FEDERAL COURT OF AUSTRALIA

Chok Man Chan v Chen [2013] FCA 1191

OTHER MATTERS:

1.    The Applicant undertakes:

a.    to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory order set out in paragraph 1 below and any continuation (with or without variation) thereof; and

b.    to pay the compensation referred to in (a) to the person there referred to.

THE COURT ORDERS THAT:

1.    The Respondents, whether by themselves or by their officers, employees or agents, are restrained until the trial of this proceeding or further order from:

a.    using a name that consists of or includes “Four C Group”, “Four C”, “4C”, “4hai”, “四海” or “四海集团” in connection with the provision of real estate agency or real estate development;

b.    using a domain name or email address that consists of or includes “fourcgroup”, “fourc” or “4C”, “4hai”, “四海” or “四海集团” in connection with the provision of real estate agency or real estate development;

c.    using the composite phrase “communication, cooperation, coordination, care”; or

d.    representing that their business is the business formerly operated by Four C Realty Pty Ltd or is associated or affiliated with, or approved by, that business.

2.    By 9 October 2013, the Respondents file and serve an affidavit identifying any communications, in addition to the emails which comprise exhibits “MRC-4” to the Affidavit sworn by Matthew Richard Critchley on 27 September 2013 and “YC-2” to the Affidavit affirmed by Yin Chen on 1 October 2013 respectively, that they have made under or by reference to the name “Four C Group”, advising of new contact details for the Respondents and/or canvassing or soliciting the custom of any person in connection with the provision of real estate agency services or real estate development.

3.    Paragraph 1 of the orders made on 27 September 2013 be vacated.

4.    The parties participate in a mediation to be conducted by a Registrar of the Court, such mediation to be completed by 15 November 2013. In the event that the matter does not settle at mediation, the Registrar is empowered to make directions and orders for the further conduct of the proceeding.

5.    Costs reserved.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

introduction

1    On 2 October 2013, I made the orders set out above for the reasons that follow.

2    The applicant, Alice Chok Man Chan, a director and shareholder of Four C Realty Pty Limited (in liquidation) (“the company”), sought interlocutory relief against the respondents, Yin (Ian) Chen (who is also a director of the company) and his recently incorporated company, Four C Group Pty Ltd, including orders that:

1.    An order restraining the Respondents from canvassing or soliciting the custom of any person who was a customer of Four C Realty Pty Ltd (in liquidation) as at 25 July 2013 in connection with estate agency services, until further order.

2.    An order that the Respondents file and serve an affidavit identifying each person with whom they have corresponded in the form set out in Annexure ‘MRC-4’ to the Affidavit of Matthew Richard Critchley sworn 27 September 2013 (or in substantially similar form) on 27 September 2013, and any responses they have received.

3.    Damages.

4.    Such further or other orders as the Court deems fit.

3    The application was supported by:

(1)    the affidavit of Matthew Richard Critchley, of the applicant’s solicitors sworn on 27 September 2013;

(2)    the affidavit of Haley Amanda Aprile, of the applicant’s solicitors sworn on 1 October 2013; and

(3)    written submissions dated 1 October 2013.

4    An originating application dated 27 September 2013 claimed the relevant relief.

5    The application was opposed. The affidavit of the first respondent. Yin (Ian) Chen, affirmed on 1 October 2013, was filed in opposition.

Facts and evidence

6    The company carried on business as a licensed real estate agent from premises at suites 1316 and 1317, 401 Docklands Drive, Docklands. It maintained the following “mission statement” on its website:

Four C: Communication-Cooperation-Coordination-Care

With the simple philosophy of achieving success for all parties which involved in our business activities. A four way Win, Win, Win, Win is in the horizon with a Win (Investor) – Win (Customer) – Win (Developer) – Win (Four C) situation in every venture or project undertaken.

7    On 25 July 2013, joint and several liquidators were appointed to the company. The liquidators sought expressions of interest in purchasing the company’s assets, including its business. Two opposing groups of shareholders associated with the applicant and the first respondent respectively emerged as potential purchasers of the business.

8    On 13 August 2013, the applicant entered into a contract with the liquidators to purchase the company’s business.

9    A dispute arose about the enforceability of the contract and whether the liquidators’ entry into it required the court’s approval under s 477(2B) of the Corporations Act 2001 (Cth) (“the Act”).

