FEDERAL COURT OF AUSTRALIA

Marley New Zealand Limited v Icon Plastics Pty Ltd

[2007] FCA 851

MARLEY NEW ZEALAND LIMITED, THE MARLEY COMPANY (NZ) LIMITED AND MARLEY TILE S.A. v ICON PLASTICS PTY LTD (ACN 071 392 366)

VID 319 OF 2007

GORDON J

10 MAY 2007

MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 319 OF 2007

BETWEEN:

MARLEY NEW ZEALAND LIMITED

First Applicant

THE MARLEY COMPANY (NZ) LIMITED

Second Applicant

MARLEY TILE S.A.

Third Applicant

AND:

ICON PLASTICS PTY LTD (ACN 071 392 366)

Respondent

JUDGE:	GORDON J
DATE OF ORDER:	10 MAY 2007
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

UPON the applicants, by their counsel, each UNDERTAKING to the Court to abide by any order the court may make as to damages in the event that the court should subsequently be of the opinion that the respondent sustained any damages by reason of the undertakings given by the respondent, which the applicants ought to pay,

THE RESPONDENT, by its counsel, UNDERTAKES to the Court, without admission of liability, that it will not, until the trial of the action or further order:

1. Sell, offer for sale or supply any product supplied to it by the First Applicant (Marley New Zealand Limited) pursuant to the Marley Rainwater (Gutter, Gutter Fittings and Downpipe Fittings) Supply and Distribution Agreement made between it and Marley New Zealand Limited dated 30 June 2003.

2. Sell, offer for sale or supply any product manufactured by it pursuant to the Marley Surface Drainage Licence and Supply and Distribution Agreement made between it and Marley New Zealand Limited dated 30 June 2003.

3. Use Registered Trade Mark No. 316866 for the word STORMCLOUD, or any other deceptively similar trade mark (which “Cloudburst” is not) as a trade mark in relation to building products for rainwater systems including plastic gutters, gutter fittings or downpipes, or goods or services of the same description (the Rainwater Products).

4. Use Registered Trade Mark No. 285191 for the word MARLEY, or any other deceptively similar trade mark as a trade mark in relation to the Rainwater Products.

5. Use the name “Classic”, or any other deceptively similar name, in relation to the Rainwater Products made from PVC.

6. Represent that it is entitled or permitted to:

(a) supply or sell;

(b) manufacture;

any products by reference to the names Marley, Stormcloud or, in the case of Rainwater Products made from PVC, Classic.

THE RESPONDENT, by its counsel, ALSO UNDERTAKES to the Court, without admission of liability, that it will:

1. On or before 15 May 2007, send a copy of a letter sent by registered mail or courier to every company, firm or person to which it has supplied product by reference to the Marley, Stormcloud or Classic names, care of the person or persons at the company or firm concerned with whom it has had dealings since 1 July 2006, addressed by title and/or name, such letter to be in the form set out in Schedule A to these undertakings and orders.

2. On and after the date of this order, keep records and provide those records to the Applicants and to the Court following a direction from the Court to do so, which records must comprise the following particulars of the Respondent’s sale or supply of Rainwater Products in the course of the conduct of any business conducted, or to be conducted by the Respondent:

(a) the name and contact details of each person to whom the Respondent sells or supplies any Rainwater Products;

(b) a description of all Rainwater Products sold or supplied to each person referred to in paragraph (a) and the date(s) on which each of those products was sold or supplied;

(c) all sums received by the Respondent for or in respect of the sale or supply of any of the products referred to in paragraph(a)and the date of receipt of each sum.

3. The Respondent provide to the solicitors for the Applicants a copy of any form of brochure, pamphlet or advertising which the Respondent proposes to provide to retailers in relation to the sale or supply of Rainwater Products sold or supplied by reference to the Cloudburst trade mark not less than three business days before the Respondent provides it to retailers.

