946) 63 RPC 39.
[60] There is a price to be paid for the advantages flowing from the possession of an eloquently descriptive trade name. Because it is descriptive it is equally applicable to any business of a like kind. Its very descriptiveness ensures that it is not distinctive of any particular business and hence its application to other like businesses will not ordinarily mislead the public. In cases of passing off where it is the wrongful appropriation of the reputation of another or that of his goods that is in question, a plaintiff which uses descriptive words in its trade name will find that quite small differences in a competitor's trade name will render the latter immune from action.
[61] The possibility of blunders by members of the public will always be present when names consist of descriptive words. So long as descriptive words are used by two traders as part of their respective trade names, it is possible that some members of the public will be confused whatever the differentiating words may be: see Sir Ninian Stephen at page 229 in Hornsby Building (above).
147 Accordingly the Court finds that the domain names of the respondents which use the word Thredbo should not be restrained.
Consideration of the ‘get-up’ of the websites
148 The designs of the various websites operated by the respondents are dissimilar to www.thredbo.com.au. In particular, the various websites operated by the respondents are focused on the provision of accommodation in Thredbo, whereas the website operated by KT takes a more holistic approach, providing much more detailed information about the activities available at the Resort, enabling the purchase of lift tickets, ski passes, and similar related activities, in addition to information about accommodation. A sample of both KT’s and the respondents’ websites are included below for comparison. The website of KT appears immediately below:
149 A page of the respondents’ website www.thredbo.com is reproduced below:
150 In regard to the confusion evidence led by KT, Mr Brooks was extensively cross-examined in relation to his confusion between the respondents and KT. As a result the respondents submitted that Mr Brooks was not a person upon whose evidence the court could rely as being a typical consumer because he had a past working association in Thredbo with the Department of Sport and Recreation, was engaged in the building industry and through that association was aware that a large entity managed the Village.
151 The Court rejects such submission. Mr Brooks appeared to the Court to be a typical consumer, one who was prudent and careful to the degree which he believed he needed to be in determining that he was in fact dealing with KT.
152 Whilst Mr Smith maintains that Mr Brooks is only one of approximately 3000 bookings that he would make in any one year, the Court does not accept that this fact warrants dismissing Mr Brooks’ evidence.
153 This evidence, in addition to the anecdotal evidence of the employees at the TRC who interacted with customers who mistakenly believed that they booked their accommodation through KT instead of the respondents, leads the Court to conclude that some consumers were confused, holding the belief that the respondents’ services were associated with the services of the applicant.
154 The Court finds however that such confusion is generated as a result of both KT and the respondents using the word ‘Thredbo’ in conjunction with their business and in the domain names of the websites, rather than the appearance of the respondents’ websites. The same is true for the misdirected mail sent by the CTTT. In any event, the Court must engage in an independent assessment of evidence to determine whether the websites of the respondents are, or are likely to be, misleading or deceptive.
155 KT placed particular emphasis in their oral submissions on the use of the colour red by the respondents in their websites.
156 The colour red is widely used in the sport of snow skiing. The respondents have used the colour red on at least some of its websites since 2005 and that the slogan ‘This is our Thredbo’ was, on KT’s website, written in red to be consistent with the those websites. As to the respondents’ use of red, Mr Smith said he adopted red because it was widely used for the colour by ski instructor uniforms in many resorts around the world, including KT’s skiing instructors, and that it was a colour he had used in his website www.accommodationthredbo.com since 2005. In 2006 Mr Smith used red in Thredbo Accommodation Specialists, and in 2009 he used red in the webpage www.thredboreservations.com.au. Mr Smith stated that KT’s website used blue colouring, and that www.thredbo.com.au website did not use red until 2008. The evidence before the Court shows that red is widely used by ski instructors in many international resorts.
157 Based upon such evidence, and having considered the general ‘get up’ of the websites of both parties, the Court must consider whether the use of the colour red is so connected to KT’s ‘product’ that it would be misleading for another trader in a similar industry to KT to use it in its advertising, media, or product get-up: see Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 4) (2006) 69 IPR 23 (‘Cadbury Schweppes’) at [81]-[83]; Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) (2008) 75 IPR 557 at [54]-[61].
158 There are general differences between the websites of KT and those of the respondents. For instance:
(a) On every page of KT’s website its logo is prominently displayed;
(b) KT’s website offers information upon a wide range of matters, such as ski passes, winter specials, live cams, weather conditions, plan a trip, what’s on, ski trails, and an ‘activity status report’;
(c) KT describes its website as the official website;
(d) Bookings for lift tickets and ski classes may be made through KT’s website;
(e) The colours of the websites are not the same. Whilst the word Thredbo appears in red writing in both KT’s and the respondents’ websites, a blue background features more predominantly on KT’s website that it does on the respondents’ website;
(f) Mountain scenery is extensively shown on KT’s website.
In contrast, the respondents’ websites:
(g) Make it plain that their businesses of accommodation only;
(h) Show mountain scenes, but not in such a way as to dominate the web pages;
(i) Include a menu of activities which information could be of use to those persons using the respondents’ accommodation.
(j) Do not bear the KT logo, nor describe their websites as ‘official’.
159 The general design layout of KT’s and the respondents’ websites are different, the colours are different, and there is no reference in KT’s website to ‘Thredbo’ in a similar prominent position as is shown on the respondents’ websites. In fact the only similarities are the use of snow scenes, which are both unremarkable and different snow scenes. When compared together, KT’s principal website bears little resemblance to that of the respondents. The use of the colour red by KT is unremarkable and does not distinguish their ‘product’.
160 The Court also notes that after the commencement of this proceeding and prior to the hearing, the respondents included on their primary website www.thredbo.com the following disclaimer:
About thredbo.com
This website is operated by Thredbonet Marketing Pty Ltd. Our company manages more than 50 properties in Thredbo and has provided booking and accommodation services in Thredbo since 2001. Please note this is NOT the official website of the owner and operator of the Thredbo Alpine Village or the Thredbo Ski Resort, Kosciuszko Thredbo Pty Ltd, and is not approved, endorsed or sponsored by them.
161 Due to the differences outlined above, the Court is satisfied that consumers are not likely to be misled by believing the respondents’ web pages are those of KT, and that the evidence of confusion being that of the tenants who complained to KT, and the wrong address of the correspondence from the CTTT, cannot be elevated to conduct which misleads or deceives, or which is likely to do so, within the meaning of ss 18, 29(1)(g) or 29(1)(h) of the ACL.
Consideration of the use of ‘This is our Thredbo’ by the respondents
162 The slogan used by the respondents on their website www.thredbo.com until March 2012 was as follows:
163 Such use ceased prior to the commencement of the proceedings, as a result of the respondents’ endeavour to reach a compromise with KT and thereby to avoid this litigation. In these circumstances, even if the Court should find that the use of such slogan amounted to misleading or deceptive conduct or passing off, it would be futile to make any order for injunctive relief. However, for the sake of completeness, the Court will state its findings on this issue.
