FEDERAL COURT OF AUSTRALIA

Dataflow Computer Services Pty Ltd v Goodman [1999] FCA 1625

MISLEADING AND DECEPTIVE CONDUCT – in trade or commerce – whether a person not carrying on a business can engage in conduct in trade or commerce

WORDS AND PHRASES – “in trade or commerce”

Trade Practices Act 1974 ss 6(3)(a) and 52

Federal Court Rules O 15A and O 62 r 19

Supreme Court Rules 1970 (NSW) Pt 52A r 26

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 discussed and applied

Plimer v Roberts (1997) 150 ALR 235 considered

Fasold v Roberts (1996) 70 FCR 489 considered

Robin Pty Limited v Canberra International Airport Pty Ltd [1999] FCA 1019 not followed

Tobacco Institute of Australia Ltd v Woodward (1993) 32 NSWLR 559 not followed

Firewatch Australia Pty Ltd v Country Fire Authority [1999] FCA 761 referred to

Advanced Hair Studio Pty Ltd v TVW Enterprises Ltd (1987) 18 FCR 1 referred to

Sedgwick Ltd v Bain Clarkson Ltd (1995) 129 ALR 493 cited

Airservices Australia v Transfield Pty Ltd [1999] FCA 886 cited

Comcare v Labathas (1995) 61 FCR 149 cited

DATAFLOW COMPUTER SERVICES PTY LIMITED v SCOTT GOODMAN

N 573 OF 1999

HELY J

25 NOVEMBER 1999

SYDNEY

THE COURT ORDERS THAT:

1.                  Application dismissed with costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     The applicant (“Dataflow”) sells and distributes in Australia computer software programs such as educational programs, games and productivity programs.  Among those to whom Dataflow distributes those games and programs are franchisees of the retail department stores known as “Harvey Norman”, a business conducted by Harvey Norman Holdings Ltd (“Harvey Norman”).

2                     The respondent (“Goodman”) was an employee of Dataflow from mid-late March 1999 to about early May 1999.  On Saturday, 22 May 1999 Goodman sent an e-mail to thirteen representatives of Harvey Norman, or franchisees of Harvey Norman, and to three representatives of the print media.

3                     An extract of the content of the e-mail is as follows:

“With Tony Gattari stating that ‘Deal direct and your out!’ whats he going to do when one of largest software distis goes direct.  On Friday Dataflow registered a new business ‘Software Ventures Australia Pty Limited’ perhaps its sole purpose is to direct to the end user.  But Mr Tobias will swear black and blue and follow to the word that ‘Were not going direct with Dataflow, and Harvey Norman only deals with Dataflow not Software Ventures Australia Pty Limited (who will trade as e*flow)’.  Mr Gattari will you stand by and watch another disti try and pull the wool over your eyes.  No, you are the professional retailers, thats why Dataflow sold you the Kidscape concept.  But I spose that now since DF has lost MS which will shrink at least 60 mill in sales, he has to find the $$$ somewhere, and thats out of the pockets of each and every proprietors cash register.  Why don’t you check the hard core facts yourself.  Go to these web sites.

The first is ASIC (Australian Securities and investment commission) a government body, which will list the details of a registered business.

www.search.asic.gov.au/gns010.html

then in the search box type e*flow.

then you want to get the juicy search, go to this site:

http://www.aunic.net/cgi-bin/whois.aunic

and in the search box search for the web address

e-flow.com.au (do not include www)

you will then see every thing!

But I have included the results for you …”

A further extract of the e-mail is as follows:

“You make your mind up.  Better still call Mr Tobias and ask him why he may plan to steal the $ from your wallet?”

4                     “Tony Gattari” is the General Manager of computers and communications at Harvey Norman.  “Mr Tobias” is the Executive chairman of Dataflow.  “MS” is Microsoft.

5                     Software Ventures Australia Pty Limited is and has been for some time a dormant company in the Dataflow group.  It has not traded.  It is not intended that it will undertake business activities, nor has it in fact done so.  In May 1999 Dataflow did not intend to sell software direct to consumers, nor did it have any intention of altering its trading or commercial relations with retailers of its software.  Thus, if the e-mail conveys a representation in relation to Dataflow intending to alter its trading or commercial relations with retailers of its software, it is without factual foundation.  So much was accepted by the respondent.

6                     There is no evidence as to Goodman’s position other than that he is a former employee of Dataflow.  There is no evidence as to whether he was carrying on business, or as to the motivation for sending the e-mail.

