Guano seller proves you should not leave your damages claim up to kismet

The recent Federal Court decision of Kismet International Pty Ltd v Guano Fertilizer Sales Pty Ltd ([2013] FCA 375) is a salutary lesson to plaintiffs of the need to provide evidentiary support for a claim for damages.

Guano is a phosphate fertiliser created from bird and bat droppings. The proceedings involved two sellers of guano which originated from the same region of Indonesia. The applicant, John Jashar, had sold guano under the name Guano Gold or Guano Kwik Start since 1996, and had a substantial reputation in the relevant market for the sale of guano under those marks. The respondent, James McMahon, placed two advertisements in a local classifieds advertising 'Guano Gold' fertiliser from 2009 to 2011. Jashar sued Mr McMahon for misleading and deceptive conduct and passing off.

McMahon admitted the misleading and deceptive conduct, the goodwill and reputation of Jashar in the marks and the passing-off claim – he had mistakenly believed the trademark to refer to the type of guano sold by the Indonesian seller, rather than the guano of Jashar. Therefore, the only issue at trial was the remedy for the misleading and deceptive conduct and passing off. Jashar sought to argue that he should get damages for lost sales, damages for loss of reputation and an injunction.

In order to make out the claim to lost sales, it was incumbent on Jashar to prove that the lost sales were due to the use of his trademark by McMahon. Despite this, no evidence was put on by Jashar. He simply sought to rely on the methodology for assessing damages discussed in GM Holden v Paine, where Justice Gordon essentially assumed that proven sales of the infringer were lost sales of the trademark owner, subject to a discount to take into account varying circumstances.

Justice Murphy rejected this approach in the circumstances of the case, finding that such methodology was only suitable where it was difficult to provide evidence in relation to lost sales. This was not the case in the present circumstances, as McMahon put on detailed evidence from a number of individuals who, between them, purchased the majority of the guano sold by McMahon. Those people said that they had not been influenced to buy the product based on McMahon's use of the trademark GUANO GOLD – most had purchased from McMahon because the guano was cheaper than Jashar's or that they did not like dealing with Jashar. Further, McMahon did not extensively promote his guano under the trademark, only referring to it as 'Guano Gold' in his advertisements, which were small, and on some of the packing of guano – though most of the guano sold was sold in bulk without packaging. In discussions with purchasers, McMahon referred to his product as guano, as did his purchasers.

Overall, Justice Murphy was unable to find that any of the sales of guano by McMahon were motivated by the use of Jashar's trademark, and therefore that they were lost sales of Jashar. Justice Murphy found that, while it would often be difficult to provide evidence in relation to damages and in those situations the court would do the best job it could, this did not excuse an applicant from having to provide evidence where it was available, and certainly to rebut evidence which is put on by the respondent.

In relation to the reputational damage claim, Justice Murphy awarded Jashar a mere $5,000 in damages due to that fact that the guano was treated largely as a commodity by purchasers and the fact that, on the evidence before the court, most purchasers did not care what trademark the guano was sold under. Justice Murphy refused to award an injunction because McMahon had already ceased selling the guano under the trademark.

While Kismet v Guano breaks no new legal ground regarding damages, it is a useful reminder for those contemplating or conducting litigation that evidence regarding damages cannot be an afterthought following proof of infringement. The remedy is what makes the litigation worthwhile, and the applicant has the onus of proof. For Jashar, kismet* has not been kind.

* fate

Rob Clark, Allens, Melbourne