164 It was alleged by KT that Mr Smith had altered www.thredbo.com to include the words ‘This is our Thredbo’ to make it as close as possible to KT’s advertising of ‘My Thredbo’. The slogans ‘My Thredbo’ and ‘My Thredbo, My Mountain, My Way’ were widely advertised by KT in or about early June 2011 not only on its website, but also displayed on lift ticket booths, tickets, bus shelters in the Village and in print advertisements. KT’s website included references to ‘My Thredbo’ special offers for the purchase of lift passes. Such passes enable the holder to access the ski lifts, purchase products and gain access to exclusive offers.
165 The ‘My Thredbo’ slogan has taken various forms. Sometimes the slogan is written ‘MY THREDBO’ in red lettering on a blue background. On other occasions it appears as reproduced below:
166 Mr Smith denied using ‘This is our Thredbo’ as a result of KT’s use of ‘My Thredbo’. He testified that he independently developed his slogan ‘This is our Thredbo’ and commenced using it within two years prior to the hearing. Mr Smith said that he was unaware of KT’s ‘My Thredbo’ slogan and advertising until the commencement of this proceeding.
167 KT produced evidence to show that emails from KT containing the ‘My Thredbo’ slogan had been issued by KT on 11 June 2011, 22 June 2011, 16 July 2011, 5 August 2011, 18 August 2011, 2 September 2011, 19 September 2011 and 6 October 2011 and had been opened within Mr Smith’s email account. This evidence was made possible by email tracking software entitled ‘MailChimp’, which records when emails are opened by an addressee. Some emails bearing the ‘My Thredbo’ slogan from KT to Mr Smith’s email account were recorded by MailChimp as having been opened on multiple occasions. This included one email dated 16 July 2011 which was recorded on MailChimp records as having been opened on Mr Smith’s email account on 12 occasions.
168 Mr Smith was cross-examined extensively on this subject. Mr Smith deposed that he had no recollection of reading the emails. Mr Smith was firm in his testimony that until this proceeding commenced he was unaware of KT’s use of the ‘My Thredbo’ slogan. He testified that in the period when the emails were recorded as having been read he was exceptionally busy, dealing with approximately 3000 bookings, and that he did not have the time to read such emails. Mr Smith said that he no longer skis at Thredbo, and had never seen the ‘My Thredbo’ slogan displayed at ticket offices, on lift passes, on ski tickets or on bus shelters in Thredbo Village.
169 Mr Smith maintained that MailChimp may have recorded such emails as having been opened by him when in fact he was merely scrolling through them and that a recording by MailChimp that the emails were ‘opened’ did not verify that he had read them. Despite such explanation, it became apparent that even if the email had not been opened, the ‘My Thredbo’ portion was probably visible on Mr Smith’s computer screen pane even when scrolling through email messages.
170 In light of this uncertainty the Court is not prepared to find that Mr Smith’s testimony on this issue was untruthful. The evidence surrounding the MailChimp software was inconclusive with regard to the issue of whether the subject emails, if recorded as opened, were actually read.
171 Regardless of any alleged intent on Mr Smith’s part, KT asserted that the use of ‘This is our Thredbo’ by the respondents contains a false underlying assumption that the accommodation business of the respondents is affiliated with that of KT, and that there were obvious similar connotations between the slogans ‘My Thredbo’ and ‘This is our Thredbo’, merely by the use of the word ‘Thredbo’ and the preceding possessive adjective.
172 A slogan or advertisement that in some way explicitly or obviously refers to a competitor’s business may be regarded as a ‘competitor claim’ and will not amount to misleading or deceptive conduct. This results from the fact that the explicit distinction within the advertisement between the advertiser’s business and that of the competitor removes any likelihood of deception amongst potential consumers. Where an advertisement or similar representation is more subtle in its effect however, it may amount to misleading or deceptive conduct. Such situation arises where a representation influences, or is likely to influence, prospective customers to favour the business of the maker of the representation upon the basis of a false underlying assumption: see Pacific Dunlop Ltd v Hogan (1989) 23 FCR 553 at 586.
173 The Court does not find that the use of ‘This is our Thredbo’ by the respondents amounts to misleading or deceptive conduct. The Court regards the adjective ‘our’ as a term of distinction from KT’s ‘My Thredbo’. Further, as set out above, the word ‘Thredbo’ in and of itself does not have a secondary meaning connected with the business of KT. The addition of the possessive adjective ‘my’ does not, without more, transform the slogan from being descriptive to becoming distinctive and thereby predominantly associated with KT’s business.
174 KT also submits that the font of ‘My Thredbo’ and ‘This is our Thredbo’ is the same. This submission cannot be accepted. KT’s slogan appears in prominent block capital letters, usually in crayon font, whereas the respondents’ slogan is essentially in lower case and in script font. Further, KT appears to use its slogan ‘My Thredbo’ in conjunction with one of its logos, whereas the respondents used their slogan only on their web banner advertising their accommodation.
Conclusion: misleading or deceptive conduct in respect of the websites
175 As was observed by Lockhart J in Lumley Life Ltd v IOOF of Victoria Friendly Society (1989) 16 IPR 316 at 234, the risk of a consumer being misled, or the likelihood thereof, must be a ‘real risk in a practical sense and in all the circumstances’. The ultimate assessment of the level of such risk is an assessment for the judge in light of all the evidence. As was observed by Jacob J in Neutrogena Corporation v Golden Limited [1996] RPC 432, at 482:
The Judge must consider the evidence adduced and use his own common sense and his own opinion as to the likelihood of deception. It is an overall “jury” assessment involving a combination of all these factors … ultimately the question is for the Court, not for the witnesses. It follows that if the Judge’s own opinion is that the case is marginal, one where he cannot be sure if there is a likelihood of sufficient deception, the case will fail in the absence of enough evidence of the likelihood of deception. But if that opinion of the Judge is supplemented by such evidence, then it will succeed. And even if one’s own opinion is that deception is unlikely though possible, convincing evidence of deception will carry the day …
176 Such passage was approved by the English Court of Appeal in Premier Luggage & Bags Limited v Premier Company UK Limited [2002] EWCA Civ 387 at [39].
177 Having considered all of the evidence, the Court is not satisfied that KT has discharged the burden of proof that the respondents have engaged in misleading or deceptive conduct or in conduct which is likely to mislead or deceive with respect to their use of the word ‘Thredbo’, the use of their websites, the use of the slogan ‘This is our Thredbo’, or the overall impression created by the combination of these actions. The respondents’ conduct constitutes legitimate competition in the business of providing accommodation services and facilities. Mere confusion created in the minds of consumers is insufficient to constitute misleading or deceptive conduct, or the likelihood thereof.
