COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
O'Loughlin J.(1)

CWDS
  Trade Practices - passing off - misleading or deceptive conduct - rival
traders - respondents former distributor of applicants' product - material
difference in shapes of bottles - similarities in labels and get-up - state of
mind of respondents.
  Contract - whether "landed cost plus carrying cost" vague and unenforceable
- whether the same constitutes a pricing formula.

HRNG
ADELAIDE
#DATE 19:2:1992
  Counsel for the Applicants   : Mr N. Young and Mr G. Clarke
  Solicitors for the Applicants: Mallesons Stephen Jaques
  Counsel for the Respondents  : Mr A.C. Archibald QC and Mr D. Shavin
  Solicitors for the Respondents: Corrs Australian Solicitors

ORDER
  Applicants to file and serve short minutes of order.
  All parties be at liberty to speak to the minutes of order.
  The matter be listed for mention at 9.30 a.m. on Wednesday 4 March 1992 in
Melbourne.
NOTE Settlement and entry of orders is dealt with in Order 36 of the Federal
Court Rules.

JUDGE1
  From about October 1989, the respondents - or one or other of them - have
manufactured and distributed their "Valentino" range of three liqueurs;
previously, the third named respondent, John Cawsey and Co (Aust) Pty. Ltd.
("Cawsey") had been the principle Australian distributor for the competing
"Galliano" brand.  The applicants, having acquired the "Galliano" range of
liqueurs, have sued the respondents in these proceedings alleging (inter alia)
that the respondents have passed off their "Valentino" liqueurs as and for
"Galliano" products; they have also accused the respondents of breaching
various provisions of the Trade Practices Act 1974 (Cth) ("the TPA") and of
breaching an agreement to sell to the second named applicant Remy Australia
Limited ("RAL") Cawsey's stocks of "Galliano" products that were on hand on 30
June 1989.
2.  During the course of the trial, the parties agreed that initially the
issues should be limited; accordingly, by consent, an order was made that the
trial of questions of liability arising on the pleadings be determined
separately.  As a consequence, it was further agreed that issues of relief and
questions relating to damages and accounts of profits would, if they arose,
proceed at a later stage after publication of these reasons. The delay in
publication is a matter of regret.  The litigants, believing that they had
settled their differences subsequent to judgment being reserved, passed a
message to my associate that it would not then be necessary for a judgment to
be written and published. Unfortunately, for reasons not known to me, the
matter did not "settle" and a request was made that I proceed to compile and
deliver my judgment.  After a period of some five or six months it was a
matter of some difficulty to find the time necessary to re-read all the
written material and to compose my findings; I apologise to the parties and to
their representatives for my delay in the matter.
2.    Events Prior to 1979
3.  In 1979, the third named applicant, Distillerie Riunite Di Liquore SpA
("DRL"), a corporation established in accordance with the laws of Italy, was,
and had been for some time, the manufacturer of certain alcoholic liqueurs
known as "Liquore Galliano", "Sambuca from Galliano" and "Amaretto from
Galliano"; those three products are, in appropriate circumstances, referred to
in these reasons as the "Galliano" products or the "Galliano" range.  DRL was,
in 1979, a subsidiary of Foremost McKesson Inc., as was "21" Brands Inc. - the
latter corporation being the international distributor of the "Galliano"
products.
4.  It is relevant to these proceedings to explain the derivation of the word
"Galliano".  Literature was tendered that told the story of Major Giuseppe
Galliano, an Italian soldier who was on active service in 1895 during the
Italian-Abyssinian campaign.  The story of the Major's defence of the fortress
of Enda Jesus, near the ancient city of Makale, was and is, apparently, one of
immense national pride for Italians; it is said that "against all odds" he and
his small force held out for some 44 days against the advancing Abyssinians.
Because of this, the Italian Army was able to regroup and gain a tremendous
victory.
5.  So great was this victory that Ditta Arturo Vaccari, a distiller from the
Italian port of Livorno, decided to commemorate the defence of the fortress in
such a way as would be remembered for generations to come.  He immortalised
the gallant Major by creating a special liqueur which he named "Liquore
Galliano".
6.  To emphasize the military and national aspects of the liqueur, the main
(front) label on the bottle of "Liquore Galliano" carries a depiction of an
edifice that is intended to represent the fortress of Enda Jesus whilst the
rear label carries a portrait of a 19th century army officer in full
ceremonial dress with a plumed headpiece in the Italian colours.  The Italian
colours of green, white and red also dominate the neckband of the bottle.  The
Italian connection is further strongly advanced by the endorsement, "Ditta
Arturo Vaccari", on the front label in gold, embossed, classical print
followed, on the next line, with the word "Livorno" similarly embossed.   The
words, "Imported from Italy", are printed in ordinary type on the neckband of
the bottle and on the front label, the word "Italy" appears in ordinary type
immediately after the word "Livorno"; underneath that word there are
endorsements that the product is artificially coloured, that it is made and
bottled in Italy and, in bolder type, that it is "Produce of Italy".  Thus
there is a strong and a dominating Italian influence and impact when close
regard is had to the visual presentation of the labels on the bottle of
"Liquore Galliano".  One does not even need to know the story of Major
Galliano and Enda Jesus to come to that conclusion.
7.  The stories of Sambuca and of Amaretto are neither so colourful nor so
interesting.  It is said that both are generic names; the Oxford English
Dictionary, 2nd Ed. Vol.XIV page 427 includes as one of its sundry definitions
of Sambuca this description: "an Italian liqueur resembling anisette".  The
rear label on the "Sambuca from Galliano" bottle claims that "Galliano blends
Anise from the exotic Orient and sunny Mediterranean shores to create a taste
worthy of topping off a fine meal".  The evidence showed that Sambuca is a
popular liqueur; no less than eight sample bottles of Sambuca from different
manufacturers were tendered in evidence.
8.  The rear label on the bottle of "Amaretto from Galliano" claims that it
has "the subtle taste of almonds glorified in an ancient recipe...".  Another
product, "Amaretto di Saronno", was tendered in evidence (Exhibit A61); the
labelling on Exhibit A61 does not disclose the base ingredients of its
contents, claiming that "(i)ts taste is so elusive it cannot be described...
only enjoyed)".   The label romantically claims that the particular liqueur
was "created about 1525 by a poor, beautiful young widow, as a gift to the
artist Bernardino Luini...".   The evidence did not investigate the accuracy
of this statement.
9.  Although "Sambuca from Galliano" and "Amaretto from Galliano" are later
additions to the range of "Galliano" products, the labelling for these two
liqueurs followed the established pattern for the labelling for "Liquore
Galliano".  Thus the fortress is depicted on the front labels on each of these
bottles; they also carry, in the same type of lettering, the name "Ditta
Arturo Vaccari" and his place of origin, Livorno.  The Italian colours
likewise appear in the seal on the neck of each bottle and the same references
to Italy as appear on the "Liquore Galliano" labels appear on the Sambuca and
Amaretto labels.  In fact, the labels for all three products are virtually the
same save only for the individual names, the individual mix of colours and the
short dissertation about each of the liqueurs on the rear label.
10.  As the mix of colours is a matter of importance, it is appropriate to
describe them at this stage.  First, there is "Liquore Galliano". The colour
of the liquid is golden; it is complimented by a white label with a gold
border on which the word "Galliano" dominates.  That word is preceded, in
smaller but similar print, by the word "Liquore".  Both words are coloured
purple with a gold shadow or edging.  Underneath them, in red, is the
depiction of the fortress with green surrounds (presumably grassy hills); but,
on the whole, the colour effect is purple and gold printing on a white label.
The Sambuca liquid is colourless and the base colour of its label is dark blue
with a silver border.  The word "Sambuca" dominates the label in white with a
silver shadow or edging and silver and white are the colours that are used for
all other printing.   The word "Galliano" appears immediately below but it is
not quite so prominent as "Sambuca" and not as prominent as the use of the
word "Galliano" on the bottle of "Liquore Galliano".   The same red fortress
and green hills appear in the centre of the label but its strong colour effect
is white and silver printing on a dark blue label.  Lastly, there is the
bottle of Amaretto; it is a brown liquid and it has a matching dark brown
label with a gold border.  It also has the red fortress and green hills in the
centre.  Its dominating word is "Amaretto" in white with a gold shadow or
edging; the word "Galliano", in similar colours, is underneath and replicates,
in position, size and effect, the same word on the Sambuca label.  The balance
of the printing is either white with a gold shadow or plain gold. Its colour
effect is white and gold printing on a dark brown label.  All three labels are
substantially rectangular.
11.  The bottles used for the three "Galliano" products are identical. They
come in various sizes but one size is merely a proportionate increase or
decrease of another size.  It is my finding that this particular bottle shape
is unique and distinctive.  It is circular at its base and tapers
symmetrically to a thin circular neck.  The bottle does not have a shoulder or
a curve in its lines; it is a very tall bottle.  Senior counsel for the
respondents described the "Galliano" bottle, quite accurately in my opinion,
as having "an eccentricity of configuration".  It will be necessary, in due
course, to return to bottle shapes and configurations and to labels and
get-ups.
12.  The respondents admitted in their defence that as at 1 February 1979,
Foremost McKesson Inc. was the registered proprietor of the following
Australian Trade Marks, each in class 33:
      "(a)  A168,149, being a representation of an old fortress
            against a setting of gently undulating hills beneath
            the words 'LIQUORE GALLIANO' in ornate lettering;
      (b)   B300,281, being the word 'GALLIANO'."
13.  The respondents also admitted that on the same date, Foremost McKesson
Inc. was the applicant for the registration in Australia of the following
Trade Marks, each in Class 33:
      "(a)  No. 319,353 made on 22 June 1978 being the words 'AMARETTO
            DI GALLIANO';
      (b)   No. 319,382 made on 23 June 1978 being the words 'SAMBUCA DI
            GALLIANO'."
14.  The fact that the applications referred to the Italian "DI" whereas the
labels used the English "from" was not the subject of comment during the
course of the trial.
15.  On 1 February 1979, Foremost McKesson Inc. entered into an agreement with
Cawsey.  It was pleaded in paragraph 16 of the statement of claim that under
that agreement ("the 1979 agreement") Foremost McKesson Inc:
      "...appointed Cawsey to be the licensee in Australia of the
      said marks and granted to Cawsey the right to use those
      marks on or in relation to such licensed products as Cawsey
      with the approval of FMI imported into Australia."
16.  Thereafter, and, as I find, as a consequence of the 1979 agreement,
Cawsey imported the "Galliano" products into Australia and distributed them
throughout the country.
3.    The events of March 1989
17.  On 9 March 1989, Foremost McKesson Inc. (which had, by then, changed its
name to McKesson Inc.) "sold" its interests in the "Galliano" products to the
Remy Martin group.  So far as it may be relevant to these proceedings, the
following transactions should be noted:- first, McKesson Inc. assigned to the
first applicant Remy Martin Amerique Inc. ("RMA"), an American corporation,
the whole of its right, title and interest in and to the trade marks and all
other intellectual property rights in the words or names "Galliano", "Liquore
Galliano", "Sambuca di Galliano" and "Amaretto di Galliano"; twelve months
later, on 30 March 1990, RMA assigned all its right, title and interest in and
to those assets to a Dutch corporation, the fourth applicant, Remy Finance BV
("Remy Finance").  It was also pleaded (and admitted) that on 30 March 1990:
      "...RMA assigned to Remy Finance all its rights and
      obligations in all agency, distribution, marketing,
      representation or other agreements between RMA and third
      parties relating to the Galliano products."
18.  Although not admitted on the pleadings, it is clear that at some time in
March 1989 the second applicant, RAL, was appointed "to be the Australian
importer of the Galliano products": (paragraph 22 of the statement of claim).
