Nestle (Fiji) Ltd v Tonga Cooperative Federation [1998] TOLawRp 17; [1998] Tonga LR 120 (7 August 1998)

IN THE COURT OF APPEAL OF TONGA
Court of Appeal, Nuku’alofa

CA 12/97

Nestle (Fiji) Limited

v

Tonga Cooperative Federation

Lewis CJ, Burchett, Beaumont JJ
29 July 1998; 7 August 1998

Trade marks ⎯passing off — distinctive goods

Nestle (Fiji) Ltd [“Nestle”] the appellant, instituted proceedings in the Supreme Court claiming that the respondent, Tonga Co-operative Federation Limited [“The Co-operative”], had passed off one of its snack food products as that of Nestle’s. The packaging and labelling of the two products — their “get up” — in virtually all respects was identical (ie, the type of packaging material, colours on packets, size of packets, printing and diagrams on packets, the placement and colour of printing). The names were also similar — “Bronco” and “Bongo”. Nestle sought (a) a permanent injunction enjoining further passing off, (b) an account of profits and (c) damages. Pending the trial, Nestle moved for, and upon giving the usual undertaking as to damages, obtained an interim injunction enjoining the Co-operative from selling the product. However, at the final hearing, all of Nestle’s claims were, by order of the primary Judge, dismissed. The Co-operative counterclaimed upon Nestle’s undertaking as to damages. The Supreme Court ordered that Nestle pay the sum of $13,630.90 damages by way of compensation for loss suffered by the Co-operative by virtue of the restraint imposed upon it by the interim injunction. Nestle appealed against these orders and sought (1) an order to set aside the judgment at first instance and (2) in lieu thereof, a permanent injunction to restrain the Co-operative from selling its “Bronco” product in Tonga. The order for damages, or for an account of profits, was no longer sought by Nestle.

Held:

1. The necessary elements of the action for passing off: i. that the plaintiff’s goods or services had acquired a goodwill or reputation in the market and were known by some distinguishing feature; ii. that there was a misrepresentation by the defendant (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by the defendant were goods or services of the plaintiff; and iii. that the plaintiff had suffered or was likely to suffer damage as a result of the erroneous belief engendered by the defendant’s misrepresentation.

2. On the facts found by the trial judge, Nestle had demonstrated that all the elements were present.

3. It is not a necessary element of passing off that the misrepresentation be made by the manufacturer or the distributor of the product being passed off; a retailer may be liable to be enjoined even if not intending to pass off.

4. What Nestle had to show, and did show, was that its goods were distinctive in Tonga.

5. The action should have succeeded at first instance and the counterclaim ought to have been dismissed; accordingly, the appeal was allowed.

Cases considered:
Champagne Heidsieck et Cie v Scotto and Bishop (1926) 43 RPC 101 (ChD)
Childrens Television Workshop v Woolworths (NSW) Ltd [1981] NSWLR 273
Customglass Boats Ltd v Salthouse Brothers Ltd [1976] 1 NZLR 36
E Cusenier Fils Aine et Compagnie & George Idle Chapman & Co v Gaiety Bars & Restaurant Co Ltd (1920) 19 RPC 357 (ChD)
Leather Cloth Company v American Leather Cloth Company (Ltd) [1865] EngR 199; (1865) 11 HL Cas 523; 11 ER 1435
Magnolia Metal Co v Atlas Metal Co (1897) 14 RPC 389 (CA)
R Johnston & Company v Archibald Orr Ewing & Co (1882) 7 App Cas 219
Reckitt & Colman Products Ltd v Borden Inc [1990] UKHL 12; [1990] 1 WLR 491; [1990] 1 All ER 873 (HL)

Counsel for appellant: Mr Appleby
Counsel for respondent: Mr Edwards

Judgment

Introduction

This appeal from orders dismissing an action for passing off arises in these circumstances. Nestle (Fiji) Ltd [“Nestle”] the appellant, instituted proceedings in the Supreme Court claiming that the respondent, Tonga Co-operative Federation Limited [“The Co-operative”], had passed off one of its snack food products as that of Nestle’s. Nestle sought (a) a permanent injunction enjoining further passing off, (b) an account of profits and (c) damages.

