What [right]'s in a [Business] Name
Westpac was a secured creditor of Rynah Pty Ltd (Rynah) which for many years had owned the business name ‘Melba’s On The Park”. As you’ve probably guessed, Rynah went bust and because, unlike Fannie Mae, it was not sufficiently in debt, it was actually asked to pay its debts. Westpac had a security by way of a fixed and floating charge over the assets of Rynah including ‘Intellectual property and goodwill’.
The catch for Westpac was that Rynah assigned its business name to George McMillan (in his capacity as an individual and as a trustee of property owned pursuant to a joint venture agreement between Rynah and Melbas on the Park Pty Ltd). Westpac was unimpressed because it, presumably, wants to sell the restaurant as a going concern. In fact, the company’s receivers have continued to run the restaurant as ‘Melba’s on the Park’ since their appointment. Technically, that put the receivers in breach of the Business Names Act because you can not run a business (other than a business using your own name) unless you are the registered owner of the business name. There were two problems for the receivers. First, the business name was registered in the name of George McMillan and, second, the company name Melba’s on the Park was registered pursuant to the Corporations Act 2001.
Westpac sought, among other orders, declarations that Rynah was entitled to registration of the business name, that George McMillan was not so entitled to registration and that Melba’s On the Park Pty Ltd was not available as a company name to that company. The case was then argued about the interpretation of the Joint Venture Agreement between Rynah and Melba’s on the Park Pty Ltd and, in particular, whether it effected an assignment of the business name to George McMillan as trustee of joint property of the joint venture prior to the Westpac security documents or whether it was in fact a security agreement itself which, being unregistered, was lower in priority than Westpac’s. Justice White held that the “Joint Venture Agreement’ was not binding on Westpac but that still left the problem that the business name was registered to George McMillan and there was a company with the name Melba’s On the Park.
As Justice White noted, there was no power in the Business Names Act to require the Registrar to alter the registration. Instead, the declarations were granted pursuant to various provisions in the legislation that prohibited a person from being registered unless they carried on business or were proposing to carry on business under that name. George McMillan neither carried on the business nor proposed to do so. Hence, Justice White was prepared to make declarations that Rynah is entitled to registration of the business name, George McMillan is not and that Melba’s on the Park was not entitled to that name under the Corporations Act 2001.
As I said at the outset, the result was fine but it was a messy way of going about it. Business name registrations and company name registrations carry with them no substantive legal rights. Registration simply gives the registrant immunity from prosecution for carrying on business under than name. It gives nothing else (except the basis for registration of a .com.au domain name but that is another issue). The way in which the case was argued was as if business names were some magical form of intellectual property right. They are not. They are just an administrative requirement so that members of the public may know which individuals or entities are standing behind the name.
If George McMillan had started up a business called ‘Melba’s on the Park’, Westpac would have been in a spot of bother in terms of declarations that it was seeking pursuant to the Business Names Act. The real name of the game should have been ownership of the goodwill in the Surfers Paradise restaurant of that name.
What should they have argued? Now, at the risk of sounding like a picky academic, and bearing in mind that, after the victory, Westpac is laughing all the way to the bank, there may have been a more legally and conceptually appropriate way of running the case. It may also have involved a tad more discussion of intellectual property issues rather than the detail of the Queensland Business Names Act of 1962.
Here’s my suggestion as to how to argue the matter. It was about the goodwill in the business ‘Melba’s on the Park’. The Business Name issue is a very secondary consideration. The restaurant had traded for many years. It had a significant reputation, especially in Surfers Paradise. Westpac acquired the goodwill via its security agreement with Rynah and was entitled to control both Rynah and its goodwill. How then could it wrest the Business Name off Credit Systems? An action pursuant to s52 of the Trade Practices Act. Registration in the name of anyone but Rynah would be misleading and deceptive. It would be an instrument of fraud, somewhat like the wrongful registration of a domain name as per the decision in CSR Limited v Resource Capital Australia Pty Limited [2003] FCA 279.
So the mere registration of the name would have been conduct that was misleading or deceptive or likely to mislead or deceive.
The remedy would be an order requiring George McMillan to transfer the business name to the rightful owner of the goodwill in the business (whether or not he was or was proposing to run his own restaurant of that name) and requiring Melba’s on the Park Pty Ltd to change its name. The action did not have to be brought by Rynah itself as any party may bring an action in respect of a breach of s52. The power to make the necessary declaratory orders is quite clearly set out in the Trade Practices Act.