That was to become the first step towards supplanting Cawsey who had, until
then, enjoyed the role of principle distributor of "Galliano" products in
Australia since 1979.  The last of the March 1989 transactions to which
reference need be made is that dealing with the fate of DRL.  It was pleaded
and admitted that, with effect from 9 March 1989, DRL became a subsidiary of a
French corporation, Remy and Associes S.A..  The exact relationship between
Remy and Associes S.A. and the other corporations in the Remy Martin group is
somewhat blurred; it is probably sufficient to think of it as something akin
to a holding company (in paragraph 4 of the Statement of Claim it is described
as "the principal (sic) shareholder" in each of the first four named
applicants).  The fifth applicant, Remy Blass and Associates Pty. Ltd., an
Australian company, is a subsidiary of the second applicant, RAL, another
Australian company.
4.    The activities of the respondents in early 1989
19.  The sale by McKesson Inc. of the "Galliano" products did not take Cawsey
by surprise.  Mr Greig, who in 1989 was Cawsey's National Sales and Marketing
Manager, deposed in his affidavit of 28 June 1990 that "there were strong
rumours in the Australian liquor market place" in early 1989 that "the world
wide business relating to 'Galliano' products was to be sold to the Remy
Martin organisation".  Mr Greig went on to say in paragraph 6 of his
affidavit:-
      "I realised that if the Galliano business was sold to the Remy
      Martin organisation then, because Remy Martin had its own
      Australian distributor, Remy Martin Limited, that company would
      become the Australian distributor of Galliano products."
20.  This view was shared by the respondents' witness, Mr Walker who in 1989
was Cawsey's Finance Manager; it was also conveyed by Mr Greig to the
respondents' witness, Mr Martin, Cawsey's Product Manager. Cawsey's reaction
to the threat of the Remy Martin group entering the market is best summarised
in Mr Martin's affidavit of 28 June 1990.
      "Mr Greig told me that he believed that if the company lost
      the distribution rights to these products, there would be a
      gap in the company's product range which it should take
      steps to fill.  Accordingly, he instructed me to work upon
      the launch of a range of Italian style liqueurs that would
      suitably replace the three products then being sourced from
      Galliano."
      Later in the same affidavit, Mr Martin went on to say -
      "Mr Greig told me that the company had narrowed down the
      name by which the range was to be promoted to one of two,
      namely, 'Gallanto' or 'Valentino'.  Of these, I preferred
      the name 'Valentino' because, in my opinion, it was both
      more readily distinguished from the Galliano names and, as
      well, opened greater marketing possibilities to exploit a
      'romantic' and 'Italian' theme.  In about April or May 1989,
      the company decided that the new range of products would be
      released under the name 'Valentino'."
21.  In his affidavit of the same date, Mr Greig referred to these and other
passages from Mr Martin's affidavit and confirmed that they accurately
recorded the events to which they related.
22.  Mr Greig stated Cawsey's objectives quite clearly.   In paragraph 9 of
his affidavit, he said:-
      "I could see that there would be a gap in the product range
      of John Cawsey and Company if the Galliano products were to be
      distributed by another company and, as a result, it was
      determined that we should produce products equivalent to the
      Galliano range namely Liquore Galliano, Galliano Sambuca and
      Galliano Amaretto."
23.  To this end, he had given instructions to a technician to formulate a
product that tasted like "Liquore Galliano; he received a satisfactory sample
as early as February 1989.
24.  Mr Greig also said in the same affidavit (paragraph 12) that it was his
opinion that:-
      "... the Galliano range of products had a substantial
      Italian influence and I believed that the new range of
      products to be produced by John Cawsey and Company would also
      need to reflect that Italian influence.  This is
      particularly so because the Sambuca product was growing in
      popularity in Australia and Sambuca and Amaretto are
      distinctly Italian products.  If the merchandising and
      get-up surrounding the new products was not Italian I believed
      that the new product range would not get anywhere."
25.  According to Mr Greig (paragraph 10 of his affidavit) he wanted "a bottle
and package that would be different from that of the Galliano products".  It
was his belief that the tall elongated "Galliano" bottle was the most
distinctive feature of the "Galliano" range; he expressed the belief that
"most people identify Galliano products by the bottle shape".
26.  Mr Martin's task was to develop the labelling and marketing of Cawsey's
new products ("the 'Valentino' products").  It will be necessary to return to
the subject of labelling in due course but it is convenient, at this stage, to
address and dispose of the subject of the bottle used by Cawsey for the
"Valentino" products; it is completely different from the "Galliano" bottle.
It is as fat and squat as the other is tall and elegant.  It has a pronounced
"shoulder" and a neck that is, when compared with its body, thin. I find that
no one could possibly confuse the two bottles in any circumstances.
27.  Just as it was relevant to explain the history of the word "Galliano", so
also something should be said of the evidence relating to the name
"Valentino"; it came from the applicants' witness, Mr John Hinde, the well
known journalist and film critic.  In his affidavit that was sworn on 29 March
1990, Mr Hinde told briefly of the story of Rudolph Valentino.  It appears
that Valentino was born in Italy in 1895 and that he went to the United States
at the age of 18.  After spending a short time as a dancer on Broadway,
Valentino ultimately settled in Hollywood where he quickly achieved stardom in
the silent film "The Four Horsemen of the Apocalypse".  This film was followed
with the release of the film called "The Sheik".  According to Mr Hinde that
film is the one for which Valentino is best remembered.  Mr Hinde then quoted
the following extract from the International Film Encyclopedia by Ephraim
Katz:
      "Darkly handsome and solidly built yet lithe, Valentino
      moved gracefully and gazed at his heroines with a mixture of
      passion and melancholy that sent chills down female spines.
      To the American woman he represented a symbol of mysterious,
      forbidden eroticism, a vicarious fullfilment of dreams of
      illicit love and inhibited (sic) passions.  But male
      audiences found his acting ludicrous, his manner foppish,
      and his screen character effeminate.  Nevertheless, the
      Valentino craze reached new heights with The Sheik (1921),
      at Paramount.  During the film's exhibition woman fainted in
      the aisles and Arab motifs began to infiltrate fashions and
      interior design."
28.  The respondents sought to create a relationship between Valentino, the
actor, and their products in several ways.  In addition to the choice of the
name, the rear label on each bottle contained a head and shoulders portrait of
a man with an Arabian headdress - the so called "Sheik" - whilst the
advertising and promotional material for the new range of liqueurs referred,
heavily and constantly to "The Great Latin Lover";  (see, for example,
Exs.A17, A21, A22 and A28).
29.  The case for the respondents was to the effect that their choice of name
- "Valentino" - and their method of presentation - e.g. "The Great Latin
Lover" - were intended to give their products an association or connection
with Italy.  This, of course, was literally untrue: there was nothing
whatsoever "Italian" about the "Valentino" range of products. In addition,
even though much of the respondents' promotional and advertising material was
tendered in evidence, the applicants' attack has been directed to the
labelling on and the get-up of the respondents' bottles - and the term "The
Great Latin Lover" does not appear anywhere on the bottles.
30.  Thus it can be seen that long before their distributorship was cancelled,
and while they were still representing the "Galliano" products in Australia,
Cawsey was using its knowledge and resources to prepare a range of products
for ultimate competition in the market place with their principal.  In fact,
their marketing plan for the "Valentino" products,  which was compiled prior
to the termination of their distributorship, called for a so-called "hit-list"
of the 100 largest Cawsey's customers of "Galliano" products.
5.    The events of April 1989
31.  Having acquired the "Galliano" products, the Remy Martin group decided,
predictably, to have its own Australian distributor.  It was the case for the
applicants that on 6 April 1989 a meeting took place involving Messrs Terrio
and Church who represented the applicants and Messrs Brady and Walker who
represented the respondents.  I find that this meeting was convened by the
applicants; I also find that the representatives of the respondents did not
tell the applicants at the meeting or at any relevant time thereafter that
they were working towards the production of a competing range of liqueurs.
The applicants claimed that at that meeting a notice was given to the
respondents' representatives that had the effect of cancelling the 1979
Agreement upon the expiration of 30 days.  Whether the notice had that effect
or not is unimportant because of the applicants' further claim that an oral
agreement ("the 1989 agreement") was made at that same meeting.  As pleaded in
paragraph 24 of the statement of claim, the applicants' case was that it was
agreed that -
     "(a)  RAL would not commence to distribute the Galliano products
            in Australia until 1 July 1989;
      (b)   Cawsey would continue to distribute the Galliano products in
            Australia, and to do so making use of the said marks, until
            30 June 1989 only, and only for the purpose of disposing of
            its existing inventory;
      (c)   any remaining inventory as at 30 June 1989 would then be
            sold by Cawsey to RAL at landed cost plus carrying cost, and
            RAL would purchase that inventory accordingly;
      (d)   Cawsey would supply to RAL -
            (i)  'full depletion', that is to say, details of
                  sales actually made into the Australian market;
            (ii)  point of sales data;
            (iii) details of past promotions of the Galliano brand;
            (iv)  sales contest data; and
      (e)   Cawsey would not, after 30 June 1989, distribute or (save to
            RAL as provided above) sell any of the Galliano products,
            nor use any of the said marks."
32.  The respondents denied that any such agreement was made; they admitted
that on or about 6 April "discussions were held between representatives of
Cawsey on the one part and RMA and RAL of the other part" but it was their
case that those discussions "did not result in a final agreement": (paragraph
24 of the defence).  It will be necessary, in due course, to make a close
examination of the evidence for the purpose of determining what (if any)
bargains were struck at that meeting.
6.    The events of June-October 1989
33.  It was pleaded and admitted that on or about 15 June 1989, the second
respondent Carlton and United Breweries Limited ("CUB") applied to register in
Australia various trade marks in Class 33 of the Register in respect of
alcoholic beverages, including liqueurs.  They were described in paragraph 30
of the statement of claim as follows:
      "App. No. 512901 A label in respect of 'Amaretto Liqueur
                       from Valentino' including a representation
                       of an old fortress;
      App. No. 512902  A label in respect of 'Sambuca Liqueur
                       from Valentino' including a representation
                       of an old fortress;
      App. No. 512904  'Rudolph Valentino';
      App. No. 512905  A label in respect of 'Valentino Liqueur'
                       including a representation of an old
                       fortress; and
      App. No. 522634  'The Harvey Wallbanger Liqueur'."
34.  It was further claimed by the applicants that, as from about October
1989, the respondents "in concert" commenced to manufacture, promote,
advertise, market, distribute, sell and supply three liqueurs called
"Valentino Liqueur", "Sambuca Liqueur from Valentino" and "Amaretto Liqueur
from Valentino"; these three products are the "Valentino" products to which
reference has already been made.  The respondents have admitted these
allegations, save that they have identified the first respondent, Carlton Wine
and Spirits (Aust) Pty. Ltd. ("Carlton Wine and Spirits") as the party who
sold and supplied the new range of liqueurs.
7.    The claims of the Applicants
35.  The applicants mounted five separate, but closely connected, claims
against the respondents in their statement of claim.  First, it was said that,
in breach of the 1989 agreement, Cawsey refused to sell to RAL its inventory
of "Galliano" stock that remained on hand at 30 June 1989 and that Cawsey,
instead, continued thereafter to distribute and sell "Galliano" products from
its inventory in Australia.  Secondly, it was claimed that the continuing
conduct of Cawsey, in selling and distributing the "Galliano" products after
30 June 1989, amounted to infringements of the applicants' trade marks;
however that allegation was withdrawn at trial.
36.  The remaining three claims were claims of passing off, misleading and
deceptive conduct and unconscionable conduct; they were based on numerous
allegations, the general effect of which was that the respondents had falsely
represented that the "Valentino" products had the sponsorship or approval of
the manufacturers of the "Galliano" products, that they came from a source or
origin that was connected or associated with, or related to, the source or
origin of "Galliano" products, that they were manufactured by and had emanated
from a long established manufacturer of liqueurs, that they were Italian in
origin or otherwise closely associated with Italy and that they were also
closely associated with the late Rudolph Valentino and the fashion house of
Valentino.
37.  The applicants also pleaded (inter alia) that the respondents falsely
represented that "Valentino" liqueur was "the well-known Harvey Wallbanger
liqueur".  As to this, the respondents replied positively in paragraph 35 of
their defence:
      "Valentino Liqueur has characteristics and is of a quality,
      standard and composition that makes it the ideal liqueur for
      Harvey Wallbanger cocktails and in advertising, promoting,
      marketing, distributing, selling and supplying the Valentino
      products, Carlton Wines and Spirits so represented it. Save
      as aforesaid, they deny each and every allegation contained
      in paragraph 35 thereof."
