NOT FOR DISTRIBUTION
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No NG 963 of 1995
GENERAL DIVISION )
BETWEEN:
MELHERO PTY LIMITED (ACN 055 880 469)
First Applicant
AND:
MITCHELL PRODUCTS PTY LIMITED (ACN 053 664 010)
Second Applicant
AND:
CLUB X PTY LIMITED (ACN 006 864 688)
First Respondent
AND:
WALTER DELL PTY LIMITED (ACN 006 046 117)
Second Respondent
AND:
ASHWOOD WAY PTY LIMITED (ACN 005 757 942)
Third Respondent
AND:
SHAFT THEATRES PTY LIMITED (ACN 005 354 414)
Fourth Respondent
CORAM: Lindgren J
PLACE: Sydney
DATE: 15 January 1996
REASONS FOR JUDGMENT
INTRODUCTION:
In this matter the commercial issue between the parties is whether the name "Adam & Eve" should be able to be used by only one or the other of them pending the final hearing of the proceedings. The application was filed on 20 December 1995 and there were directions given to enable short service. The application was made returnable on 22 December 1995. The proceedings were touched by an element of urgency. The hearing took place on 9 January 1996 and occupied the full day. The urgency arose from the fact that the applicants proposed to open a shop under the name "Adam & Eve" as from the end of January 1996 at 159 Oxford Street, Sydney.
The applicants
The applicant companies are associated with Mr Mark Franks of Los Angeles. The first applicant ("Melhero") operates an adult entertainment and products store under the name "Adam & Eve" at 125 Gladstone Street, Fyshwick in the Australian Capital Territory and has done so since January 1993. The second applicant ("Mitchell") also operates such a store which has been referred to as "Adam & Eve 2" at 32 Grimwade Street, Mitchell in the Australian Capital Territory and has done so since June 1995.
What the applicants wish to do is to open a third store, their first in New South Wales, under the same name at, as I said, 159 Oxford Street, Sydney from the end of this month. In fact, the fit-out of this third store has been completed and the "Adam & Eve" sign went up outside the store on 11 December 1995, but trading has not commenced yet.
The "Adam & Eve" sign as I have called it outside both of the stores in the Australian Capital Territory and the premises at 159 Oxford Street, Sydney includes a representation of a serpent and a partly eaten apple as well as the words "Adam & Eve". The name is clearly the name under which the three businesses are carried on. It is their only identifier and is identical as between the three.
The respondents
The respondent companies, which are associated with, amongst others, Mr Eric Hill, operate adult book stores under the name "Club X" in Melbourne, Canberra, Western Australia and Sydney. Of particular relevance to this case is a shop at 78 Darlinghurst Road, Kings Cross. At that location the name which is displayed prominently outside the premises is "Club X", but just inside the doorway there has appeared, since 21 September 1995, in a reasonably prominent position visible from the street, a sign reading "Adam & Eve". The name "Club X" is the name under which the store, and apparently other stores forming part of the same group, is carried on and is their identifier.
Recent developments
The applicants became aware that someone connected with the respondents was using the name "Adam & Eve" at 78 Darlinghurst Road, Kings Cross in late November 1995. Accordingly, the applicants (I need not distinguish between them) were aware that the name was being used by someone connected with the
respondents before the applicants erected the name "Adam & Eve" at 159 Oxford Street, Sydney on 11 December 1995.
The applicants promptly caused their solicitors, Hunt & Hunt, to write a letter dated 27 November 1995 to the manager of "Club X" at 90 Talinga Road, Cheltenham, Victoria demanding that that use should cease. In that letter Hunt & Hunt referred to a certain business name which had been registered in connection with the applicants' business.
This prompted a reply by Messrs Phillips Ormonde & Fitzpatrick ("Phillips Ormonde"), patent and trade mark attorneys, on behalf of the respondents. They were able to point out that two of the respondent companies, namely Ashwood Way Pty Ltd and Walter Dell Pty Ltd, were the proprietors of a trade mark "Adam & Eve" under trade mark registration number A635943. By virtue of at least the fact of that registration, they claimed that their clients were entitled to a monopoly over the use of the expression in relation to businesses of the kind in question. In their letter, they said that the registration was in respect of:
"wholesaling and retailing of adult products namely aphrodisiacs, sound and image films and video tapes, body stimuli apparatus, equipment and devices including vibro massage and vibro stimuli apparatus and devices and vibrators for personal use, hygienic rubber articles including condoms; restaurant services and provision of food and drink; brothels, massage parlours; social and relaxation centers [sic] and meeting places all being services in class 42".