10    On 13 September 2013 and 23 September 2013 respectively, Gordon J delivered judgments on those questions. Her Honour held there was a binding contract and that approval under s 477(2B) of the Act should be granted.

11    On 26 September 2013 the applicant, the company and the liquidators executed an asset sale deed in relation to the sale of the business, which was acknowledged to record the terms of the contract.

12    The deed included terms that the applicant would obtain all of the company’s right, title and interest to the assets, including the company’s real estate business, the company name of Four C Realty Pty Ltd (in English and Chinese), the company’s trade marks and copyright (including any rights subsisting in trade secrets, know how, methods, techniques, libraries, client lists, databases), the domain name http://www.4hai.com.au (in English and Chinese) and any rights of the company to use email addresses with the suffix “@4hai.com.au” (in English and Chinese).

13    The asset sale deed was completed on the afternoon of 26 September 2013.

Affidavit of Matthew Critchley

14    By his affidavit sworn on 27 September 2013, Mr Critchley deposed that he was informed by the applicant and her husband that on the morning of 27 September 2013, the first respondent sent an email to Leo Lei Shang of 360 Property Group Pty Ltd and Freddy Wang of Mirvac Group, both of which are major customers of the company.

15    The email stated:

Dear all,

To satisfy the new business development and companies’ restructuring within our group, I’m pleased to let you know that my new email address ian.c@fcg.net.au will be effective from today, the previous address ian@4hai.com.au will be stopped shortly. Please update the contact details in your record accordingly.

I thank you for your attention and cooperation, and sorry for any inconvenience caused by this change.

Look forward to hearing from you through this new email.

Kind regards,

Ian Chen

Four C Group Pty Ltd

Tel: +613 96025560; Fax: +613 9602 5580; Email: ian.c@fcg.net.au

Mobile: +61 401 765 668

Suite 1312, 401 Docklands Drive, Docklands VIC 3008

Please consider the environment before printing the email.

Communication | Cooperation | Coordination | Care

For more information, visit our website www.fcg.net.au (currently under construction).

16    Mr Critchley deposed to the applicant’s grave concern that the email was likely to confuse and mislead customers of the company and cause irreparable damage to the business she had purchased on 26 September 2013.

17    Mr Critchely annexed a company search which revealed that the second respondent, Four C Group Pty Limited, was incorporated on 8 July 2013 (some two weeks before the company was wound up) and that the first respondent is its sole director and secretary.

Affidavit of Yin (Ian) Chen

18    By his affidavit affirmed on 1 October 2013, the first respondent deposed to his employment in the real estate industry since 2006, when he commenced employment with a real estate company, Bianlan Properties Pty Ltd (trading as Iron Fish) (“Bianlan”), where he met the applicant, who was employed as a sales consultant.

19    The first respondent deposed that in 2007, he incorporated Signature Investment (Australia) Pty Ltd (“Signature Investment”) with a colleague, Edwen Yew. In about July 2010, the applicant replaced Mr Yew as a director and held office until about March 2012. Signature Investment imported kitchen joineries (which it sold to developers and builders), assisted foreign investors to find and purchase properties in Australia, purchased and on-sold off-the-plan properties and imported and sold LED lights to builders and developers.

20    The first respondent deposed that he built up contacts in the real estate industry, especially with developers, through Signature Investments, of which he was the sole director after about March 2012.

21    The first respondent deposed that in the sale process conducted by the liquidators, the expressions of interest did not refer to client lists or other such records. The first respondent deposed that he was unaware that the company maintained any client or supplier lists. He stated that the company’s customers were simply contacts and acquaintances of himself, the applicant and other company officers. The first respondent acknowledged that the company maintained a marketing newsletter subscription, email database and a list of all purchasers of property, to which he no longer had access.

22    The first respondent deposed that the liquidators’ sale did not subject him to any restraint of trade provision and although he did not succeed in purchasing the company’s business, he considered himself free to compete commercially with the applicant in the real estate industry.

23    The first respondent deposed that on 25 September 2013, he sent the email (extracted at paragraph 15) in Chinese to people in his personal contact list who understood Chinese, including acquaintances, friends, family and only a few contacts he had made in real estate (including through Bianlan, Signature Investments and the company).