178 An analogy can be drawn to the decision in Barry v Lake Jindabyne Reservation Centre Pty Ltd (1985) 8 FCR 279. The applicant, who traded under the name ‘Jindabyne Resort Centre’, claimed that the ‘Lake Jindabyne Reservation Centre’ had passed off its business as being associated with that of the applicant. Further, the applicant alleged that the respondent had engaged in misleading or deceptive conduct. At 283-284, Toohey J observed in relation to s 52 of the TPA:
However the question remains – what are the implications for these proceedings of a finding that the respondent has done little to avoid the use of the name Jindabyne Reservation Centre? If the use of the name does not constitute misleading or deceptive conduct, it is no answer to say that the respondent has made some efforts to avoid the use of the name. For the purposes of s 52 of the Trade Practices Act, the respondent’s conduct is to be measured objectively and not by reference to the intentions of those who control its activities: see Hornsby Building Information Centre.
179 Toohey J continued at 285:
In my view, the use by the respondent of the name Jindabyne Reservation Centre has done no more than give rise to uncertainty. Viewed objectively, the use of the name contains or conveys no misrepresentation by the respondent and does not constitute conduct that is misleading or deceptive or conduct likely to mislead or deceive.
180 In this decision, the claim for passing off was acknowledged to be dependent upon the success of its s 52 claim. Toohey J however observed at 286 that his finding applied equally to the passing off claim. For a decision to similar effect, see Davies J in R & C Products Pty Limited v SC Johnson & Sons Pty Limited (1993) 42 FCR 188 at 189 where his Honour said:
Conduct which merely causes doubt or uncertainty is not, without more, conduct which is misleading or deceptive or likely to mislead or deceive.
181 Subject to the use of the Genkan link and the respondents’ Facebook page as considered immediately below, the Court is not satisfied that the respondents have engaged in conduct in contravention of ss 18, 29(1)(g) or 29(1)(h) of the ACL.
USE OF GENKAN LINK
182 A link with the address of www.thredbo.com/mythredbobooking.htm was provided by the automated Genkan booking system via email to all customers of the respondents who made a reservation online through one of their websites (‘the Genkan link’). That link opened a webpage entitled ‘My Thredbo Accommodation Booking’ (‘the Genkan webpage’).
183 Evidence provided by Mr Smith suggested that such webpage could only be accessed by customers of the respondents through the Genkan link, and further, that if the Genkan link was entered into a browser by a non-customer, a blank page would be returned. This was shown during the hearing to be incorrect. First, the webpage entitled ‘My Thredbo Accommodation Booking’ appeared as a Google search result after the phrase ‘My Thredbo’ was entered into Google. Second, when the Genkan link was entered into an internet browser, the webpage entitled ‘My Thredbo Accommodation Booking’ was returned.
184 The Genkan link does not appear on any of the respondents’ websites, and no evidence was led to suggest that the Genkan webpage may be accessed through a different link on the other web pages of the respondents. It is for this reason that the issues as to whether the Genkan link or the Genkan webpage are misleading or deceptive must be considered separately from the analysis of the respondents’ websites as a whole. The Genkan page is reproduced below:
185 The extensive use of the ‘My Thredbo’ slogan by KT has been outlined above in the relation to the respondents’ use of the ‘This is our Thredbo’ slogan. The use of the Genkan link and Genkan website however raise distinct issues.
186 The first issue is in relation to the construction of the phrase ‘My Thredbo’. Although KT have added the words ‘My Mountain, My Way’ in certain contexts, KT also led significant evidence of the use of the words ‘My Thredbo’ as a complete slogan. Unlike the respondents use of the phrase ‘This is our Thredbo’, there are no ‘small differences’ in words between KT’s uses of ‘My Thredbo’ and the respondents’ use of ‘My Thredbo’ in the Genkan link: see Hornsby Building Information Centre at 229. As already referred to, KT has widely promoted its ‘My Thredbo’ slogan, both in electronic media and in print. The slogan is used to promote many of KT’s activities.
187 Further, KT heavily relied on the fact that upon the phrase ‘My Thredbo’ being entered as a search term into Google at the time of hearing, the Genkan web page was returned as one of the first search results. Such Google search is displayed immediately below:
188 An analogous issue was considered by the Court of Appeal (UK) in Reed Executive plc v Reed Business Information Ltd [2004] IP & T 1049 (‘Reed Executive’). The proceeding in part involved the alleged infringement of a trademark, in which the defendant used the claimant’s registered trademark as a metatag for their website. It was alleged that the defendant’s purpose was to ensure that when a consumer searched for the registered trademark of the claimant on Google, the defendant’s website was returned as an early search result. Jacob LJ highlighted the importance of the fact that metatags are invisible to consumers on the internet, before proceeding to state at [149]:
…one way of competing with another is to use his trade mark in your metatag – so that a search for him will also produce you in the search results. Some might think this unfair – but others that this is good competition provided that no one is misled.
189 Critically for the respondents in this proceeding, the Genkan link and the Genkan webpage go one step further. Rather than merely refer to ‘My Thredbo’ in an invisible metatag for the Genkan webpage, ‘My Thredbo’ is visible and obvious to consumers in the following ways:
(a) In the title to the Genkan webpage, namely ‘My Thredbo Accommodation Booking’;
(b) In the Genkan link, both in the address bar of the browser, and on the second line of the relevant Google search result;
(c) In the title of the relevant Google search result; and
(d) In the description of the relevant Google search result, which also directly refers to the ‘Thredbo and snowy mountains resort’ [sic].
190 It is the fact that ‘My Thredbo’ is visible and obvious to consumers that elevates the use of the phrase by the respondents from what Jacob LJ referred to as ‘good competition’ in Reed Executive at [149] to misleading or deceptive conduct. The Court considers that the use of ‘My Thredbo’ in relation to the respondents’ accommodation services through the Genkan webpage, the Genkan link, and the resulting Google search return evinces a connection to KT’s business.
191 There are additional considerations. The Google search result does not contain distinguishing features, and indeed refers to a ‘Thredbo and snowy mountains resort’. It is highly likely that a consumer readings this content would assume that it is referring to KT’s operations because:
(a) The words ‘Thredbo’ and ‘resort’ are in close proximity;
(b) KT has used ‘My Thredbo’ extensively since or about the commencement of the winter 2011 ski season and widely promoted it;
(c) Although Mr Smith said he commenced using the ‘My Thredbo’ slogan within the last two years, no documentary evidence such as captures of the respondents’ website demonstrating any use prior to that of KT were produced. Accordingly the Court concludes that KT’s use of ‘My Thredbo’ predates that of the respondents;
(d) The features that distinguish the respondents’ websites from that of KT, as stated above, are not apparent in the Google search result.