Interlocutory relief sought
It is not necessary for me to set out the forms of final relief which is sought in the application, or for that matter in a cross-claim which was filed on behalf of the respondents. By the time of the hearing on 9 January the parties had refined the forms of interlocutory relief which they respectively sought. The applicants sought the following relief:
"1. Until further order the respondents, by themselves, their servants or agents be restrained from:
(a) using in trade or commerce the words "Adam & Eve" or any other substantially identical or deceptively similar words or mark in relation to the carrying on of any business at any premises at:
(i) 78 Darlinghurst Road, Kings Cross, Sydney; or
(ii)any other place not being in the State of Victoria.
2. Until further order the respondents remove from public display at their premises at 78 Darlinghurst Road Kings Cross, Sydney the sign that includes the words "Adam & Eve" and that is depicted in the photographs that are Exhibit SCW1 to the affidavit of Sarah Caroline Webb sworn 20 December 1995 in these proceedings."
The respondents sought the following relief:
"1. An order that the Cross-Respondents [applicants] be restrained from using the Trade Mark or any trade mark or sign that is substantially identical with, or deceptively similar to, the Trade Mark in relation to goods and services in respect of which the Trade Mark is registered at premises anywhere in Australia other than in the Australian Capital Territory."
Business names and trade mark
The second applicant, Mitchell, is registered in New South Wales, South Australia and the Australian Capital Territory in respect of the business name, "Adam & Eve of Australia". That name was registered as long ago as 15 April 1992 in New South Wales, on 1 June 1992 in South Australia and on 25 August 1992 in the Australian Capital Territory. The New South Wales registration fell due for renewal on 15 April 1995, but it was allowed to expire. The name was, however, re-registered by Mitchell on 6 December 1995, that is to say, at about the time of the recent events to which I have referred. Of course, the renewal is currently on foot. As I said earlier the name was also registered as long ago as 25 August 1992 in the Australian Capital Territory and that has been the location of most of the business activities of the applicants. I presume that that registration has, in fact, been renewed.
I turn now to another business name which is registered currently in the names of Ashwood Way Pty Ltd and Walter Dell Pty Ltd, two of the respondents. This business name is "Adam & Eve Adult Book Shop". This business name was registered in Victoria as long ago as February 1984 in connection with a business carried on by one Edward Fraser Oxlee. In July 1994,
the business of "Adam & Eve Adult Book Shop" carried on at 323 Sydney Road, Brunswick in Victoria was transferred by Mr Oxlee to Ashwood Way Pty Ltd and Walter Dell Pty Ltd.
I have referred to the trade mark previously. The second and third respondents lodged the application to register that trademark on 26 July 1994 and so the trade mark is a currently registered trademark for a term of seven years from that date. Mr Mark Franks says that he was unaware of the lodgment of the application for the registration of the trade mark and that if he had been, he would have opposed its registration on the basis, no doubt, of an allegation of prior use of the name by the applicant companies and of the deception which might arise from the use of it as a trade mark by the respondents.
Applicants' evidence as to distinctive nature of business
A considerable body of evidence was led on behalf of the applicants in relation to two things: first, what was said to be the distinctive nature of their business and secondly, the extension of the reputation of their business of that kind beyond the Australian Capital Territory, and, in particular, into New South Wales. I will paraphrase the affidavit evidence relating to the former matter. It is necessary for me to give an account of this evidence in order that the concerns of the applicants can be understood. The applicants' stores are retail outlets which sell adult products such as "adult toys, naughty gifts, collectable items, videos, magazines, greeting cards, board games, massage oils and
instruction manuals and have a wide range of lingerie with in excess of 1,000 different items". The applicants seek to target couples and single women rather than men, the stores are furnished with quality finishes including timber bench tops, carpet and glass displays, the staff are trained over a period of four weeks and are required to dress in smart casual clothing and jeans. I quote from an affidavit of John Buckland, the Manager of Mitchell's store:
"In my experience in the adult industry over the last three years I have had couse [sic] to visit a number of adult retail stores in Canberra and Sydney. The Adam & Eve stores are unique in that the presentation of the stores is quite different from other adult stores and is more akin to the presentation in a department store such as David Jones."