THE COURT ORDERS AS FOLLOWS:

1. By 4pm on 14 May 2007, the Applicants file and serve any amended application and any amended statement of claim.

2. By 4pm on 18 May 2007, the Respondent file and serve its defence and any cross claim.

3. By 4pm on 23 May 2007, the Applicants file and serve any Reply and Defence to Cross-Claim.

4. By 4pm on 25 May 2007, the parties exchange categories of discoverable documents.

5. By 4pm on 5 June 2007, the parties file and serve lists of documents and give inspection from 9am on 6 June 2007.

6. By 4pm on 8 June 2007, the Applicants file and serve any further affidavits upon which they intend to rely at trial and give notice to the Respondent as to which existing affidavits, or parts of affidavits, they intend to rely upon at trial.

7. By 4pm on 15 June 2007, the Respondent file and serve any further affidavits upon which it intends to rely at trial and give notice to the Applicants as to which parts of the affidavit of Mike Duskovic dated 3 May 2007 they intend to rely upon at trial.

8. By 4pm on 22 June 2007, the Applicants file and serve any affidavits in reply only to the affidavits referred to in paragraph 7 above.

9. The matter be referred to mediation pursuant to Order 72, such mediation to be conducted between 14 June 2007 and 29 June 2007.

10. By 4pm on 3 July 2007, the Applicants file and serve a paginated Court Book.

11. By 4pm on 6 July 2007, the parties file and serve any notices of objections to evidence.

12. By 4pm on 13 July 2007, the parties file and serve contentions of law and fact.

13. The matter be set down for trial to commence on 16 July 2007 at 9.30 am for a duration of not more than five days.

14. Liberty to apply on 48 hours written notice.

15. Costs be reserved.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

SCHEDULE A

The letter will be in the following terms:

Icon Plastics Pty Ltd

[insert company logo here]

Dear ….

As you know, we have supplied you previously with Classic and Stormcloud PVC guttering products. Prior to 1 January 2007, Icon Plastics was authorised to distribute Marley NZ Limited’s Classic and Stormcloud PVC guttering products and Icon Plastics was authorised to use the names Classic and Stormcloud in relation to these products.

Icon Plastics Pty Ltd is no longer associated with the distribution of these products under the names Marley, Classic and Stormcloud. Our products are manufactured in Australia and are called Cloudburst.

Icon Plastics is an Australian owned company and is not in any way associated with the Marley Group, which includes Marley New Zealand Ltd.

We request that you take the following steps:

1. Please remove all copies from public view or display of the brochure, a copy of which is enclosed herewith. A new brochure will be available shortly to assist your customers. [The brochure in exhibit AMW1 to the affidavit of Anna Margaret Wells sworn 4 May 2007].

2. Please ensure that the names Marley, Classic and/or Stormcloud are not used in connection with any PVC products manufactured by Icon Plastics. For the avoidance of doubt, please ensure that those names are not used in connection with Icon Plastics’ Cloudburst product range.

3. Please only use bar codes and product numbers supplied in connection with our product range, as enclosed [The last page of the exhibit MD 7 to the affidavit of Mike Duskovic dated 3 May 2007].

We agree to provide every assistance or resource to you in any form in undertaking these steps, and ask that you contact your local representative to discuss this as required.”

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 319 OF 2007

BETWEEN:

MARLEY NEW ZEALAND LIMITED

First Applicant

THE MARLEY COMPANY (NZ) LIMITED

Second Applicant

MARLEY TILE S.A.

Third Applicant

AND:

ICON PLASTICS PTY LTD (ACN 071 392 366)

Respondent

JUDGE:	GORDON J
DATE:	10 may 2007
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

INTRODUCTION

1 By an application and statement of claim filed on 20 April 2007, the applicants (collectively “Marley”) asserted that the respondent, Icon Plastics Pty Ltd (“Icon”), had engaged and continued to engage in a “deliberate campaign of deception” in relation to the sale of guttering systems and surface drainage systems.

2 Marley made application for interlocutory relief to restrain Icon from engaging in conduct described in the following terms:

“(i) Misappropriating Marley’s product code references and barcodes [by] using them in relation to copy components identical in dimension and appearance to the genuine Stormcloud components.

(ii) Continuing to use the Stormcloud, Classic and Marley trade marks both on and in relation to copy components without the authority or consent of Marley, and despite demands from Marley to cease such use.