24    On 26 September 2013, he sent the email in English to those in his personal contact list who understood English, including family members, friends, business acquaintances and contacts in the real estate industry made during his time with Bianlan, Signature Investments or the company.

25    The first respondent deposed that when he sent the emails, he did not know that the sale had been completed and that rights in client lists and databases had been transferred to the applicant.

26    He deposed that he was nevertheless aware that he could no longer use the domain name “4hai.com.au” and sent the emails to provide people in his personal contact list with his new contact details.

27    The first respondent exhibited lists of names of persons to whom he sent the email in English and Chinese.

28    The first respondent deposed that the second respondent was not a licensed real estate agency and had no employee with an appropriate licence. While he did not intend the second respondent to become a licensed real estate agency, he intended to continue to work in the real estate industry. The first respondent offered to undertake not to use the name “Four C Group Pty Ltd” for any entity operating as a licensed real estate agency.

Application for an interlocutory injunction

Applicable principles

29    The principles relevant to the grant of an interlocutory injunction are well established. The court principally considers whether:

(a)    if the evidence remains as it is, it is probable that the applicant will be entitled to permanent injunctive relief at the final hearing of the matter; and

(b)    the inconvenience or injury which the applicant would be likely to suffer if the injunction is refused outweighs, or is outweighed by, the injury which the respondent would suffer if an interlocutory injunction were granted.

(Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 (“ABC v O’Neill”) at 81-82 (Gummow and Hayne JJ), citing Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 (“Beecham v Bristol”) at 622-623 (Kitto, Taylor, Menzies and Owen JJ).)

30    The two inquiries are not rigidly separated. The plaintiff must show “a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial” (ABC v O’Neill at 82 (Gummow and Hayne JJ)). Whether the likelihood is sufficient will depend not only on the rights asserted by the applicant but also on “the practical consequences likely to flow from the order” sought (ABC v O’Neill at 82 (Gummow and Hayne JJ), quoting the High Court in Beecham v Bristol at 622).

Sections 18 and 29(1) of the Australian Consumer Law

31    Section 18(1) of the Australian Consumer Law (schedule 2 to the Competition and Consumer Act 2010 (Cth)) (“ACL”) provides that:

A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

32    Section 29(1) of the ACL provides that:

A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:

…

(b)    make a false or misleading representation that services are of a particular standard, quality, value or grade; or

…

(g)    make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits;

…

33    The interpretation of section 18 of the ACL (and its predecessor, s 52 of the Trade Practices Act 1974 (Cth) (“TPA”)) is governed by well settled principles. The provision requires the Court to determine: “whether conduct is misleading or deceptive, having regard to all the contextual circumstances within which something was said or done” (Complete Technology Integrations Pty Ltd v Green Energy Management Solutions Pty Ltd [2011] FCA 1319 (“Complete Technology”) at [75]).

34    The interpretation of sub-ss 29(1)(b) and (g) of the ACL (and the predecessor of s 29, s 53 of the TPA) does not differ materially from the interpretation of section 18. In ACCC v Dukemaster Pty Ltd [2009] FCA 682 (“Dukemaster”) at [14] Gordon J considered s 53(e) of the TPA, which required a representation to be “false or misleading”, while s 52 of the TPA required that a representation be “misleading or deceptive”. Gordon J found that, as recognised in cases where both allegations were made, there was no “meaningful difference” between a representation which is “false or misleading” and one which is “misleading or deceptive”, and such aspects of the conduct are treated mutatis mutandis (Dukemaster at [14], citing Foxtel Management Pty Ltd (2005) 214 ALR 554 at [94]; ACCC v Target Australia Pty Ltd (2001) ATPR 41-840; ACCC v Harbin Pty Ltd [2008] FCA 1792; ACCC v Prouds Jewellers Pty Ltd [2008] FCAFC 199 at [42]).