192 These features are different from the facts considered in Goconnect. In the present circumstances, the description contained in the Google search adds a dimension of potentially misleading conduct which was not present in Goconnect.
193 The Court is satisfied that there is a real risk that the use of this link could mislead reasonable consumers into believing that the Genkan link was affiliated to, or part of the business of KT. The consumers so likely to be misled would be a not insignificant number of those persons seeking accommodation in Thredbo: see Peter Bodum at [209]; see also National Exchange Pty Ltd v Australian Societies and Investments Commission (2004) 61 IPR 420.
194 Accordingly, the Court finds that the use of the Genkan link, for the reasons already referred to, is misleading or deceptive or is likely to mislead or deceive within the meaning of ss 18, 29(1)(g) and 29(1)(h) of the ACL.
Similarities between the KT’s and the respondents’ Facebook pages
195 As part of its social media presence, KT operates a Facebook page entitled ‘Thredbo Resort’. The respondents operate a Facebook page entitled ‘Thredbo Reservations’ containing images of the slopes with the word ‘Thredbo’ in the top left corner in red and beneath that accommodation reservations written in white. As part of their Facebook page, the respondents have included a map of the Thredbo resort. The applicants submit that the use of such page gives the impression that the respondent’s ‘Thredbo Reservations’ Facebook page is associated with KT.
196 There are a few similarities between the Facebook page of KT entitled ‘Thredbo Resort’ and the Facebook page of the respondents. Chief among them is the use of the colour red. From a comparison, the Court concludes that a person who encountered the respondents’ Facebook page would not form the view that it was associated with KT in any way. Nor would a person form the view that the ‘Thredbo Reservations’ Facebook page was associated with the ‘Thredbo Resort’ Facebook page. This finding is based on the fact that almost 50,000 people ‘like’ the ‘Thredbo Resort’ Facebook page, whereas less than 200 people ‘like’ the respondents’ ‘Thredbo Reservations’ Facebook page. The large number of ‘likes’ on KT’s Facebook page, as well as the word ‘resort’ would suggest to a visitor to the Facebook page that it was the page associated with the well-known ski resort operated by KT. A visitor to the respondents’ Facebook page would not form such an opinion. The Court’s finding on this issue corresponds with the evidence of Ms Maes.
PASSING OFF
197 There are significant similarities between the causes of action for misleading or deceptive conduct and the common law tort of passing off. This was addressed by the Full Court in Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 72 IPR 261, where it was stated at [98]-[99]:
There is an overlap between causes of action arising under Pt V of the Trade Practices Act and the common law tort of passing off. However, the causes of action have distinct origins and the purposes and interests that both bodies of law primarily protect are contrasting. Passing off protects a right of property in business or goodwill whereas Pt V is concerned with consumer protection. Part V is not restricted by common law principles relating to passing off and provides wider protection than passing off.
198 Similar statements as to the distinct origins of the causes of actions have been made in various cases: see Taco Bell at 197; The Kettle Chip Company Pty Limited v Apand Pty Limited (1993) 46 FCR 152 (‘Kettle Chip’) at 181; Playcorp Group of Companies Pty Ltd v Peter Bodum (2010) 84 IPR 542 at 554.
199 This is not to say however that an applicant that brings proceedings for misleading or deceptive conduct should also do so for passing off as a matter of course. Indeed, as was noted by Deane and Fitzgerald JJ in Taco Bell, the Court should not decide an associated claim of passing off where there is no utility in doing so. Their Honours said at 205-206:
It is, no doubt, ordinarily desirable that a trial court should make all findings appropriate to the determination of each claim where a number of causes of action are properly joined. It is also plainly desirable that if it is proposed to bring proceedings both for contravention of s 52 of the Act and for passing-off in respect of substantially the same conduct, both claims shall be pursued in the Federal Court which alone has jurisdiction to deal with the claim for contravention of s 52. On the other hand, we consider that the Federal Court should not, as a matter of general discretion, proceed to decide additional claims where it is pointless so to do. There are plainly many cases where an associated claim for passing-off provides no basis for wider or more effective relief than the primary claim for contravention of s 52 and where, if the primary claim fails, the associated claim will plainly also fail. In such cases, the court should not be troubled by the associated claim.
On the other hand, there may well be cases in which there are legitimate reasons for pursuing a claim for passing-off in addition to a claim for contravention of s 52. It is, for example, conceivable that a claimant might be entitled to relief for passing-off, even though his primary claim for contravention of s 52 of the Act fails. Alternatively, a wider form of injunction or more extensive damages might, arguably, follow from success in the associated claim for passing-off. In such circumstances, however, the applicant should, either in his pleading or in the presentation of his case, make clear the reason for the joinder of the associated claim or claims. Such a course would both highlight whether there is any purpose in such joinder and permit the identification of any additional issues which arise beyond the claim which primarily attracts the jurisdiction of the Federal Court. A side benefit of that course would be that it would better enable it to be seen whether the joinder of the associated claim is within jurisdiction and otherwise appropriate.
200 In the present proceeding, there are no practical differences between KT’s claims for misleading or deceptive conduct and passing off. Further KT did not, either in their pleadings or in the presentation of their case, seek to highlight the purpose or benefit of the associated passing off claim.
201 In these circumstances, there is no utility in the Court further addressing the claim for passing off.
BREACH OF SUBLEASE
Restrictions in subleases
202 As noted at [22] above, Mr Smith subleases a property known as Fire Dreaming from Kosciuszko Thredbo Pty Limited. Mr Smith also subleases a property know as Snowstreams 4 with Wayne Donald Walgers from Kosciuszko Thredbo Pty Limited. The current subleases for both properties were executed in June 2007 (‘the 2007 subleases’).
203 Clauses 4.3 for both of the 2007 subleases are identical. They read:
The Sublessee must not use or permit the use of the word ‘Thredbo’ in connection with any business carried on by the Sublessee, without the prior written consent of the Company.
204 For ease of reference, the clauses will be referred to together as the ‘No Thredbo’ clause.
205 KT seeks relief against Mr Smith on the basis that Mr Smith has breached the No Thredbo clause. In response, Mr Smith claims that the clauses are invalid as being restraints of trade. In the event that the Court finds the No Thredbo clause to be an invalid restraint of trade, and the Court reads down such clause to only apply within the land specified in the 2007 subleases, then Mr Smith denies that ThredboNet conducted its business in Thredbo.
Place of business
206 Mr Smith submits that his business was being conducted from premises at Warringa Road, Cammeray, rather than in Thredbo.
