“Attempts to produce a definition of the tort [of passing off] which is both succinct and comprehensive have had mixed success.”^[1]

 

The tort of passing off is similar to, and often pleaded alongside, claims of misleading and deceptive conduct under s. 18 of the ACL (previously section 52 of the TPA), and/or claims of misrepresentations as to sponsorship, approval or affiliation under s. 29 of the ACL (previously s. 53 of the TPA) (see above 4.1.5.1.1 and 4.2.4). Further, one frequently finds this tort being pleaded in cases of alleged trade mark infringements. Indeed, to a degree, the importance of the tort of passing off has declined in the light of the possibility of taking action under the extremely broad scope of s.  18 of the ACL. However, the tort of passing off should nevertheless not be ignored.

 

Essentially, the tort of passing off is committed where the defendant seeks to falsely represent that she/he, or her/his products, has some association with the plaintiff. Different commentators have taken different approaches in outlining the requirements of the tort. Courts have, in several cases, focused exclusively on the three elements of reputation, misrepresentation and damage. One such example is Vieright Pty Ltd v Myer Stores Ltd,^[2] where the Full Federal Court outlined and applied the three-step test established by Lord Oliver in Reckitt and Colman Products Ltd v Borden Inc:^[3]

In establishing that a trader has passed off goods as those of another … three elements have to be demonstrated:

(1) that the trader’s get-up, including any brand name, is recognised by the public as distinctive specifically of the plaintiff’s goods;

(2) that 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 offered by the defendant are the plaintiff’s goods (whether the public is aware of the plaintiff’s identity as the manufacturer or supplier of the goods is immaterial, provided they are identified with a particular source, eg by means of a brand name which is in fact the plaintiff’s);

(3) that the plaintiff suffers 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 is the same as the source of those offered by the plaintiff.

 

However, the most often cited case dealing with passing off is Erven Warnink v Townend & Sons (Hull) Ltd,^[4] in which Lord Diplock identified five characteristics which must be present in order to create a valid cause of action for passing off. 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 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.

 

These five requirements are frequently cited in textbooks and, as is clear from Ward Group Ltd v Brodie & Stone,^[5] they have been adopted as law in Australia.^[6]

 

Importantly, in his judgment in Erven Warnink v Townend & Sons (Hull) Ltd,^[7] Lord Diplock noted that: “It does not follow that because all passing off actions can be shown to present these characteristics [i.e., the five requirements referred to above], all factual situations which present these characteristics give rise to a cause of action for passing off”. This observation makes clear that even where all these characteristics are present in a particular case, the situation does not necessarily justify an action in passing off; something more is required. However, Lord Diplock does not mention any other requirement. This seems to indicate that, rather than there being some additional characteristic being required, one or more of the mentioned characteristics must be of a certain degree of severity to justify the action being brought.

 

Thus, it is necessary to examine which of these characteristics need to be of a certain degree of severity to justify the action being brought. The first three characteristics (i.e. (1) a misrepresentation; (2) in the course of trade; and (3) to the plaintiff’s customers are essentially of a yes/no nature). In other words, either it is a misrepresentation, or it is not; either the misrepresentation is made in the course of trade, or it is not; and either the representation is made to the plaintiff’s customers, or it is not – these are simply not matters of degree. In contrast, the question of whether the plaintiff suffered or risked suffering damage is certainly a matter of degree. The same is true about the question of whether such damage was reasonably foreseeable.

 

In conclusion, it seems that under Lord Diplock’s test as expressed in Erven Warnink v Townend & Sons (Hull) Ltd,^[8] a claim in passing off will, even where all the five characteristics mentioned are present, only succeed if the plaintiff suffered or risked suffering sufficiently serious damage, and such damage was, to some degree, reasonably foreseeable.