8.    The witnesses for the applicants and the evidence adduced on behalf of
the applicants
38.  Three witnesses were called on behalf of the applicants.  They were Mr
Terrio the Managing Director of the second applicant, RAL, and Mr Church, the
Financial Controller of the fifth applicant, Remy Blass and Associates Pty.
Ltd. (a wholly owned subsidiary of RAL). The evidence of both men was
directed, in the main, to the matters that were discussed at the meeting of 6
April 1989 with Messrs Brady and Walker and to their respective understandings
of some of the terms allegedly used at that meeting.  The third and final
witness called on behalf of the applicants was Mr Druse who, since January
1990, has been the Director of Marketing for RAL.  The purpose of his evidence
was to give general background information about the liquor trade, the history
of "Galliano" products and his observations about the "Valentino" products. In
addition, promotional, advertising and other materials dealing with
"Valentino" products were tendered through Mr Druse.
39.  Each of these men impressed me as a witness of truth.  I believe that
each of them gave his evidence to the best of his ability and to the best of
his recollection.  Where their evidence or the evidence of one of them is in
conflict with the evidence of a witness for the respondents, I accept their
evidence in preference to that proferred on behalf of the respondents; my
reasons for coming to that conclusion will, I believe, become apparent when I
discuss the evidence that was led on behalf of the respondents.
40.  In addition to the affidavits and oral evidence of the three witnesses to
whom I have just referred, affidavits from other parties were read as part of
the applicants' case.  I have already made reference to the affidavit of Mr
Hinde; in addition other deponents referred to observations made by them with
respect to the location of "Galliano" products and "Valentino" products in
liquor stores, to various purchases that they made and to particulars of
comparative prices.  Through those deponents, photographs of liquor stores
were tendered in evidence showing how "Galliano" and "Valentino" products were
displayed for sale to the buying public.
41.  The applicants read the affidavit of Mr Van Beemen a director of a
company that claimed ownership of the mark "Valentino" in its application to
ladies' fashions.  Mr Van Beemen said that his company had no association with
Cawsey and that it had not agreed to support the use of the name "Valentino"
with respect to the supply of liqueurs. There was no other evidence to suggest
any association or, indeed, any confusion between the use by Cawsey of the
name "Valentino" and its usage in the ladies' fashion market and I put to one
side the affidavit of Mr Van Beemen.   I did not obtain any assistance from
the affidavit evidence of Dr. Baxter, a chemist who analysed the various
"Galliano" and "Valentino" products, nor from the evidence of Mr Vitali, a
Restaurantuer who deposed to an occasion when, having ordered a stock of
"Liquore Galliano" from Cawsey, he was supplied with "Valentino" liqueur.
9.    The witnesses for the respondents and the evidence adduced on behalf of
the respondents.
42.  In his opening address (p 227) senior counsel for the respondents
submitted that the respondents, as was their right, set out to put into the
market place a range of three liqueurs in competition with the "Galliano"
range.  I agree that they were entitled to compete; but this case deals not
with their right to compete but with the consequences of the manner in which
the respondents chose to compete.  The respondents denied that they set out to
duplicate the "Galliano" range; their claim was that they were aiming "to
market products in the three best-known categories of Italian products": (the
evidence of Mr Greig at p 254).
43.  In addition to some affidavit material which, as events transpired, was
of no great significance, four witnesses gave evidence on behalf of the
respondents.  The first of them was Mr P.B. Sampson, a freelance graphic
designer; then followed Mr Martin, Cawsey's Product Manager, who had been
given the task of working upon the launch of the "Valentino" products and who
had the responsibility for label design, Mr Greig who appeared to be Mr
Martin's immediate superior and Mr Walker who had attended with Mr Brady at
the meeting with Messrs Terrio and Church on 6 April 1989.  Mr Brady was not
called by the respondents.  I know nothing of him other than his employment
with the respondents ceased on the next day.  As the applicants made no point
about his absence as a witness, I take the matter no further.
44.  I refer first to the evidence of Mr Sampson. In his affidavit of 12
November 1990 he said that he received a telephone call from Mr Martin "during
the early part of 1989".  They met and Mr Martin gave him a "brief" to "come
up with a product label design that would be consistent with the appeal of the
Galliano range of products": (paragraph 3).  When questioned about "the brief"
that Mr Martin had given him, Mr Sampson agreed in cross-examination, that at
an early stage, Mr Martin had given him some labelled "Galliano" bottles
"relating to each of the three Galliano products" (p 162).  He also agreed
that Mr Martin gave him a sample of the proposed "Valentino" bottle and told
him that Cawsey believed that "they would soon lose the distributorship" (p
162).  He was then asked:
      "Yes.  And, did he tell you that they wished to produce an
      equivalent range of liqueurs to retain the consumer base
      that they had formerly sold Galliano to?...  Yes, he did.
      And he told you that they wanted to produce the same three
      range of liqueurs as Galliano had produced?... Yes, he did.
      ...
      Yes.  Did he tell you that he wanted the labelling and get
      up for the new range to be identifiable with the Galliano
      range of products?... Not in those words, no.
      But words to that effect?... Yes." (pp 162-163)
45.  Mr Sampson also said in evidence that Mr Martin told him that the
"Valentino" labels were to be consistent "across the range".  This meant that
each of the three "Valentino" bottles - like the three "Galliano" bottles, -
"was to be a variation on a theme in terms of labelling".  According to Mr
Sampson, not only did Mr Martin say that the labelling was to be "distinctly
Italian", he wanted the labelling to suggest that the product was Italian: he
wanted it "to look like it is an imported product": (p 166).
46.  Nevertheless, Mr Sampson maintained that he had not been instructed by
Cawsey to copy any of the "Galliano" labels and he further claimed that he had
not copied any such labels.  Mr Sampson denied that his objective "was to
create the same overall impression", claiming that he set out to obtain "a
similar feel" (p 173).
47.  In paragraph 5 of his affidavit Mr Sampson said that "rough mock-up
labels" were delivered to Cawsey within 48 hours of his original instructions
and that those first mock-up labels included the graphic design of two rolling
hills with a sun rising.  According to Mr Sampson, Mr Martin was "not
particularly pleased" with this design. Mr Martin wanted something "a little
more creative", something that was "more Italian in style and feel".
48.  Mr Sampson then continued in paragraph 6 of his affidavit in these
terms:
      "He '(Mr Martin)' referred to the graphic on the Galliano
      labels and observed that the graphic on those labels was
      supposed to be a fort of some kind although most consumers
      would not recognise it as such.  He therefore suggested to
      me that what we should consider putting on the label was
      something which a consumer would readily regard as having
      some meaning and he suggested that we have a castle forming
      the centrepiece of the graphic design on the label."
49.  In cross-examination, counsel for the applicants referred to this passage
asking Mr Sampson these questions:
      "Well, what is the meaning that the castle has if
      incorporated on the label that makes it preferable to having
      a design of rolling hills and a rising sun on the label?...
      Possibly making it more Italian.
      Yes?... And giving it more individuality.
      Yes, and how does it make it more Italian other than
      mimicking the fort on the Galliano labels?... Well,
      Australia is not renowned for its forts and castles, and it
      is a European tradition, is it not?  So that was the line of
      thinking.
      Yes, and in suggesting a castle, Mr Martin drew your
      attention to the fort that appeared on the Galliano labels,
      did he not?... No.  No, we were trying to have an individual
      graphic.
      Yes, well, what I have just put to you was the substance of
      what you put in the paragraph, is it not?  Mr Martin
      referred to the graphic on the Galliano labels, observed
      that the graphic on those labels was supposed to be a fort
      of some kind, skipping a few words:
            He therefore suggested to me that what we should
            consider putting on the label was something
            which a consumer would readily regard as having
            some meaning, and he suggested that we have a castle.
      ?...Yes, that is right.
      He was suggesting that you adopt a graphic that, in a
      general way, resembles that which appeared on the Galliano,
      was it not?... No, it was to make it more Italian.  Not to
      make it like the Galliano label.
      Yes.  Well, to make it more Italian because a well known
      Italian product was marketed with a fort on its label?...
      No, no.  It was because castles and things like that are -
      as I said before, they are in the European tradition.  They
      are from the European background.  It gives it that
      authenticity, if you like, or trying to get that authenticity.
      Trying to suggest the product originates in Europe?...Yes,
      in Italy.
      Yes?... Yes.
      Specifically in Italy in this case?... Yes." (pp 169-170)
50.  I reject this passage of Mr Sampson's evidence.   On most subjects I
believe that he gave his evidence to the best of his ability; but on this
subject, I have come to the conclusion that he felt, notwithstanding his
protestations to the contrary, that the insertion of the fortress on the
"Valentino" labels would either constitute copying the "Galliano" labels or,
at least, amount to an attempt to create an association or connection between
the "Valentino" labels and products and the "Galliano" labels and products.  I
will return to this subject at a later stage.
51.  Mr Sampson prepared a second design for the mock-up labels; he replaced
the rolling hills and rising sun with a castle graphic.  He also included, at
Mr Martin's suggestion, the "coat of arms" that Cawsey had, from time to time,
used on other of its products.  But Mr Martin was still not satisfied; he next
wanted an endorsement on the "Valentino Liquor" label to the effect that it
was "Ideal for Harvey Wallbangers".
52.  Evidence was led and documents were tendered that established that a
"Harvey Wallbanger" was a cocktail that had traditionally been made with
"Liquore Galliano"; but it was not suggested that the applicants had any
proprietary or other rights to the name "Harvey Wallbanger" or to its recipe.
On the other hand it was argued, and I accept, that there was a well
established connection between that name and "Liquore Galliano".  I also find
that the respondents were well aware of that connection and I regard the
deliberate insertion of this endorsement as another example of the
respondents' attempts to create an association or connection between their
products and the "Galliano" range.
53.  According to Mr Sampson, Mr Martin was still not satisfied with the
labels.  He next said that the neckband of the bottle should be "evocative of
the Italian flag", and suggested at a later stage, the insertion of the words
"In the Italian Tradition" within the neckband. In addition to the many other
matters that were the subject of specific directions by Mr Martin, Mr Sampson
also agreed that the colours to be used on the labels were dictated by Mr
Martin.   Finally, it was specifically put to Mr Sampson:-
      "Q.   Well, as near as you can achieve, the original
            conception which was implemented was that the colours
            on each of the three Valentino labels should, as
            nearly as you could, match the colours on the
            corresponding Galliano label?... Yes." (p 172)
54.  I turn next to the evidence of Mr Martin.   On the subjects of motivation
and intention, I have no faith in what he said.  I have formed the opinion
that his approach to his task was to devise a range of products and so promote
them that they would not merely compete with, but would copy, the "Galliano"
range and be passed off as, or as connected or associated with, the "Galliano"
products.  To do this, he was prepared to go as far as he thought might be
legally safe in copying the "Galliano" range.
55.  On the subject of the composition of the "Valentino" labels, he sought in
evidence to distance himself from the end result, saying:
      "I cannot recall exactly what directions I gave Mr Sampson,
      I try to avoid giving too many to creative people at that
      stage other than the broad parameters of which they have to
      operate in." (p 308)
56.  That passage was quite untruthful; it was not only contrary to the
evidence of Mr Sampson, it was also contrary to Mr Martin's own answers to a
series of questions that were then put to him.  He was forced to concede, for
example, that the colours of the Italian flag and the endorsement "In the
Italian tradition" were incorporated on his instructions.  He agreed that he
gave Mr Sampson the caption that appears in each of the rear labels - "Capture
the essence of Italy in this fine Valentino liqueur...."  On the other hand he
refused to acknowledge that he directed Mr Sampson to include a fort on the
label and he denied that he dictated the colour schemes.  On the subject of
colours, he said that he knew that Mr Sampson was producing labels that were
"extremely close in colour background to the Galliano product" (p 310).  When
asked whether that was what he wanted, he replied:
      "No, that is not what I originally wanted but it satisfied
      the parameters of the brief."
