Re Taco Bell Pty Limited v Taco Company of Australia Inc [1981] FCA 219; (1981) 60 FLR 60 (22 December 1981)

COURT

CATCHWORDS

Trade Practices Act 1974, ss. 52, 53

Trade Practices - Unfair practices - Misleading and deceptive conduct - Principles - "Taco Bell's Casa" - Meaning of name in Sydney commerce - Whether relevant mark distinctive of plaintiff's goods and services - Whether false representation of standard, quality, grade, sponsorship or approval - Trade Practices Act 1974 (Cth), ss. 52, 53.

Trade Practices - Passing off - Action - Remedy for invasion of property in goodwill - Plaintiff to show it had local goodwill. The applicant, Taco Bell Pty. Ltd. a corporation incorporated in New South Wales, had, for several years, conducted a Mexican food restaurant at Bondi, Sydney, under the name "Taco Bell's Casa". It had registered in 1974 in New South Wales "Taco Bell" and "Taco Casa" as business names and the applicant had commenced negotiations to establish similar restaurants under the same name in other parts of Sydney. The respondent, Taco Company of Australia Inc. was a corporation incorporated in the United States of America in 1980 for the purpose of establishing Taco Bell restaurants in Australia, restaurants which were to be similar to some 1,300 distinctive restaurants operating under the name "Taco Bell" mainly in the United States of America. In Australia the respondent operated such a restaurant since 1981 in George Street, Sydney, and used the letters "T.M." in association with "Taco Bell" in advertising its business. Some of the respondent's signs and advertisements stated "Taco Bell is the trade mark to Taco Bell, a California corporation". In an action in the Federal Court of Australia the applicant claimed that the respondent was guilty of misleading and deceptive conduct in breach of ss. 52 and 53 of the Trade Practices Act 1974 and guilty of passing off. The respondent counterclaimed making similar allegations.

Held: (1) The respondent was in breach of s. 52 of the Trade Practices Act 1974 because the respondent by the use of the name "Taco Bell" in its restaurant operations did engage in trade and commerce that was likely to mislead and deceive and was misleading and deceptive in the local market.

Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd. [1978] HCA 11; (1978), 140 CLR 216; Oertli v. E.J. Bowman (London) Ltd., (1957) RPC 388, applied.

(2) That the respondent's licensor had operated or licensed a large chain of "Taco Bell" restaurants in the United States of America was no answer in the present case.

(3) The respondent, by using the name "Taco Bell" as it did, was passing off its business in the Sydney metropolitan area as that of the applicant. The action for passing off was designed to protect the goodwill which exists within the jurisdiction in question and the knowledge by people in Sydney that a successful business under the name of "Taco Bell" was being conducted in the United States of America did not, in this instance, give that business a goodwill in Sydney.

Warnink v. J. Townend & Sons (Hull) Ltd., (1979) AC 731; Star Industrial Co. Ltd. v. Yap Kwee Kor, (1976) FSR 256, applied.

W. & A. Gilbey Ltd. v. Continental Liqueurs Pty. Ltd. [1960] HCA 21; (1960), 103 CLR 406, distinguished.

(4) On the facts of this case the applicant was not entitled to succeed under s. 53 of the Trade Practices Act 1974.

(5) The assertion "T.M." and "Taco Bell is the trade mark to Taco Bell, a California corporation" by the respondent on its signs was not to be regarded as a representation that "Taco Bell" was registered as a trade mark in Australia.

HEARING

Application and counter-application to the Federal Court of Australia seeking orders restraining the parties from using certain business names and from passing off.

A. M. Gleeson Q.C. and J. D. Heydon, for the applicant.

R. L. Hunter Q.C. and W. M. Gummow, for the respondent.

Cur. adv. vult.

Solicitors for the applicant: P. W. Turk & Associates.

Solicitors for the respondent: Baker & McKenzie.

E. F. FROHLICH

DECISION

Since 3 September each of the restaurants conducted by the respondent has traded under the name "Taco Bell". In advertising and on signs relating to its business it has used the letters "T.M." in association with the name "Taco Bell" and has stated "Taco Bell is the trademark of Taco Bell, a California Corporation".

The applicant claims that the respondent is guilty of misleading or deceptive conduct and of making false representations contrary to ss. 52 and 53 of the Trade Practices Act 1974 ("the Act") and is passing off the respondent's goods and services as the goods and services of the applicant.

The respondent denies these claims and has itself lodged a counter-claim alleging misleading and deceptive conduct, false representations and passing off by the applicant. For the purposes of these claims it has added as a cross-claimant another American company, Taco Bell and as cross-respondents, directors and shareholders of the applicant.

I shall first set out the significant facts relevant to the determination of the claim and the cross-claim.

The applicant was originally incorporated on 13 March 1973 under the Companies Act 1961 (N.S.W.) as "B. & B. Mexican Enterprises Pty. Limited". On 7 December 1976 B. & B. Mexican Enterprises Pty. Limited changed its name to Taco Bell Pty. Limited. On 8 February 1974 the applicant registered the names "Taco Bell" and "Taco Casa" as business names under the Business Names Act 1962 (N.S.W.). At all material times since its incorporation the applicant has conducted a mexican food restaurant at Bondi. The original owner of the restaurant was an American, Bill Chillcoate, who opened it in September 1970. According to statements in documents which are in evidence before me it was the first mexican food restaurant to be opened in Sydney. The restaurant was at first run under the name "Taco Bill's" and "Taco Bill's Casa" Prior to June 1977, the shares in the applicant were owned by James Bruce Baird and James David Baird. During their ownership thereof the name of the restaurant was changed from "Taco Bill's" and "Taco Bill's Casa" to "Taco Bell's Casa".

On 3 June 1977, the shares in the applicant were purchased from the Bairds by Eric Francis & Co. Pty. Limited and Denbrad Management Pty. Limited which have been joined as cross-respondents by the respondent. At that date the business was conducted by the applicant in the restaurant under the name "Taco Bell's Casa". The directors of the company are now Eric Francis and his son Robert Francis who have also been added as cross-respondents. Eric Francis & Co. Pty. Limited is now the sole beneficial shareholder of the applicant.