(iii) Continuing to represent on its website that it was the authorised distributor of Marley products, including the Stormcloud and Classic products, when it was not so authorised.

(iv) Making verbal representations after 1 January 2007 that Icon continued to be authorised to supply and sell genuine Marley components.

(v) Continuing to supply the Stormcloud and Classic installation guide to retailers when it was supplying those retailers with copy components and/or failed to cause the retailers to withdraw them.

(vi) Failing to advise retailers that they were being provided with non-genuine components and thereby deceiving those retailers into assuming that the copy components were in fact genuine Marley components with the result that these retailers continued to sell the copy components be reference to the Stormcloud and Marley trade marks.”

3 The principles applicable to the grant of interlocutory injunction were not in dispute: is there a serious question to be tried and secondly, does the balance of convenience favour the grant of an injunction because either damages would be an inadequate remedy or because it is otherwise just in all the circumstances: Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622-623 cited with approval by Gummow and Hayne JJ in Australian Broadcasting Corporation v O’Neill [2006] HCA 46 at [65]-[72]; and Hurst (by her next friend) (Gail Smith) v State of Queensland [2006] FCAFC 151 at par 20ff (per Ryan, Finn and Weinberg JJ).

SUMMARY OF THE FACTS AND ISSUES

4 Before proceeding to consider Marley’s complaints and the form of the interlocutory relief sought by Marley, it is necessary to set out a summary of what, on the evidence as it now stands, is said to be the factual basis of the various claims.

5 Prior to June 2003, Icon was called Marley Plastics Pty Ltd and was associated with at least some of the applicants. The shares in Icon were sold to its present owners in June 2003. From that date until 31 December 2006, Icon imported from Marley New Zealand Limited (“Marley NZ”) and sold “Stormcloud” and “Classic” PVC guttering. The imported products were also sold by Icon by reference to the name “Marley”. Both “Marley” and “Stormcloud” were and remain registered Trade Marks owned by Marley NZ and used by them in relation to various building products [Resps Subs, par 2.1]. Marley NZ supplied the “Stormcloud” and “Classic” PVC guttering to Icon pursuant to two agreements: the Marley Rainwater (Gutter, Gutter Fittings and Downpipe Fittings) Supply and Distribution Agreement dated 30 June 2003 between Icon and Marley NZ (“the Rainwater Agreement”) and the Marley Surface Drainage Licence Supply and Distribution Agreement dated 30 June 2003 between Icon and Marley NZ. Also, until 31 December 2006, Icon was entitled to sell the products supplied by Marley under and by reference to the names “Classic” and “Stormcloud” pursuant to a “Trade Name Licence and Product Warranty Agreement” between Marley NZ and Icon. I will refer to these agreements as the “Marley Agreements”.

6 Although pursuant to the Marley Agreements, Marley sold to Icon and Icon purchased from Marley the “Stormcloud” and “Classic” PVC guttering, Icon in fact manufactured other component parts for the “Stormcloud” and “Classic” PVC guttering systems (for example downpipes, downpipe fittings and elbows) from moulds that it owned. Icon sold these component parts to Marley NZ and to customers in Australia. Both the Marley supplied products and the Icon supplied products used a common product code system. The product codes commenced with the prefix “1” followed by a two, three or four letter and / or number code. Each product had its own part number. For example, the 2.9 meter length of “Stormcloud” Gutter Spouting manufactured by Marley and supplied to Icon had the part number “1MS1.2.9”.

7 It is common ground between the parties that (at a point in time which I am neither required nor able to determine) Icon “procured a new set of moulds for the manufacture of rainwater products that it had previously purchased from Marley NZ ...” and commenced to sell these products under one or more of its own trade marks (“Cloudburst”, “Icon Plastics”) and bearing its stylised “I” with product codes with the prefix “1MS”. Icon asserts that it was and remains entitled to manufacture and sell these copy products in the manner described.

