“In 2013, it can hardly be doubted that New Zealand and Australia may, for the purposes of enforcing intellectual property rights, be regarded as one market.”

Despite many strides made towards closer economic relations between New Zealand and Australia, the words of Justice Toogood above in the case of Muzz Buzz Franchising Pty Limited v JB Holdings (2010) Limited [2013] NZHC 159 may come as a surprise to many.

The Muzz Buzz case concerned an Australian drive-through coffee outlet franchise business, “Muzz Buzz”, established in Western Australia in 2002, and its New Zealand foe, “Jitta Buzz”, which set up a similar business in Auckland in 2010.

From 2004 onwards the Muzz Buzz business had expanded through parts of Australia, but a substantial majority of its outlets (36 out of 51) remained in Western Australia. Although Muzz Buzz registered trade marks in New Zealand in 2004 and 2007, it was not until August 2011 that a master franchise for Muzz Buzz in New Zealand was granted.

Meanwhile, in 2010, Mr and Mrs Christie opened their first Jitta Buzz drive through coffee outlet in Auckland. Jitta Buzz adopted a similar get up to the Muzz Buzz outlets and the Christies created a web page with a very similar content and look. The Christies denied that they had in any way copied the Muzz Buzz brand or ‘look’, essentially claiming that any similarities were coincidence. Toogood J was not impressed with this evidence, finding in particular that Mr Christie’s denials that he had copied the Muzz Buzz website “offended commonsense”. It was clear that his finding that Mr Christie had been untruthful in that respect also influenced his view as to the credibility of Mr Christie’s explanation as to how the name and branding of Jitta Buzz had come about. He concluded that the success of Muzz Buzz in Western Australia (which Mr Christie admitted he was aware of) must have led them to the conclusion that the branding and marketing strategy worked, and that they had decided to appropriate it to themselves for use in New Zealand by copying the essential elements of the brand.

While the judgment also deals with copyright and trade mark infringement, it is the findings in relation to passing off which is perhaps of most interest. The general requirements for passing off are well established and can be summarised as follows:

  • The plaintiff must show goodwill in the relevant market;
  • There must be a misrepresentation by the defendant, likely to lead the public to believe there is a connection between its goods and/or services and the plaintiff;
  • The plaintiff must have suffered, or be likely to suffer, damage as a result of the misrepresentation.

The problem faced by Muzz Buzz was that they had not traded in New Zealand before Jitta Buzz started business in 2010. Jitta Buzz therefore argued that they had no goodwill in New Zealand at the relevant time. Indeed the only possible sources of reputation in New Zealand appeared to be generalised spill over of reputation from Australia (for example, as a result of New Zealanders visiting Australia and hearing of brand) and the existence of an Australian website and Facebook page accessible to New Zealanders.

In considering this issue, Toogood J turned to the judgments of the Court of Appeal in Dominion Rent a Car Ltd v Budget Rent A Car Systems (1970) Ltd [1987] 2 NZLR 395 (CA), in which it was called upon to consider the extent to which an Australian based company could establish goodwill in New Zealand. The judgments in that case clearly distinguished between reputation, which is not alone sufficient for passing off, and actionable goodwill.

While accepting that where a business has an international reputation extending to New Zealand, the reputation may be tantamount to goodwill, it appears clear from Dominion Rent a Car that some business connection with New Zealand is required, albeit minimal if the international reputation is sufficiently strong. The example of a large multinational such as MacDonalds comes to mind. Even before it entered New Zealand, it most likely had considerable reputation here and little in the way of actual activity would have been required to create goodwill. Cooke P went onto in Dominion Rent a Car to note progress made between New Zealand and Australia towards a common market and suggested that this should be part of the background which should influence the development of the common law in Australasia in this respect.

Having considered Cooke P’s comments in this regard, Toogood J commented:

“This discussion of the globalisation of the marketplace, particularly in relation to New Zealand and Australia, preceded the creation of the Internet and global access to the Web. In 2013, it can hardly be doubted that New Zealand and Australia may, for the purposes of enforcing intellectual property rights, be regarded as one market. This view adopts the indication given by Cooke P in Dominion Rent a Car Ltd over 25 years ago that the courts of New Zealand and Australia should be prepared as far as reasonably possible to recognise the progress that has been made towards a common market.... Nearly three decades on, there can be no doubt that the two markets are even more integrated now.”

