REASONS FOR JUDGMENT

1                                             This is an application for interlocutory relief.  The applicant seeks an order that the respondent be restrained pending the final outcome of the proceedings from conducting any restaurant business in Sydney or Brisbane under or by reference to any of the names ‘Sake’, ‘Sake Sake’, any name beginning with the word ‘Sake’ or any other name which is deceptively similar to the applicant’s name ‘Sake’, ‘Saké’ or ‘Sake Restaurant’. 

Factual background

2                                             The application for interlocutory relief is supported by an affidavit from Alex Walker, sworn 30 September 2010, the Chief Financial Officer of the applicant.  In summary, Mr Walker’s affidavit is to the effect that the applicant operates a successful restaurant at 18 Argyle Street, The Rocks, which trades under the name and trademark ‘SAKE’.  The Sake restaurant in The Rocks opened for business on 12 October 2009 and has traded continuously since.  Further, a second Sake restaurant of the applicant is scheduled to open soon in Eagle Street Pier in Brisbane. 

3                                             According to Mr Walker, the Sake restaurant uses its name in logo form as well as in plain type.  The name and logo both appear on a large sign outside the restaurant at The Rocks and both are used extensively inside the restaurant in various ways. 

4                                             The restaurant has been reviewed by many leading newspapers and restaurant guides.  It was awarded a “Hat” mark by the editors of the Sydney Morning Herald Good Food Guide in August 2010.  It has a website, www.sakerestaurant.com.au.  The applicant has entered into a lease and commenced preparation for the opening of the second restaurant in Brisbane.  Building delays mean that the expected launch date will be in early November 2010.  This expansion means that it is a critical time for the applicant’s business. 

5                                             On 7 May 2010 and 13 July 2010, the principal of the Sake restaurant and its main chef, Mr Shaun Presland, appeared as the guest chef on two episodes of the television program MasterChef (broadcast on Channel 10 and its affiliated stations throughout Australia).  I have seen extracts from the DVD containing these episodes.  They show the Sake restaurant (including its name shown in prominent shots inside and outside the restaurant), the Sake name and trademark (worn by Mr Presland on his jacket throughout the show), and there are frequent mentions of the Sake restaurant on the soundtrack to the shows.  According to Mr Walker, and the evidence is unchallenged in this respect, the response to Mr Presland’s appearance on MasterChef was immediate and enormous and has not diminished. 

6                                             There is evidence to the effect that the applicant became aware of the respondent’s premises not later than 28 June 2010.  There is a reference to that date in a letter of 6 July 2010 from Trademark Investigation Services to the solicitors for the applicant referring to the solicitor’s instructions of 28 June 2010 in which the solicitors requested that they investigate the respondent’s “use of the ‘SAKE’ trademark and the ‘SAKE SAKE’ logo”. 

7                                             There is also evidence that the applicant applied for registration of the trademarks ‘SAKE’ and ‘SAKE RESTAURANT & BAR’ on 23 June 2010.  This application was expedited for consideration by the Trade Marks Office.  It was the subject of an adverse report on or about 30 June 2010, having regard to the issue of the distinctiveness of the name ‘SAKE’.  The applicant submitted supplementary information in support of its application which resulted in the marks being accepted for registration on 24 August 2010. 

8                                             Mr Walker has been employed by the applicant since 28 June 2010 as Chief Financial Officer.  Other than this, there is no indication of his knowledge or expertise.  Nevertheless he says in his affidavit that he is “concerned that if the respondent continues to trade under a name which begins with ‘Sake’ and which does not clearly distinguish its restaurant from the applicant’s Sake restaurants, people will be misled into thinking that Sake Sake at Cammeray [that is, the respondent’s premises] is another branch of the applicant’s group of restaurants”.  Mr Walker says he is also “concerned that customers who have seen the ‘SAKE’ trademark on television, or have read references to the Sake restaurants in newspapers or magazines, will search for the restaurant in the internet, in telephone directories or restaurant listings such as eatability.com.au or the Good Food Guide, and be unsure which is the restaurant they are looking for, or be misled into booking with the respondent”.