The restaurant at Bondi seats approximately 90 people and it's gross sales have increased from approximately $170,000 in the year ended 30 June 1978 to approximately $306,000 in the year ended 30 June 1981. It is estimated that it catered for between 48,000 and 49,000 diners in the year ended 30 June 1981. It caters mainly for customers who wish to be served by a waiter and dine on the premises but also offers a facility for take-away food. Its meals are relatively inexpensive. The name "Taco Bell's Casa" is displayed on the awning and on the front window of the restaurant as well as on the menu. The name "Taco Casa" appears on a board on the front window of the premises and this name has in the past been used in connection with the restaurant. I am satisfied, however, from the evidence, that despite any such use the restaurant is known as "Taco Bell's Casa" or "Taco Bell's". The name "Taco Tucker" was also used after the take-away food operation was commenced.

The applicant's restaurant has since 1971 been advertised in the ordinary and classified sections of the Sydney telephone directory. Since (but not including) the 1977 directory, it has been advertised in each section under the name "Taco Bell's Casa". It has also been advertised in the "Wentworth Courier", a newspaper circulating in the Eastern Suburbs of Sydney.

From time to time it has been mentioned in newspaper and magazine articles and copies of these dating from February 1978 till March 1981 are in evidence. In articles dated February 1978 and March 1980, it is referred to under the name "Taco Bill's Casa". In the "National Times" of September 1980 and the "Sydney City Monthly" of March 1981 it is referred to as "Taco Bell's Casa".

Up to the time of the hearing the applicant had only established one restaurant, but Mr Robert Francis, a director of the company, gave evidence that he had always been of the view after taking over the restaurant in 1977 that, if the business proved successful, the restaurant should be expanded, by which I take him to mean the applicant should open up other restaurants. He has also held the view that it might open up a restaurant in the inner city.

In October 1979, after instructing the manager to look for suitable premises, a restaurant was inspected in Glebe. Since April 1980 a number of real estate agents have been approached and enquiries have been made concerning the availability of a suitable location where a second "Taco Bell's Casa" restaurant might be established. Since October 1979, over 8 premises have been inspected on behalf of the applicant with a view to expansion. Sites have been considered in the St. George, Parramatta, Hurstville, Glebe and Dee Why areas.

In August 1981 negotiations were commenced to purchase a restaurant at Pittwater Road Manly in the name of a company of whose shares the applicant is part owner. In October contracts were exchanged to purchase the goodwill and equipment of the restaurant for $52,500. It is the intention of the purchasing company, when the sale is completed, to operate a mexican food restaurant there similar to the one at Bondi under the name "Taco Bell's Casa".

The respondent was incorporated in the State of Delaware in the United States of America in 1980 for the purpose of establishing and operating Taco Bell restaurants in Australia. It is a wholly owned subsidiary of another American company, Pepsico Inc. of the United States. The cross-claimant, Taco Bell, is incorporated in California and is also a wholly owned subsidiary of that American company.

The restaurants which the respondent opened this year in George Street and at Granville are, it is said, operated under licence from the cross-claimant, Taco Bell. This last-mentioned company, operates and franchises the operation of a large chain of mexican food restaurants under the name "Taco Bell" in the United States, Canada and Guam. It is the intention of the respondent to open and operate other "Taco Bell" restaurants in the Sydney metropolitan area if it is successful in these proceedings. These would include restaurants in the eastern suburbs. In the long term other persons would be franchised to operate such restaurants.

In 1962 a Mr Glen Bell opened a mexican food restaurant in California under the name "Taco Bell". He subsequently opened more restaurants operated in the same style and under the same name and granted licenses or franchises to others to operate similar restaurants. There are at present some 1366 restaurants operated under the name Taco Bell in 40 States of the United States, in Canada and in Guam. The number of such restaurants has increased from 325 in 1969 to 1100 in 1979. In 1970 there were 232 operating in California and 157 in other States of the United States. In 1980 there were 345 operating in California and 925 in other States. The number of restaurants operated by Taco Bell itself presently exceeds those operated by others under franchise from it. The whole chain employs over 10,000 people. Taco Bell is the assignee of the rights in the name "Taco Bell" of the founder Mr Glenn Bell.

Taco Bell restaurants have always had a distinctive appearance. There is a standard mexican decor and architecture with a distinctive bell tower and bell. The restaurant at Granville is typical of the general style of Taco Bell restaurants elsewhere. The George Street restaurant is also typical except for the fact that it was not practical to change the style of architecture of the building to conform exactly to the "mission" style of the Taco Bell buildings. Evidence was given as to how the restaurants have been conducted in the United States.

Taco Bell restaurants in the United States are operated according to a standard system. The menu is the same. The food is prepared to the same recipe and is presented in the same way. They are brightly lit and emphasise take-away food or a very quick sit-down meal. There is no table service and bookings are not accepted. Customers order their food at the counter, receive it wrapped and either take it away or eat it at the tables. Liquor is not sold on the premises and it is company policy not to allow the consumption of alcohol. There is an emphasis on hygiene, cleanliness and tidiness. All staff wear uniforms. The general colour scheme of yellow, orange and brown is followed in packaging, signs and uniforms. The restaurants compete directly with other chains of stores selling what is often referred to as fast food such as McDonalds.

The required method of establishing, operating and promoting Taco Bell restaurants is specified in a number of manuals and handbooks. There are standard requirements for decor, signs and presentation. There is an operations manual dealing with customer service, food preparation, menu preparation, packaging, multiple window service procedure, daily restaurant operations, records, restaurant security and control, accounting, safety, cleaning and maintenance and franchise restaurants. There is a restaurant manager's handbook, a local store marketing handbook, an operations proficiency training handbook and various other manuals dealing with all aspects of the operation and promotion of the restaurant. The central management of Taco Bell in the United States regularly circulate the restaurant managers and franchisees memoranda providing information about and making suggestions for improving operations and promotion.

Mr Robert Francis, a director of the applicant, says that at the time his family purchased the shares in 1977 he had never heard of the name "Taco Bell" in any other context. He says that he first heard of the name in reference to restaurants in America in July 1978 when he saw an article appearing in the Financial Review of 3 July announcing that Pepsico Inc. had completed its merger with Taco Bell Inc.