57.  I reject Mr Martin's evidence on these two subjects.   I accept Mr
Sampson when he says that the idea of a fortress or a castle was Mr Martin's.
I am also satisfied that Mr Martin had a direct involvement in the colour
schemes of the labels.  I accept Mr Sampson's evidence on this subject in
preference to Mr Martin.
58.  The next witness to be considered is Mr Greig. In his affidavit sworn on
28 June 1990, Mr Greig challenged certain of the opinions expressed by Mr
Druse about the principal characteristics of the "Galliano" get-up.  For
example, Mr Druse thought that "the colour and colour separation of the
labels" and "the logo of the castle which appears on each label" were two such
characteristics (paragraph 12 of his affidavit sworn 28 March 1990).  As to
this, Mr Greig said in paragraph 30 of his affidavit:
      "... the colours and get up of the Galliano labels are not
      distinctive..."
59.  He reaffirmed this view in his evidence.  When cross-examined on the
subject he said that he believed that the label was "virtually immaterial" (p
246).  When pressed in cross-examination to explain why then Mr Martin would
have submitted sample "Galliano" labels to Mr Sampson Mr Greig said, in
effect, that labels, as such, had not been produced to Mr Sampson.   Rather,
so he said, Mr Martin would have produced bottles of the "Galliano" range so
that Mr Sampson would be aware of the colour of the liquids in the bottles.
Mr Greig asked facetiously -
      "Should we have steamed the labels off?" (p 246)
60.  This answer was one of the few occasions when Mr Greig let down his
guard.  It was contrary to Mr Martin's evidence who had conceded that when he
gave the "Galliano" bottles to Mr Sampson, he told him to produce something
"which had a feel, a connection... with the Galliano labels". (p 310)
61.  When questioned about the presence of a castle on the "Valentino" labels
Mr Greig said that the "Galliano" labels, carried "a fortress from Abyssinia"
and that there was a distinction between a castle and a fortress.  He said
that the two buildings were "vastly dissimilar" and that he failed to see any
association between them (p 254).  Whilst I agree that the two buildings are
dissimilar I reject the proposition that there is no association between them.
As I have earlier stated, I regard Mr Martin's instruction to Mr Sampson to
include the castle as evidence of an attempt by Cawsey to copy the "Galliano"
labels.  It is also a matter of no small significance to note that just as the
edifice in the "Galliano" labels is set off by green hills, so also is the
edifice in the "Valentino" labels set off by green trees.
62.  Mr Greig denied that an attempt had been made to copy the "Galliano"
labels.  He was then pressed for his comments about the artwork (Ex.A48) for
the competing Amaretto labels; on this subject his answers were confusing and
unconvincing.  At first he said that "(t)here are certainly noticeable
differences..." (p 250), asserting in answer to subsequent questions, that the
difference was "substantial in nature" and that "the overall impression (was)
different".  He took the position that his company's labels were "different
and noticeably so".  However, in an apparent contradiction to those answers,
he stated, shortly afterwards, that with respect to the "overall impression
between the Valentino Amaretto lettering and the Galliano Amaretto lettering"
there was "a reasonable degree of similarity". (p 251).  The plain truth of
the matter is that, on a casual glance, when not viewed side by side, the
three "Valentino" labels bear striking resemblances to the three "Galliano"
labels.  I find that Mr Greig was well aware of this and his attempts to avoid
this issue did not impress me.
63.  There was another area in Mr Greig's evidence where he seriously
contradicted himself.  In his marketing plan Ex.A3, Mr Martin had advocated
retention by Cawsey of sufficient "Galliano" stock so that Cawsey could
continue supplying  its customers with liqueurs until such time as it was
ready to launch the "Valentino range".  By this means there would be no hiatus
in supply and hence it would be to Cawsey's commercial advantage.  In evidence
Mr Martin said that Mr Greig had seen and approved his marketing plan and Mr
Greig confirmed this.   Yet under cross-examination Mr Greig shied away from
this particular topic saying -
      "... from a marketing point of view it is disadvantageous..."
      (p 245)
64.  That was not true.  Cawsey increased its holdings of "Galliano" stock in
the first half of 1989.  Aware of the fact, early in that year, that it might
lose its franchise, one is entitled to wonder why it would be that stock on
hand in May 1989 was about 15% higher than at February 1989. (See Ex.A75).  It
is true that there was a need for forward orders to be placed overseas well in
advance but the evidence suggests that the increases in the orders were made
after the rumours began to circulate that McKesson Inc. was about to sell the
"Galliano" range.  It was an essential part of the marketing plan that
"Galliano" stocks should be built up to a size that would permit the
respondents, for their commercial benefit, to continue marketing "Galliano"
until they were ready to launch "Valentino".
65.  The final witness for the respondents was Mr Walker.
66.  His evidence was that at the meeting of 6 April 1989 there had been some
discussion about a hand-over of stock but nothing firm had been agreed: rather
it had been left for him and Mr Church to discuss the matter further.  He
agreed that Mr Terrio had referred to 30 June 1989 as the proposed date of
transfer and that Mr Terrio was the person "who made the statement concerning
the price (at) which the stock was to be transferred..." (pp 355-6).  Asked to
recount what Mr Terrio had said, he replied:
      "The words would have included landed costs and holding or
      handling charges."
It was put to him -
      "... (Did) he '(Mr Brady)' say to Mr Terrio - I accept the
      formula - landed cost plus holding charges as the price at
      which the goods are to be transferred?...  No, I do not
      recollect him saying that?" (p 356)
67.  He maintained that Mr Brady's reaction was to "leave it for the financial
people to work out" (p 356).  He said that the arrangement was that Mr Church
would contact him; as Mr Church did not, Mr Walker assumed that RAL had
changed its mind about acquiring the stock.
68.  In cross-examination (p 358) Mr Walker claimed that the arrangement that
had existed between Cawsey and McKesson Inc. since 1979 was not, "a
distribution arrangement"; instead, it was, so he said, "a registered user
agreement of the trade mark".  He was then asked whether this distinction was
the basis for him saying that the industry practice (on termination of
distribution agreements) was inappropriate to the facts of this case.  He
replied: "that is correct", acknowledging, as I find, that there is an
industry practice that applies on the termination of distribution agreements.
Indeed Mr Walker acknowledged as much in paragraph 14 of his affidavit of 13
November 1990 wherein he said:-
      "I do not agree that industry practice on termination of
      distribution agreements and arrangements was appropriate or
      relevant in the circumstances if we were not strictly
      dealing with such a termination in this case."
But Mr Walker, when pressed, was unable or unwilling to identify the relevant
industry practice that applied on the termination of distribution agreements,
claiming that each case had to be treated on its merits.  Later he
contradicted his statement in his affidavit and his earlier evidence by saying
"In my experience there was no common industry practice."
69.  When it was put to him that, effectively, he had contradicted the
contents of his affidavit his reply was that he was "merely trying to put
(his) view of Mr Terrio's contention that there was such a common industry
practice." (p 358).  I reject these sections of Mr Walker's evidence.  No
matter the correct legal classification of the 1979 agreement, the evidence
was quite clear that a distribution arrangement had existed between McKesson
Inc. and Cawsey for 10 years; in refusing to acknowledge the existance of such
an arrangement, Mr Walker contradicted his fellow witnesses and the obvious
truth of the matter.
70.  In paragraph 20 of his affidavit of 28 June 1990 Mr Walker acknowledged
that the Remy Martin group had asked at the meeting of 6 April 1989 "for
'depletion' information from John Cawsey and Co. in relation to Galliano
products, namely monthly sales by brand, by State in the 12 twelve month
period prior to 30 June 1989". When this subject was addressed in
cross-examination Mr Walker first acknowledged that he understood what was
meant by the request for "full depletion information"; then it was put to
him:
      "And you knew it meant monthly sales by brand, by State, in
      the 12 month period prior to 30 June 1989?"
The words in that question were the exact words taken from paragraph 20 of Mr
Walker's affidavit.   Nevertheless he could not bring himself to give a simple
affirmative answer.  Instead he said -
      "It meant the sales history by brands, possibly by State - I
      was not aware of the full detail of it.  I was aware of the
      conceptual nature of it." (p 359)
When his attention was drawn to his apparent understanding of the term in
paragraph 20 of his affidavit, he replied, weakly,
      "Yes I was trying, in that paragraph, to define the word
      'depletion' - my concept of it."
I am at a loss to understand this example of needless equivocation.
71.  In the same paragraph of his affidavit Mr Walker said:-
      "I do not recall Mr Terrio asking for past promotional
      material, sales contest data or any other similar material."
72.  In paragraph 7 of his second affidavit of 13 November 1990 he said -
      "I do recall that Mr Terrio made a general request for
      point of sale material, information on past promotions,
      sales contests and the like."
This contradiction in the contents of his two affidavits was put to him in
cross-examination.  He was forced ultimately to confess that he had
"difficulty" in recalling precisely what Mr Terrio said about those matters.
(p 360)
73.  Mr Walker acknowledged that Mr Terrio ultimately contacted him about the
stock transfer and he also acknowledged that he then told Mr Terrio, for the
first time, that Cawsey would not be selling any surplus stock to RAL.
Pressed to explain why Cawsey had changed its stand he said -
      "The things that changed my mind were that (there) were no
      minutes of the meeting of 6 April, there was no follow up by
      letter or phone call, there was no visit by Mr Church,
      there was absolutely no indication of any intention to go
      ahead with the proposition." (p 362)
74.  He agreed that he could have pursued the matter but, when asked why he
did not do that, he said -
      "I did not feel it was my position to do so."
75.  It is obvious that Mr Walker could have contacted Mr Church, Mr Terrio
and any one else at RAL if he had wanted to - and it is equally obvious that
he would have contacted them if it had suited him.  But it did not suit him.
Consider Cawsey's position.  They had decided, probably by February or March
1989, to launch their own product in the market place but it would not be
ready until at least September. Meanwhile they had customers to service -
customers who they hoped would become customers of their new products.  It
would be bad for business if there was a gap in supplies - hence the build up
of "Galliano" stocks to carry them through until "Valentino" was ready.  It is
a matter of regret that a business house, which is part of such a well known
national group, would engage in such subterfuge but the clear inference -
indeed the only inference - is that Cawsey did not intend to sell its
"Galliano" stock to RAL.  The only matter of doubt is whether Cawsey ever did
have that intention.  In fairness to the absent Mr Brady, who was the senior
Cawsey representative at the meeting and to whom Mr Terrio attributed a
willingness to sell, I will limit my finding to a change of intention on the
part of Cawsey on a date subsequent to 6 April 1989.
76.  In paragraph 18 of his affidavit of 13 November 1990 Mr Walker recounted
his version of one aspect of his conversation with Mr Terrio at the meeting of
6 April.  The following is extracted from his affidavit:
      "What was said was to the following effect:
      Terrio:     'What stock is likely to be transferred as at 30
                  June 1989?'
      Walker:     'I cannot predict what amount of stock would be
                  left at that time'."
      Mr Walker then went on to depose in the same paragraph:
      "There was simply no way of predicting what, if any, stock
      of Galliano branded products would be left as at (30 June
      1989)." (Emphasis added)
77.  This last statement was not read as part of the respondents' case but it
still formed part of the witness' statement on oath.  It was patently
misleading.  Mr Walker was forced to concede in cross-examination that he
could have made "a reasonably accurate estimate" (p 367) because he had access
to the figures for stock-on-hand, goods on order, past sales and sales
projections.  To depose on oath in November 1990 in terms that used the phrase
"if any", thereby suggesting, the possibility at least, that there might not
be any stock on hand in June 1989 rests most uneasily with his admission in
cross-examination that in May 1989 he knew that Cawsey "had no hope" of
selling its accumulated stock by the end of the financial year (p 364).  I
have come to the conclusion that Mr Walker was not a truthful witness.
78.  I have no hesitation in deciding therefore that where there is any
conflict in the evidence between Messrs Terrio and Church on the one hand and
Mr Walker on the other hand I reject Mr Walker's evidence and prefer that of
Messrs Terrio and Church.