9                                             From the respondent’s point of view, there is evidence in the form of an affidavit of Phillip Blanco, sworn 6 October 2010.  Mr Blanco is a director of the respondent and has been involved in retail, food, beverage and franchising for over 15 years.  He also lived in Japan for a period of four years, and studied Japanese culture, language and history during university.  According to Mr Blanco’s affidavit, he was first approached about opening the respondent’s premises (described as a Japanese restaurant and bar at the ‘Stockland’ Cammeray mixed use development, located at the corner of Miller and Amherst Streets in Cammeray, New South Wales) in August 2009.  From that time, he considered the possibility of opening what is described as a Japanese ‘izakaya’-style sake bar at the location.  An izakaya is a casual Japanese drinking establishment that also serves some food to accompany the drinks served on the premises.

10                                          He accepted with his partners the invitation to lease from Stockland on 21 September 2009.  In about mid-September 2009, he instructed an independent design company, Medusa Design, to come up with a name and concept for the proposed izakaya-style sake bar.  The designer came up with the name ‘SakeSake Izakaya’, and this was the option with which Mr Blanco and his business partners decided to proceed.  According to Mr Blanco, at the time they decided on this name and concept, that is about 30 September 2009, he was unaware of the applicant’s plans to open a restaurant called Sake in The Rocks (as I have noted already, the applicant’s restaurant in The Rocks was opened on 12 October 2009).

11                                          According to Mr Blanco, during October 2009, he and his business partners worked out the concept for their proposed izakaya-style bar.  They prepared a business plan dated 5 October 2009.  That business plan shows the focus of the respondent on serving over 30 types of sake by the glass.  The heads of agreement for the respondent’s premises was signed on 9 October 2010, that is, before the applicant opened its business in The Rocks.  It was not until 6 November 2009 that Mr Blanco by chance saw the applicant’s sign advertising the applicant’s restaurant when he was visiting The Rocks.  He then went to the restaurant for lunch with his family on 8 November 2009 and made notes about the menu and his evaluation of the menu.  In the meantime, the Mr Blanco and his business partners continued with the design and construction of the respondent’s premises.

12                                          The respondent was handed over control of the premises by Stockland on or about 3 February 2010.  Medusa Design was then instructed to prepare a billboard advertising the respondent’s premises under the name ‘SakeSake Izakaya’.  A large billboard bearing the name ‘SakeSake IZAKAYA’ was subsequently placed at the premises on or about 23 February 2010.  During construction, and after the erection of that billboard, the respondent decided to abandon the ‘Izakaya’ aspect of the name, because it “did not entirely match the inexpensive ‘no frills’ nature of traditional Japanese izakayas”.  Construction was completed in early May 2010.  On or about 24 May 2010, the respondent opened its izakaya-inspired bar at the premises under the name ‘SakeSake’.

13                                          As I have said, the applicant, it can be inferred, became aware of the respondent’s premises at the latest by 28 June 2010 and possibly, on the evidence, before that date.  According to Mr Blanco, the respondent and related parties expended approximately $800,000 on the development, construction and other expenses in establishing and opening the respondent’s premises.  There is evidence of the respondent’s weekly turnover.  According to Mr Blanco, he does not believe (contrary to Mr Walker’s evidence) “that the use by the respondent of the ‘SAKESAKE’ name in connection with the provision of restaurant services [by the respondent] will damage, or is currently damaging, any goodwill and reputation” associated with the applicant’s restaurant.

14                                          Mr Blanco also says that if the interlocutory injunction were granted as sought, the effect on the business of the respondent will be, in his word, “devastating”.  Mr Blanco estimates that the respondent would lose revenue of approximately $15,000 before GST per week.  Combined with the short-term costs of rebranding, he estimates the respondent could sustain itself only for approximately one month before becoming insolvent.  Further, he says that if an order was granted as sought by the applicant, it would be extremely likely that the respondent would no longer be in a position to defend the proceeding by the time the matter came to trial.