There was ph otographic evidence of the interior of the applicants' stores which lent support to this assertion that the presentation had some resemblance to that of a department store.
The evidence on the question of the reputation of the applicants outside the Australian Capital Territory shows that tourists from interstate including, in particular, Sydney, visit the applicants' stores there from time to time. At least one tourist bus per week visits the Gladstone Street store. As well there is evidence of interstate advertising of the businesses. Indeed, there is evidence that there is a mailing list on the counter to which customers can add their names and addresses and the evidence from Mr Buckland is that there are currently approximately 1500 names on the list of which approximately 90% are from customers who reside interstate.
The applicants' case
The case for the applicants will be put in various ways but it suffices at present to say that one basis of the claim is s 52 of the Trade Practices Act 1974 (Cth). In my view there is a serious issue to be tried as to the distinctive reputation of the applicants for the special kind of business which I have attempted to describe and also as to the reputation of that business under the name "Adam & Eve" beyond the Australian Capital Territory and, in particular, in New South Wales. There may be questions as to the precise nature of that reputation in New South Wales arising out of the fact that the applicants have not, to date, operated a shop of any kind in this State, but their name is known to a not insignificant extent here in connection with the special kind of business which they operate.
The premises at 78 Darlinghurst Road, Kings Cross is not far from the premises at 159 Oxford Street, Sydney where the applicants propose to open up business. No doubt there is some overlap between the pool of customers and potential customers for the two businesses. There is a serious issue to be tried as to whether the continued use of the name "Adam & Eve" at 78 Darlinghurst Road, Kings Cross will be conduct apt to mislead and deceive.
But the case is not the strongest that one encounters in this respect. I refer, in particular to the quite different uses made of the words "Adam & Eve" at the two locations and to the different markets which the two businesses seek to exploit. At the premises at 78 Darlinghurst Road, Kings Cross the name "Adam & Eve" is not used as an identifier of the business. That identifier is "Club X". A person familiar with the consistent way in which the applicants use the words "Adam & Eve" in association with a stylised serpent and apple, might well not be misled or deceived upon becoming aware of the different use of the words "Adam & Eve" alone just inside the doorway of the "Club X" shop.
Both the applicants and the respondents have proffered the usual undertaking as to damages as the price of obtaining interlocutory relief. A major attack was made on the financial substance of the applicants. In effect the submission was that even if I found that there was a serious question to be tried I should decline to award interlocutory relief to the applicants because their undertaking as to damages was, at least, suspect. There is substance in the attack which has been made on the value to be attributed to the applicants' undertaking as to damages.
I will first deal with the first applicant, Melhero. This company was incorporated on 20 May 1992 and apparently its original purpose was to operate a retail shop selling adult products. Melhero has a paid up capital of $2. Its registered office is at 42 Hoskins Street, Mitchell in the Australian Capital Territory. Its directors are Mr Franks of Los Angeles and Mr Paul Anthony Di Pasquale of Melbourne. Its shareholders, that is the holders of the only two shares, are a person named Harlan Shapers of San Francisco and "Itorial Trust Co ATF The Franks Family Irrevocable Trust" of Mauritius. There is a charge over Melhero's assets.
Financial statements tendered show that as June 1995 the total equity of Melhero was ($61,177.81) (I use the conventional brackets to indicate a negative or minus figure) and for the year ended 30 June 1995 it had a net loss of $13,148.21. Melhero has funds at the bank, but as I have said, according to the evidence runs at a loss. Other financial statements which purport to show Melhero's position as at November 1995 show that it has a total equity of ($106,755.58).
When I turn to the position of Mitchell the position is no better. It was incorporated on 24 September 1991, apparently originally to operate a mail order business. Its name was originally "Truefeat Pty Ltd" and was changed to "Mitchell Products Pty Ltd" on 1 May 1995. According to a company extract, it has a paid up capital of $5.
