Many happy returns: The NZ Tax Refunds case
Thursday 4th April 2013
In a relatively rare decision in this area of law, the Court of Appeal last week granted an interim injunction in favour of an appellant, an online tax refunds service called NZ Tax Refunds Ltd, to prevent the respondents from using the domain name www.taxrefundnz.co.nz and the trading name “Tax Refund NZ”.
The appeal partially overturned the earlier decision of Justice Fogarty in the High Court. In a separate finding that was not appealed, the High Court had granted an interim injunction in favour of NZ Tax Refunds Ltd to prevent a third business from using the trading name “NZ-Tax Refund” or the domain name www.nz-taxrefund.co.nz.
NZ Tax Refunds Ltd brought proceedings against its competitors the parties associated with the My Refund, alleging breach of the Fair Trading Act 1986 (alleging misleading and deceptive conduct) and passing off under common law. Both the High Court and the Court of Appeal noted that the NZ Tax Refunds trading name was descriptive of the services that the business provided to its customers, quoting the words of Justice Tipping in Airport Car Rentals (Southern) Ltd: “As a general rule the more distinctive a trading name is, both in itself and as identifying the plaintiff’s business, the further away competitors must keep in the names they adopt.”
The respondents operated their business under the name My Refund but wanted to raise their internet search rankings for New Zealand based services by building a New Zealand connection into the name. In the High Court, Justice Fogarty found that, despite the highly descriptive nature of NZ Tax Refunds name, the trading name “NZ-Tax Refund” was effectively a direct copy of “NZ Tax Refunds”. Justice Fogarty considered that there was a serious argument to be made that NZ-Tax Refunds had deliberately attempted to pass itself off as NZ Tax Refunds. Justice Fogarty, however, felt that “Tax Refund NZ” (which is simply a re-ordering of NZ Tax Refunds, minus the final “s”) was not similar enough to NZ Tax Refunds to warrant interim intervention from the court. The result was a very fine line drawn between extremely similar and descriptive trading names and domain names, with Tax Refund NZ falling on the right side of that line and NZ-Tax Refund falling foul of it.
The Court of Appeal reviewed Justice Fogarty’s reasoning and overturned his findings on Tax Refund NZ. Key to the Court of Appeal’s decision was the finding that NZ Tax Refunds had spent some $3.5 million on development and advertising of its brand since its inception in 2008, so that the name had moved from being highly descriptive to becoming somewhat distinctive. That afforded NZ Tax Refunds slightly greater protection than it otherwise would have as a descriptive name. The Court of Appeal also found that there was a possibility that the respondents had adopted the name Tax Refund NZ to free-ride on the goodwill of NZ Tax Refunds. The respondents operated concurrently under the trading name “My Refund”, which raised questions why they were using Tax Refund NZ and www.taxrefundnz.co.nz. What appeared to be a deciding factor for the court was that visitors to www.taxrefundnz.co.nz were redirected to My Refund, suggesting that Tax Refund NZ was simply a means of increasing the respondents’ catchment pool and not a separate business The Court of Appeal referred to the lack of evidence as to why the respondents had not simply adopted the name “My Refund NZ” or “My NZ Refund”.
There is now a temporary order in place until trial, or until the case settles, whichever comes first. The case highlights the fine balance between competing interests over highly descriptive names. On the one hand, businesses that adopt highly descriptive words for their trading names should not be able to monopolise those words and prevent other traders from using them. On the other hand, if a business has built up significant goodwill and reputation in a trading name that is descriptive, that goodwill and reputation should be protected from those that seek to free-ride on it to obtain a commercial advantage. Regardless of the ultimate result in this case, adopting a more distinctive and less descriptive trading name would have avoided the argument.