35    The principles relevant to this proceeding include the following:

(a)    conduct is misleading or deceptive if it induces, or is capable of inducing error (Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 194 FCR 564; [2000] FCA 1572 at [63] (French J with whom Beaumont and Finkelstein JJ agreed));

(b)    conduct is not misleading or deceptive simply because it causes confusion or wonderment in members of the public (Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 (“Parkdale v Puxu”) at 199 (Gibbs CJ) and 209 (Mason J); Campomar Sociedad Limitada v Nike International Ltd (2000) 202 CLR 45 (“Campomar v Nike”) at 85; Astrazeneca Pty Ltd v GlaxoSmithKline Australia Pty Ltd [2006] FCAFC 22 (“Astrazeneca”) at [38] and Singtel Optus Pty Ltd v Telstra Corporation Ltd [2004] FCA 859 (“Singtel v Telstra”) at [76]);

(c)    when considering conduct directed to, or representations made to, the public at large or a section thereof, it is necessary to:

(i)    identify the relevant target audience;

(ii)    consider what characteristics a reasonable or ordinary member of the relevant target audience would have; and

(iii)    consider whether the misconceptions or deceptions alleged to arise from the impugned conduct or representations would, or would be likely to, arise in a reasonable or ordinary member of the relevant target audience;

(Complete Technology at [75], citing Peter Bodum A/S v DKSH Australia Pty Ltd (2011) 280 ALR 639 at 679 (Greenwood J with whom Tracey J agreed).)

(d)    there is no express requirement to prove reputation in any aspect of a product (including its get up, trademarks, signs or logos) in order to succeed in a claim for breach of sections 18 and 29(1)(b) and (g), although such reputation may be an element of establishing that consumers are likely to be misled or deceived by the respondent’s use of similar features (see Hansen Beverage Co v Bickfords (Australia) Pty Ltd (2008) 251 ALR 1; [2008] FCAFC 181 (“Hansen v Bickfords”) at [44]-[47] (Tamberlin J), [51] (Finkelstein J), [67] (per Siopis J)) or an element of establishing whether any similarity between the relevant marks is, in fact, deceptive (see Mars Australia Pty Ltd v Sweet Rewards Pty Ltd (2009) 81 IPR 354; [2009] FCAFC 174 at [22]-[30]).

36    The effect of the conduct or representations on “reasonable” or “ordinary” members of the target audience must be considered (Parkdale v Puxu at 199 (Gibbs CJ) and 209 (Mason J); Campomar v Nike at 85). The class may include a wide range of people, including the inexperienced and the gullible, but the ordinary or reasonable member will have particular characteristics referable to the particular sector of trade or commerce where the conduct takes place (Parkdale v Puxu at 199 (Gibbs CJ); National Exchange Pty Ltd v ASIC (2004) 49 ACSR 369 (“National Exchange”) at [18]; Astrazeneca at [34], [37]).

37    The application of the reasonable person test:

(a)    requires only that a “not insignificant number” of persons “in fact, or by inference, have been misled, or are likely to be misled” by the conduct or representations (Hansen v Bickfords at [46] (Tamberlin J) and [67] (Siopis J), citing Conagra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 at 380-301 (French J));

(b)    means that extreme or fanciful reactions to the conduct or representations are not to be taken into account (Campomar v Nike at 86; and National Exchange at [18]); and

(c)    allows for the fact that reasonable people can come to differing views about what conduct or representations may mean, but recognises that if any of those reasonable views are consistent with being misled or deceived, the conduct will breach the section (National Exchange at [24]).

38    The impugned conduct must be viewed in context, having regard to the relevant surrounding facts and circumstances, and as a whole (see Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 199 (Deane and Fitzgerald JJ) (“Taco Co v Taco Bell”); Parkdale v Puxu at 199 (Gibbs CJ)).

39    It suffices that “dealing” or “negotiations”, rather than an actual purchase, are induced by the conduct (Tec & Tomas (Aust) Pty Ltd v Matsumiya Computer Co Pty Ltd (1984) 1 FCR 28; (1984) 53 ALR 167 at 177). The fact that the consumer will or may learn the true position prior to entering into an agreement in respect of the goods or services which are the subject of the false, misleading or deceptive conduct, does not mean that there has been no infringement of the ACL (Singtel v Telstra at [42]; ACCC v Telstra (2004) 208 ALR 459; [2004] FCA 987 at [58]).