Pending the trial, Nestle moved for, and upon giving the usual undertaking as to damages, obtained an interim injunction enjoining the Co-Operative from selling the product.

However, at the final hearing, all of Nestle’s claims were, by order of the primary Judge, dismissed. The Co-Operative counterclaimed upon Nestle’s undertaking as to damages. The Supreme Court ordered that Nestle pay the sum of $13,630.90 damages by way of compensation for loss suffered by the Co-Operative by virtue of the restraint imposed upon it by the interim injunction. Nestle now appeals from these orders.

The Judgment under Appeal

The following facts were found by the learned primary Judge. These findings are not challenged on the appeal.

• Nestle, in Fiji, manufactured (and sold to the Co-Operative in Tonga) a packaged and processed corn and rice based flavoured snack food called “Bongo”.

• The Co-Operative sold “Bongo” in Tonga and had done so for at least 10 years.

• Goi Hiang (Singapore) Pte. Ltd manufactured (and through its own network of suppliers sold to the Co-Operative in Tonga) a similar packaged and processed corn based flavoured snack food called “Bronco”.

• The Co-Operative bought 2 containers of “Bronco” in late 1995 (through one of its regular suppliers in Fiji) and sold or otherwise disposed of some 96,281 packets of “Bronco” in Tonga, leaving some 56,311 packets unsold at the time the interim injunction was ordered.

• The packaging and labelling of the two products - their “get up” - in virtually all respects was identical (ie, the type of packaging material, colours on packets, size of packets, printing and diagrams on packets, the placement and colour of printing).

• The survey evidence proved:

- that products “Bongo” and “Bronco” are in fact perceived “to be of high degrees of similarities 100 (sic)”;

- that there are features that “distort any perceptions” of differences between the two products;

- that the public of Nuku’alofa (where the surveying was done) “may be confused to believe that the two products are of the same manufacturing company (sic)”.

After making these findings, his Honour said:

“7. [Nestle] does not sell its ‘Bongo’ product in Singapore, or so it was stated in para 11 of the agreed statement of facts, although I note from the printing on the back of the 20g. packet of ‘Bongo’ produced in Court, that it is stated that the product is ‘Imported by Nestle Singapore (Pte) Ltd, 200 Cantonment Road, #03-01 Southpoint, Singapore 0208’.

8. That leaves me somewhat hesitant about [Nestle’s] position because [it] says, in the course of the submissions on its behalf, that no action has been taken by it against the manufacturer of “Bronco” (Goi Hiang (Singapore) Pte. Ltd) because of its assertion that it does not sell “Bongo” in Singapore and does not trade there.

9. And that is said to be, at least part of the explanation of and the justification for taking these passing off proceedings just against this defendant, who is described in the agreed statement of facts as (i) not trading with the manufacturer of “Bronco” (ie, the Goi Hiang company); and as (ii) not having made any intentional misrepresentation concerning either “Bongo” or “Bronco” products; and as (iii) not being aware that the sale of 130 “Bronco” products, by it, might infringe the rights of the plaintiff.”

Having said that his findings “would indicate a satisfaction, a fulfilling of [the] test [in passing off as to misleading the public]”, his Honour said that he was “concerned with more fundamental matters here”. He explained:

“13. One of those concerns is as to why liability should be visited on a person in the position of this defendant who, as [Nestle] accepts, does not trade with the maker of “Bronco” and who has not made any intentional misrepresentation concerning either product and was unaware that the sale of “Bronco” might infringe the rights of the maker of “Bongo”. The [Co-Operativel is sued in tort - what wrong has it committed? The various authorities referred to me by counsel, on my reading of them, do not seem to have extended liability to someone as remote from the manufacture and packaging of the goods as this defendant is. Let alone to someone in an even approximately equivalent position as that of this defendant, without suing as well the manufacturer and/or packager and/or labeller, and others in the line of distribution, marketing and so on (Refer Leather Cloth Company v American Leather Cloth Company (Ltd) [1865] EngR 199; (1865) 11 HL Cas 523 at 538; [1865] EngR 199; 11 ER 1435; R Johnston & Company v Archibald Orr Ewing & Co (1882) 7 App Cas 219 at 228-9; Magnolia Metal Co v Atlas Metal Co (1897) 14 RPC 389 (CA) at 394; and the four New Zealand cases I referred to in paragraph 6 above).”

His Honour went on to say that “something ... fundamental ... leads me, inevitably, to the view that this claim must fail ... [that is] ... that there is no evidence at all as to which of the two manufacturers — [Nestle] or Goi Hiang — first made the product, let alone adopted, the name, the design of and labelling on the packaging [and all its
features ... mentioned ...].”

The primary Judge stated that Nestle, in its statement of claim, did not allege that it had made and “got up” this product, in its own packaging, first.

Accordingly, his Honour held, Nestle’s claim should fail and the counterclaim should be upheld.

Nestle’s Appeal

By its notice of appeal, Nestle seeks (1) an order setting aside the judgment at first instance and (2) in lieu thereof, a permanent injunction restraining the Co-Operative from selling its “Bronco” product in Tonga. The order for damages, or for an account of profits, is no longer sought by Nestle. Indeed, the Co-Operative having indicated that it does not now intend to sell the product, Nestle no longer asks for an injunction. Instead, it seeks a declaration that the Co-Operative did pass off its product, coupled with a reservation of liberty to Nestle to apply for injunctive relief against the Co-Operative should this become necessary in the future.

In its grounds of appeal, Nestle challenges the conclusion of the trial Judge that an action for an injunction to restrain passing off cannot lie:

• against a vendor of a product who does not trade with the manufacturer and packager of the product.

• against a vendor of a product who does not trade with the manufacturer and packager of the product unless actions are also brought against the manufacturer and/or packager and/or labeller and others in the line of distribution, marketing and so on of the product.

• where the parties in the action are manufacturers of two different products which are the subject matter of the action, if the plaintiff does not sell its product in the place where the defendant’s product is manufactured.

• where the defendant has made no intentional misrepresentation concerning the products which are the subject matter of the action.

• where the defendant is not aware that its actions might infringe the rights of the plaintiff in the action.

Nestle further challenges his Honour’s conclusion that the question which of the “Bronco” or the “Bongo” food products was manufactured first in time, and which of the manufacturers — the appellant or the manufacturer of “Bronco” — first adopted the name, the design of and labelling on the packaging of, respectively, “Bongo” and “Bronco”, was relevant to the issue of whether tortious passing off had occurred.

Nestle next argues that the primary Judge failed to consider the question of market recognition and goodwill in the Kingdom of Tonga in relation to “Bongo” and “Bronco”.

Conclusions on the Appeal

With all respect to the learned trial Judge, there is, in our view, considerable force in Nestle’s contentions.

It is now settled that the necessary elements of the action for passing off are three:

(1) that the plaintiff’s goods or services have acquired a goodwill or reputation in the market and are known by some distinguishing feature;

(2) that there is a misrepresentation by the defendant (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by the defendant are goods or services of the plaintiff; and

(3) that the plaintiff has suffered or is likely to suffer damage as a result of the erroneous belief engendered by the defendant’s misrepresentation.

[see Halsbury’s Law of England, 4th Ed., Vol 48 at 97, citing Reckitt & Colman Products Ltd v Borden Inc

[1990] UKHL 12; [1990] 1 WLR 491 at 499; [1990] UKHL 12; [1990] 1 All ER 873 (HL) per Lord Oliver].

In our opinion, on the facts found by the trial Judge, none of which findings are challenged, Nestle has demonstrated that the above elements were present here.