There was tendered in evidence on behalf of the respondents an affidavit which Mr Mark Franks made in other proceedings in this Court, no NG 378 of 1994. In that affidavit, dated 17 June 1994, Mr Franks said that Mitchell, then called "Truefeat Pty Ltd", was indebted to him. His evidence was that he had provided $150,000 to the company by way of working capital. As well, his evidence at that time was that Planet Group Incorporated, of which he was the President, Chairman of the Board and sole shareholder, had supplied the company with product as a result of which an indebtedness in the range of US$200,000 to US$300,000 had been run up. Further, that affidavit said that Mr Franks was aware that the company owed approximately $70,000 to the Australian Taxation Office.
Elsewhere, there was evidence that in fact Mitchell had been under external administration for a period. On 21 December 1994 an agreement was entered into as a result of which all the assets of the company were sold to Mr Mark Franks for $275,000 but it is clear that its debts exceed this figure. Mitchell also has funds at the bank but runs at a loss. The financial statements in relation to Mitchell show that as at June 1995 its total equity was ($98,643.57) and that for the year ended 30 June 1995 it had a net loss of $20,687.68. Further financial statements show that as at November 1995 Mitchell's total equity was ($240,643.98).
No doubt, ultimately, if one were called upon to analyse to the final dollar and cent the positions of the two applicant companies, the position would almost certainly be somewhat different, for better or for worse, than the picture that I have portrayed. It suffices to say that I am not convinced that the undertaking as to damages proffered by the two applicants is a satisfactory one. No individual has been forthcoming on their behalf to proffer a personal undertaking and no form of security has been offered.
When I link this with the fact that the case for injunctive relief, although I think it raises a triable issue, is not as strong as cases which one frequently sees and when I also take into account what I am yet to mention, namely that there is at least a reasonable prospect of an early final hearing, I do not think that interlocutory relief as sought by the applicants should be given. Another factor which leads me to this conclusion is the registration of the trade mark and the respondents' own case for relief.
Interlocutory relief sought by the respondents
That brings me to the question of the interlocutory relief sought by the respondents. They have a registered trade mark. The applicants are infringing it. Prima facie, the registered owners of the trade mark are entitled to an injunction. However, that is not the end of the matter because the applicants have indicated their intention to include in these proceedings an application for rectification of the register by way of cancellation of the registration of the trade mark. And see s 230 of the new Trade Marks Act 1995. The parties informed me, and I have no reason to doubt it, that this case may be the first case to arise under that Act. The application would be made under s 88 of that Act and at least one ground available would be that the trade mark was substantially identical with, or deceptively similar to, a trade mark which prior to the respondents' application in July 1994, had acquired a reputation in Australia, namely, the name "Adam & Eve" and the associated reputation of the applicants.
I do think that the applicants raise here also a triable issue although the position is far from clear.
All things considered it does appear to me that because of the question raised as to whether there will be a cancellation of registration of the trade mark, I ought not pre-empt that question by granting interlocutory relief to the respondents either.
Conclusion
The result of all that I have said will simply be that neither party gets interlocutory relief and for a short period down to the final hearing use will, no doubt, be made of the name "Adam & Eve" by both parties although they use that name in different ways. What I will therefore do is to decline interlocutory relief to each party and I will reserve costs on the respective parties' applications for interlocutory relief unless they wish to suggest a different course.
Directions
I will give directions for the preparation of the matter for final hearing.
I direct that the applicants file and serve any further affidavits together with a statement of claim and amended application by Friday, 9 February 1996 including any application for rectification of the Register of Trade Marks.
I direct that the respondents file and serve a defence, any amended cross-claim, statement of cross claim and any further affidavits on which they will rely by Friday, 23 February.
I direct that the parties give mutual discovery by Friday, 8 March 1995.
I grant the parties liberty to apply to the registry for a hearing date on the basis of an estimated hearing time of 3 days plus.
Next I note that the case warrants as expedited a hearing as the commitments of the Court will permit.
I will also note that the respondents contemplate applying for security for costs, and I direct that any such application be by notice of motion to be filed by Monday, 22 January. Any such motion may be made returnable before me on Monday 29 January 1995.
I certify that this and the preceding 15 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.
Associate:
Dated: 29 January 1996
Heard: 9 January 1996
Place: Sydney
Decision: 15 January 1996
Appearances: Mr R Cobden of counsel instructed by Hunt & Hunt appeared for the applicants.
Mr T J Hancock of counsel instructed by Rockliffs Solicitors, appeared for the respondents.