 

Based on the above and subsequent court decisions, the following rule describing the tort of passing off can be formulated:

The scenario envisaged in Article 2 could be said to be the traditional, or classic, form of passing off; that is, where one business seeks to attract a competing business’s customers by the use of deception. This is a typical tort situation. The scenario envisaged in Article 3, on the other hand, represents an extension of the tort of passing off. In this form, it is quite different and is more like a violation of a proprietary right. There, the defendant is seeking to give added value to its products by falsely representing some association between them and the plaintiff. The following two cases are illustrative:

 

In Erven Warnink BV v Townend & Son (Hull) (The Advocaat Case),^[9] the plaintiff Dutch firm had been manufacturing and importing into England an alcoholic spirit (Advocaat) made from eggs and a Dutch brandy for several years, enjoying a 75% market share. The defendant manufactured a local egg liquor in England, named “Keeling’s Old English Advocaat”, which was made with lower quality ingredients, such as dried egg powder and sherry, due to the lack of stringent regulations which applied to production of the “genuine article” in the Netherlands. The House of Lords, restoring the judgment at first instance which the Court of Appeal had overturned, held that, although the name ‘Advocaat’ was descriptive only and not inherently distinctive to the Dutch plaintiff (consequently being shared by several such companies), the English defendant had made a misrepresentation in the branding of its product and had caused a wrongful diversion of custom away from the plaintiff. This was sufficient to establish that passing off had occurred. Lord Diplock held that, as ‘Advocaat’ signified a particular species of beverage that was most commonly associated with the plaintiff, and the Keeling product had no natural association with real ‘Advocaat’, the defendant should not be allowed to pass off its product under that term.

 

Hogan v Koala Dundee Pty Ltd,^[10] on the other hand, involved quite a different type of passing off action. In this case, shops in Surfers Paradise and Brisbane were found to be selling “Dundee Country” merchandise, which featured a koala in the get-up normally associated with Paul Hogan’s iconic character from the film Crocodile Dundee. Justice Pincus held that, as the purpose of the get-up was to initiate a connection in the minds of customers between Paul Hogan’s character and the goods being sold, and such a connection did not in fact exist, this amounted to a misappropriation of the image by the retailers. The mere association was enough to enable customers to readily infer a connection between the film and merchandise.

 

Thus, the tort of passing off exists in two different versions: the classic version (i.e., Article 2), as illustrated in the Advocaat Case; and the extended version (i.e., Article 3), as illustrated in the Koala Dundee Case.

 

Under the structure used in Rule 7, there are seven elements for the plaintiff to prove in the classic version of the tort of passing off, while there are five elements for the plaintiff to prove if relying on the extended version of the tort. Below, the elements relevant for both the classic and the extended versions of the tort of passing off are discussed first. Then follows a discussion of the elements of relevance only to the classic version, and finally the elements of relevance only to the extended version of the tort are discussed.

 

5.1 Elements relevant for both the classic and the extended versions

5.1.1 Misrepresentation

The first thing to note in relation to the element of “misrepresentation” is that it is not necessarily connected to the rules of misrepresentation discussed elsewhere in this book. On the other hand, there does not seem to be any reason to suspect that the wide definition of what constitutes a “representation” is not also applicable in this context. Thus, as far as the tort of passing off is concerned, misrepresentations may be expressed or implied and can take a multitude of shapes such as the placing of a particular product on the market (Advocaat); using symbols, packaging (“get-up”) or trading names similar to those used by the plaintiff;^[11] statements made in advertisements;^[12] or even where the same or a similar fictitious character appears in television advertisements for separate products.^[13]

 

Furthermore, a representation is a misrepresentation where it is untrue, whether or not the party making the representation is aware of its falsity. Consequently, intention is not a necessary requirement in an action for passing off.

5.1.2 Reputation or goodwill

The term “goodwill” was discussed in detail by Lord Macnaghten in IRC v Muller & Co’s Margarine Limited:^[14]

 

What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old-established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates. Goodwill is composed of a variety of elements. It differs in its composition in different trades and in different businesses in the same trade. One element may preponderate here and another element there.