In fact no restaurant or other business under the name "Taco Bell" had been carried on by the California corporation Taco Bell or its affiliates or franchisees in Australia prior to the commencement of business in George Street on 3 September 1981.

The American corporation, Pepsico Inc. is also the parent company of the Pizza Hut corporation which conducts a chain of fast-food outlets in the United States and Australia. In August 1979, Mr Robert Francis was approached by a representative of the Pizza Hut corporation enquiring whether he was interested in selling the name Taco Bell. Nine months later he was approached by another representative of Pizza Hut on the same subject. These discussions did not lead to any agreement. On 24 November 1980 Mr Francis received another approach from the Solicitors for the American corporation but without result.

Around this time it was announced that Pepsico Inc. was about to set up in Australia a chain of mexican fast-food outlets under the name "Casa Amiga". Newspaper articles to this effect dated January 1981 are in evidence. In fact, the restaurant opened at Granville by the respondent in January 1981 was opened under the name "Casa Amiga". It was conducted under this name until September last when the name was changed to "Taco Bell".

There was some conflict in the evidence as to what was said in the conversations between Mr Robert Francis and representatives of the respondent and its parent corporation. I do not think anything turns on the detail of these conversations. They are relevant only in the sense that they establish that the respondent and its parent and affiliate companies were aware of the existence of the applicant's restaurant at Bondi as early as 1979 and were willing to acquire the name "Taco Bell's Casa" from the respondent if a price could be agreed upon. It is also clear that they were aware of the applicant's firm intention to continue to use the name "Taco Bell's Casa".

Photographs of the respective restaurants at Bondi, Granville and George Street are in evidence and I have had the benefit of a view of the George Street and Bondi restaurants. Also in evidence are examples of the packaging and other literature used in the respondent's restaurants. They are apparently copies of the distinctive packaging and literature used in the American chain.

Copies have also been tendered of the menus and table mats used in the applicant's restaurant over the years of its operation.

Taco is a word of Spanish derivation and one of its meanings is "a snack". Apparently it is frequently used in cookbooks, restaurant reviews and menus to denote a crisp folded corn waifer filled with other food typically cooked ground beef, fresh lettuce, tomato and shredded cheese. The word "casa" means "house".

The cross-claimant, Taco Bell, is registered in the United States as the proprietor of the trademark "Taco Bell" in various manifestations. Copies of the certificates of registration are in evidence. It has also applied for registration of the trademark "Taco Bell" in Australia and these applications are pending.

As stated earlier, the applicant at present serves approximately 48,000 or 49,000 diners in a year. These customers reside mainly in Bondi, the eastern suburbs and other parts of Sydney.

A number of witnesses were called on behalf of the applicant to prove reputation and to establish deception or a likelihood of deception. In each case these witnesses formed views (variously expressed) that on hearing of or seeing the respondent's new restaurant they thought there was a connection between it and the Bondi restaurant conducted by the applicant. It also seems that in each case, as a result of discussions with the applicant's staff these false assumptions were corrected. The witnesses came from Bondi, other eastern suburbs and other suburbs of Sydney. Several knew the director, Mr Robert Francis.

Their reactions on hearing of or seeing the George Street restaurant of the respondent varied. One thought the Bondi restaurant had expanded to the city, another thought - "they must have opened another one". Another, on hearing on the radio that Taco Bell was opening mexican food restaurants in Granville and in the city, thought they were being conducted by "Taco Bell's Casa" of Bondi. Another thought "fancy him opening up in town and not letting me know". Others thought they were connected or that the Bondi restaurant had expanded. Another assumed the restaurant at George Street was a franchise of "Taco Bell's Casa" restaurant at Bondi.

As stated earlier, all these views, which of course were false, were corrected by the applicant's staff.

These witnesses, however, did not simply wonder about the matter or only become confused as to whether it was one business or the other. They actually formed a view which was incorrect. All except one were cross-examined and most agreed that they noticed differences between the respondent's restaurant in George Street and that of the applicant. They had varying occupations such as nurse, dental surgeon, building supervisor, publisher, bank officer, computer operator, property manager and student.

A large number of affidavits (in excess of 50) were filed on behalf of the respondent from deponents who had come to know the Taco Bell chain of restaurants in the United States and who live in Australia. Some learned of them while visiting that country, others learned of them whilst living there and later came to Australia to live. Some of them learned of Taco Bell in the United States in the 1960's and others more recently. Each of them gave evidence of the circumstances in which they came to know the Taco Bell restaurants overseas. Each of them seemed to be aware of the nature of the restaurants as mexican fast food outlets and of their distinctive architecture as well as the use of a bell along with the name "Taco Bell". Some of them were aware of the applicant's restaurant at Bondi. Those who were, said they wouldn't connect it with the American chain. Some of them had become aware of the respondent's restaurants at Granville and George Street and had immediately associated them with the restaurants with which they had become familiar in the United States. Several of them who saw the restaurant at Granville when it was called "Casa Amiga", immediately associated it with the Taco Bell restaurants in the United States.

I think it is clear from this evidence that there is a significant group of people in the Sydney area who are aware of the Taco Bell chain of restaurants in the United States, of the use in relation to them of the name "Taco Bell", of the distinctive nature of their architecture and get-up used, of the use of a bell with the name "Taco Bell" and of the nature of the business they conduct. Such people are most unlikely to be confused between the Taco Bell American chain and the Bondi restaurant of the applicant. On seeing the Granville or George Street restaurants of the respondent or restaurants identical to them they would associate them with the American chain. In other words, because of their previous experience, they would not be misled or deceived. If they visited the applicant's restaurant at Bondi it is clear from the evidence of some of these witnesses that they would not regard it as associated with the American food chain.

In my opinion, the facts I have outlined and the evidence which supports them, establish that the applicant has, since at least 1977, conducted a restaurant at Bondi under the name "Taco Bell's Casa" and that that restaurant has been patronised by people who come from various parts of the metropolitan area of Sydney. Over the period, its business has grown and at present approximately 48,000 or 49,000 diners are catered for each year. I think a significant number of these people have come to know the restaurant as "Taco Bell's Casa" or "Taco Bell's".

