Earthtech Consultants (Qld) Pty Ltd v Earth Tec Engineering Pty Ltd [2001] QSC 38

SUPREME COURT OF QUEENSLAND CITATION: Earthtech Consultants (Qld) Pty Ltd v Earth Tech Engineering Pty Ltd [2001] QSC 038 PARTIES: EARTHTECH CONSULTANTS (QLD) PTY LTD (Applicant) v EARTH TECH ENGINEERING PTY LTD (Respondent) FILE NO/S: 11042 of 2000 DIVISION: Trial DELIVERED ON: 23 February 2001 DELIVERED AT: Brisbane HEARING DATE: 10 January 2001 JUDGE: Fryberg J ORDER: Upon the plaintiff by its counsel giving the usual undertaking as to damages, order that until the determination of this action or earlier order, the defendant be restrained from carrying on business as a professional engineer using the name “Earth Tech” or any derivative thereof (a) in Queensland or (b) elsewhere in respect of work to be carried out in Queensland. Order that costs of and incidental to this application be reserved. Direct that parties bring in a draft order containing procedural directions up to the stage of readiness for trial and in relation to mediation. Liberty to apply. CATCHWORDS: INTELLECTUAL PROPERTY - Trade names - Passing off - Elements of action - Liability to deceive - Application for interlocutory injunction COUNSEL: R Perry for the applicant. J S Douglas QC and D G Clothier for the respondent. SOLICITORS: Bennett & Philp for the applicant. Allen, Allen & Hemsley for the respondent. -- 1 of 8 -- 1 The parties [1] The name "Earthtech" has been used in connection with professional engineering in Queensland since 1987. In that year, "Earthtech Laboratories" was adopted as the business name of Soil Rock and Engineering Testing Services Pty Ltd. Both names have been in continuous business use in Queensland since that time, although until 1996, the latter usage was dominant. The plaintiff is the successor in title to that business (except for the Cairns region). It acquired the business in 1996 and almost immediately expanded it into an engineering consultancy specialising in environmental and geotechnical areas. The plaintiff adopted its present corporate name in March 1998. [2] The plaintiff operates its business throughout the eastern seaboard of Australia and in Papua New Guinea. It is based in Brisbane and most of its work is done in Queensland. It has 22 employees. About 35 percent of its work is laboratory work and the balance is consultancy work. It is well known for doing major contaminated land engineering consultancy work. It carried out all of the contaminated land assessment for the Brisbane area on the South East Transit Lane project, one of the largest contaminated land engineering consultancy projects being undertaken in Queensland at the time. It has done all of the investigation and testing for the construction of the land fill cells at the Rochedale land fill site, a major land fill project in Queensland. It has been involved in preliminary geotechnical investigations for the Brisbane Airport Rail Link project; the provision of geotechnical and contaminated land assessments and the impact assessment study for that project; and various other site investigations which it is unnecessary to detail. It has been involved not only in site remediation but also in the investigation, design and supervision of the construction of tailings dams and water supplies. It has carried out geotechnical investigation and design on aspects of road systems and railways - for example, for retaining wall foundations for structures and the stability of cut and fill slopes. It is the third largest company operating in its field in Queensland. There is evidence, unchallenged at this stage, that it is well- known in Queensland for doing this sort of work and has a substantial reputation in Queensland associated with the Earthtech name. [3] The defendant was incorporated in Victoria in September 1999. It is a wholly owned subsidiary of Tyco Group S.a.r.l., a company incorporated in Luxembourg. The ultimate holding company of the latter is Tyco International Ltd. That company is a very large, multinational engineering company with a turnover measured in billions of dollars. In about 1996 it acquired an environmental services company in the United States called The Earth Technology Corporation Pty Ltd. Since May 1994, that company had used a trademark consisting of a globe device and three stripes in between the words "Earth" and "Tech" and some time in or after 1995, it changed its name to Earth Tech Inc. According to the annual report of Tyco International Ltd for 1999, Earth Tech Inc was undertaking a process of "international expansion into strategically important locations". [4] Earth Tech Inc has four business streams internationally: water management; environmental services