10.   Findings of fact with respect to the meeting on 6 April 1989
79.  The case for the applicants in contract, as pleaded in paragraph 24 of
the statement of claim, has already been set out; I will not repeat it save to
comment that in the statement of claim the terminology used was "landed cost
plus carrying cost".
80.  In evidence, the terminology was inexact; different witnesses referred to
"carrying costs", "handling costs" and "holding costs" and at times the word
"charges" replaced the word "costs".  I do not however understand the
respondents to rely on such variations in terminology. Their attack is more
fundamental. Their case was simply put: no concluded and binding contract was
ever achieved between the representatives of the litigants because what took
place at the meeting of 6 April was incomplete and was not intended to be
complete - the most that could be said of the discussions at the meeting was
that they amounted to an agreement to make an agreement.
81.  For ease of convenience I will hereafter refer to the case for the
applicants in the language used by the draftsman of the statement of claim -
that the agreement for sale and purchase was concluded upon the premise that
RAL would pay to Cawsey an amount equal to "landed cost plus carrying cost"
relative to stock that Cawsey had on hand at the close of business on 30 June
1989.
82.  It was Mr Terrio's evidence that a concluded agreement had been reached
by the parties on 6 April 1989.  His evidence at page 102 was -
      "The concept that we would pick up all inventory and pick up
      Cawsey's handling costs, carrying costs, was stated, and
      that Denis Church and Ken Walker would work out what that
      was to be."
83.  In his affidavit that was sworn on 28 March 1990, Mr Terrio deposed:
      "15.  I then said 'I will buy back inventory which you were
            holding now or in 30 days time' and Mr Walker
            responded 'that does not help with our profit for this
            year' or words to that effect.
      16.   Mr Brady then said 'our financial year ends 30 June
            and we would like to be able to sell exclusively until
            then and to retain profit' or words to that effect.
      17.   I said 'I have no problem with that - you can sell
            your existing inventory until 30 June at normal
            trading prices if you let us buy whatever inventory is
            not sold by then at land(ed) cost plus carrying cost'
            or words to that effect.
      18.   We then discussed this proposal and I said 'at 30 June
            I will also want to have full depletion, p.o.s.
            manufacturing, past promotions, sales contest data and
            any similar material' or words to that effect.
      19.   I also said 'at that date there are to be no
            outstanding invoices' or words to that effect.
      20.   One of the Cawsey representatives then said 'what
            about accounts that trade exclusively with us - will
            we still be able to buy Galliano from you at
            "wholesale" price to service those accounts?' or words
            to that effect and I indicated that I foresaw no
            difficulty with that."
84.  Mr Walker answered those assertions in his affidavit that was sworn on 28
June 1990.  The relevant sections were:
      "14.  The meeting discussed the future of the stock.  Mr Brady
      told Mr Terrio that he would like the opportunity to sell all of
      the stock on hand because the profit from the stock was required
      to meet the John Cawsey and Co. budget for 1989.
      15. On being asked by Mr Terrio what that meant, Mr Brady
      told him that he would like until 30 June 1989 to sell off
      the remaining stock of Galliano products.
      16. I recall that Mr Brady said 'I would like it if you gave
      me until 30 June 1989 to sell the stock, that would be
      sufficient', or words to that effect.
      ...
      21. In return, Mr Terrio said that RAL would not sell any
      competing brands in the market place until 30 June 1989."
85.  Although Mr Walker did not expressly state anywhere in his affidavit that
Mr Terrio agreed to Mr Brady's request (as summarised in paras 14-16) the
clear inference is that he did so agree and that he thereafter volunteered, as
stated in paragraph 21, that RAL would not sell "Galliano" products while
Cawsey was quitting its stock.
86.  Based only on the affidavit evidence of Mr Walker, and putting to one
side questions of legal rights and obligations, it is abundantly clear from
this evidence that RAL would have left that meeting with a belief, honestly
and reasonably held, that a commercial transaction had been concluded. That
transaction, shortly expressed, allowed Cawsey until 30 June to quit its stock
and restrained RAL from entering the market until 1 July.  But, of course, RAL
says that there was more; it says that a further bargain was struck whereby
Cawsey would sell and RAL would buy all unsold stock on hand at the close of
business on 30 June but that in breach of that bargasin Cawsey continued to
sell.  The subject of when sales by Cawsey actually ceased is a matter that
need not be investigated at this stage.  It is sufficient to note that they
continued to sell "Galliano" products until they were able to launch their
"Valentino" products in about October 1989 and that other smaller sales
continued for some months hereafter.
87.  Mr Walker said that Mr Terrio contacted him at Cawsey's in late June or
early July 1989, but it was Mr Terrio's evidence that he placed the call "in
June, mid to late June ..." (p 102).  I accept the evidence of Mr Terrio in
preference to that of Mr Walker for the following reasons.  First, RAL stayed
out of the market place until 1 July because it had acceded to Cawsey's wish
that it have the opportunity of maximising its profits for the financial year
ending 30 June 1989. Secondly, it was consistent with such an agreement having
been struck in April that RAL did not have, as Mr Terrio pointed out, any
stock on hand prior to 1 July (p 103).  Therefore the probabilities strongly
favour the conclusion that RAL made an approach to Cawsey prior to 30 June
with a view to completing the transfer of surplus stock as at that date.
88.  The failure by Cawsey to hand over stock as at 30 June meant that Remy
Martin had minimal stock to sell in the month of July.  I find that RAL acted
in the belief that there would be a handover of stock by Cawsey on 30 June
1989.  Otherwise, it could have, and in my opinion would have, placed orders
in April or May for the delivery of stock in July and thereafter.  There is
evidence that RAL was able to effect some sales in July but I find that its
sales would have been greater if Cawsey had made the handover of stock as
anticipated or, alternatively, if Cawsey had made it clear at the meeting of 6
April - or indeed at any time thereafter - that it did not intend to transfer
the stock to RAL.
89.  I find that Cawsey and RAL struck a commercial bargain as a result of the
meeting of their representatives on 6 April 1989.  It was in terms as pleaded
in the statement of claim and, in particular it included, by necessary
implication, a term for the transfer of surplus stock at landed cost plus
charges that have variously been referred to as "carrying", "holding" and
"handling".  I further find that Mr Walker well knew and understood that such
a commercial arrangement had been struck.  Unfortunately I am compelled to
find that, well knowing that such a commercial arrangement had been struck,
for reasons best known to himself, he thought it in Cawsey's best interests to
deny the making of such an arrangement.
    11.   Do the findings of fact constitute a concluded contract?
          "It is a first principle of the law of contracts that there
          can be no binding and enforceable obligation unless the
          terms of the bargain, or at least its essential or critical
          terms, have been agreed upon.  So, there is no concluded
          contract where an essential or critical term is expressly
          left to be settled by future agreement of the parties.
          Again, there is no binding contract where the language used
          is so obscure and incapable of any precise or definite
          meaning that the court is unable to attribute to the parties
          any particular contractual intention".
(Thorby v Goldberg (1964) 112 CLR 597 at 607 per Menzies J. quoting from the
dissenting judgment of Sugerman J. in the Court below).
90.  Senior counsel for the respondents relied on this and other authorities
in similar terms to argue that the undoubted differences in the evidence of
the witnesses meant that there was no concluded bargain. I have already
rejected the respondents' primary contention which was to the effect that the
parties had merely had general discussions and had delegated to Messrs Walker
and Church the responsibility of identifying and reaching agreement on all
material matters.  The respondents' secondary submission was that the
expression "landed cost plus carrying cost" was vague, uncertain and not
capable of precise definition.  It is not necessary to examine the evidence in
detail; it is sufficient to note that no two witnesses had a common view on
what would, and what would not, be included in the expression "landed cost
plus carrying cost".  This led the respondents to rely on remarks such as
those of Viscount Dunedin in May and Butcher Ltd v The King, reported as a
note to Foley v Classique Coaches Ltd (1934) 2 KB 17 at 21:
      "To be a good contract there must be a concluded bargain,
      and a concluded contract is one which settles everything
      that is necessary to be settled and leaves nothing to be
      settled by agreement between the parties.  Of course it may
      leave something which still has to be determined, but then
      that determination must be a determination which does not
      depend upon the agreement between the parties."
91.  The reports are littered with examples of contracts that have been held
to be unenforceable because of vagueness or uncertainty.   In Hall v Busst
(1960) 104 CLR 206 the High Court concluded that the grantee of an option
could not enforce it because the option price was too indefinite; the contract
had specified a fixed sum to which should be added "the value of all additions
and improvements to the said property since" (a particular date) from which
there was to be subtracted "the value of all deficiencies of chattel property
and a reasonable sum to cover depreciation of all buildings and other property
on the land". In Stocks and Holdings (Constructors) Pty. Ltd. v Arrowsmith
(1964) 112 CLR 646, the High Court had to consider a contract involving the
intended sale and purchase of broad-acre land when the purchase price was to
be calculated by multiplying an agreed sum by the number of allotments in the
approved plan of sub-division. As the contract contained no provision
requiring the vendor to give his approval to the purchaser's subdivisional
plans for the land, the High Court concluded that no price had been agreed
which was either certain or capable of being rendered certain; accordingly,
the document was not binding as a contract of sale.
92.  But the applicants maintained that these authorities did not fairly
represent the circumstances of this case because, so it was argued, the facts
of this case established the existence of a "pricing formula"; acceptance of
this proposition would mean that there was no uncertainty about the price that
RAL would have had to pay to Cawsey for the "Galliano" stock that Cawsey had
on hand at the close of business on 30 June 1989.  As counsel for the
applicants pointed out, correctly, no-one suggested any uncertainty about the
formula: the adumbrated difficulties related to questions surrounding the
application of  the formula to the circumstances of the case.  In support of
his proposition that a concluded "pricing formula" applied, counsel referred
to and relied upon the  decision of the High Court in The Council of the Upper
Hunter County District v Australian Chilling and Freezing Co. Ltd (1967) 118
CLR 429.  That case dealt with an agreement for the supply of bulk
electricity.  One of the provisions of the agreement was in these terms:-
      "It is agreed that during the term of this agreement if the
      supplier's costs shall vary in other respects than as has
      been hereinbefore provided the supplier shall have the right
      to vary the maximum demand charge and energy charge by
      notice in writing to the purchaser."
The argument centred on whether the expression 'supplier's costs' was so
ambiguous as to strike down the contract as void for uncertainty.  In
upholding the enforceability of the contract, Barwick C.J. said -
      "I do not think there is any uncertainty or for that matter
      ambiguity in the expression "supplier's costs" in cl.5,
      however wide may be the area of possible disagreement as to
      its denotation in a particular case.  A contract to build a
      bridge at cost could not, in my opinion, be held void for
      uncertainty: it could not properly, in my opinion, be said
      to be meaningless: nor is it, in my opinion, ambiguous.
      Endless might be the arguments pro and con as to whether or
      not in marginal cases some item of expenditure is as claimed
      a cost, or as to how much of an expenditure is a cost, of
      the particular activity.  But to my mind, generally
      speaking, the concept of a cost of doing something is
      certain in the sense that it provides a criterion by
      reference to which the rights of the parties may ultimately
      and logically be worked out, if not by the parties then by
      the courts.  There are no elements in the circumstances of
      this contract to deprive the concept of that certainty."
      (p 437)
93.  Earlier his Honour had pointed out (p 436) that a contract of which there
can be more than one possible meaning or which, when construed, can produce in
its application, more than one result is not therefore void for uncertainty.
With respect, this seems highly appropriate to the facts of this case as I
have found them.  Businessmen had met and struck a bargain; the Court should
strive to maintain and enforce that bargian wheresoever possible.
Acknowledging, as I do, that there may be some difficulties in arriving at the
final decision, it nevertheless seems to me to be abundantly clear that the
parties intended by their bargain that Cawsey was not to be out of pocket when
it transferred over its surplus stock; it was to be paid all the costs that it
had incurred in acquiring and carrying that stock.  It was not to make a
profit but it was not to suffer a loss.