40    It is not necessary to establish that a particular person has been misled or deceived in order to establish a breach of the sections, although “evidence of actual misleading or deception and of steps taken in consequence thereof” may be significant (Astrazeneca at [33], [52]). The test of whether conduct is misleading is objective and the court must determine the question for itself (Trade Practices Commission v Optus Communications Pty Ltd (1996) 64 FCR 326; (1996) 34 IPR 176 (TPC v Optus) at 186 (Tamberlin J) quoting Taco Co v Taco Bell at 202-203 (Deane and Fitzgerald JJ); Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1; [2003] FCA 289 at [43] (Stone J with whom Mansfield J relevantly agreed)).

41    An accurate disclaimer or qualification will not negate the misleading nature of conduct if it would not have come to the attention of a reasonable consumer in the target audience or that consumer would, in any event, be left with an erroneous assumption (TPC v Optus at 188-189 (Tamberlin J)).

Passing Off

42    In order to establish a claim of passing off, it is necessary to establish that:

(a)    the plaintiff’s get-up, including any brand name, is “recognised by the public as distinctive specifically of the plaintiff’s goods or services”;

(b)    there has been “a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that the goods or services offered by [the defendant] are the goods or services of the plaintiff”; and

(c)    the plaintiff has suffered or, in a quia timet action, is likely to suffer, “damage by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s goods or services is the same as the source of those offered by the plaintiff”.

(Reckitt & Coleman Products Ltd v Borden Inc (1990) 17 IPR 1 at 7, cited with approval by the Full Federal Court in TGI Friday’s Australia Pty Ltd v TGI Friday’s Inc (1999) 45 IPR 43 at 50.)

43    The tort of passing off does not require proof of actual deception or any “actual, subjective intention to mislead” by the tortfeasor (Nutrientwater Pty Ltd v Baco Pty Ltd (2010) 265 ALR 140; [2010] FCA 2 (“Nutrientwater”) at [81]). Rather, as stated in Nutrientwater (at [81]):

It is sufficient that there be a misrepresentation that is likely to lead the public to believe that the tortfeasor’s goods are those of the claimant … [which] is a question of fact the court must decide, having regard to the relevant circumstances.

CONSIDERATION

44    In the present case, the emails were sent by the first respondent to persons including customers of the company. They were signed by the first respondent (who is a director of the company), followed by the second respondent’s name “Four C Group Pty Ltd”, which differs from that of the company only by the substitution of “Group” for “Realty”. The emails reiterated the composite phrase in the company’s website mission statement and used an address which, save for a different suite number, was identical to that of the company. They referred to “the new business development and companies’ restructuring within our group”, requiring the first respondent to furnish a new email address to which further communications could be sent. It is arguable that the references to “our group” and “restructuring”, combined with the second respondent’s name, “Four C Group Pty Ltd”, may, in that context, have induced some recipients reasonably to apprehend that the first respondent was writing on behalf of a group of companies of which the company was a member. The emails did not indicate, even obliquely, that Four C Group Pty Ltd was not associated with the company or that the first respondent was no longer associated with the business it formerly conducted.

45    In such circumstances there was, in my view, a serious question to be tried whether the emails falsely represented that the company was associated with Four C Group Pty Ltd and, despite some internal reorganisation, its business continued to be conducted by, and associated with, the first respondent, whose new contact details were a means of making contact with the business previously conducted by the company.

46    The first respondent’s freedom to compete with the applicant in the real estate industry is necessarily subject to the laws prohibiting misleading or deceptive conduct and passing off and to the applicant’s proprietary rights (including any intellectual property, trade secrets, confidential information and customer lists assigned to her by the company).

47    Accordingly, I concluded that there was a serious question to be tried as to whether the respondents had:

(a)    engaged in misleading or deceptive conduct in contravention of s 18 of the ACL;

(b)    made a false or misleading representation that services are of a particular standard, quality, value or grade in contravention of s 29(1)(b) of ACL;

(c)    made a false or misleading representation that services have sponsorship, approval or affiliation in contravention of s 29(1)(g) of the ACL; and/or

(d)    engaged in passing off.

48    I concluded that the relevant conduct, if unrestrained, could result in prejudice and injury to the applicant’s business, for which (should the applicant succeed in the proceeding) an award of damages would not be a sufficient or convenient remedy.

49    While there was no evidence that the first respondent was subject to any restraint of trade provision, the orders as framed posed no significant impediment to the respondents’ legitimate conduct of their business operations.

50    Accordingly, the balance of convenience favoured the relief sought by the applicant.

Associate:

Dated:    13 November 2013