15                                          According to Mr Blanco, moreover, he had no knowledge until 7 September 2010 that the applicant objected to the respondent’s use of the name ‘SakeSake’, which was over six months since the respondent first advertised by way of a billboard on 23 February 2010, and three and a half months after the respondent commenced trading on 24 May 2010.  This is consistent with the fact that after acceptance of the applicant’s trademark on 24 August 2010, the applicant’s solicitors first contacted the respondent by letter objecting to the use of the name SakeSake on 7 September 2010.  The respondent’s solicitors replied on 16 September 2010.  The application seeking final and interlocutory relief was filed on 1 October 2010.

Issues

16                                          There are three issues which I indicated to the applicant caused me concern in respect of the interlocutory application.  They are the status quo, delay, and the balance of convenience. 

17                                          Both parties helpfully filed written submissions.  Those submissions disclose that there is no real dispute between them about the relevant principles which are to be applied.  Two questions are to be addressed.  First, whether there is a serious question to be tried in the sense of a prima facie case being made out on the evidence.  Second, where the balance of convenience lies. 

18                                          There is a significant dispute between the parties as to the strength or weakness of the prima facie case which is said to be made out on the evidence. 

19                                          The applicant maintains that there is a very strong prima facie case in circumstances where, according to the applicant’s characterisation of the evidence: - (i) the respondent knew of the applicant’s business when it opened its own premises, (ii) the respondent has steadily moved its restaurant concept closer towards that of the applicant, and (iii) with knowledge of the applicant’s restaurant, the respondent elected to use the name of the applicant’s restaurant in its own name.

20                                          The respondent, on the other hand, has characterised the prima facie case as weak, having regard to: - (i) the generality of the name ‘Sake’ (according to the respondent, the applicant seeks to appropriate for itself a word which is descriptive), (ii) the fact that all of the respondent’s investment and other decisions were made in ignorance of the applicant’s name and the applicant’s business, and (iii) the fact that the concept of the respondent’s premises is quite different from that of the applicant.

21                                          It does not seem to me that it is necessary that I say other than I accept there is a serious question to be tried in this matter.  It does not seem to me that there is either a very strong or a very weak prima facie case.  It is not necessary to precisely resolve the strength of the applicant’s case because it is sufficient that I accept that a prima facie case has been established. 

22                                          It is the three concerns which I specifically asked the applicant to address which lead me to the firm view that in this matter interlocutory relief should not be granted in favour of the applicant. 

Status quo

23                                          The first issue is that of the status quo.  The respondent’s restaurant has been trading since 24 May 2010 under the name ‘SakeSake’.  It advertised itself before it started trading on 23 February 2010.  The practical effect of the injunction that the applicant seeks would be to alter the way in which the respondent can operate its business, by preventing it from using the Sake name.  The applicant submitted that the relevant status quo is the legal and not the practical status quo.  In other words, the evidence establishes that the reputation and goodwill the applicant currently enjoys will be adversely affected if the respondent is permitted to continue to trade.  According to the applicant it is that legal right, namely the applicant’s reputation and goodwill, which must be protected by maintaining the status quo.

24                                          Irrespective of the precise characterisation of the relevant status quo, the evidence of damage to the reputation and goodwill of the applicant can be described only as weak.  It is limited to the expressions of concern by Mr Walker in his affidavit and some other evidence in the form of comments by customers on a restaurant review website and a conversation on 4 July 2010 between an employee of the respondent’s restaurant and the trademark investigator hired by the applicant.  The conversation was described as follows:

Employee: The owner [of the respondent’s restaurant] is American but the Head Chef is Japanese.  He used to be at Sake on the Rocks, it’s a well-known restaurant in Sydney.”

Investigator: Oh, is that where you got the name?

Employee: Well no, it’s the same name but the restaurant is not connected.  Sake on the Rocks is owned by Bavarian Beer Café, and we are owned by an American.

25                                          Nevertheless, taken as a whole, the evidence does not rise far above mere conjecture and speculation about the impact on the applicant’s reputation and goodwill if the respondent continues to trade with its name as it is.

26                                          The respondent’s premises have been trading since 24 May 2010 and advertised under that name since 23 February 2010.  These proceedings were not commenced until 1 October 2010, that is, there has been a relatively long period during which the respondent’s premises have been trading under their name.  There is also unchallenged evidence of Mr Blanco that the interlocutory order sought would have a significantly negative impact on the respondent (even if, as the applicant submitted, they are capable of being sculpted to attempt to minimise the impact on the respondent).  Whether those matters be characterised as relating to the legal status quo or the practical status quo is not to the point, they remain relevant as part of the balance of convenience.