94.  The remainder of the terms of the agreement as pleaded in paragraph 24 of
the statement of claim were not seriously disputed.  I hold that the parties
entered into a valid and enforceable contract on 6 April 1989 and that the
contract was still on foot on 30 June 1989; the material terms of that
contract are set out in paragraph 24 of the statement of claim.  I further
hold that, in breach of its obligations as contained in that agreement, Cawsey
refused to transfer over to RAL its remaining inventory as at 30 June 1989; it
also failed to supply to RAL the "full depletion" details and the other
information that it had promised.  I further hold that Cawsey, in breach of
the agreement, continued to sell and distribute the "Galliano" range of
products after 30 June 1989.
12.   Passing off
95.  The characteristics of the tort of passing off are stated in the decision
of the House of Lords in Erven Warnink Besloten Vennootschap v J. Townend and
Sons (Hull) Ltd. (1979) AC 731. At p 742, Lord Diplock said:
      "... later cases make it possible to identify five
      characteristics which must be present in order to create a
      valid cause of action for passing off: (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."
96.  A year later, the Privy Council addressed the subject of passing-off in
Cadbury Schweppes Pty. Ltd. v Pub Squash Co. Pty. Ltd. (1980) 2 NSWLR 851.
Lord Scarman, in delivering the judgment of the Privy Council referred to
various United Kingdom authorities, including Warnink v Townend (supra) and
the decision of the High Court in Hornsby Building Information Centre Pty.
Ltd. v Sydney Building Information Centre Pty. Ltd. (1978) 140 CLR 216.
His Lordship then said:-
      "The width of the principle now authoritatively recognized
      by the High Court of Australia and the House of Lords is,
      therefore, such that the tort is no longer anchored, as in
      its early 19th century formulation, to the name or trade-mark
      of a product or business.  It is wide enough to
      encompass other descriptive material, such as slogans or
      visual images, which radio, television or newspaper
      advertising campaigns can lead the market to associate with
      a plaintiff's product, provided always that such descriptive
      material has become part of the goodwill of the product."
      (p 858)
Later his Lordship added at p 859:
      "As always in a 'passing-off' action the ultimately critical
      question was one of fact.  The critical question in this
      case proved to be: were customers or potential customers
      led, by the similarities in the get-up and advertising of
      the two products, into believing that 'Pub Squash' was the
      Cadbury-Schweppes product.  Or, if no deception be proved,
      was there a real probability of deception?"
97.  In the particular circumstances of the "Pub Squash" case, the trial Judge
had concluded that the public was not deceived.  Bearing in mind that in this
present case there was evidence, including photographs, of the location of
"Valentino" and "Galliano" products on the shelves of liquor stores in close
proximity to each other, it is of some interest to note the following findings
of fact of the trial Judge that are recorded at p 859 in the judgment of Lord
Scarman and separately, in edited form, at p 867-8 of the same report:
      "There is no doubt that if the two cans (or two bottles) are
      placed side by side, it can readily be seen that they are
      different.  This, however, is not necessarily enough, for
      one must take into account the nature of the market-place
      and the habits of ordinary purchasers: (see e.g. Saville
      Perfumery Ltd v June Perfect Ltd (1941) 58 RPC 147, at
      pp 174, 175; Tavener Rutledge Ltd v Specters Ltd (1959)
      RPC 83 at pp 88, 89).     As I have pointed out earlier, it
      is not uncommon, albeit that it is not the universal
      practice, both in supermarkets, and in mixed businesses and
      milk-bars which have self-selection display refrigerators
      for products such as 'Solo' and 'Pub Squash' to be displayed
      alongside each other; and in those cases in which they are
      not, they are, nonetheless displayed in close proximity to
      each other.  Further, as I have pointed out, the purchase of
      a soft drink is often a casual transaction.  These two
      features of the market seem to explain most, if not all, of
      the cases of incorrect selection of which evidence has been
      given.... But even accepting, as I do, that by reason of the
      nature of the market-place and of the habits of purchasers,
      mistakes are likely to, and do, in fact, occur, the evidence
      would seem to demonstrate that in most, although not all,
      cases in which there has initially been a wrong selection by
      a customer, or the wrong product has been offered by the
      shopkeeper, the error has been recognized before the
      purchase has been completed.... This being so, it seems to
      me that the defendant has sufficiently differentiated its
      product from that of the plaintiffs'."
98.  Unlike the "Pub Squash" case, consumer evidence (for or against)
deception or confusion was not led in this case.  However, such evidence,
whilst it might be of assistance, is not essential, for it can never be
conclusive: Hogan v Pacific Dunlop Ltd (1988) 83 ALR 403 at 415 per Gummow J.
and, on appeal, sub.nom. Pacific Dunlop Ltd v Hogan (1989) 87 ALR 14 at 22 per
Shepherd J.  The explanation for this is to be found in the speech of Lord
Diplock in General Electric Co (of U.S.A) v General Electric Co. Ltd. (1972) 1
WLR 729 at 738:
      "But where goods are sold to the general public for
      consumption or domestic use, the question whether such
      buyers would be likely to be deceived or confused by the use
      of the trade mark is a 'jury question.'  By that I mean:
      that if the issue had now, as formerly, to be tried by a
      jury, who as members of the general public would themselves
      be potential buyers of the goods, they would be required not
      only to consider any evidence of other members of the public
      which had been adduced but also to use their own common
      sense and to consider whether they would themselves be
      likely to be deceived or confused.
      The question does not cease to be a 'jury question' when the
      issue is tried by a judge alone or on appeal by a plurality
      of judges.  The judge's approach to the question should be
      the same as that of a jury.  He, too, would be a potential
      buyer of the goods.  He should, of course, be alert to the
      danger of allowing his own idiosyncratic knowledge or
      temperament to influence his decision, but the whole of his
      training in the practice of the law should have accustomed
      him to this, and this should provide the safety which in the
      case of a jury is provided by their number.  That in issues
      of this kind judges are entitled to give effect to their own
      opinions as to the likelihood of deception or confusion and,
      in doing so, are not confined to the evidence of witnesses
      called at the trial is well established by decisions of this
      House itself."
99.  It is not essential for the applicants to prove that the respondents
misrepresented the "Valentino" products as being the applicants "Galliano"
liqueurs.  As Lord Jauncey explained in Reckitt and Colman Products Ltd v
Borden Inc. (1990) 17 IPR 1 at 18:
      "It is sufficient that he misrepresents his goods in such a
      way that it is a reasonably foreseeable consequence of the
      misrepresentation that the plaintiff's business or goodwill
      will be damaged."
100.  Thus the facts in Hogan v Pacific Dunlop (supra), which dealt, in the
main, with a television advertisement for shoes and a claimed relationship to
the lead character in the film "Crocodile Dundee", led Gummow J. to emphasise
that the passing-off action -
      "...is concerned with misrepresentation, and with a
      particular type of misrepresentation involving use of the
      image or indicium in question to convey a representation of
      a commercial connection between the plaintiff and the goods
      or services of the defendant, which connection does not
      exist." (p 426)
This emphasis upon a commercial connection can be traced back, indirectly, to
the remarks of Goff L.J. in H.P. Bulmer Ltd and Showerings Ltd v J. Bollinger
SA and Champagne Lanson Pere et Fils (1978) 95 RPC 79 at 117 -
      "Not every kind of connection claimed will amount to passing
      off; for example if one says that one's goods are very
      suitable to be used in connection with the plaintiff's.  On
      the other hand in my view  there can be a passing off of
      goods without representing that they are actually the
      well-known goods which the plaintiff produces or a new line which
      he is supposed to have started.  It is sufficient in my view
      if what is done represents the defendant's goods to be
      connected with the plaintiffs in such a way as would lead
      people to accept them on the faith of the plaintiff's
      reputation...
      Of course, in order to found a case in passing off the
      plaintiff must prove that the name or get-up on which he
      relies has acquired a reputation with the public, or some
      appreciable section or part of the public, as denoting his
      goods or business, though it is not necessary that they
      should know who he is or who carries on the business, or
      even where...."
101.  There is no doubt in my mind - indeed, the respondents did not argue to
the contrary - but that each of the "Galliano" products, that is "Liquore
Galliano", "Sambuca from Galliano" and "Amaretto from Galliano" had acquired,
well before 1989, a reputation with an appreciable section of the public;
eschewing any idiosyncratic knowledge on the subject, the oral evidence and
the literature that was tendered established that each of the three products
had an established place in the liqueur market.  "Liquore Galliano" was, the
most popular but "Sambuca from Galliano" was the fastest growing.  Sales
information suggested that, in comparative terms, "Amaretto from Galliano" was
not quite as popular - a factor that was used against the respondents by
posing the question why did they produce an Amaretto if not to copy the
"Galliano" range and thereby deceive intending purchasers?
102.  Reverting back then to the five characteristics of a passing-off action,
it would seem to me that it is only the first which requires a detailed
consideration - that is, have the respondents engage in a course of conduct
that relevantly amounts to a "misrepresentation"? Referring to their conduct
in neutral terms, it can be said to be that of a trader operating in the
course of trade; it can also be said, in neutral terms, that the conduct was
directed towards prospective customers or ultimate consumers.  Thus the second
and third tests have been met.
103.  It was the case for the respondents that they were competing lawfully
with the applicants; even so, it was a reasonably foreseeable consequence
that, as a competetor, because of their previous involvement in the liquor
industry as the distributor of "Galliano" products, their entry into the
market would injure the business or goodwill of the applicants; this was a
strong commercial connection. I hold therefore that the fourth test has been
met.  There is evidence about the extent of the sales of "Valentino" products
since they entered the market; coupled with the evidence that Cawsey made use
of its knowledge about its former "Galliano" customers, I find that there was
a probability that the distribution by the respondents in about October 1989
and thereafter of the "Valentino" products with their labelling and get-up
would have had a deleterious effect on the applicants' reputation, goodwill or
business.  Notwithstanding that their acquisition of the "Galliano" range was
recent, the applicants were entitled to protect the substantial reputation and
goodwill then enjoyed by the name "Galliano" and its products.  The fact that
Cawsey, in its ten years as the leading Australian distributor, may have
played a major part in the establishment of that reputation and goodwill in
this country may be ironic but it is not otherwise to the point.  I am
prepared to find, on the balance of probabilities that the fifth test has been
met in that the respondents' entry into the market caused actual damage to the
business or goodwill of the applicants.  The evidence quantifying that damage
was, by arrangement between the parties and with the consent of the Court,
deferred pending the publication of these reasons.
104.  There remains then the first question which has now become the critical
question - did the conduct of the respondents amount to a misrepresentation?
I have already described the "Galliano" bottle and the "Galliano" labels.
Their combination is distinctive but so also is the individual bottle.  The
respondents conceded that the "Galliano" bottle was distinctive but argued
that there was nothing special, unique or distinctive about the labelling.  In
my opinion, the "Galliano" labelling is synonymous with the "Galliano"
products and has been so for at least 40 years.  The perception by the
respondents of the "Galliano" range of liqueurs is best identified by quoting
from one of their own documents, the Marketing plan, Ex.A3:-
      "Liqueur Galliano is a branded product which virtually
      'owns' its niche within the liqueur market (similar in a way
      one might say Cointreau, for example, 'owns' a particular
      area).  There are products in the market of a similar type
      (e.g, Strego) but because of a strongly established
      positioning and reason-for-being for the Galliano product
      (due solely to the efforts of JCC over some years) the brand
      has become synonymous with particular usages, especially
      within certain cocktails.  This is to say that Liqueur
      Galliano does not have much in the way of direct and/or
      'active' competition.
      The contrary applies to Galliano's Sambuca and Amaretto.
      The establishment of these products has revolved around
      'piggy-backing' upon the success of liqueur Galliano and the
      efforts of JCC in offering additional support for the
      products above a below-the-line, particularly in on-premise
      situations.
      This, in conjunction with the fact that there are a number
      of alternative brands on the market, would suggest that
      Galliano's Sambuca and Amaretto are more vulnerable to
      competitor activity."