7                     It is common ground that s 52 of the Trade Practices Act 1974 applies to the sending of the e-mail by virtue of s 6(3)(a).  The remaining issues are:

·        whether by sending the e-mail Goodman engaged in conduct that is misleading or deceptive or likely to mislead or deceive.

·        Whether the sending of the e-mail was in trade or commerce.

·        Whether Dataflow suffered any loss by that conduct, and if so what loss.

·        Whether the making of a publication order is appropriate.

Other issues arise on the pleadings, but they were not pursued.

Misleading and deceptive conduct

8                     The respondent submits that the e-mail does not convey any representation in relation to Dataflow whether in respect to a future matter or otherwise.  It is nothing more than Goodman’s speculation as to what Gattari might do if faced with a situation in which a distributor of software to Harvey Norman began to sell its software direct to consumers.  Idle musings are not misleading and deceptive conduct, even if they are mischievous.

9                     I do not agree with the respondent’s characterisation of the e-mail as no more than an idle musing on the part of its author.  In my view the e-mail does convey a representation, namely that Dataflow was then intending to sell its software products direct to consumers, and that retailers, including Harvey Norman and its franchisees, would suffer financially if this plan were carried into effect.  On the evidence, at least the first part of this representation is false, because Dataflow then had no such intention.  Even if construed as an opinion, the uncontradicted evidence is that it was without factual foundation.

10                  There is no evidence of actual deception.  Depending on the circumstances evidence of actual deception may be persuasive, but it is not essential.  An objective consideration of the e-mail leads to the conclusion that it conveys a misrepresentation.  In despatching the e-mail, Goodman engaged in conduct which was misleading or deceptive, and likely to mislead or deceive.

In trade or commerce

11                  Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 establishes that not everything done by a corporation which is engaged in trade or commerce is done in trade or commerce.  The preposition, in, operates by way of limitation.  The question is not whether the conduct engaged in was in connection with trade or commerce, or in relation to trade or commerce, it must have been in trade or commerce (CLR at pp 602, 614).

12                  The respondent did not have a commercial or trading relationship with any of those to whom the e-mail was directed, nor did he have any subsisting relationship with Dataflow.  The respondent was in the position of an officious or mischievous bystander making a false statement to those in an industry (and the press) about the plans of a participant in the industry and about the financial impact which implementation of those plans would have on other participants.

13                  In Concrete Constructions at p 604 in the joint judgment of Mason CJ, Deane J, Dawson J and Gaudron J it is said:

“What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character.  Such conduct includes, of course, promotional activities in relation to, or for the purposes of, the supply of goods or services to actual or potential consumers, be they identified persons or merely an unidentifiable section of the public.”

The respondent submits that there is not a shred of evidence from which the Court could conclude that the sending of the e-mail was of that character.  I agree.  There is no evidence that Goodman represents or seeks to promote any interests other than his own.  The sending of the e-mail by Goodman is not conduct “towards persons … with whom (Goodman) has or may have dealings in the course of those activities … which of their nature bear a trading or commercial character”.

14                  But the joint judgment recognised that there is an area where the dividing line between what is, and what is not, conduct in trade or commerce is less clear.  The issue is whether the present case falls into that area.  Toohey J (at pp 613-614), whilst recognising the dangers in substituting one expression for another, said that if the conduct in question is a representation, it must be made “as part of trade or commerce” (although not necessarily the trade or commerce of the defendant) if the operation of s 52 is to be enlivened.  There is no significant difference between the approach adopted in the joint judgment, and that of Toohey J in this respect: Plimer v Roberts (1997)150 ALR 235, 244.

15                  In Robin Pty Limited v Canberra International Airport Pty Ltd [1999] FCA 1019 at [45] Gyles J said:

“I have considerable difficulty in accepting that as a matter of construction of s 52 a party may be in breach where that party is not a participant in the relevant trade or commerce.  For example, I would not have thought that disparagement of goods manufactured by nuclear power by a conservationist with no commercial interest in the outcome would be caught by the section (cf Eighth SRJ Pty Limited v Merity (1997) 7 BPR 15, 189 at 15, 203 (line 48) – 15, 204 (line 10)).”

The same notion is implicit in the decision of Bryson J in Tobacco Institute of Australia Ltd v Woodward (1993) 32 NSWLR 559, 572.