and remediation; engineering construction; and transportation. The second of those is concerned with site contamination. It conducts site assessment, site remediation and decontamination, as well as “regulatory compliance”, pollution prevention and general environmental management consulting. It is said to have a "global reputation" in each of its -- 2 of 8 -- 2 business areas, although there is no specific evidence of any reputation in Queensland. It has never carried on business in Australia, although it apparently permitted an isolated use of its name by another company in Victoria in 1995-1996. In the months immediately prior to the defendant’s incorporation, those involved in the defendant submitted some tenders in the name of Earth Tech Inc. [5] To date, the defendant has carried on business in two of the four fields in which the plaintiff is engaged: water management and environmental remediation. There is no reason to suppose that it intends to limit itself to these fields. It does not do laboratory work. The water management business is conducted from Sydney and the environmental services and remediation business is conducted from Brisbane. Work has been carried out or tendered for in all states except Western Australia. In Queensland, its activities have apparently been restricted to a quotation and three tenders. The quotation was for groundwater remediation at a service station site and the tenders are for remediation work not precisely described but with estimated values ranging from $35,000 to $24 million. The tenders are current. Whenever it attempts to obtain new work, it emphasises its relationship with Earth Tech Inc, which has management responsibility for it. [6] In late 1999 or early 2000, Mr Michael Leggo, an employee of Boral Ltd, became aware that Earth Tech Inc wished to establish an Australian operation. He encouraged Mr Don Shosky, an employee of Earth Tech Inc to consider engaging Mr Bengt von Schwerin and Mr Jim Soltau as part of that operation. At that time, they were both employed by a company called URS Australia Pty Ltd, but in and for some years after 1996, both worked in Queensland for a company called Woodward-Clyde. Mr Soltau worked in the environmental section of that company, dealing with contaminated land investigation and bioremediation. Between 1996 and 1998 there were numerous dealings between the plaintiff and Woodward-Clyde and I infer that both Mr Soltau and Mr von Schwerin were aware of the plaintiff and its business. Neither man has yet applied to be registered as a professional engineer in Queensland, nor has the defendant. [7] The plaintiff first became aware of the defendant’s existence at the end of October 2000 when it discovered by chance that Mr Soltau was having a business card printed. In early November an employee of another engineering firm (one of the plaintiff's major clients) told Mr Marley, a director of the plaintiff, that Mr Soltau had joined a firm called Earth Tech which originated in the USA. Within a week, the plaintiff had consulted its solicitors. This application for an interlocutory injunction is the outcome. Triable issue [8] The plaintiff relies on the tort of passing off and on s 52 of the Trade Practices Act 1974. Definition of the tort is not an easy task. As Gummow J has observed, “Attempts to produce a definition of the tort which is both succinct and comprehensive have had mixed success." 1 In Erven Warnink Besloten Venootschap v J. Townend and Sons (Hull) Ltd, Lord Diplock identified five essential characteristics of the action. These are: "(1) a misrepresentation (2) made by a trader in the course of trade (3) to prospective customers of his or ultimate consumers of goods 1 ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302. -- 3 of 8 -- 3 or services supplied by him (4) which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) and (5) which causes actual damage to the business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so." 2 [9] That formulation was referred to with apparent approval by Deane J (in whose judgments the other members of the court concurred) in Moorgate Tobacco Co Ltd v Phillip Morris Ltd (No 2).3 It has, however, encountered some criticism in the English Court of Appeal, where Nourse LJ has expressed the view that in his experience, it has not given the same degree of assistance in analysis and decision as "the classical trinity" of (1) reputation (2) misrepresentation and (3) damage. 