207 The evidence establishes that ThredboNet prepared a management agreement for use between itself and the property owner clients. One such agreement which bears the date 5 January 2010 shows the address of ThredboNet as PO Box 149, Thredbo Village 2625. It describes the agreement as having been made between ThredboNet Marketing Pty Ltd and the property owner and describes the address of the respondents’ company as 3 Summit Way, Thredbo NSW 2625.
208 Mr Smith said he changed the address of ThredboNet to the Cammeray address due to a trust account audit in August 2012 and that the Department of Fair Trading who conducted the trust account audits indicated that the address advertised was wrong. However, Mr Smith conceded that until such audit had taken place the address was 3 Summit Way, Thredbo, and that he had changed the address so as to comply with the address shown on his real estate agent’s licence.
209 It was not disputed that the management of 50 properties is conducted in Thredbo by staff that live in a rented property called Bollygums located in Thredbo. The business operations on a day to day basis are conducted in Thredbo Village.
210 ‘Discover Thredbo Real Estate’, ‘Discover Thredbo’ and ‘Thredbo Accommodation Specialists’ each record their principal place of business in ASIC records as 3 Summit Way, Thredbo Village, NSW 2625.
211 Additionally, the following facts are established:
(a) that the address referred to under the heading “ThredboNet Marketing Pty Ltd” on “Property Compendium” left for guests of Fire Dreaming, was PO Box 149, Thredbo Village;
(b) that the contact address on the “Contact Us” webpage on www.lastminutethredbo.com, was PO Box 149, Thredbo Village;
(c) that the signature on emails from Mr Smith at THREDBO RESERVATIONS to Michael Brooks were from Glenn Smith at ThredboNet Marketing PO Box 149 Thredbo NSW;
(d) that further email signatures from Discover Thredbo Real Estate and ThredboNet Marketing Pty Ltd listed PO Box 149 Thredbo NSW 2625 as the address for those entities;
(e) that on the “Thredbo Reservations” Facebook page, Thredbo Reservations was listed as a “Local Business at PO Box 149 Mowamba Place, Thredbo Village”;
(f) that the “Terms and Conditions” tab on www.thredbo.com listed ThredboNet Marketing Pty Ltd’s address as PO Box 149 Thredbo;
(g) that emails from ges@genkan.com.au were from Glenn at ThredboNet Marketing Pty Ltd at PO Box 149 Thredbo NSW 2625;
(h) that emails to Michael Brooks were from Glenn Smith ThredboNet Marketing Pty Ltd PO Box 149 Thredbo NSW 2625; and
(i) that the address on the 2013 Thredbo Booking Form was listed as Thredbo Reservations, PO Box 149 Thredbo Village.
212 Only ‘Thredbo Property Management’, ‘Discover Thredbo’ and ThredboNet Marketing Pty Limited record their principal place of business as being located at 36 Warringa Road, Cammeray. Mr Smith’s licence No. 1584962 issued under the Property Stock and Business Agents Act 2002 (NSW) recorded, prior to 2009, his place of business at 3 Summit Way, Thredbo Village. Currently, it records the Cammeray address.
213 The business of the respondents is that of provision of accommodation in Thredbo. The maintenance of properties under the respondents’ control in Thredbo is carried out by employees engaged by the respondents in Thredbo. Further, the provision of linen, cleaning and other supplies is carried out by the respondents’ staff in Thredbo. Mr Smith manages the properties in Thredbo on behalf of the owners and the advertising for such properties is directed to those premises located in Thredbo. Mr Smith spends approximately 30 days per year in Thredbo.
214 The above facts together with the nominated place of the principal place of business of several of the respondents’ businesses satisfy the Court that the respondents are carrying on business in Thredbo. However in view of the Court’s finding below concerning the width of application of the No Thredbo clause, this finding is of no practical impact.
Restraint of trade
215 Mr Smith submits that the ‘No Thredbo’ clause is invalid under the common law restraint of trade doctrine, or alternatively that it is contrary to public policy and thus invalid under s 4 of the Restraints of Trade Act 1976 (NSW) (‘the Restraints Act’).
216 KT disputes the construction of the clause as a restraint of trade, but submits in the alternative that either: (a) the clause is a reasonable restraint of trade, or; (b) to the extent that the clause is not reasonable, the Court should read it down.
217 These submissions give rise to the following questions:
1. Is the No Thredbo clause a restraint of trade?
2. What test is to be applied to determine the nature of the restraint?
3. If the clause is a restraint of trade, is the restraint of trade doctrine applicable?
4. If so, is the restraint reasonable?
5. If not, can the restraint be read down so as to be valid?
Does the clause operate as a restraint of trade?
218 In Petrofina (Great Britain) Ltd v Martin [1966] Ch 146 (‘Petrofina’) at 180, Diplock LJ gave the following definition of a restraint of trade:
A contract in restraint of trade is one which a party (the covenantor) agrees with any other party (the covenantee) to restrict his liberty in the future to carry on trade with other persons not parties to the contract in such manner as he chooses.
219 This test was adopted by Hodson LJ in Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 (‘Esso’) at 317.
220 An alternative formulation of the test was given by Lord Denning in Petrofina at 169, where his Lordship said:
Every member of the community is entitled to carry on any trade or business he chooses and in such manner as he thinks most desirable in his own interests, so long as he does nothing unlawful: with the consequence that any contract which interferes with the free exercise of his trade or business, by restricting him in the work he may do for others, or the arrangements which he may make with others, is a contract in restraint of trade. It is invalid unless it is reasonable as between the parties and not injurious to the public interest.
221 In Esso, Morris of Borth-Y-Gest LJ at 307 stated that he found both the statements of Diplock LJ and Lord Denning to be ‘helpful expositions, provided they are used rationally and not too literally’.
222 Reid LJ in Esso at 298 expressed what is known as the ‘pre-existing freedom’ test. Such test was adopted by Morris, Hodson and Pearce LLJ, and was stated as follows:
Restraint of trade appears to me to imply that a man contracts to give up some freedom which otherwise he would have had. A person buying or leasing land had no previous right to be there at all, let alone to trade there, and when he takes possession of that land subject to a negative restrictive covenant he gives up no right or freedom which he previously had.
223 Finally, Wilberforce LJ in Esso at 335 stated what is known as the ‘trading society’ test. His Lordship examined the question why some contracts were of their nature outside the scope of the restraint of trade doctrine, and said:
One may express the exemption of these transactions from the doctrine of restraint of trade in terms of saying that they merely take land out of commerce and do not fetter the liberty to trade of individuals; but I think one can only truly explain them by saying that they have become part of the accepted machinery of a type of transaction which is generally found acceptable and necessary, so that instead of being regarded as restrictive they are accepted as part of the structure of a trading society. If in any individual case one finds a deviation from accepted standards, some greater restriction of an individual’s right to ‘trade’ or some artificial use of an accepted legal technique, it is right that this should be examined in the light of public policy.