8 On the other hand, Marley asserts that Icon’s conduct contravenes, inter alia, ss 52 and 53 of the Trade Practices Act 1974 (Cth), the law of passing off and is in breach of one or more of the Marley Agreements and that the conduct complained of commenced prior to the termination of those agreements. Marley also asserts that the point in time at which Icon commenced the conduct is relevant to a number of its claims including its assertion that clause 3.2(c) of the Rainwater Agreement was in the nature of a best endeavours clause which, by its conduct, Icon breached contrary to the principles set out in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 63-65, 91-92, 94-96, 123-124, 139-140 and 143 and Hudson Resources Ltd v Australian Diamonte Mining Pty Ltd [2002] NSWSC 314 at [127]-[129] (per Einstein J).

9 These substantive issues cannot be resolved on an interlocutory basis. They are set down for final hearing on 10 July 2007.

UNDERTAKINGS PROFFERED

10 In answer to the application for interlocutory relief, Icon proffered, without admission of liability, certain undertakings. Marley accepted that the undertakings proffered by Icon addressed many of their complaints. There is some dispute between the parties as to the precise wording of the undertakings and whether some of the undertakings should, in fact, be orders of the court. The form and content of the undertakings and the orders is addressed below.

11 Despite the undertakings proffered by Icon, Marley submitted that further particular aspects of Icon’s conduct, not dealt with by the undertakings proffered by Icon, should be restrained. That conduct was described as:

(1) Icon supplying copy components for the Stormcloud guttering system (the “Copy Products Issue”); and

(2) Icon using “Marley’s product code designation[s] on or in relation to PVC guttering systems” (the “Product Code Issue”).

12 For the reasons which follow, I refuse to grant the applicants the interlocutory relief they sought in relation to these two issues. It is convenient to describe this as the “Further Relief”. I will address each aspect of this Further Relief in turn.

‘COPY PRODUCTS ISSUE’

13 The entitlement of Icon to compete in the market with Marley was not disputed. Mr Leach, the Managing Director of Marley NZ, “acknowledge[d] that Icon is entitled to compete with Marley in Australia in relation to the sale of products alternative to or competitive with Marley’s Classic and Stormcloud gutter systems.”

14 The undertakings proffered by Icon, without admission of liability, addressed Marley’s issues about the alleged use by Icon of Marley’s trade marks and trade names after the expiration of the Marley Agreements on 31 December 2006. The remainder of Marley’s complaints in relation to this issue were about the timing and methods by which Icon produced their copy products and whether those facts gave rise to rights of the kind protected by the High Court in Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41.

15 The substance of Marley’s complaint was described by Senior Counsel for Marley in the following terms:

“[T]he the products here have been copied. There is no doubt about that. [Icon] concedes it. They have been copied or reversed engineered. The competition which my client concedes, my learned friend is entitled to engage in, is firstly, as one alternative, to obtain an alterative source of supply of other like products manufactured by someone other than the respondent or secondly, as the second alternative, is for my learned friend's client to design, test, develop and manufacture to a product suitable for market which is not a copy.

That is to say that in the circumstances of this case it ought not be entitled to the springboard advantage in breach of its obligations to my client under the Rainwater Agreement to enter the market as it has on 1 January using copy product and gradually introduce it and, your Honour, my client seeks to deny my learned friend's client of the springboard advantage it has had by copying. Now, your Honour will recall that the notice of termination was given by my client on 22 June of last year.

Your Honour will recall that the Cloudburst trademark registration was applied for, I think it was 3 July, so that from 3 July at the latest my learned friend's client has had in plan and in prospect the development of an alternative business so it now seems, and it is the fact, in relation to copy products. Now, what my learned friend's client could have done during the six months down to 1 January because it had the three months notice period plus the three months stock sell-off period, it had six months in which to design, test and market and manufacture down to the point of sale of having a product, if not on 1 January then shortly thereafter, and your Honour will recall Mr Leach's evidence at the end of his second affidavit to the effect that that development process would take eight or nine months.

…

Now, that all could have been done and had that been done it would have been entirely lawful. The obligation on my learned friend's clients to promote, including the promotion of my client's products in the stock sell-off period, there would have been no inconsistency with such conduct even if my client didn't know about it. However, …such secret conduct, copying my client's product with a view and with the intention which is absolutely clear of appropriating my client's business, is a breach of a reasonable effort to promote clause.”