4 He welcomed what he perceived as a "return to the classical approach". Without adopting that rebellious approach, Gummow J has observed that the “classical trinity” does serve to emphasise three core concepts in this area of law.5 [10] The different approaches are, I think, immaterial in the present case. At this stage of the proceedings, the matter can adequately been be dealt with by reference to the three concepts referred to by Gummow J. Reputation [11] I am satisfied that there is adequate evidence at this stage to found a claim in respect of the plaintiff's reputation in Queensland. Indeed, I do not understand the existence of such a reputation to have been seriously challenged. Whether the evidence is sufficient to establish a reputation in the other areas where the plaintiff carries on business is less certain; but having regard to my conclusions in relation to the balance of convenience, I need make no finding. Misrepresentation [12] As to misrepresentation, it is the plaintiff's case that by trading under its corporate name, the defendant is wrongly representing itself as the plaintiff and its services as those of the plaintiff. The resulting confusion is likely, it is argued, to cause the plaintiff damage. The plaintiff argues that the similarity of the name, the substantial overlap of business activities and the similarity of e-mail addresses all contribute to the misrepresentation and produce the likelihood of confusion. It points to evidence of actual confusion amongst those with whom it deals. It relies on the knowledge of the defendant of its prior existence through Mr Soltau and Mr von Schwerin to support its claim. It submits that the case is "largely on all fours" with EMAP Elan Ltd v Pacific Publications Pty Ltd.6 2 [1979] AC 731 at p 742. 3 (1984) 156 CLR 414 at pp 443-4. 4 Consorzio del Prosciutto di Parma v Marks and Spencer plc [1991] RPC 351 at pp 368-9. 5 ConAgra Inc v McCain Foods (Aust) Pty Ltd (1992) 33 FCR 302 at p 356. 6 (1997) AIPC ¶91-305. -- 4 of 8 -- 4 [13] The similarity between the parties' names is obvious. The plaintiff's web site has the domain name "earthtech.com.au"; the defendant has the domain name "earthtech.com". The evidence shows that on 3 November 2000, the plaintiff's receptionist took two separate telephone calls, one from a person asking to speak to Mr von Schwerin and the other from a person asking for Mr Soltau. When told that the plaintiff did not have anybody by the name working for it, each caller then asked, "Is this Earth Tech Brisbane?" On 8 November, an officer of the Environment Institute of Australia located in Melbourne telephoned the plaintiff and asked to speak to Mr Soltau. The evidence also shows that during November 2000, until his mistaken belief was corrected, a Mr Wayne Curry, from Sinclair Knight Merz (a large engineering firm which is one of the plaintiff's major sources of work) believed that the "other Earthtech" must have been part of "Mike Marley's Earthtech" (Mr Marley is a director of the plaintiff). On 30 November, Mr David Arnold, from the same firm, told Mr Middleton, a director of the plaintiff, of his confusion about Mr Soltau's employer. The confusion had arisen in the context of a discussion with a Sinclair Knight Merz employee about the old gasometer site at Newstead, Brisbane, which is in need of remediation. On 13 December, the plaintiff received an e-mail from ALS, a chemical laboratory testing service which it uses "quite a deal". The e-mail was intended for Mr von Schwerin. [14] The overlap of business activities was, on the defendant's submission, far from clear. It was submitted that because the plaintiff had not identified its regular clients, there was no evidence that they included or were likely to include the large multinational companies with which the defendant principally deals. It was submitted that the plaintiff's turnover from consultancy suggested that they were not so included. There is a fallacy in this submission. It is true that the defendant is part of an enormous multinational conglomerate. It operates in fields.in which the plaintiff does not operate, and, I assume, deals with clients with whom the plaintiff does not deal. The fact is, however, that it also operates in some fields in which the plaintiff does operate. The plaintiff's turnover in these fields may well be small compared to that which the defendant expects, but it is significant for the plaintiff. I am satisfied that the plaintiff will probably be able to show at trial that the parties operate in the same market. [15] In any event, I am not satisfied that it is essential for the plaintiff to demonstrate that the parties do operate in the same market. In my view, all the plaintiff must show is that it has a reputation in an overlapping market: ConAgra Inc v McCain Foods (Aust) Pty Ltd.7 [16] In determining the likelihood of confusion, I accept the defendant’s submission that regard must be had to the class of persons with whom the parties can be expected to deal. Consulting engineers seldom, if ever, deal directly with ordinary members of the public. Certainly, the present parties do not. They deal with corporations, public authorities and other engineers. That said, it must be remembered that these bodies are still staffed by people subject to all of the frailties of human nature. I see no reason to assume that in the majority of cases, they would be alert enough to notice the subtle differences between the parties’ names, nor to assume that this would indicate to them a difference between the parties. 