224 In Australia, there has been considerable debate concerning the appropriate test for determining a restraint of trade. In Australian Capital Territory v Munday (2000) 99 FCR 72 (‘Munday’), Heerey J of the Australian Capital Territory Supreme Court (at [27]-[105]) engaged in a very thorough analysis of cases from several Commonwealth jurisdictions and the United States. His Honour considered High Court authorities such as Queensland Co-operative Milling Association Ltd v Pamag Pty Ltd (1973) 133 CLR 260 (‘Pamag’); Amoco Australia Pty Ltd v Rocca Bros Motor Engineering Co Pty Ltd (1973) 133 CLR 288 (‘Amoco’) and Quadramain Pty Ltd v Sevastapol Investments Pty Ltd (1976) 133 CLR 390 (‘Quadramain’) in order to divine whether the High Court considered one of the various proposed tests for a restraint of trade to be authoritative. Heerey J stated his conclusion on this question at [73]:
There does not appear to be any Australian decision which explicitly prefers one of the Esso tests above the others. Nor is there any authority which explicitly holds that such a choice is unnecessary.
225 Heerey J observed at [88] that regardless of which one of the Esso tests is applied, the result will very often be the same. Such finding accordingly reduces the utility of distinguishing between the various tests or propounding a new test. However, his Honour concluded at [99] that the ‘pre-existing freedom’ test provided an unsatisfactory basis for the exclusion of the doctrine of restraint of trade in that case. His Honour stated at [100] that on balance, the ‘trading society’ test was the test preferred by the High Court and at [105] adopted that test in the circumstances of the proceeding. Both Miles CJ and O’Connor J agreed with Heerey J’s analysis.
226 In Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 (‘Maggbury’), Gleeson CJ, Gummow and Hayne JJ stated at [55]:
In [Peters] the Court has recently considered the cases in which it has been said that some restraints are not of a nature to which the doctrine applies. In particular, the Court rejected the criterion of “fettering existing freedom” associated with statements of [Reid, Morris of Borth-Y-Gest and Hodson LJJ in Esso]. The Court also rejected the principle of exclusion by reference to ‘sterilisation’ associated with the speech of Lord Pearce in Esso. The Court left open for further consideration in an appropriate case the identification by Lord Wilberforce in Esso of species of restraint which have become generally accepted as part of the structure of a trading society. The present appeal is not the occasion for dealing with that subject. [References removed]
227 Callinan J, in dissent, stated at [95]:
The doctrine of restraint of trade, as I earlier suggested, has not been clear in its application. A doctrine that provides no clear criteria for the ascertainment of the situations to which it applies can only be regarded with deep concern. The House of Lords in [Esso] suggested no fewer than three different tests for the identification of contracts or situations to which the doctrine might be applicable: the sterilisation of capacity test; the pre-existing freedom test; and the trading society test. Other courts have preferred to exempt restraints from the doctrine on the basis of the “public interest”. And although this Court has recently cast doubt on the sterilisation of capacity test, it is not entirely clear what is to be the test in Australia. [References removed]
228 In C Convenience Stores Pty Ltd v Wayville Plaza Retirement Pty Ltd (2012) 114 SASR 299, White J at [104] to [108] referred to the analysis of Heerey J in Munday and applied the ‘trading society’ test. Buchanan, Mandie and Osborn JJA in Specialist Diagnostic Services Pty Ltd v Healthscope Ltd [2012] VSCA 175 at [68] to [78] did the same.
229 The Court agrees with Heerey J that the preponderance of judicial support is for the ‘trading society’ test. Put another way, the ‘trading society’ test is the test which has had the fewest aspersions cast upon it by the High Court (see however the criticisms of John D Heydon in The Restraint of Trade Doctrine (LexisNexis Butterworths, 3rd ed, 2008) 76-78). This is the test which the Court will adopt in considering whether the No Thredbo clause is a restraint of trade.
Does the restraint of trade doctrine have application?
230 A separate issue is whether the restraint of trade doctrine should have any application to the ‘No Thredbo’ clause. This is on the basis that the doctrine does not apply to restrictive covenants given by persons leasing or purchasing land.
231 In considering whether a clause is enforceable, the Court must consider the practical effect of the clause, not its language: see Howard F Hudson Pty Ltd v Ronayne (1972) 126 CLR 449 at 467-468. This concept is closely linked with the ‘pre-existing freedom’ test stated in Esso by Reid LJ at 298 as set out at [222] above. Such test has received some support in Australia. In Quadramain, Gibbs J stated at 402:
The doctrine of restraint of trade is based upon public policy. When a purchaser, with a view to obtaining a particular piece of land, which that purchaser could not otherwise acquire, or could acquire only on paying a greater price, freely gives to the vendor a covenant, for the benefit of other land of the vendor, that the purchaser will not use the land purchased for the purpose of trade generally or for the purpose of a particular trade, there is, generally speaking, no possible reason of public policy that would require such a covenant to be invalidated. The same is true where a purchaser or lessee chooses to buy or lease land already subject to a restrictive covenant.
232 KT contended that the Court should apply a general principle that the doctrine of restraint of trade does not apply to covenants which are given by persons purchasing or leasing land. KT submitted that the land in question was not the specific parcel or parcels which were leased to Mr Smith and others, but was the entirety of the lease which KT has obtained from the government and the interests therein. KT submitted that the application of this general principle would lead the Court to the conclusion that the doctrine of restraint of trade does not apply to the No Thredbo clause.
233 There are a number of difficulties with this submission. First the proposition that the doctrine does not apply to covenants in relation to land is stated too broadly. In Amoco, Menzies J stated at 293:
Nor do I think that the doctrine based on public policy which requires a restraint of trade to be reasonable can have no application where the covenant in restraint of trade is given by someone starting a new business in relation to future trading. In [Pamag at 260] a covenant given in such circumstances was subjected to the test of reasonableness.
234 When Mr Smith entered into subleases of the various properties with the applicant, he was, in essence, starting a new business, namely the further rental of the property which he had subleased for profit. Therefore, Pamag and Amoco suggest that the restraint of trade doctrine applies to this covenant.
235 Similarly, in Quadramain Jacobs J recognised at 415 that although the doctrine does not apply to covenants which protect the amenity of land, it does apply to ‘covenants which are imposed in a trade or commercial context or for a trade or commercial purpose, present or future’.
236 In the Court’s consideration, the covenant is not imposed to protect the amenity of land subleased to Mr Smith or any other land. The covenant is not designed to, for example, prevent Mr Smith from operating a noxious business which would interfere with the applicant’s ability to operate a ski resort. Certainly, the restriction of Mr Smith’s ability to use the word ‘Thredbo’ in connection with a business operated by him could potentially benefit the applicant’s goodwill and business profits, but that is an insufficient connection to the land for this clause to be considered a type which is excised from the application of the restraint of trade doctrine.