16 There is, in my view, a serious question to be tried about these issues. Whether or not Marley is entitled to deny Icon what it describes as its “springboard advantage” will ultimately turn on factual and legal issues arising out of the terms of the Marley Agreements and the conduct of the respective parties both before and after 31 December 2006. I am unable to resolve those issues on an interlocutory basis. Moreover, whether those factual issues also give rise to other legal issues such as whether there has been a breach of the Trade Practices Act or whether Icon has passed offits own products as those of Marley is a matter which I do not need to resolve. On any view, in the absence of design registration or the like, the hurdle for the applicants to succeed in relation to these other legal issues is high: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199 per Gibbs CJ. See also Dr Martens Australia Pty Ltd v Rivers (Aust) Pty Ltd (1999) 95 FCR 136 (per Sundberg, Emmett and Hely JJ); Koninklijke Philips Electronics NV v Remington Products Australia Pty Ltd (2000) 100 FCR 90 (per Burchett J, Hill and Branson JJ agreeing); Sheldon & Hammond Pty Ltd v Metrokane Inc (2004) 135 FCR 34 at [161] – [163]; Collins Debden Pty Ltd v Cumberland Stationery Co Pty Ltd (No. 2) [2005] FCA 1398 (Lindgren J).

17 It is therefore necessary to consider the balance of convenience. Taken as a whole, that balance lies firmly in favour of refusing Marley the Further Relief that it seeks. First, the undertakings proffered by Icon will, so far as is possible, maintain the status quo pending the hearing and determination of the substantive issues. This is not one of those cases where the refusal to grant the interlocutory relief shuts Marley out of the market. On the contrary. Since 1 January 2007, the status quo was and remains that it is open to Marley to compete with Icon in the market. When viewed in that light, it is apparent that the Further Relief sought by Marley is akin to final relief.

18 Secondly, the terms of the undertakings proffered by Icon are important. Not only do they provide that Icon will not refer to the Marley trade marks or trade name in relation to the copy products, they provide that Icon undertakes to keep an account of profits in relation to any sale of copy products. Thirdly, the parties have agreed a timetable for the management of the proceedings which will result in a trial of the substantive hearing to commence on 17 July 2007. Fourthly, Icon submitted that if it were restrained from supplying its copy products it was likely to lose its major customer potentially resulting in the redundancy of eight employees and loss of a significant part of its annual net profit. Marley submitted that I should be slow to rely upon Icon’s evidence in this regard because of the form of the evidence and the range of other products produced by Icon. The veracity of Icon’s evidence on this aspect (which cannot be resolved on an interlocutory basis) can be put to one side. For present purposes, it is sufficient to recall the fact that Marley’s complaint is its inability to compete with Icon if Icon remains in the market place. The fact is that Marley is able to compete in the market even if Icon is not restrained. It is open to Marley to attend upon retailers and seek to sell its products to them. In the circumstances, the inconvenience to Icon if it were restrained from supplying the copy products far outweighs the inconvenience to Marley. The undertakings and the trial directions, in my view, are appropriate.

19 Given the way in which argument was developed, it is unnecessary to consider Icon’s arguments that delay in bringing the application disentitled Marley from claiming interlocutory relief or Icon’s further arguments attacking the content of the Statement of Claim and the content and timing of Marley’s evidence.

20 For completeness, I would add that I have not overlooked the fact that Marley alleges that Icon engaged in conduct which it sought to characterise as a “deliberate campaign of deception”. Because the hearing is interlocutory it would be wrong to express any opinion about that contention. In the end, it suffices to say that there are serious questions to be investigated at trial, the balance of convenience dictates the course I propose to adopt and absent the undertakings, I would have granted Marley interlocutory relief substantially in the terms of the undertakings proffered.

21 I refuse to grant Marley the Further Relief that it seeks in relation to this issue.

PRODUCT CODE DESIGNATIONS

22 The second issue concerns Icon’s use of the product code references identified above. Marley’s complaint about the use of product codes extends to the use of those codes on Icon’s copy products and the component parts. In my view, the factual and legal questions raised here are of a less serious nature to the copy products issue.