7 (1992) 33 FCR 302. -- 5 of 8 -- 5 [17] An associated submission for the defendant was that the goodwill of an organisation is very much attached to the individuals who are involved in it. That does not seem to me a self-evident truth. It may be more likely to be true where the organisation is small and those dealing with outsiders are few. I would not accept the submission, in the absence of evidence, that the proposition was applicable to a firm of consulting engineers in Queensland. [18] Mr von Schwerin gave evidence that, to his knowledge, the defendant had received only one phone call from a person wishing to speak with a consultant at the plaintiff. As regards Sinclair Knight Merz, he said that he was aware that several employees knew of the plaintiff and was therefore "very careful to clearly differentiate Earth Tech from the plaintiff". He did the same with ALS. As Mr Perry for the plaintiff submitted, that seems to amount to a tacit acceptance of the real prospect of confusion in the industry. [19] In argument, there was some suggestion on behalf of the defendant that the case should be approached as if "Earthtech" were a descriptive name. It suffices to say that I do not accept that submission. [20] The defendant submitted that the question of confusion should be considered from the point of view of two classes of clients of the plaintiff: existing or recurrent clients, and potential clients. The former, it was submitted, would know the plaintiff well and would be likely to deal with the plaintiff by reason of its association with Mr Marley. They would either not be confused or would quickly realise any mistake. The latter group, knowing of the plaintiff by reputation as "a local, privately owned provider" of services, would, if they dealt with the defendant, soon realise that it was not the plaintiff. This submission is assertive only; it is not supported by the evidence. [21] For the plaintiff, some emphasis was placed on the fact that Mr Soltau and Mr von Schwerin were aware of the plaintiff's existence from the outset. This is not a case of fraud. There can be no suggestion that the defendant has deliberately adopted the plaintiff's name or e-mail address in an act of piracy. The defendant's name derives from its association with Earth Tech Inc. The knowledge of the defendant’s employees is irrelevant. [22] The related questions of misrepresentation and confusion are essentially questions of fact. Evidence of examples of confusion, while relevant, is not determinative. In the end, it is a matter of impression. Even looking at the question from the point of view of the two classes of clients postulated by the defendant (and I doubt if clients can be so neatly categorised), there is a significant likelihood of confusion. There is in my view an arguable case that by carrying on business as it does, the defendant is guilty of misrepresentation. Damage [23] The defendant correctly submits that the gravamen of the cause of action is a misrepresentation likely to cause damage to the plaintiff. Mere confusion is not enough; there must be confusion productive, or likely to be productive, of damage. In the present case, the only possible damage is loss of business. But the defendant goes one step further. It submits that the plaintiff must demonstrate an arguable case that, unless restrained, the defendant's conduct will or is likely to induce customers or potential customers of the plaintiff to deal with the defendant in the -- 6 of 8 -- 6 mistaken belief that the defendant is, or is somehow associated with, the plaintiff. In my judgment, the plaintiff need not go so far. It is sufficient if the misrepresentation is likely to induce such persons not to deal with the plaintiff. However whichever way the proposition is expressed, my conclusion is that the defendant's conduct is likely to cause the plaintiff damage. It must be remembered that in this context, many different types of dealing may occur, from a casual telephone inquiry based on lunchtime gossip to a formal subcontract of considerable magnitude. I accept that it is likely