Delay

27                                          Next, there is the issue of delay.  The applicant’s submission is that while it cannot deny there has been some delay, the delay is fully explained by the trademark registration process.  According to the applicant it was reasonable and indeed proper for the applicant to overcome the Trade Mark Registrar’s initial objections before asserting its rights against third parties.  The trademark application was lodged on 23 June 2010.  The first report was issued on 30 June 2010 and the trademark was accepted on 24 August 2010 (the application having been expedited as requested by the applicant).

28                                          According to the applicant, it decided not to commence proceedings until it had its trademark accepted.  While that may be the reason for the delay, the inescapable fact is that the applicant was aware of the respondent’s premises since at least 28 June 2010 and yet took no action to put the respondent on notice of any objection that the applicant might have to the respondent’s activities until 7 September 2010.  Even then, there was delay between the acceptance of the trademark on 24 August 2010 and the notice to the respondent of the objection on 7 September 2010, as well as further delay before the commencement of these proceedings on 1 October 2010.

29                                          In circumstances where it is the applicant’s case that this is a critical time for it having regard to the proposed expansion by the opening of the second restaurant in Brisbane, it was incumbent upon the applicant to act to act with expedition.  Acting with expedition at the time that it first became aware of the respondent’s premises not later than 28 June 2010 might have possibly ameliorated some of the “devastating” impact that the making of an interlocutory order would now have upon the respondent, it having traded since 24 May 2010 through June, July, August and September 2010, with the first notice of any objection from the applicant being on 7 September 2010. 

Balance of convenience

30                                          Finally, there is the balance of convenience.  The applicant says that all of the factors to which Mr Blanco refers and to which I have briefly made reference must be discounted as the respondent was at all time aware of the applicant’s business (having become aware of the applicant’s business on 6 November 2009, as referred to in Mr Blanco’s affidavit).  Hence, the respondent invested and made its investment decisions with knowledge that its business name was incorporating the applicant’s name. 

31                                          According to the applicant, the respondent cannot expect in these circumstances the same type of consideration as someone who acts in complete ignorance of the applicant’s business and trademark.  Further, the applicant refers to the fact that damages cannot be an adequate remedy for it, it being notoriously difficult to assess damages in cases such as these in contrast to the position of the respondent.  Also, in circumstances where the applicant is about to open its second restaurant, even the most expeditious of proceedings would not protect it from the harm that it would suffer by reason of the respondent being able to continue to trade.

32                                          The difficulty with these submissions is that weighing against them is the fact that the evidence indicates that all of the critical conceptual and investment decisions were made by the respondent at a time when they had no knowledge of the applicant’s business.  The chronology shows the respondent decided on its business name and concept in September 2009 before the applicant even opened its restaurant on 12 October 2009.  Indeed, the respondent signed heads of agreement with Stockland on 9 October 2009, which was three days before the applicant opening its restaurant in The Rocks. 

33                                          Moreover, when the respondent erected the signage for its restaurant on 23 February 2010 it did so under the name “SakeSake IZAKAYA”, which somewhat undermines the suggestion that the respondent has been deliberately moving its restaurant concept closer to that of the applicant. 

34                                          Having regard to the delay by the applicant in taking steps to assert its rights against the respondent, I do not accept that no weight can be given to the evidence which Mr Blanco has adduced of the “devastating” effect of the interlocutory order.  Mr Blanco is of the view that the effect of such an order after approximately one month would be the insolvency of the respondent. 

35                                          This evidence of the impact of the interlocutory order on the respondent, when taken with delay by the applicant and combined with the evidence that the respondent’s investment decisions were made without knowledge of the applicant’s business, means that the balance of convenience in this matter weighs heavily in favour of the respondent and against the making of any interlocutory order as sought by the applicant. 

36                                          For these reasons, I decline to make order 2 on an interlocutory basis as sought by the applicant in its application.

Associate:

Dated:         11 October 2010