105.  Despite the concession that is contained in the first sentence of the
quoted passage, some attempt was made by the respondents to diminish the
distinctiveness of "Liquore Galliano" by tendering a variety of liqueurs,
including a bottle of "Strega", all of which had, in common, the same golden
colour of "Liquore Galliano".  But in my opinion that is all that the tenders
proved: - that is, that a variety of named liqueurs possessed the same colour
as "Liquore Galliano".  What, one might ask, is achieved by proving that some
whiskys and brandys have the same colour?   No detailed evidence was led on
the subject of taste:  I therefore have no evidence, other than colour, that
would enable me to find that they or any of them were similar.  I see no
reason why I should not make findings in terms that are consistent with the
contents of the respondents' Marketing plan.
106.  First, I find that "Liquore Galliano" is a product that virtually "owns"
its niche within the liqueur market; the supplementary findings that follow
are that it is thereby unique and that its unchanged labelling and get-up have
become distinctive and synonomous with its uniqueness.  The second finding is
that "Sambuca from Galliano" and "Amaretto from Galliano" have "piggy-backed"
upon the success of "Liquore Galliano".  Notwithstanding the existence of
competing brands, the supplementary finding is that the "piggy-backing" has
had the effect of making their labelling and get-up also distinctive -
independently of the shape of the bottle.
107.  It is now necessary to assess the respondents "Valentino" products
together with their labelling and get-up.  First, it should be repeated that
the bottles are very different; it would be impossible for any person to pick
up one bottle thinking that it was the other.  Secondly, the name "Valentino"
is prominently displayed on the front label of each bottle.  Thirdly, there is
the depiction of the "Sheik" on the rear label (in place of the 19th century
soldier).  This difference is of less importance because the rear labels
cannot be seen by a casual observer who is looking at products on the shelves
in a liquor store; however, it is of greater prominence in some of the
respondents' advertising and promotional material.  There are, of course,
other differences; for example, there is no reference on the front label to
Ditta Arturo Vaccari, to Livorno or to Italy (except on the neckband where
there appears the endorsement "In the Italian Tradition"). Indeed, there is a
endorsement at the base of each label "Produce of Australia".  On the small
rear label of each of the three "Valentino" bottles, there is this
endorsement:
      "Capture the essence of Italy in this fine Valentino
      liqueur.  Sipped neat, over ice, within a favourite
      cocktail, or even as part of a special recipe this unique
      blend of flavours suits any occasion."
108.  No such endorsement appears on the back of the "Galliano" bottles.
There then follows, on the back of each "Valentino" bottle the name "John
Cawsey and Company" with its address but without an explanation about the role
(if any) that it plays in the manufacture or distribution of the liqueur.
109.  I turn then to consider the similarities in the competing products and
their labels; first, there are the colours of the "Galliano" products:
"Liquore Galliano" and "Amaretto from Galliano" are respectively golden and
brown, but both are artificially coloured. "Sambuca from Galliano" is
colourless; the three competing "Valentino" lines appear to the untrained eye
to have the same colours.  Originally the base colour for each competing label
also appeared to be identical. Hence, "Liquore Galliano" and "Valentino
Liqueur" were white, both Sambucas were dark blue and both Amarettos were dark
brown.  The respondents changed the Sambuca label to black and the Amaretto
label to red late in 1989, following complaints from the applicants but I
regard those changes of colour as being insubstantial and having no weight in
the determination of the final issues in this case.
110.  Just as the "Galliano" bottle has a neckband of the Italian colours of
banded green, white and red so also does the "Valentino" bottle.  However, its
colour pattern reaches upwards diagonally, from left to right whereas the
"Galliano" colours are banded horizontally. In the white section of the
neckband, the "Galliano" seal contains the words "Imported from Italy"; in the
white section of the "Valentino" neckband are the words "In the Italian
Tradition".
111.  The most striking similarity is the combination of the colours on each
of the three competing labels.  Just as the "Liquore Galliano" label has
purple and gold printing on a white background so also has the label of
"Valentino Liqueur" purple and gold printing on a white background.  The word
"Valentino", printed in purple and edged in gold matches the word "Galliano"
which is likewise printed in purple and edged in gold.  This striking
similarity permeates through to the two Sambucas and the two Amarettos.  Even
the subsequent change in colours of the "Valentino" labels for the Sambuca and
the Amaretto was insufficient to remove this similarity.  The coloured
reproductions of the labels in the schedule to these reasons give some
indication of the similarities but the photographic process was unable to
reproduce the gold shadow or edging of the "Valentino" labels.  The
reproductions contradict therefore some of the actual colour similarities.
112.  The next issue that must be addressed was the decision of the
respondents to incorporate a castle or a fortress on the front of each label.
Whether the depiction should properly be described as a "castle" or a
"fortress" makes little difference for it is a fact that when the "Galliano"
edifice is viewed side by side against the "Valentino" edifice they are quite
different.  The matter of importance rests, rather, in the explanation offered
by the respondents' witnesses for the presence of such an edifice on their
labels. The respondents have claimed that the presence of the fortress
emphasised the Italian look that they were endeavouring to achieve in the
project.
113.  However, no witness pointed to any aspect of the edifice as Italian in
concept or design.  If then the fortress was not included in the label to give
it an Italian look, what was the true explanation for its inclusion?  The
answer, in my opinion, is not difficult to find. The respondents were very
annoyed at the loss of the "Galliano" franchise.  They felt (and perhaps
rightly so) that they had built up the range of "Galliano" products in
Australia and that they were being unfairly treated.  I accept the evidence of
Messrs Terrio and Church that initially Mr Brady and Mr Walker were hostile at
the meeting of 6 April 1989 and were threatening legal action against the Remy
Martin group.  It was in that atmosphere - one of pique and anger - that the
respondents conceived the idea of entering the market in headlong competition
with and opposition to the "Galliano" range of products. They were determined
to do anything that they could to promote "Valentino" at the expense of
"Galliano".
114.  But they were not fools; they knew, for example, that it would be
impossible to use the same uniquely shaped bottle; they also knew that their
labels could not be exact copies of the "Galliano" labels.  I find that the
respondents set about the task of filching as much of the "Galliano" label and
get-up as they thought would be safe to withstand legal challenge.  I further
find that the use of an edifice on the labels of the "Valentino" products with
its green surrounds was a practical manifestation of the respondents' attempt
to establish a connection or an association with the "Galliano" range.  The
changes that they made were limited to those that were obvious and necessary;
they could not use the shape of the bottle or the name "Galliano".
Nevertheless, it was their deliberate intention to make use of as many
elements in the "Galliano" range as they thought might be done with safety.
The respondents were intent on using their prior knowledge about the
"Galliano" products and the purchasers and consumers of the "Galliano"
liqueurs to establish a connection between "Valentino" and "Galliano".
Indeed, in the case of "Liquore Galliano", the respondents well knew that it
dominated its market and that the only way in which they could establish
"Valentino Liqueur" would be to connect it with or associate it with "Liquore
Galliano".
115.  If the respondents were so intent on capturing an Italian "feel" for
their products one is entitled to wonder why did they not choose some
obviously recognizable Italian scene or concept such as a Venetian Gondolier
or the Ponte Vecchio or Romulus and Remus and the wolf or the Trevi Fountain -
the choice is endless - yet they choose a castle which might have come from
any part of medieval Europe or England.  I reject the proposition: I note that
the most that counsel for the respondents could say of it was that it had a
European look.  I find that the insertion by the respondents of a castle or a
fortress on their labels was an attempt by them to attract the eye of the
intending purchaser in the hope that he or she would mistake the respondents'
product for the "Galliano" range; it was a poorly disguised attempt to
establish an association or connection with the applicants' products.
116.  The insertion of the fortress was a serious mistake; not only did it
fail to achieve the Italian look, but also its presence destroyed the bona
fides of the respondents' case.
117.  The respondents made a further mistake when they inserted on the
"Valentino Liqueur" label the caption "Ideal for Harvey Wallbangers". As I
have already said, the applicants had no proprietary rights to this cocktail,
to its name or to its recipe and it is always a possibility that "Valentino
Liqueur" might be used "ideally" in the recipe for "Harvey Wallbangers"; in
another context, on another label, there would have been nothing wrong with
this caption.  But when one stands back, ignoring minutiae, there is an
overwhelming sense of association - as if the proprietors of "Liquore
Galliano" might have decided to market their product in a different bottle
with a different name.  That is the context in which the reference to "Harvey
Wallbangers", combined with the colour combination on the label and the
presence of the fortress, achieves a marked degree of importance and reacts
adversely upon the respondents.
118.  I therefore find that the respondents embarked upon the manufacture and
distribution of their "Valentino" range with improper motives and lacking good
faith.  Although such findings do not prove, simpliciter, passing-off, they
offer, at least, a firm indication that it was the  respondents' expectation
that the passing-off would be successful.  This point was discussed and
explained in the joint judgment of Dixon J. (as he then was) and McTiernan J.
in Australian Woollen Mills Ltd v F.S. Walton and Co. Ltd. (1937) 58 CLR 641
at 657:
      "The rule that if a mark or get-up for goods is adopted for
      the purpose of appropriating part of the trade or reputation
      of a rival, it should be presumed to be fitted for the
      purpose and therefore likely to deceive or confuse, no
      doubt, is as just in principle as it is wholesome in
      tendency.  In a question how possible or prospective buyers
      will be impressed by a given picture, word or appearance,
      the instinct and judgment of traders is not to be lightly
      rejected, and when a dishonest trader fashions an implement
      or weapon for the purpose of misleading potential customers
      he at least provides a reliable and expert opinion on the
      question whether what he has done is in fact likely to
      deceive.  Moreover, he can blame no one but himself, even if
      the conclusion be mistaken that his trade mark or the get-up
      of his goods will confuse and mislead the public."
119.  Lord Simonds expressed himself more positively on this subject in Office
Cleaning Services Ltd v Westminster Window and General Cleaners Ltd. (1946) 63
RPC 39 at 42:
      "Confusion innocently caused will yet be restrained.  But if
      the  intention to deceive is found, it will be readily
      inferred that deception will result.  Who knows better than
      the trader the mysteries of his trade."
120.  In Telmak Teleproducts (Australia) Pty. Ltd. v Coles Myer Ltd. (1989) 89
ALR 48 Wilcox and Einfeld JJ. explained the position in these terms:
      "... proof of the fact that a trader has deliberately copied
      the name or "get-up" of a rival does not itself establish a
      contravention of s.52 "(of the TPA)" or a passing off of
      goods.  The proof has evidentiary value only.  But the
      evidentiary value is significant.  The courts have long
      recognised that traders best know their trade." (p 69)
Their Honours then referred to and relied upon certain passages from the
judgments in Australian Woollen Mills v Walton and Office Cleaning Services v
Westminster Window, which included the sections therefrom set out above.
121.  Unfair completion is not an actionable tort in Australia; that led Deane
J., with whom the other members of the Court agreed, to refer, in Moorgate
Tobacco Co. Ltd v Philip Morris Ltd. (1984) 156 CLR 414, to the -
      "... adaptation of the traditional doctrine of passing off
      to meet new circumstances involving the deceptive or
      confusing use of names, descriptive terms of 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." (p 445)
122.  In this present case the relevant "indicia" is the combination of first,
the range of three products, secondly the respective colours of each product,
thirdly, the dominant colours of the three labels (including the neckbands)
and fourthly, the incongruous fortress with its green surrounds; to these can
be added, in the case of "Liquore Galliano", the addition of the endorsement
"Ideal for Harvey Wallbangers" on the label of "Valentino Liqueur".  I find
that this labelling and get-up as used by the respondents would induce or
persuade ordinary members of the public (as distinct from business houses that
may have been wholesale or retail purchasers) to believe that the "Valentino"
products have an association, quality or endorsement which belongs to or is
associated with the "Galliano" products.
123.  The evidence and my own observations satisfies me that it is a real
probability that a significant number of uninformed members of the public
would be deceived and confused.  It is not necessary to prove that
substantially all persons would be deceived nor is it a defence to a
passing-off action to prove that some were not deceived: Saville Perfumery Ltd
v June Perfect Ltd and F.W. Woolworth and Co. Ltd (1941) 58 RPC 147 at 175-6;
Norman Kark Publications Ltd v Odhams Press Ltd (1962) 79 RPC 163 at 168.