 

Whether an action is taken in a scenario involving the classic version (outlined in Article 2) or the extended version (outlined in Article 3), it is necessary that the plaintiff has an established reputation or goodwill in the jurisdiction where the action is brought.^[15] While it is clear that this requirement may often cause difficulties for a party taking action in a jurisdiction different to its primary market, the exact details of the requirement have been disputed. On the one hand, it is argued that the plaintiff must actually be trading with the relevant market, and on the other hand, it is argued that it is sufficient that the plaintiff has an established business reputation or goodwill within the jurisdiction. Following the Federal Court of Australia’s decision in Taco Company of Australia Inc v Taco Bell Pty Ltd,^[16] it seemed that the Australian approach is to require actual trading, but leading textbook authors have identified strong arguments in favour of the latter approach.^[17] However, the Full Federal Court in Conagra Inc v McCain Foods (Aust) Pty Ltd^[18] clarified that the requirement does not necessitate the plaintiff to have established a business in the jurisdiction or have sold goods or services in the jurisdiction. This was in the light of the realities of modern advertising and the ability for businesses to establish goodwill or reputation in other jurisdictions. It is still necessary for a plaintiff to establish sufficient reputation with respect to the plaintiff’s goods or services within the relevant jurisdictions, however, it can be proven by a variety of means (e.g., proof of advertisements in the relevant jurisdiction, number of travellers).

5.1.3 Reasonably foreseeable

The requirement that damages or potential damages were reasonably foreseeable is related to the requirement that the misrepresentation be likely to deceive the plaintiff’s customers. While that requirement is objective, the reasonably foreseeable requirement is, to an extent, subjective. However, that is not to suggest that the defendant can easily raise a defence of ignorance. Instead, whether or not the damages or potential damages were reasonably foreseeable ought to be judged by reference to the standard of a reasonable man.

5.1.4 Actual or potential damage

Whether or not actual or potential damage is suffered depends on whether the relevant misrepresentation is capable of being misleading. The test for this was outlined in Australian Woollen Mills Limited v F. S. Walton and Company Limited:^[19]

 

An attempt should be made to estimate the effect or impression produced on the mind of potential customers by the mark or device for which the protection … is sought. The impression or recollection which is carried away and retained is necessarily the basis of any mistaken belief that the challenged mark or device is the same. … The usual manner in which ordinary people behave must be the test of what confusion or deception may be expected. Potential buyers of goods are not to be credited with any high perception or habitual caution. On the other hand, exceptional carelessness or stupidity may be disregarded. The course of business and the way in which the particular class of goods are sold gives, it may be said, the setting, and the habits and observation of men considered in the mass affords the standard. Evidence of actual cases of deception, if forthcoming, is of great weight.

 

It should be noted that Lord Diplock’s statement in Erven Warnink v Townend & Sons (Hull) Ltd,^[20] as quoted above, makes clear that an action in passing off can be taken in relation to potential damage being suffered. Further, the very fact that injunctions can be awarded in relation to the tort of passing off, makes clear that an action can be taken prior to actual damage being suffered.

 

As far as the requirement of damage is concerned, it is interesting to note the Court’s observation in Pacific Publications Pty Limited v Next Publishing Pty Limited:^[21] “Damage is an essential part of an action for passing off, although, in many cases, damage will be presumed to have occurred where there has been a misrepresentation or deceitful conduct in relation to the appropriation of the applicant’s reputation”.

 

5.2 Elements relevant for the classic version only

5.2.1 Common field of activity

The Court in Campomar Sociedad, Limitada v Nike International Limited noted that:^[22]

 

The decision of the New South Wales Full Court in Henderson [Angelides v James Stedman Hendersons Sweets Ltd]^[23] marked the rejection in Australia nearly 40 years ago of the requirement apparent in some English decisions … that there be a “common field of activity” between the commercial activities of the parties. In deciding whether purchasers are likely to believe that the goods or services of the defendant have an endorsement by, or other association with, the plaintiff, the courts in Australia have not applied any “erroneous assumption” doctrine [10th Cantanae Pty Ltd v Shoshana Pty Ltd;^[24] Hogan v Pacific Dunlop Ltd].^[25] (footnotes omitted)