I also conclude from the evidence that a substantial number of those who have dined at the restaurant, who would themselves form a significant section of the public, would on seeing the respondent's restaurant at George Street or Granville, form the view that in some way it was associated with the applicant and its restaurant. Their views might vary, e.g. they may think it is "the same business" or that it is a "franchisee" or is a "branch" of the business conducted at Bondi. This would be so, in my opinion, notwithstanding the distinctive nature of the architecture and get-up of the respondent's restaurant and notwithstanding the obvious differences in the style and manner of conducting them.

Indeed, the evidence before me of what customers of the applicant's restaurant thought on seeing the respondent's supports the conclusion I would have drawn from the similarity between the two names - that is, that the ordinary member of the public knowing of the Bondi restaurant would conclude that there was some business connection between the two establishments. I don't think there can be any real doubt on the evidence before me, that the truly distinctive feature of the applicant's restaurant which fixes in the customer's mind is it's name "Taco Bell's Casa". On seeing the name "Taco Bell" as the name of a fast-food outlet in George Street, I think it natural that a customer of "Taco Bell's Casa" would think there was some business connection between the two. The fact that the businesses are different and that the "Taco Bell" restaurants have the distinctive features in their get-up etc. would not, in my opinion, prevent this conclusion from being drawn. Indeed some who had been to "Taco Bell's Casa" might patronise the George Street restaurant believing it to be so connected whether they saw it first themselves or heard of it from others. Others not knowing "Taco Bell's Casa" and having patronised the George Street restaurant on seeing the restaurant at Bondi or at some other location, e.g. Manly, might go there expecting the same type of service as they received at George Street. In either case, deceived by the similarity of the names, they could act to what they might regard as their detriment.

It was submitted by counsel for the respondent that the ordinary member of the public, who knew the applicant's restaurant and who, on seeing the respondent's, formed the view that it had a business connection with the applicant's, would, if he or she patronised the respondent's, quickly realise it had no connection because of the obvious differences and the emphasis on the American connection in the signs and literature used in the restaurant. There is a great deal of force in this argument.

However, having considered the relevant evidence, I am satisfied that there would be a significant section of the public whose initial misconception, induced by the similarity between the names, would not be removed in this way. There would be those who wouldn't notice the literature - remembering the restaurant is designed for people in a hurry - and there would be others who, even if they noticed it, would not necessarily conclude that there was no business connection between the two.

The ordinary public are educated to treat distinctive names like "Taco Bell" as representing the goods or services of particular traders and if they are confronted by the use of very similar names, I think it takes a great deal to remove the assumption which they naturally make - that the goods or services in relation to which they are used are the product of the same or a related business. In any event, those who go into the "Taco Bell" restaurant in George Street or Granville, believing it to be connected with the Bondi restaurant, would have acted on the faith of the misconception before they were confronted with the literature and other material in question.

It was submitted that the words "Taco" and "Casa" were well known mexican words and that the names "Taco Bell" and "Taco Bell's Casa", although adapted to distinguish a particular restaurant had a descriptive character about them. It is not clear to me from the evidence that the words are well known or that their meanings are well understood here. However, I am prepared to assume that some members of the relevant public here would be aware of their descriptive character. Nevertheless when used in the name "Taco Bell" or "Taco Bell's Casa" they are composite parts of names which I am satisfied are quite apt to distinguish one restaurant from another.

It is equally clear however, that there is a significant section of the public who would, on seeing the respective restaurants, not be deceived in the manner I have described, because they are familiar with the Taco Bell chain of restaurants in the United States. It is likely that they would know sufficient about that chain not to be confused or deceived on confronting the different style of restaurant conducted by the applicant. These people would neither be misled nor confused. On the balance of probabilities, I am satisfied that people who obtained this knowledge of the American chain exist as a significant section of the public in Sydney and so existed before the applicant started using the name "Taco Bell's Casa" prior to 1977.

It is clear, of course, that neither the respondent nor Taco Bell, the California corporation, nor any of their United States affiliates, conducted any business activity here in relation to restaurants under the name "Taco Bell" prior to September 1981. There were, for instance, incidental references to Taco Bell as a United States food outlet in a film "China Syndrome" shown in Australia, in the "Daily Mirror" newspaper (September 1979) and in a recording. It may have been referred to in financial articles such as those appearing in the Financial Review. However, none of these uses of the name was part of business activity conducted by the respondent, Taco Bell of California, or their affiliates. There was no advertising in Australia by or on behalf of the United States chain nor any other endeavour to attract Australian custom for their products or services.

All this evidence, the applicant claims, establishes that there has been a breach of s.52 and s.53 of the Trade Practices Act by the respondent and a passing-off by it of the applicant's business. It asserts that, notwithstanding that there is a significant number of people in the Sydney area who, by reason of their association with the United States, have a knowledge of the United States "Taco Bell" chain, this knowledge related to what occurred in the United States did not result from business activity here by or on behalf of the respondent or the Taco Bell corporation and was not the result of any attempt to establish a business here. It submits that the United States corporation has no goodwill here by virtue of this knowledge and that the only relevance of it is that it shows that there are some people in the community who would not be deceived by the respondent's actions.

The applicant submits that it is not only its existing customers who need protection from the likelihood of misleading and deception, but also those who may patronise its restaurants in the future and those who come to its restaurant having been to the respondent's. All this misleading and deception, it is submitted, is the result not of the applicant's conduct but the respondents' and therefore the respondents should be restrained from continuing it. In a similar vein the applicant asserts that it is entitled to a finding that the respondent has passed off its business as and for the applicant's business.

Were this simply a case of a respondent who or whose affiliates had never been associated with "Taco Bell" restaurants, I do not think there could be any real doubt that in commencing business here under that name it would be guilty of a breach of s.52. However, this is not the case, and the proper determination of the issues raised by the parties depends, to a very large degree, on the effect in law of my finding of fact that there is and has been since prior to the use of "Taco Bell's Casa" by the applicant, a significant section of the public in the Sydney area who are aware, in the manner I have described, of the "Taco Bell" chain of restaurants in the United States with which the respondent is now associated. Does it mean that the respondent has a reputation here which it can protect from passing off or which it can rely upon as a defence to any such action by the applicant.