As to (1), the sales by the Co-Operative of Nestle’s product for at least 10 years under the name “Bongo” and in the get-up described by his Honour, indicated that Nestle’s goods have acquired a goodwill or reputation in the Tongan market and were known in Tonga by the distinctive features of their name and get-up.

As to (2), there was a misrepresentation by the Co-Operative [whether or not intentional] when it marketed a similar product under a similar name, “Bronco”, with a get-up also similar to that of Nestle’s goods, which was likely to mislead the public to believe that the goods offered by the Co-Operative were Nestle’s goods. His Honour’s unchallenged findings of the perceptions of “high degrees of similarities” and of confusion confirm this conclusion.

As to (3), this inference is clearly open, given the likelihood of Nestle’s loss of 230 sales of its product demonstrated by the survey evidence accepted by his Honour.

It is well established that it is not a necessary element of passing off that the misrepresentation be made by the manufacturer or the distributor of the product being passed off. A retailer may be liable to be enjoined even if not intending to pass off. As Ricketson [The Law of Intellectual Property at 573] says:

“It does not matter that a retailer does not know that he is engaging in passing off, although obviously he himself will also be a potential defendant. See, for example, Cusenier etc Co v Gaiety Bars & Restaurant Co Ltd (1920) 19 RPC 357 (ChD); Champagne Heidsieck et Cie v Scotto and Bishop (1926) 43 RPC 101 (ChD); Childrens Television Workshop v Woolworths (NSW) Ltd [1981] 1 NSWLR 273.”

And as Lahore (Patents, Trade Marks & Related Rights at [181,0701]) puts it:

“The defendant ... may be any person who has made the misrepresentation. There may be several possible defendants extending from the manufacturer to the retailer.”

Moreover, “it does not matter what means the defendant uses to represent his goods or business to be another’s. He may simply supply his own in response to an order to the plaintiff, without ever making a positively misleading statement” [see Cornish, Intellectual Property, 3rd Ed at 545].

With all respect to the primary Judge, the authorities he mentions do not support the gloss he sought to make upon the well established principles in this area. Most of those cases dealt with different questions, eg, the admissibility of survey evidence, and are accordingly distinguishable. In any event, all of them accept the settled principles we have mentioned. For instance, in Customglass Boats Ltd v Salthouse Brothers Ltd [1976] 1 NZLR 36, one of the New Zealand cases relied on by the trial Judge, Mahon J said (at 45):

“a plaintiff must show that the use by the defendant of the name or mark indicates a common trade origin for his and the plaintiff’s goods.”

But Mahon J does not suggest that the use cannot be that of a retailer.

It is also now well established that an action for passing off may be brought by a person other than the manufacturer of the goods. As Fleming [Law of Torts, 4th Ed at 628] says:

“it is no longer necessary that the goods in question should be asserted to be of the plaintiff’s manufacture; it is sufficient if there is a representation that the plaintiff has been associated with their production or distribution.”

In our view, Nestle had title to maintain this action.

Nor was it necessary for Nestle to prove that its get-up was designed before the get-up used for the “Bronco” product. Moreover, there was no burden upon Nestle to demonstrate the circumstances of the design of the get-up of the two products, including their timing, in Singapore. Rather, what Nestle had to show, and did show, was that its goods were distinctive in Tonga.

In our opinion, the action should have succeeded at first instance and the counterclaim ought to have been dismissed. Accordingly, we propose to allow the appeal.

Orders

We make the following orders:

1. Appeal allowed, with costs, to be taxed if not agreed.

2. Set aside the orders made at first instance, except order (ii) discharging the interim injunction granted on 14 June 1996. In lieu thereof, make the following orders:

(a) Declare that by selling the “Bronco” product the respondent passed off those goods as the goods of the appellant.

(b) Reserve liberty to the appellant to apply for any injunctive relief necessary to restrain future passing off by the respondent, if it should occur.

(c) Order that the counterclaim be dismissed.

(d) Order the respondent to pay the costs of the appellant of the proceedings at first instance, such costs to be taxed if not agreed.