23 The evidence filed to date discloses that Icon’s principal customer orders products by reference to the bar codes placed on the stock and not by reference to the product codes. In addressing the product code issue, two further matters must be stated at the outset: the product codes are not found on all of the copy products produced by Icon as evidenced by exhibit “VE:12” to the affidavit of Ms Evans filed on behalf of Marley and, further, where the product code was found on a product sold by Icon, it is necessary to look at the product code reference in the context of the other physical markings on the product.

24 During the course of argument, I was shown a number of physical examples of products which bore a product code reference. The product code was attached to the products produced in evidence in one of three ways: as part of the mould of the product, on a sticker which was affixed to the product or embossed onto the product. The copy products that contained a product code appeared to use the last method for affixing the product code. Despite the physical means by which the product code was affixed to any product produced by Icon (whether it was a copy product or a component part), the product code sat under or near the “Icon Plastics” trade mark and, in some instances, Icon’s stylised “I”. Moreover, the product code reference was by no means the largest item. In those cases where Icon had affixed the product code by means of a sticker or by means of embossing, the bar code appeared as the first and often the largest part of the information provided on the product. Marley contended that by using the product code reference, Icon was in contravention of ss 52 and 53 of the Trade Practices Act and had passed off its business as and for the business of Marley. In my view, on the evidence currently before me, the seriousness of that question is open to doubt.

25 However, it is necessary to consider the balance of convenience. Taken as a whole, that balance lies firmly in favour of refusing the Further Relief that Marley seeks. Icon submitted that if it was restrained from using the product codes in relation to all of its products, it would require it to manufacture new moulds and that process could take as long as one month to complete with the consequent loss of its principal customer. That evidence does not seem to address the fact that it is no longer affixing product codes to at least some of its copy products. On balance, the inconvenience to Icon if it were restrained from using the product codes far outweighs any inconvenience to Marley. As noted earlier, the form of the undertakings including the sending of the letter in the form of Schedule A will ensure that the status quo is maintained pending the substantive hearing. In the circumstances, I refuse Marley the Further Relief that it seeks in relation to this issue.

FORM AND CONTENT OF THE UNDERTAKINGS AND ORDERS

26 At the conclusion of the interlocutory hearing on 8 May 2007, the parties requested time to discuss the form and content of the undertakings and the orders. On 9 May 2007, Marley and Icon each provided me with draft undertakings and orders.

27 The substantive differences between the two drafts can be addressed under the following headings:

(1) whether the undertakings by Icon not to sell any product supplied to it by Marley NZ should extend to “supply”;

(2) whether some of the undertakings by Icon should, in fact, be orders of the Court;

(3) the notice period required to be given by Icon to Marley if Icon proposes to provide any form of brochure, pamphlet or advertising to retailers in relation to its Cloudburst products; and

(4) the content of the letter which Icon has undertaken to send to its customers and which is to be annexed to the court order.

28 In relation to item (1), the word “supply” should be included for consistency. It is referred to in other undertakings, such as undertaking 6. In relation to item (2), I have accepted the undertakings. The fact that Icon offered the undertakings was not surprising. The conduct alleged against it was serious and in the absence of the undertakings, would have attracted interlocutory relief. Moreover, the consequences for Icon if it fails to comply with the undertakings are serious.

29 In relation to item (3), I have not adopted the course proposed by either party. In my view, Icon should provide Marley with not less than 3 business days notice. In relation to item (4), the settled form of the letter is set out in the schedule to the orders. In my view, the amendments proposed by Marley are unnecessary having regard to the content of the balance of the letter and the undertakings.

30 The form of the undertakings that I propose to accept from Icon and the form of the orders that I propose to make are:

“UPON the applicants, by their counsel, each UNDERTAKING to the Court to abide by any order the court may make as to damages in the event that the court should subsequently be of the opinion that the respondent sustained any damages by reason of the undertakings given by the respondent, which the applicants ought to pay,