In dealing with the effect of that fact, it is convenient to deal first with the alleged breach by the respondent of s.52 of the Act.

In order for such a breach to be found it must be established by the applicant that it is the respondent's conduct in trade or commerce that has caused or is likely to cause any misleading or deception. (Hornsby Building Information Centre Pty. Limited v. Sydney Building Information Centre Limited [1978] HCA 11; (1978) 18 A.L.R. 639).

At first sight it does appear that it is the respondent's action in opening the restaurants which has caused or is likely to cause the misleading or deception. If it did not conduct them the deception would not occur. However, similar arguments could have been used against the Sydney Building Information Centre in the above case. The fact that in that case the respondent used descriptive words in its title caused a degree of confusion in the public mind but this had to be accepted because the respondent was doing no more than describing its business. Here the words "Taco Bell" are not descriptive. They are as I have found words clearly capable of distinguishing one trader's business from another. What is suggested is that the respondent had an existing reputation in Australia and that all it was doing was taking advantage of or expanding that reputation.

The respondent claims that it is the applicant that has caused any deception because it deliberately chose to use the name and take advantage of the international reputation of the American "Taco Bell" chain. In my opinion, the evidence does not support this conclusion. There is certainly no evidence that the applicant or its then directors knew of any existing reputation in Australia attaching to the American chain or decided to take advantage of it when the name "Taco Bell's Casa" was adopted. The restaurant was previously called "Taco Bill" and perhaps "Taco Bill's Casa" and this may have derived from the christian name of the original owner, Bill Chillcoate. In my opinion, the most that can be inferred is that the person who caused it to be adopted was an American and that he adopted "Taco Bell's Casa" knowing it was the name of such a chain. However, even if it was deliberately chosen it does not follow that it was the applicant and not the respondent who is guilty of misleading or deceptive conduct or passing off.

If I am to hold that the respondent has infringed s.52 of the Act, I must be satisfied that it has engaged in trade and commerce in conduct that is misleading or deceptive or is likely to mislead or deceive. Passing off is a classic instance of deception in the marketplace and it has been held that in applying s.52 assistance is to be gained from cases relating to passing off. The law of passing off recognises a trader's right to protect the goodwill which attaches to his business because a particular name etc. has become distinctive in the market of or, to put it another way, has come to mean his goods or services. Clearly the use by one trader of a name which has become distinctive of the goods of another can be as misleading and deceptive in the marketplace as a false statement made by a trader about the goods of another. Basic to establishing such deception is proof that in the marketplace the particular name etc. distinguishes or means to consumers the goods or services of an identifiable trader.

The point is clearly made in the judgment of Jenkins L.J. (as he then was) in Oertli v. Bowman ((1957) R.P.C. 388) in the following passage (at p.397):-

"It is of course essential to the success of any claim in respect of passing-off based on the use of a given mark or get-up that the plaintiff should be able to show that the disputed mark or get-up has become by user in this country distinctive of the plaintiff's goods so that the use in relation to any goods of the kind dealt in by the plaintiff of that mark or get-up will be understood by the trade and the public in this country as meaning that the goods are the plaintiff's goods." (Appeal to House of Lords dismissed (1959) R.P.C.1).

Section 52 in its application to this case is concerned with trade and commerce in Australia and in particular trade and commerce in the Sydney metropolitan area. By way of contrast, it is clearly not concerned with conduct by an American company in trade and commerce in the United States. The question therefore for the purposes of s.52 is what did the name "Taco Bell's Casa" as at 3 September 1981 mean in trade and commerce in the Sydney metropolitan area.

On the basis of the findings I have already made there was, at that date and, in my view, there still is, a significant number of members of the public in the Sydney metropolitan area who, in my opinion, regard the name "Taco Bell's Casa" as denoting or meaning the restaurant business conducted by the applicant at Bondi and who would on seeing that name or a name such as "Taco Bell" used in connection with a restaurant elsewhere within the Sydney metropolitan area believe that it was a restaurant which had a business connection with the applicant's. Clearly enough if the restaurant was not conducted by the applicant or had no such connection they would thereby be misled or deceived.

Furthermore, in my opinion, a significant number of such people would, on seeing the name "Taco Bell" as used by the respondent in connection with its restaurants in Granville and George Street, believe that they had some business connection with the applicant.

However, there was also, as at 3 September 1981, a significant number of people in Sydney who knew the "Taco Bell" chain of restaurants in the United States and who knew that in the United States the name "Taco Bell" meant the restaurants that they had come to know there. They had noticed the distinctive character of those restaurants and when they saw a similar style of restaurant open in Sydney on or after 3 September last, they thought the American chain had opened up here. They were clearly not deceived.

Does this mean, therefore, that, as at that date, the name "Taco Bell" or "Taco Bell's Casa" had no clear meaning in Sydney or that "Taco Bell's Casa" meant one trader and "Taco Bell" another? Is it therefore deception of the public which has to be accepted? Is the respondent merely using its licensor's name and, so far as this second group of people are concerned, taking advantage of it's reputation here?

In my opinion, the answer to this apparent dilemma lies in what I have already stated - that s.52, for the purposes of its application to the present case, is concerned with the protection of the consumer in trade and commerce in the local market in the Sydney metropolitan area and the question which arises is what did the words "Taco Bell" mean to those consumers on 3 September 1981. The evidence, I think, establishes quite clearly, that, at that time, the words "Taco Bell" were part of a name "Taco Bell's Casa" which meant to those consumers a restaurant at Bondi in fact conducted by the applicant. Neither the respondent nor its licensor had previously conducted any restaurant business in Australia using the name "Taco Bell" nor had they attempted to attract the custom of people in Sydney to their business outside Australia. In trade and commerce in the local market the name, therefore, could not have had a meaning to consumers which denoted them. To some people residing here it had and has a meaning connected with them but this relates to what the name "Taco Bell" means in the United States.