On the basis of such market integration, Toogood J concluded that not much in the way of business activity would be required to establish the goodwill and reputation of Muzz Buzz in New Zealand and found that Muzz Buzz had satisfied that requirement.

So what were the activities of Muzz Buzz which allowed it to establish goodwill? Toogood J refers to the fact that Muzz Buzz had registered a trade mark here in 2007, a fact unlikely to have had any bearing on its reputation in New Zealand, and the fact that it “had a well established reputation in Western Australia and elsewhere, including New Zealand, through internet access”. Nowhere in the judgment are there any details of any evidence as to how Muzz Buzz’s internet presence reached New Zealand, or whether even a single New Zealander (other than the defendants) had viewed their web site. One certainly wonders what interest New Zealanders would have had in viewing a web site for a primarily Western Australian drive through coffee business, given that such services are inherently location based and unavailable in New Zealand.

The judge also appears to have been influenced by the confusion evidence of two witnesses. The first was the captain of the Perth Wildcats basketball team, a team sponsored by Muzz Buzz. He deposed that on seeing a Jitta Buzz outlet when visiting Auckland, he had thought it was associated with Muzz Buzz. While this might provide evidence of Muzz Buzz’s reputation in Western Australia, it appears to say little about its reputation here. The second witness was the general manager of Gull New Zealand, who gave evidence that he was familiar with Muzz Buzz, having been a frequent visitor to Perth, and had inspected a Muzz Buzz kiosk there because of the possibility of Gull Australia combining Muzz Buzz services with Gull outlets. Again, he clearly obtained knowledge of Muzz Buzz from a specific connection with the business in Western Australia. It seems unlikely that the experiences of either of these witnesses could be extended to the general New Zealand public.

It may not be doubted that the Australian and New Zealand markets are now far more integrated than 30 years ago. However, in the absence of specific evidence, it is, I submit, a considerable leap further to conclude that a drive through coffee business primarily based in Western Australia with no New Zealand outlets at the relevant time has a reputation or goodwill in New Zealand as a result of its Australian web site and/or Facebook page. The core of passing off is a misrepresentation to consumers of a connection with a pre-existing business, and such misrepresentation simply cannot occur if that business has no awareness, reputation or goodwill.

It is interesting to contrast the Muzz Buzz case with the increasingly stringent approach of the Trade Marks Commissioner, recently endorsed by the High Court in Unilever PLC v McPherson's Consumer Products Pty Limited [2013] NZHC 1458, to establishing awareness of a mark in New Zealand for the purposes of preventing registration of a confusingly similar mark.

Section 17(1)(a) of the Trade Marks Act 2002 prevents a trade mark being registered where its use would be likely to deceive or cause confusion. This section is often used by third parties without a New Zealand trade mark registration to argue that use of a trade mark which is sought to be registered would cause confusion with their own mark, as used in the New Zealand market. In such circumstances, the third party is required to show an awareness of its mark in the market, before the onus shifts to the applicant to show there will be no confusion. It is generally accepted that the threshold for establishing awareness of a mark for this purpose is a low one, and not as high as the passing off threshold for establishing goodwill.

Nevertheless a number of recent cases have shown that the requirement to prove such awareness is not merely a technicality, and cannot be established on the basis of general assertion. Parties have been criticised for not providing details which might help to show such awareness, for example sales figures proportional to the market size, the number of New Zealanders having accessed relevant web sites and the readership, dates and circulation of publications carrying advertisements for the relevant brand.

It is these types of details which one might expect could have shown actual reputation of Muzz Buzz in New Zealand, yet they are noticeably absent from discussion in the judgment.

Whereto from here for the so-called single Australasian intellectual property market? Have we really reached the point of integration where an Australian company with no business activities in New Zealand can prevent a New Zealand business from using a similar name purely by virtue of the fact that it has an Australian web site, even if the services it offered are inherently restricted to a location in Australia?

No doubt the Internet has internationalised business exponentially since the days of Dominion Rent a Car. However it is worth reflecting on the fact that even in those thirty years, reputation does not appear, as a matter of course, to have transcended the Tasman. While there will be some Australian businesses not operating in New Zealand which still have reputation here, there are plenty more which do not. Businesses which are inherently location based seem less likely to make the leap, unless they have a strong element of tourist attraction. So if passing off is to continue as a tort based in misrepresentation, then it seems that it should still be necessary for an Australian business to prove reputation in New Zealand.

Let’s check back in another 30 years, but for now, in the absence of actual evidence, the assumption of reputation on the basis of the Internet seems somewhat misplaced.