237 Secondly, on its face the restriction imposed by the ‘No Thredbo’ clause is not restricted to the land in question at all. The restriction is stated to apply ‘in connection with any business carried on by the Sublessee’. Mr Smith could have conducted his business anywhere in the world and as long as he continued to sublease premises in Thredbo subject to this clause, he would be in prima facie contravention of the clause.
238 Such interpretation corresponds with the conclusion of Hope J in McGuigan Investments Pty Ltd v Dalwood Vineyards Pty Ltd [1970] 1 NSWR 686 (‘McGuigan’). McGuigan concerned a vineyard in the Hunter Valley named ‘Dalwood’, which was owned by the respondent. The property had been named ‘Dalwood’ for over 100 years, but vines had only been planted on it many years later. The applicant owned another vineyard in the Hunter Valley called ‘Penfold Vale’. In 1968 the respondent conveyed ‘Dalwood’ to the applicant. That conveyance was subject to two covenants given by the applicant to the respondent. The covenants were stated to be for the benefit of ‘Penfold Vale’. The first covenant was to the effect that:
Neither the land ‘Dalwood’ nor any part thereof would at any time thereafter be used for the purposes of a business or undertaking carried on under a name of which the word ‘Dalwood’ forms the whole or part or the sale or production of wine products under any name including the word ‘Dalwood’.
239 The second covenant provided that if the applicant conveyed the land to anyone, it would procure the conveyee to enter into a covenant on the same terms as stated above.
240 Subsequent to the conveyance, the applicant argued that the covenant was a restraint of trade and was unreasonable. Hope J considered that the covenant did not touch and concern ‘Penfold Vale’. His Honour stated at 690-691:
On the view I have taken as to the proper construction of covenant (a), the only limitation which is imposed on the use of the land by either limb of the covenant relates to the use of the name “Dalwood”, and I am satisfied that a restriction of the use of this name in connexion with this one single property in the Hunter Valley would not in any way enhance the value of Penfold Vale.… The only real basis of the defendant’s claim is that the property sold to the plaintiff was previously called Dalwood, and had for a long time been connected with Dalwood wines, and it is submitted that the inability of the owner or occupier of the property to use the name “Dalwood” in connexion with any business he carried on upon the property, would be of such an advantage to the person entitled to use the name “Dalwood” in connexion with his business or his wine products that he would pay more than the price he otherwise would for the property to which the benefit of the relevant covenant was attached. I do not think that circumstances such as these bring the covenant within the Tulk v Moxhay (1848) 2 Ph 774… doctrine.
241 Having established that the covenant was subject to the doctrine of restraint of trade, his Honour found that the restraint was not reasonable and therefore was invalid.
242 Having regard to these principles, the Court considers that the ‘No Thredbo’ clause is subject to the restraint of trade doctrine. The applicant has not provided any evidence to suggest that this type of clause is of a type that a trading society considers necessary as part of doing business. The fact that this sort of clause has received scant judicial consideration (McGuigan and Hepworth Manufacturing Company Ltd v Ryott [1920] 1 Ch 1 (‘Hepworth’) are the only significant cases the Court was referred to on this issue) suggests the opposite. Furthermore, the absence of limitations as to time or place in terms of the clause’s application suggest that on its face the clause deviates from accepted standards and involves a greater than usual restriction of an individual’s right to trade.
Is the clause, on its face, reasonable?
243 The classic expression of the word ‘reasonable’ in this context is found in the judgment of Macnaghten LJ in Nordenfeldt v Maxim Nordenfeldt Guns & Ammunition Co [1894] AC 535, where his Lordship stated at 565 (and cited in Hepworth by Harringon LJ at 22):
The public have an interesting every person carrying on his trade freely; so has the individual. All interference with individual liberty of action in trading, and all restraints of trade of themselves, if nothing more are contrary to public policy and are therefore void. That is the general rule. But there are exceptions. Restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification and indeed it is the only justification if the restriction is reasonable – reasonable that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded to afford adequate protection to the party in whose favour it is imposed while at the same time it is in no way injurious to the public. That, I think, is the fair result of all the authorities.
244 There are two elements of reasonableness. The first is that the restraint must be reasonable as between the parties. The second is that the restraint must be reasonable with reference to the public interest.
245 In order for a restraint to be reasonable as between the parties, the restraint must afford no more than adequate protection to the party in whose favour it is imposed: see Maggbury at [97]. In the context of a covenant given by the buyer of a business, the test for the reasonableness of a restraint is what is necessary to protect the business sold, not other businesses run by the buyer: see British Reinforced Concrete Engineering Co Ltd v Schelff [1921] 2 Ch 563 at 574-575, 579 (‘Schelff’). In that case, the respondent and his partners carried on a business selling road reinforcements in a limited part of the United Kingdom. They sold their business to the applicant. The respondent covenanted with the applicant that he would not carry on, manage or act as servant for any person concerned or interested in the business or manufacture of road reinforcements ‘in any part of the United Kingdom’. The Court of Appeal found the covenant to be too wide to be a reasonable restraint of trade. Younger LJ said at 576:
A covenant in gross against trading, however great the consideration, is void. A covenant only exacted for the protection of a business with which the covenantor has never had any connection is for this purpose no better than a covenant in gross.
246 In Cream v Bushcolt Pty Ltd (2004) ATPR 42-004 at [93] Malcolm CJ applied Schelff and stated:
It may be accepted that the justification for the taking of the restraint lay in the protection of the goodwill of the business being acquired. In the present context that is the customer loyalty and reputation of Cream Transport. This is the goodwill of the business being acquired, which a purchaser is entitled to protect, but not that of other businesses already owned by the purchaser or companies related to the purchaser.
247 In the present proceeding the Court is faced with the converse of this situation. Instead of a purchaser obtaining a covenant from a vendor to protect the goodwill of a business which he or she is purchasing, the vendor (in this case, the applicant as sublessor) is seeking to protect the goodwill of its business. Nevertheless, it is appropriate to draw analogies to Schelff and Cream v Bushcolt. In assessing the reasonableness of a restraint, a court is not entitled to consider the wider business interests of the party seeking to enforce the covenant.
248 Therefore, the Court must consider the interests that KT has in a particular property which it sublets. It is not entitled to take into account the goodwill which exists independent of the properties which are being sublet.
249 There has been recognition that a covenant restricting the use of a particular name is not a covenant against carrying on a trade: see Vernon Hallam (1886) 34 Ch D 748 at 751; referred to in Hepworth by Astbury J at 13-14. In Vernon, Stirling J observed that a covenant by a vendor of a business not to trade under the name ‘John Hallam’ or ‘Hallam Brothers’ was not a restraint of trade. His Honour said at 751:
It is not really a covenant carrying on a trade, but against using a particular name or style in trade.