Since s.52 is concerned with consumers in the local market and since "Taco Bell's Casa" at the relevant date meant to them, as I have found, the applicant's restaurant, any use in the restaurant trade in that market of the name "Taco Bell's Casa" or any name similar to it (such as a "Taco Bell") which, contrary to the fact, led or was likely to lead such consumers to believe that the person so using it was connected in a business sense with the applicant, would be deceptive or misleading conduct in trade or commerce and a breach of s.52. The use by the respondent of the name "Taco Bell" in the manner complained of was such a use and in my opinion was a breach of s.52. It is no answer that the respondent's licensor has operated or licensed a large chain of "Taco Bell" restaurants in the United States and that a significant number of people in Sydney know of them for this is knowledge of what "Taco Bell" has meant in the United States. When they see the respondent's restaurants in Sydney they may quickly relate this knowledge to those restaurants but when this happens the respondent is building on a reputation which exists, not in this market, but, in the United States market.

As I have said earlier, it is appropriate, in applying s.52 to have regard to the principles relating to the action of passing off. A consideration of those principles shows, in my opinion, that the view I take as to the application of s.52 to the facts of this case is consistent with them.

Jenkins L.J., in the passage I have quoted, pointed out that a plaintiff in such an action must show that the relevant mark by user in the local market has become distinctive of its goods or services.

There have, however, been cases where courts have tended to regard knowledge by people, in the local market, of the name or mark a foreign trader uses in a foreign market, as sufficient to establish reputation in the local market for the purposes of restraining passing off. The respondent's argument relied heavily on a number of cases which, it was said, support this proposition. (See Fletcher Challenge Limited v. Fletcher Challenge Pty. Limited (1981) 1 N.S.W.L.R. 196; Westinghouse Electric Corporation v. Thermopart Pty. Limited (1968) W.A.R. 39; Poiret v. Jules Poiret (1920) 37 R.P.C. 177; Panhard et Levassor v. Panhard-Levassor Motor Co. Ltd. (1901) 18 R.P.C. 405; Sheraton Corporation of America v. Sheraton Motels (1964) R.P.C. 202; Baskin Robbins Ice Cream Co. v. Gutman (1976) 2 F.S.R. 545; Maxim's Limited v. Dye (1977) 1 W.L.R. 1155; C. & A. Modes v. C. & A. (Waterford) Limited (1978) F.S.R. 126; Wienerwald Holding A.G. v. Kwan, Wong, Tan & Fong (1979) F.S.R. 381; Metric Resources Corporation v. Leasemetrix Ltd. (1979) F.S.R. 571).

The applicant, on the other hand, submitted that the reputation which a trader has to establish in order to sustain an action for passing off must flow from business activity on that trader's part within the jurisdiction and a number of recent decisions were cited in support of this. (See Globelegance v. Sarkission (1974 (R.P.C. 603; Alain Bernardin et Compagnie v. Pavilion Properties Ltd. (1967) R.P.C. 581; Amway Corporation v. Eurway International Ltd. (1974) R.P.C. 82; The Athletes Food Marketing Associates Inc. v. Cobra Sports Ltd. (1980) R.P.C. 343; Lettuce Entertain You Enterprises Inc. v. Gaunts (unreported - see EIPR (May 1980) 170).

In B.M. Auto Sales Pty. Limited v. Budget Rent A Car System Pty. Limited (1976) 51 A.L.J.R. 254, Gibbs J. (as he then was) referred to this problem (without deciding it) in the following passage at p.258:-

"The main argument presented on behalf of the appellants on this aspect of the case was that it had not been established that the name had become distinctive of the respondent's business in the Northern Territory at any material time. It was submitted that it was not enough that the name had become distinctive of the respondent in (say) New South Wales or that persons from New South Wales who had dealt with the respondent there, and who wished to hire a car from the respondent in Darwin, were confused by the similarity of names. It was said that it was not proved that the respondent had at any material time acquired a reputation under its business name in Darwin and that the fact that it had acquired a reputation elsewhere was not enough. Particular reliance was placed on the decision in Alain Bernadin et Compagnie v. Pavilion Properties Limited (1967) R.P.C. 581. In that case, and in the later case of Amway Corporation v. Eurway International Ltd. (1974) R.P.C. 82, it was held that in order for a plaintiff to succeed in maintaining in the English courts an action for passing off, the plaintiff must have acquired a business reputation in the United Kingdom which was entitled to be protected, that this could only be acquired by some sort of user in the United Kingdom, and that some knowledge of the name of the plaintiff, without any business activities of the plaintiff, in the United Kingdom, would not be sufficient. However, very slight activities in England have been held to suffice; for example, it was enough that the plaintiff took bookings in England (Sheraton Corporation of America v. Sheraton Motels Ltd. (1964) R.P.C. 202) or carried out orders in England (Poiret v. Jules Poiret Ltd.(1920), 37 R.P.C. 177). The judgments of Knox C.J. and Dixon J. in Turner v. General Motors (Australia) Pty. Limited [1929] HCA 22; (1929) 42 C.L.R. 352 are consistent with these authorities."

In The Athletes Foot Case (supra) Walton J. considered most of the cases cited on behalf of the respondent and the applicant and decided that a plaintiff cannot sue for passing off if he has no customers or nobody who is in a trade relation with him in the jurisdiction. He summarised his views in the following passage (supra at p.350):-

". . . . . it would appear to me that, as a matter of principle, no trader can complain of passing off as against him in any territory - and it will usually be defined by national boundaries, although it is well conceivable in the modern world that it will not - in which he has no customers, nobody who is in a trade relation with him. This will normally be expressed by saying that he does not carry on any trade in that particular country . . . . . but the inwardness of it will be that he has no customers in that country; no people who buy his goods or make use of his services (as the case may be) there."

In that case Walton J. refused to grant an injunction because the plaintiffs did not disclose "one single solitary transaction by way of trade with anybody in this country at all".

