Protecting Business Reputation in Australia — Section 52 of the Trade Practices Act and Passing Off

Published date01 September 1983
DOI10.1177/0067205X8301300303
Date01 September 1983
Subject MatterArticle
PROTECTING BUSINESS REPUTATION IN
AUSTRALIA -SECTION 52 OF THE TRADE
PRACTICES ACT AND PASSING OFF
BY
ANNA
SHARPE*
The common law relating to the tort
of
passing off is the traditional
means by which conduct threatening business reputation may be halted.
During the past five years, the Federal Court
of
Australia has been
called upon on many occasions to apply s 52 Trade Practices
Act
1974
(Cth) to prevent such conduct.
As
yet, there has been no clear judicial
statement as to the interrelationship and overlap between the two
causes
of
action.
This Article discusses the scope
of
the two causes
of
action in the
context
of
an
allegation
of
actual or threatened erosion
of
goodwill.
The types
of
cases in which such allegation is usually made is then
examined and suggestions given as to which cause
of
action should be
relied on.
1 INTRODUCTION
There are many weapons in the arsenal of a businessman whose business
reputation
is
being threatened
by
the actions of another. Those actions may
constitute one of the economic torts, such
as
passing
off,
injurious falsehood
or negligent mis-statement,1 or may be an actionable breach of confidential
information. The decision of the High Court of Australia in Hornsby
Building Information Centre Pty
Ltd
v Sydney Building Information Centre
Lttf2 confirmed that s 52 of the Trade Practices Act 1974 (Cth)
is
not
confined to plaintiff consumers but
is
another basis upon which businessmen
may vindicate their commercial reputation. Since this decision there have
been numerous actions instituted by businessmen under s 52 alleging a
threatened or actual erosion of their goodwill by the defendant's adoption
of their name, mark or product "get-up". This allegation is, however,
precisely that which the law of passing
off
is
designed to meet and has led to
questions of the overlap between s 52 and passing
off
actions, and the
advantages of one over the other, being raised in several cases.3 Unfortu-
nately, judicial answers to these questions must be gleaned from obscure
comments such
as
those of Deane and Fitzgerald
JJ
in the recent Taco Bell
case.4
The backgrounds of s 52 and of the law of passing-off are quite different.
Their respective purposes and the interests which they primarily protect
are contrasting. Their areas of operation do not coincide. The indis-
* LLB (Hons) (Qld); Solicitor (Qld); Senior Tutor in Law, University
of
Queens-
land.
1
See
generally J D Heydon, ''The Future of the Economic Torts" (1975)
12
UWALRev
1.
2 (1978) 140
CLR
216.
3Jbid
226 per Stephen J; McWilliam's Wines Pty
Ltd
v McDonald's System of
Australia Pty
Ltd
(1980)
33
ALR 394, 405 per Northrop J; Parkdale Custom Built
Furniture Pty
Ltd
v Puxu Pty
Ltd
(1982) 42 ALR 1, 22-23 per Brennan J; Taco
Company
of
Australia Inc v Taco Bell Pty
Ltd
(1982) 42 ALR 177, 186 per Franki J.
4 (1982) 42 ALR 177.
253
254 Federal Law Review
(VOLUME
13
criminate importation into s 52 cases of principles and concepts involved
in passing-off and the associated area of trade mark law
is
likely to be
productive of error and to give rise to arguments founded on false
assumptions.5
This article will attempt to answer the vexed issues of when a claim should
be made solely either in passing
off
or under s 52 and when these claims
may be made in the alternative. The conclusion is reached that there are
two deciding
factors-first,
whether the defendant's conduct is aimed at
appropriating for itself the plaintiff's business reputation, and secondly,
whether the plaintiff requires an account of profits
as
part of its relief.
An
examination of the fact situations which commonly arise in relation to
threatened business reputation, (for example, those situations involving false
claims of sponsorship and character merchandising), supports the contention
that apart from those two factors, the protection given by s 52 and the law
of passing off
is
virtually identical. In such cases, the plaintiff's personal
preferences regarding forum and remedies will decide the issue of the
appropriate cause of action.
2 PASSING
OFF
As prompt
as
plaintiffs have been in complaining of new forms of conduct
jeopardising their business reputations, so have courts in Australia and the
United Kingdom displayed a willingness to promote the action against passing
off
as
a dynamic and flexible form of redress. The "classical"6 description
of the tort of passing
off
is
a misrepresentation by one trader that his goods
or
business are those of a competitor.
In
the past 20 years, courts have
placed emphasis on the fact that the defendant has, contrary to prevailing
principles of commercial morality, mis-appropriated the plaintiff's goodwill,
and have mellowed in their requirement that the misrepresentation should
be
as
to the ownership of the defendant's goods.
Whilst the changing nature of the tort of passing off renders it difficult, if
not impossible, to precisely define its elements, certain "characteristics",
which must at the least be present in order to constitute the cause of action,
may be identified. In the leading Advocaat case,7 Lord Diplock listed these
characteristics as:
(1 ) a misrepresentation (
2)
made by a trader in the course of trade,
(
3)
to prospective customers of his
or
ultimate consumers of goods
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 a business
or
goodwill of the trader by whom the action
is
brought or (in a quia timet action) will probably do so.8
Given the vast array of representations paraded before courts dealing with
5Jbid 191.
6 W R Cornish, "The Passing-Off Action
in
English Common Law" [1982] Industrial
Property 186.
7 Erven Warnink Besloten Vennootschap v J Townsend & Sons (Hull)
Ltd
[1979]
3 WLR 68.
SJbid 14-15.

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