 

However, this should not be read as a complete departure from the focus on whether the parties are in a “common field of activity”.  When read carefully, it is clear that this passage only relates to the extended version of the tort of passing off and does not mean that no such requirement exists in relation to the classic version. Indeed, in its context, the very fact that another requirement of the classic version is that the defendant’s conduct is likely to deceive the plaintiff’s customers highlights that the two parties must be in a “common field of activity” as far as the classic version is concerned.

5.2.2 In the course of trade

Article 2 makes clear that, where the allegations of passing off relates to a situation where the plaintiff and the defendant are in business competition with each other, it is essential that the relevant misrepresentation is made in the course of the defendant’s trade.

 

Determining whether the defendant has acted in the course of trade should ordinarily not be difficult. For example, the advertisement or other promotion of a product to potential buyers ought to, typically, constitute clear evidence of the action being in the course of trade.

5.2.3 Likely to mislead the plaintiff’s customers

As to whether the defendant’s conduct is likely to mislead the plaintiff’s customers, Lord Diplock’s statement, referred to above, makes clear that the court would not only take account of the plaintiff’s immediate consumers, but would also account for the end consumers of the plaintiff’s goods or services. Presumably, the court would also take account of any party acting between the plaintiff and the end consumers of the plaintiff’s goods or services.

 

While it ordinarily is rather easy to establish whether the defendant’s misrepresentation is likely to mislead any of the plaintiff’s customers, difficulties may arise in relation to cross-border misrepresentations. In Ward Group Ltd v Brodie & Stone,^[26] products of a UK-based company had been made available online and an Australian company argued that this constituted the tort of passing off since it was already selling a product of the same name and type in Australia. The Court concluded that the marketing of a product on a website accessible in Australia did not necessarily mean that the defendant had aimed its representation at the plaintiff’s consumers in Australia:

 

If Australian consumers had been targeted by the website proprietors for the marketing and sale of the UK Restoria products under the Restoria name, the fact that the representation, when made in the United Kingdom, was accurate would probably not save it from becoming a misrepresentation when the representation was made and received in Australia.^[27]

 

Furthermore, similarly to the courts’ approach to actions under ACL s. 18, the likelihood of the plaintiff’s customers being deceived is, as is discussed above (see Chapter 4.1.4), measured by reference to the target group.

 

5.3 Elements relevant for the extended version only

There is only one element that is of relevance to an action brought under the extended version of the tort of passing off and that is not also of relevance to an action brought under the classic version of the tort – association.

5.3.1 Association

The existence of the extended version of the tort of passing off was acknowledged by Deane J in Moorgate Tobacco Co Ltd v Philip Morris Ltd (No. 2),^[28] when he referred to:

the adaptation of the traditional doctrine of passing off to meet new circumstances involving the deceptive or confusing use of names, descriptive terms or other indicia to persuade purchasers or customers to believe that goods or services have an association, quality or endorsement which belongs or would belong to goods or services of, or associated with, another or others…

 

This quote is important in that it helps define the scope of what type of association the misrepresentation must relate to in the case of an action brought under the extended version of the tort. The case of Stone & Wood Group Pty Ltd v Intellectual Property Development Corp Pty Ltd^[29] recently considered the issue of association in the context of two ale products that used the words ‘Pacific Ale’ and ‘Pacific’ in its packaging and labelling. In this case, Stone & Wood not only failed to prove that they the terms ‘Pacific Ale’ and ‘Pacific’ were distinctive of their products, the Court also found that the respondent had sufficiently distinguished their product in colouring and get-up. Thus, this case illustrates that the determination of the element of association is also closely tied to a consideration of the plaintiff’s reputation.

 

5.4 Remedies

Where a party is found to have committed the tort of passing off, the court may award damages or an account of profits or grant an injunction.