Having considered all the authorities cited, I agree in general terms with the conclusion which Walton J. reached. In order to succeed in an action for passing off in relation to the Sydney metropolitan area a plaintiff must show that it has a goodwill here. This can usually be established by proof that there has been some prior business activity here involving the use of the name or mark or get-up in question in relation to the plaintiff's goods or services. The nature and degree of business activity will differ from case to case. It does not follow from what Walton J. said that a single transaction will always suffice. In some cases it may. Nor is it necessary that a plaintiff has established a place of business here. It's goods may have been imported and sold here under the relevant name or mark by another. It may have licensed people to use its name or mark on products which are sold there. It may have advertised here to solicit orders by post from the public or to encourage the public to travel to do business at its premises in another country. In this time of fast communication it may even have solicited customers here to travel long distances to another country to use its services there.

Many of the cases cited on behalf of the respondent can, I think, be explained on this basis. For example, Poiret's Case, Panhard-Levassor's Case, Sheraton's Case Maxim's Case, C. & A. Modes Case and the Metric Resources Case. In the Baskin Robbins Case and Wienerwald's Case no injunction was granted. The decisions in Fletcher Challenge and Westinghouse Electric Corporation, do not, in my view, support the broad proposition for which they were cited in argument. In each case there appears to have been some prior business activity involving use of the name. In Fletcher Challenge, Powell J. regarded the announcement here of the proposed amalgamation and of the proposed new corporate name as creating a new reputation (ibid pp. 198-9, 205) In Westinghouse Electric Corporation the facts are not clear, but it appears that a representative of Westinghouse in Australia advertised "Laundromat" in newspapers and periodicals "circulating in Australia" and that there had, prior to the relevant date, been correspondence between that representative and the defendant's solicitors in Western Australia in which the question of using "Laundromat" had been discussed.

In contrast Alain Bernadin (the "Crazy Horse Case") Amway Corporation Case and The Athletes Foot Case clearly support the proposition that some prior business activity within the jurisdiction is usually necessary to found an action for passing off. Obviously business activity by a trader within the jurisdiction is stressed because it is this that creates goodwill and custom and encourages the public there to seek to do business with the trader.

The importance of proving the existence of a local goodwill to success in an action of passing off is stressed in several recent authoritative statements of the principles underlying the action. I have already referred to Oertli v. Bowman. It is no accident that Jenkins L.J. said that the plaintiff should be able to show "that the disputed mark has become by user in this country distinctive of the plaintiff's goods" (emphasis added). In Warnink v. Townend & Sons (Hull) (1979) A.C. 731 at p.735 Lord Fraser at pp. 755-6 listed the following facts as those which a plaintiff must prove in a passing off action:-

"(1) that his business consists of, or includes selling in England a class of goods to which the particular trade name applies;

(2) that the class of goods is clearly defined and that in the minds of the public, or a section of the public, in England, the trade name distinguishes that class from other similar goods;

(3) that because of the reputation of the goods, there is goodwill attached to the name;

(4) that he, the plaintiff, as a member of the class of those who sell the goods, is the owner of goodwill in England which is of substantial value;

(5) that he has suffered, or is really likely to suffer, substantial damage to his property in the goodwill by reason of the defendants selling goods which are falsely described by the trade name to which the goodwill is attached." (emphasis added).

(See too Cadbury Schweppes v. Pub Squash (1980) 2 N.S.W.L.R. 851, Testut Freres v. J.E. Lightbourne & Co. Ltd. (1981) F.S.R. 458).

In Warnink's Case Lord Diplock (ibid at p.741) also emphasised that the action for passing off was designed to protect the property in the business or goodwill likely to be injured by the misrepresentation. He had previously made the point in the following passage from his judgment in the Privy Council in Star Industrial Co. Ltd. v. Yap Kwee Kor (1976) F.S.R. 256 at 259):-

"Whatever doubts there may have previously been as to the legal nature of the rights which were entitled to protection by an action for 'passing off' in courts of law or equity, these were laid to rest more than 60 years ago by the speech of Lord Parker of Waddington in Spalding v. A.W. Gamage Ltd., 32 R.P.C. 273('the Gamage Case') with which the other members of the House of Lords agreed. A passing off action is a remedy for the invasion of a right of property not in the mark, name or get-up improperly used, but in the business or goodwill likely to be injured by the misrepresentation made by passing off one person's goods as the goods of another. Goodwill as the subject of proprietary rights, is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached. It is local in character and divisible; if the business is carried on in several countries separate goodwill attaches to it in each. So when the business is abandoned in one country in which it has acquired a goodwill the goodwill in that country perishes with it although the business may continue to be carried on in other countries."

All these statements of the relevant principles, in my opinion, emphasise that the action for passing off is designed to protect the goodwill which exists within the jurisdiction in question.

"Goodwill" has been said to be the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which brings in custom. (See Inland Revenue Commissioners v. Muller & Co's Margarine Ltd. (1901) A.C. 217 per Lord Macnaghten at pp.223-4).

A business has goodwill attached to it in a particular place if there is an attraction among people there to do business with it. Even if it has no place of business there people residing there may nevertheless be attracted to do business with it. For example, by buying goods which it produces and are sold there by importers, or by ordering goods from it by mail or by travelling from their residence to its place of business in an adjoining country. This "attractive force" is usually created because there has been some business activity in that place on the part of the owner of the business or those dependent on it, intended to so attract people. One cannot, in logic, exclude the possibility that it could exist because people who live there are prompted to seek out the business by a knowledge gained by them whilst travelling or living in another country where the place of business exists (e.g. a Hong Kong tailor). However, one thing, in my opinion, is clear, namely, knowledge by people in Sydney that a successful business is being conducted in the United States under a distinctive name does not give that business a reputation or goodwill here unless people in Sydney are attracted to do business with it despite the distance separating them. Only then could it be said that there existed in Sydney "the attractive force which brings in custom". In many cases distance or the nature of the business will make it highly improbable that anybody could be so attracted.