Such conduct amounted, in my opinion, to a misrepresentation.  The degree of
confusion exceeds that which might occur in the casual act of initially
choosing one brand and then noticing the mistake: c.f. the "Pub Squash" case.
The facts in this case can also be distinguished from those in  Stuart
Alexander and Co (Interstate) Pty. Ltd. v Blenders Pty. Ltd. (1981) 37 ALR
161.  There the brand names of the two competing lines of coffeee, "Moccona"
and "Andronicus", were held to be well known; they were "prominently
displayed" on every label (p 167 per Lockhart J.).  Here the name "Valentino"
was prominently displayed but it was an unknown name in the market place for
liqueurs.
124.  This is a case of "deceptive similarity", a term used by Windeyer J. in
The Shell Co of Australia Ltd. v Esso Standard Oil (Australia) Ltd.
(1963-1964) 109 CLR 407, a trade mark case.  Although that decision was
reversed on appeal, the authority of his Honour's statement of principle as
set out below was not questioned.  His Honour observed at p 415:
      "On the question of deceptive similarity a different
      comparison must be made from that which is necessary when
      substantial identity is in question.  The marks are not now
      to be looked at side by side.  The issue is not abstract
      similarity, but deceptive similarity.  Therefore the
      comparison is the familiar one of trade mark law.  It is
      between, on the one hand, the impression based on
      recollection of the plaintiff's mark that persons of
      ordinary intelligence and memory would have; and, on the
      other hand, the impressions that such persons would get from
      the defendant's television exhibitions.  To quote Lord
      Radcliffe again: 'The likelihood of confusion or deception
      in such cases is not disproved by placing the two marks side
      by side and demonstrating how small is the chance of error
      in any customer who places his order for goods with both the
      marks clearly before him....   It is more useful to observe
      that in most persons the eye is not an accurate recorder of
      visual detail, and that marks are remembered rather by
      general impressions or by some significant detail than by
      any photographic recollection of the whole': de Cordova v
      Vick Chemical Co (1951) 68 RPC at p 106.  And in Australian
      Woollen Mills Ltd v F.S. Walton and Co. Ltd. (1937) 58 CLR
      641 Dixon and McTiernan JJ. said (at p 658): 'In deciding
      this question, the marks ought not, of course, to be
      compared side by side.  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 of an injunction 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'."
125.  In considering this question of deceptive similarity and the likely
reaction of buying members of the public one must further bear in mind the
problems attendant upon imperfect recollection.  As Gummow J. said in 10th
Cantanae Pty. Ltd v Shoshana Pty. Ltd. (1987) 79 ALR 299 at 315:
      "Plainly, his Honour was correct in bearing in mind that one
      answers these questions not by close ex post facto analysis,
      but more by a perception of the usual manner in which
      ordinary people behave, bringing with them but an imperfect
      recollection of the appearance of Sue Smith in 1983 or her
      appearance at an earlier date."
126.  The approach with respect to deceptively similar trade marks that was
favoured by Windeyer J. in Shell v Esso was adopted by Wilcox J. in Dial An
Angel Pty. Ltd. v Sagitaur Services Systems Pty. Ltd. (1990) AIPC 90-687 in
respect of a claim under ss.52 and 53 of the Trade Practices Act.  In my
opinion, it applies with equal force in a passing-off action. I therefore
conclude, for the reasons set out above that a cause of action in passing off
has been established.
12.   Section 52 Trade Practices Act
127.  The authorities have made it clear that the purposes and objects of s.52
do not always coincide with the law of passing off; the former serves to
protect the public from conduct that is misleading or deceptive or that is
likely to mislead or deceive whilst the latter protects the rights of the
individual.  Thus the scope and effect of s.52 extends far beyond the right of
one trader to protect his proprietary interests.  On the other hand, there are
numerous instances of a trader enlisting the aid of the section and obtaining
injunctive and other relief against his rival because of his ability to
satisfy the Court that his rival's conduct has failed to meet the standards
required by s.52. Hornsby Building Information Centre v Sydney Building
Information Centre (supra).
128.  In Taco Company of Australia Inc. v Taco Bell Pty. Ltd. (1982) 42 ALR
177 at 202 it was said that conduct could not be categorised as misleading or
deceptive "unless it contains or conveys, in all the circumstances of the
case, a misrepresentation".  However, recent authorities have explained that
this may not always be the case.  For example, Lockhart J. as a member of the
Full Court in Bridge Stockbrokers Ltd. v Bridges (1984) 4 FCR 460 said:-
      "It is obvious that mere confusion or uncertainty is not the
      same as misleading or deceptive conduct; but, in some cases
      a corporation's conduct which causes confusion or
      uncertainty in the mind of the public may, I suggest,
      constitute misleading or deceptive conduct within s 52
      notwithstanding that the conduct does not constitute a
      misrepresentation in the sense in which that expression is
      understood at this stage in the development of s 52."
      (p 474)
129.  Let it be assumed for example, that contrary to my earlier finding, the
conduct of the respondents in this case did not amount to a representation;
should that be the case, then the applicants would fail in their passing-off
action as the making of a representation is an essential element of that tort.
But even if the applicants' action for passing-off were to fail, it would not
follow, as a matter of course, that the respondents' conduct was not
misleading or deceptive or likely to mislead to deceive.  There are no formal
boundaries to the interpretation of the word "conduct".  Lockhart J. (with
whom Burchett and Foster JJ. agreed) pointed out in Henjo Investments Pty.
Ltd. v Collins Marrickville Pty. Ltd. (1988) 79 ALR 83 at 93:-
      "Misleading or deceptive conduct generally consists of
      representations, whether express or by silence; but it is
      erroneous to approach s52 on the assumption that its
      application is confined exclusively to circumstances which
      constitute some form of representation."
130.  In Murray Goulbourn Co-operative Co. Ltd. v New South Wales Dairy
Corporation (1990) 92 ALR 239 the Full Court explained the remarks of Lockhart
J. in Bridge's case in these terms:-
      "The circumstance postulated by Lockhart J which could
      contravene s 52 was the intentional element of the conduct
      which rendered it deceptive conduct, even though the conduct
      viewed objectively would only be confusing.  The extension
      to the generally accepted notion of misleading and deceptive
      conduct encompassed by his Honour's remarks had as the
      essential element the ingredient of intentional conduct,
      conduct designed to cheat, ensnare or mislead." (p 258)
131.  In the Murray Goulbourn case, the trial judge had expressly rejected the
allegation that the challenged party's conduct was of that character; in the
present case I have reached the opposite conclusion; the  relevant conduct was
the manner in which the respondents prepared and presented the labels and the
get-up on the "Valentino" bottles. Those labels and that get-up were
intentionally used; it was intended that the "Valentino" range would be
directed at the customers and consumers, being members of the buying public,
to whom Cawsey had earlier promoted the "Galliano" products; the respondents
had no compunction about using information, confidentially acquired by them in
their capacity as representatives of the former "Galliano" owners, against the
interests of the new owners; they set about presenting a line of products in
such a way as to pass them off as connected or associated with the applicants'
products.
132.  But if, contrary to my findings, their conduct did not achieve, as a
matter of law, the hallmarks of a passing-off, it did, at the least, cause
confusion and it was the respondents' intention to do so.  I find that the
respondents set out to "cash in" on "Galliano's" reputation intending, so they
hoped, to sail as close to the wind as they might without attracting legal
liability.  In this regard they failed.  Either through need or greed - or
both - they went too far; no complaint could have been made of the bottle
shape that they adopted; the applicants complained about the use of the name
"Valentino" but failed to substantiate their complaint (the existence of a
ladies fashion house of the same name was not seriously pursued as a basis for
complaint and neither the evidence nor my own observations could seriously
lead to a finding that it has been represented that the late film actor
favoured or supported the respondents' range of liqueurs).  On the other hand,
the respondents could have, with ease, devised colour combinations for labels
and pictorial scenes and printing far removed from the labels and get-up that
had been used on the "Galliano" products for so many years and still achieve
their desired Italian feel.  Instead, they deliberately set out to use as much
of the opposition's labelling and get-up as they thought safe - intending
thereby to confuse a substantial part of the market.  Standing back and
viewing the matter objectively, I have concluded that they went too far.
Their conduct was, at the least, misleading or deceptive.  In the words of the
Full Court in the Murray Goulbourn case there was, in this case "the
ingredient of intentional conduct, conduct designed to cheat, ensnare or
mislead."
133.  The applicants pleaded the existence of numerous false representations
in paragraph 35 of the Statement of Claim; they withdrew some and the evidence
did not support others.  However, I am satisfied that each of the following
was made out, that is to say: in advertising, promoting, marketing,
distributing, selling and supplying "Valentino Liqueur", "Sambuca from
Valentino" and "Valentino Amaretto" the respondents have represented to the
general buying public in Australia (a) that each of the "Valentino" products
comes from a source or origin that is connected or associated with, or related
to, the source or origin of the "Galliano" products and (b) that each of the
"Valentino" products is manufactured by and emanates from a long established
manufacturer of liqueurs.  (See paragraphs 35(b) and (c) of the Statement of
Claim).  However, I fall short of extending those representations to the cans
of "Harvey Wallbangers" that are sold by the respondents and I do not consider
that the representations would have had the same adverse effect upon retail
and wholesale business houses.
134.  Some specific comment should be made about the applicants' complaints
concerning the use by the respondents of the name "Harvey Wallbangers".
Exhibit A.62 is a 375 ml can of "Valentino Harvey Wallbanger".  The applicants
do not market a similar product, but as Exs.R9 and R10 establish, a New
Zealand manufacturer produces products called "Harvey Wallbanger Cruisers" and
"Harvey Wallbanger".  The can, Ex.A62 makes no reference, either to "Valentino
Liqueur" or to "Liquore Galliano" and none can be inferred.  There was no
evidence to suggest that the respondents (as was alleged in sub-paragraph
35(k) and 35(ll) of the statement of claim) represented that -
      "(k)  Valentino Liqueur is the well known "Harvey Wallbanger" liqueur;
            ...
      (ll)  The canned product "Valentino Harvey Wallbanger"
            is a genuine Harvey Wallbanger cocktail or
            liqueur made by using Liquore Galliano."
135.  The applicant further complained that the respondents falsely
represented that:
      "Valentino Liqueur has characteristics, and is of a quality,
      standard and composition, that makes it the ideal liqueur
      for 'Harvey Wallbanger' cocktails."
136.  Neither side led any evidence on that subject.  There were a few
incidental remarks about quality but counsel made it clear that the question
of "taste" would not be litigated.  I am therefore unable to say whether
"Valentino Liqueur" has the characteristics attributed to it.  The applicants
have not made out their complaints about the cocktail.
13.   Sections 52A, 53 and 55 - Trade Practices Act
137.  The applicants, in addition to their charge of misleading or deceptive
conduct, levelled a series of six specific accusations against the
respondents.  I do not intend to address them in any detail.  If I am correct
in my finding that the respondents engaged in conduct that was misleading or
deceptive, no useful purpose will be served by dissecting that conduct into
one or more of the six "compartments" that are referred to in paragraphs 37
and 39 of the statement of claim.  On the other hand, if I am wrong, then
those six allegations would automatically fall.  For completeness however, I
note that the applicants abandoned their claim under s.55 and did not pursue
their claim under sub-s.53(eb) (c.f. sub-paras 37 (f) and (e) of the Statement
of Claim).
14.   Conclusions
138.  It is clear that the findings that I have made justify judgment being
entered for one or more of the applicants; the question of the specific
identity of the successful party or parties has not been addressed by counsel
and will now have to be considered; likewise, neither counsel addressed the
subject of the particular respondent or respondents against whom judgment and
orders should be entered and made. That question can also be addressed on the
resumed hearing of these proceedings which I now list for mention in Melbourne
on Wednesday 4 March 1992 at 9.30 a.m.  I direct the applicants to file and
serve by Monday 2 March 1992 short minutes of order to reflect the findings
that I have made and I reserve to all parties liberty to speak to the minutes.
On 4 March I will also hear submissions from the parties about the nature and
extent of the continued prosecution of these proceedings; in addition; I will,
on that date if required, fix dates for the resumed hearing.