16                  However, his Honour’s observations if taken as a principle of universal application, appear to me, with respect,  to be inconsistent with what was said by Toohey J in Concrete Constructions at p 613:

“The present appeal proceeded on the assumption … that the conduct said to have been misleading or deceptive must have been conduct in the trade or commerce of the appellant.  No doubt, in most cases the focus will be on the nature of the defendant’s business but the section is not so limited.  It does not, in terms, refer to the trade or commerce of the particular corporation.”

17                  Again, in Firewatch Australia Pty Ltd v Country Fire Authority [1999] FCA 761, Goldberg J held that an internal Fire Authority bulletin had a trading or commercial character because of the circumstances in which it came into existence and the purpose it was intended to achieve.  The bulletin was intended to have a consequence or impact on trading and commercial activities because it contained a recommendation that fire brigades should not become involved in the distribution or recommendation of a particular fire extinguisher.

18                  Similarly in Fasold v Roberts (1996) 70 FCR 489, 531 (and on appeal Plimer v Roberts at 259) both Sackville J at first instance and Lindgren J on appeal gave examples of conduct on the part of a person not carrying on a business which would nonetheless be in trade or commerce constituted by the commercial activities of others.

19                  As French J said in Advanced Hair Studio Pty Ltd v TVW Enterprises Ltd (1987) 18 FCR 1, 14:

“Pronouncements made on a commercial subject-matter may comment on trade or commerce but not necessarily be ‘in trade or commerce’ .  There is sometimes a fine line to be drawn.”

Whether conduct is in trade or commerce is largely a factual question.  At the edges, fine lines may have to be drawn, if only because the line between in, on the one hand, and in connection with on the other, is itself a fine one.  The fact that the conduct in question is not that of a participant in the relevant trade or commerce may be highly relevant in determining whether it is in trade or commerce, but in my respectful opinion it cannot, as a matter of construction of s 52, be conclusive of that question.

20                  Dataflow submitted that the e-mail had a “trading or commercial character” as it was intended to influence the recipients not to deal with Dataflow any longer because of the falsely suggested misbehaviour by Dataflow.  The e-mail served a similar function to the bulletin in Firewatch because it was calculated to influence the recipients to cease to deal with Dataflow.

21                  I do not agree with this characterisation.  The e-mail alerts its recipients to a (non-existent) plan on the part of Dataflow, to sell software direct, the implementation of which plan would be to the financial detriment of Harvey Norman.  To the extent to which the e-mail counsels or recommends any action, it is action calculated to deter Dataflow from implementing that plan.

22                  Trade or commerce does not exist in the abstract.  For present purposes the trade or commerce with which one is concerned can probably be described as the business or commercial dealings between Dataflow and Harvey Norman and other retailers of Dataflow products.  In my view the sending of the e-mail was not conduct on the part of the respondent which was engaged in as part of those business or commercial dealings, as opposed to being in connection with or in relation to those dealings.

23                  Goodman’s conduct is more appropriately characterised as that of a bystander commenting on the trade or commerce in which others are engaged, rather than something done in that, or any other, trade or commerce.

24                  Accordingly, the applicant’s claim fails.

25                  In the light of that finding, it is not necessary to consider whether the applicant has established that it suffered loss by the alleged misleading and deceptive conduct.  The only loss claimed is legal costs which the applicant incurred, and which it agreed to pay to others, in connection with proceedings under Order 15A to discover the identity of the author of the e-mail, that not being discernible merely by examination of the communication itself.

26                  I have reservations as to whether those costs represent loss or damage suffered by Dataflow by the misleading and deceptive conduct in question: Sedgwick Ltd v Bain Clarkson Ltd (1995) 129 ALR 493, 500 is a decision on its own facts which does not establish any general principle.  On one view it was not the misleading and deceptive conduct which caused the loss claimed, but a decision by Dataflow to pursue legal remedies in relation to that conduct.  Even if that view prevailed, there would be a further question as to whether, notwithstanding the absence from the Federal Court Rules of a provision equivalent to Part 52A Rule 26 of the Supreme Court Rules, those costs should simply be regarded as part of the costs of these proceedings, which would have been recoverable against Goodman had Dataflow established that the conduct of which it complains was in trade or commerce and received an order for costs in its favour.  See: Order 62 r 19; Airservices Australia v Transfield Pty Ltd [1999] FCA 886 at [10]; Comcare v Labathas (1995) 61 FCR 149.  I prefer not to decide this question unless it were necessary to do so as the dividing line between damages and the costs of these proceedings was not fully explored in argument.

Associate:

Dated:              25 November 1999