Here, the overseas business is operating or licensing the operation of fast mexican food restaurants in the United States under the name "Taco Bell". People living here have for some time been aware of that business because they have travelled or lived in the United States. But neither the proprietor of the business nor any person dependent on it has ever carried on business here. Nor have they sought by advertising or otherwise to attract customers from here to patronise its restaurants in the United States. Indeed, the very nature of the business - conducting fast food outlets - and the great distances separating Sydney from that place makes it highly improbable that they would ever attempt to do so. This case, in this respect, is quite unlike the case of Maxim's Ltd. It is possible that some of those people who have this knowledge, if they travel to the United States, might patronise "Taco Bell" restaurants there, but clearly enough it would be absurd to suggest that they would resort there for that purpose or while living in Sydney attempt to do business with it.

It follows, in my view, that the knowledge of this section of the public in Sydney of "Taco Bell" restaurants in the United States is no evidence of relevant reputation nor of the existence of a goodwill here which the respondent or Taco Bell of California is entitled to protect by an action of passing off. Nor is it, in the circumstances of this case, any defence to an action for passing off by the applicant since, having regard to the evidence, it did not, in my opinion, prevent the applicant from establishing a reputation for its restaurant under the name "Taco Bell's Casa".

The view I have formed as to the principles applicable in actions for passing off is, I think, fully consistent with a number of cases relating to the registration of trademarks in which it has been held by the High Court that a trademark, which is well known overseas, may be registered here by another trader, if it has not been used here by the foreign trader. (See The Seven Up Company v. O.T. Ltd. [1947] HCA 59; (1947) 75 C.L.R. 203; Re Yanx [1951] HCA 28; (1951) 82 C.L.R. 199; Aston v. Harley [1960] HCA 47; (1960) 103 C.L.R. 391; cf. Blackadder v. Good Roads Machinery Co. Inc. [1926] HCA 57; (1926) 38 C.L.R. 332).

This conclusion does not mean, of course, that a knowledge amongst a section of the public of the use of a name by a foreign trader in another country is not relevant in determining what a particular name or mark means in the market place here. For instance, in Gilbey Ltd. v. Continental Liqueurs Pty. Ltd. ((1960) [1960] HCA 21; 103 C.L.R. 406), the plaintiff was unable to establish a reputation in the name "Smirnoff" in relation to vodka, at the relevant date, having regard to the fact that the name "Smirnoff" vodka had long enjoyed an extensive reputation overseas and that the potential market for its product here was provided by a class of persons to whom that overseas reputation was already well known, they having migrated to Australia. Clearly enough, if there is a widely held view that a particular name is used in another country to denote the product or business of a particular trader, it may be difficult for another setting-up business in Australia to establish a reputation in that name for its own product.

However, this is not the case here. There is and has been, as I have held, a significant group of people in Sydney who know the name "Taco Bell" to be the name of a chain of American mexican fast food restaurants. However, the applicant is not specifically conducting its restaurant here with a view to attracting these people. It's restaurant is and has been conducted to attract custom from people throughout the Sydney metropolitan area and as a result there is, on the evidence, in my view, a significant section of the public in Sydney who regard the name "Taco Bell's Casa" as representing the applicant's restaurant and who would, on seeing it or a name such as "Taco Bell" used on another restaurant in Sydney, believe that that restaurant had some business connection with the applicant's.

In other words, there is a significant section of the public who would be likely to be misled or deceived by the use of the name "Taco Bell" by the respondent in the manner proved by the evidence.

Some of those people, in my opinion, would be likely to act on the basis of that misleading or deception. Such misleading or deception, for the reasons I have given, is the fault of the respondent not the applicant. The respondent is therefore in breach of s.52 of the Act.

There would as I have held, be some members of the public, because of their association with the chain in the United States, who would not be deceived, but this does not prevent s.52 from applying to the facts of this case. It is pertinent to note that, so far as the evidence goes, these people would not be deceived by the applicant's conduct either, because none of them, knowing the American chain and noting the differences between the two, would regard the applicant's restaurant as being connected with the American chain.

It also follows in the light of my earlier findings, that, notwithstanding the knowledge of some people in Sydney of "Taco Bell" restaurants in the United States, the respondent, by using the name "Taco Bell" as it has, is, in my opinion, passing off its business in the Sydney metropolitan area as that of the applicant.

The applicant has also claimed that the respondent is falsely representing that the goods and services supplied by it are of the same standard, quality or grade as those supplied by the applicant, that they have sponsorship or approval from the applicant and that the respondent so far as its operation of any restaurant in the Sydney metropolitan area is concerned has a sponsorship from approval of or affiliation with the applicant. In making these claims the applicant relies upon s.53 of the Act. In my opinion, the applicant is not entitled to succeed on any of these grounds. It seems to me that these provisions require proof of the precise representation alleged. Although I have held that the respondent's conduct is likely to lead people to believe that its business is connected with the applicant's I do not think it necessarily involves a representation about the goods supplied by the respondent or that the association is of any particular character such as "sponsorship", "affiliation" or "approval".

The remaining ground relied upon is that the respondent is representing that the name "Taco Bell" is registered as a trademark in Australia.

This ground relates to the assertion by the respondent on its signs and in its literature in association with the letters "T.M." that "Taco Bell is the trademark of Taco Bell, a California corporation". I do not regard this as a representation that "Taco Bell" is registered as a trademark in Australia or that Taco Bell (the corporation) is registered as the proprietor of the mark in Australia. I think that to the ordinary member of the public it is an assertion that "Taco Bell" is in the place where the representation is made the trademark of the California corporation whether registered or not. This case is only concerned with the Sydney metropolitan area. Within that area Taco Bell of California is not, in my view, the owner of the trademark "Taco Bell" and, because I propose to restrain the respondent from carrying on business there under the name "Taco Bell" I assume that it will cease to claim there that "Taco Bell" is the trademark of Taco Bell of California. If it did not, it would be, in my view, misleading or deceptive conduct.

The orders I would propose making are:-

(2) That the respondent by itself its servants or agents be restrained from passing off goods and services supplied in any restaurant in the Sydney metropolitan area not supplied by the applicant as and for goods and services supplied by the applicant;

(3) That the respondent pay the applicant's costs of this application including reserved costs;

(4) That each party have liberty to apply on two days notice.

I would make no order as to damages at this stage but the applicant may apply in relation to this issue under liberty to apply.