that sooner or later, a person dealing with the defendant and knowing of the existence and characteristics of the plaintiff would work out that he or she is not dealing with the plaintiff. By then, however, it might from the plaintiff's perspective be too late. The client might no longer wish to bother with its original intention. The risk of damage exists so long as there is confusion which may direct a client to the defendant rather than the plaintiff. Moreover, I think the risk of damage also exists in cases where a potential client who is interested in engaging a consulting engineer called Earthtech is aware that there are two engineering firms with similar names. The plaintiff is entitled to all of the benefit of its reputation in Queensland. The defendant has no reputation here. It is not entitled to share that of the plaintiff. [24] In my judgment, the plaintiff has demonstrated a triable issue in relation to passing off. It is therefore unnecessary to consider the claim under s 52 of the Trade Practices Act 1974. Balance of convenience [25] The defendant argues that there is a clear basis for concluding that it will be significantly disadvantaged in obtaining new work if it is not able to trade on the back of the international reputation of Earth Tech Inc. Conversely, it argues, there is no real evidence that the plaintiff will suffer any substantial damage if an injunction is not granted. It points to the fact that it (the defendant) does not operate a laboratory; it repeats the argument already referred to in relation to damage; and it submits that insofar as there is any risk of damage to the plaintiff, it may be dealt with by directions for a speedy trial and an undertaking from the defendant to maintain complete and accurate accounts. It submits that the plaintiff can in any event avoid any risk in relation to its recurrent customers by informing them that the defendant is in no way associated with it. The plaintiff negates these arguments and submits that loss of goodwill is extremely difficult to measure and that goodwill once lost is difficult to regain. [26] In measuring these arguments, it is necessary first to establish the ambit of the putative injunction. Although there is evidence that the plaintiff has a reputation outside Queensland, its work, or almost all of its work, appears to be carried out in Queensland. I think it would be adequately protected pending trial by an injunction restraining the defendant from carrying on business as a professional engineer using the name "Earth Tech" in this state, or using it elsewhere in Australia in respect of work to be carried out in this state. In the end, the plaintiff did not seem to oppose that proposition. Such an injunction would not prevent the defendant from carrying on business under its own name in the rest of Australia, nor from incorporating a subsidiary under a different name to carry on business in Queensland. The proportion of the defendant’s business in Queensland is low and I doubt if its activities would be seriously prejudiced in the period pending trial by such an injunction. -- 7 of 8 -- 7 [27] The balance of convenience favours granting such an injunction. In my view, the difficulty of regaining lost goodwill and of measuring the value of the loss outweigh any loss likely to accrue to the defendant from being restrained from using its name in or in relation to work in Queensland. Moreover, the defendant cannot presently lawfully carry on business as a professional engineer in Queensland and apparently it will be some time until it can do so, no application for registration of the defendant or its employees having yet been lodged. [28] The defendant challenged the adequacy of the plaintiff's undertaking as to damages. However there is no doubt of the plaintiff's solvency. Having regard to the terms of the injunction which I propose, the sorts of losses spoken of in the submissions on behalf of the defendant are improbable. I see no reason to require the plaintiff to provide security for its undertaking. Order [29] Upon the plaintiff by its counsel giving the usual undertaking as to damages, order that until the determination of this action or earlier order, the defendant be restrained from carrying on business as a professional engineer using the name "Earth Tech" or any derivative thereof (a) in Queensland or (b) elsewhere in Australia in respect of work to be carried out in Queensland. Order that costs of and incidental to this application be reserved. Direct that within seven (7) days the parties bring in a draft order containing procedural directions up to the stage of readiness for trial and in relation to mediation. Liberty to apply. -- 8 of 8 --