250 But the circumstances of those cases must be considered. Vernon was decided in relation to a sale of a business where the continued use of an established name by the vendor would have been inimical to the purchaser’s interests. Those facts are distinguishable from the present, where the elimination of competition is the focus of the clause.
251 The No Thredbo clause is not restricted to any particular geographic area. Wherever Mr Smith conducts a business and regardless of the type of business that he conducts, if he uses the word ‘Thredbo’ in conjunction with it while continuing to sublease a property from KT, he will, prima facie, breach this clause.
252 The effect of the clause goes beyond the KT’s concern to protect an interest of KT in the word ‘Thredbo’. It acts as a default monopoly on the use of the word in business. As Kitto J stated in Clark Equipment at 514, ‘[There is a] common right of the public to make honest use of words forming part of the common heritage, for the sake of the signification which they ordinarily possess’. By restricting the use of the word ‘Thredbo’ in this manner, KT has denied Mr Smith access to this common right.
253 The extent of the interest which KT would be entitled to protect by its ‘No Thredbo’ clause is any independent reputation which KT has acquired in the word ‘Thredbo’. Such an interest is already clearly protected by the laws of passing off and misleading or deceptive conduct.
254 Accordingly, the Court finds that the ‘No Thredbo’ clause is prima facie unreasonable because it affords more than necessary protection to KT.
Can the clause be read down so as to make it reasonable?
255 KT submits that if the Court were to find that the ‘No Thredbo’ clause was a prima facie unreasonable restraint of trade, then the clause should be read down so as to make it reasonable. The applicant relies on s 4 of the Restraints Act, which relevantly states:
4 Extent to which restraint of trade valid
(1) A restraint of trade is valid to the extent to which it is not against public policy, whether it is in severable terms or not.
(2) Subsection (1) does not affect the invalidity of a restraint of trade by reason of any matter other than public policy.
(3) Where, on application by a person subject to the restraint, it appears to the Supreme Court that a restraint of trade is, as regards its application to the applicant, against public policy to any extent by reason of, or partly by reason of, a manifest failure by a person who created or joined in creating the restraint to attempt to make the restraint a reasonable restraint, the Court, having regard to the circumstances in which the restraint was created, may, on such terms as the Court thinks fit, order that the restraint be, as regards its application to the applicant, altogether invalid or valid to such extent only (not exceeding the extent to which the restraint is not against public policy) as the Court thinks fit and any such order shall, notwithstanding sub-section (1), have effect on and from such date (not being a date earlier than the date on which the order was made) as is specified in the order.
256 In Orton v Melman [1981] 1 NSWLR 583 at 587-588 McLelland J explained the manner in which s 4 of the Restraints Act operates:
In my opinion where the court is to determine, in relation to a restraint to which s 4(1) applies whether (having regard to public policy) the restraint is enforceable in respect of an alleged breach (or threatened breach), it is proper first to determine whether the alleged breach (independently of public policy considerations) does or will infringe the terms of the restraint properly construed, and if so, then to determine whether the restraint, so far as it applies to that breach, is contrary to public policy. If the restraint, so far as it applies to that breach, is not contrary to public policy then by force of s 4(1) the restraint is to that extent valid, subject always of course to any order which may be made under s 4(3).
Whether, and if so the extent to which, the court will have to define the outer limits of validity of a restraint in a particular case, will depend upon the nature, and degree of generality, of the relief which in that case it is necessary or proper for the Court to grant. For example, where injunctive relief is granted, the duration of a valid restraint of any breach enjoined will have to be determined. In applying s 4(1) the court should consider the circumstances of the particular case before it and determine the validity of the restraint to the extent that it purports to operate in those circumstances, and it is unnecessary to consider its purported operation in other conceivable sets of circumstances. Other considerations may of course arise in an application under sub-s (3) of s 4. In my opinion the enactment of s 4 (1) has succeeded in requiring attention to be concentrated on “the actual breach” rather than “imaginary breaches” for the purpose of determining validity of a restraint.
257 Applying the approach in Orton v Melman, the first step is for the Court to determine whether the alleged breach does or will infringe the terms of the restraint.
258 Clearly, Mr Smith’s conduct does breach the prima facie terms of the restraint. Mr Smith has used the word ‘Thredbo’ in business names, domain names, on websites and in a variety of other ways in connection with his business.
259 For the clause to not be contrary to public policy, it will have to be read down such that it only protects any independent reputation or goodwill which KT possesses in the word ‘Thredbo’. Further, the clause would have to be read down such that it would only cover businesses which are in some way related to the business of KT. To adopt an analogy used by counsel during submissions, the clause could not apply to restrain a person who entered into a sublease containing the ‘No Thredbo’ clause from opening a pet store in Paris trading as ‘Thredbo Pet Food’. However, the Court is not empowered by s 4 of the Restraints Act to remake the covenant: see Kone Elevators Pty Ltd v McNay (1997) ATPR 41-564 at 43,833.
260 The subject clause as it currently exists is inconsistent with an elementary freedom, namely the freedom of the respondents ‘to earn his living as best he can’: see Atkin LJ in Hepworth at 27.
261 That the ‘No Thredbo’ clause applies to ‘any business carried on by the Sublessee’ is clearly excessive and is unreasonable. But if the clause was restricted such that it only applied to businesses conducted by the Sublessee on the premises subject to the sublease, would the clause remain unreasonable?
262 Public policy demands freedom in competition. The Court has found KT has not established the secondary meaning of the word ‘Thredbo’ such that only the applicants are entitled to use that word in any business to the exclusion of all others. The respondents accordingly have a common right, with other traders, to use the name ‘Thredbo’.
263 Having so found, the restriction on the use of the word ‘Thredbo’ runs contrary to Mr Smith’s right to ‘earn his living as best he can’ (see Atkin LJ above at [260]), and the clause if read down so as to only restrict Mr Smith’s operations in Thredbo, is still unreasonable. The only purpose would be to prevent competition, which is ‘outside the area of protection which the law considers permissible [to restrict]’ (see Astbury J in Hepworth at 12).
264 For these reasons the Court finds that the ‘No Thredbo’ clause is invalid and cannot be read down in a way which would make it valid. The term must be severed from the remainder of the subleases.
ESTOPPEL
265 In view of the above findings, the issue of estoppel does not arise.
ORDERS
266 Having made the findings above, the Court will provide an opportunity to the parties to confer in order to determine if agreed declarations and orders can be formulated to reflect the Court’s findings. The Court also grants liberty to either party to apply.
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I certify that the preceding two hundred and sixty-six (266) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy. |
Associate:
