FEDERAL COURT OF AUSTRALIA

Electrolux Home Products Pty Limited v Westside Direct Pty Limited

[2003] FCA 1014

CONTEMPT – failure to comply with interlocutory orders

Grant v Southwestern and County Properties Ltd [1975] 1 Ch 18

Beneficial Finance Corporation Co Ltd v Conway [1970] VR 321

Cassidy v Engwirda Construction Co [1967] QWN 16

Australian National Airlines Commission v Commonwealth of Australia (1975) 132 CLR 582 Butera v Director of Public Prosecutions for the State of Victoria (1987) 164 CLR 180

Construction, Forestry, Mining & Energy Union v BHP Steel (AIS) Pty Ltd [2003] FCAFC 13

ELECTROLUX HOME PRODUCTS PTY LIMITED v WESTSIDE DIRECT PTY LIMITED & ANOR

N 857 OF 2003

STONE J

24 SEPTEMBER 2003

SYDNEY

THE COURT DECLARES THAT:

1.         Each of the first and second respondents is guilty of contempt by reason of their failure to comply with order 4 and orders 5(a), (b) and (c) of the orders made in this proceeding on 22 July 2003.

AND THE COURT ORDERS THAT:

2.                  Each of the first and second respondents is fined the sum of $3,500, to be paid to the Registrar within 28 days of the date of this order. 

3.                  The first and second respondents pay the applicant’s cost of the motion except insofar as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the applicant will be completely indemnified by the first and second respondents in respect of such costs.

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

REASONS FOR JUDGMENT

Background

1                     Electrolux Home Products Pty Limited (‘Electrolux’), the applicant in this proceeding, is a well known supplier of household equipment.  It also supplies wholesale spare parts for that equipment to licensed distributors.  The substantive application giving rise to these proceedings was filed on 18 July 2003.  It alleges that the respondents, Westside Direct Pty Limited and one of its directors, Mr David Austin, have breached the applicant’s copyright and confidential information by their unauthorised use of the applicant’s database known as the ‘Spare Parts Customer Master File’ (‘CM File’).  That file contains a listing of the applicant’s 2,000 or so active spare parts customers.  According to the applicant the CM File is highly confidential and commercially sensitive.  The application also sought interlocutory relief to restrain the respondents from using the CM File and material derived from it. 

2                     On the day the application was filed I heard the applicant’s ex parte application for interlocutory relief, following which I made certain orders including that the respondents produce to the Court, at 10.15 am on 22 July 2003, all copies in their possession, custody or control of the CM File and documents containing information directly or indirectly derived from the CM File.  The matter was stood over to 10.15 am on 22 July 2003. 

Orders of 22 July 2003

3                     When the matter was called, at 10.15 am on 22 July 2003, there was no appearance for either respondent and no documents were produced to the Court.  Nor were any documents produced beforehand.  I am satisfied that the respondents (and they have not contended otherwise) were served with, and in accordance with, the orders I made on 18 July 2003.  Upon the applicant, by its counsel, giving certain undertakings to the Court, I made orders including the following:

 ‘4.      The Respondents, within 7 days of the date of this order, procure the transfer to the Applicant of the telephone number 1800 13 13 49.

5.         Subject to order 6, by 4 pm on 29 July 2003, a director of the First Respondent and the Second Respondent each file and serve an affidavit setting out, to the best of their knowledge, information and belief, full details of the following:

(a)        the identity of any person who has directly or indirectly provided or disclosed to the Respondents or either of them any copy of the whole or any part of the Customer Master File or any of the information contained therein;

(b)        the identity of any person who has directly or indirectly provided or disclosed to the Respondents or either of them any copy of any document (including but not limited to electronic copies) that constitutes or records any listing of any of the Applicant’s metropolitan service agents, country service agents or other spare parts customers;

(c)        the identity of any person to whom the Respondents or either of them have distributed or made available any advertising and marketing material (including, without limitation, at the website of the First Respondent) in the forms which appear at Annexures D and K to the Affidavit of David Paul Buck sworn 18 July 2003 and the pages which form part of Exhibit DPB-9 and upon which appears the footer “https://secure.ibpa.com.au/wdirect/cart/";

(d)        the identity of any person to whom the Respondents or either of them have disclosed or provided (directly or indirectly) any copy of the whole or any part of the Customer Master File or any of the information contained therein. 

6.      Each Respondent has leave to file and serve a notice of motion and supporting affidavit by 4 pm on 29 July 2003 returnable at 10.15 am on 31 July 2003 for an order setting aside order 5.’ 

I stood the proceedings over for further mention at 10.15 am on 31 July 2003 and ordered that service of the orders be effected by 12 pm on 23 July 2003. 

4                     Late in the afternoon on 22 July 2003 a letter dated 21 July 2003 from the second respondent, Mr David Austin, was delivered to the Court.  It stated:

‘In accordance with your directions received today I enclose a CD containing information which was sent to me.’

Enclosed with the letter was a compact disk (‘Austin disk’), on which was stored a Microsoft Access file.  A copy of this disk was made available to the solicitor for the applicant. 

Contempt charges

5                     On 31 July 2003 there was yet again no appearance for either respondent.  I granted leave for the applicant to file notices of motion seeking orders that the respondents be punished for contempt, such motions to be returnable before the Court at 11.15 am on 14 August 2003.  By notices of motion filed on 6 August 2003 the applicant now moves the Court for orders that the respondents be found guilty of contempt of Court in that they failed to comply with orders 4 and 5 made on 22 July 2003 and that they be punished in relation to that contempt.  The applicant also seeks orders that the respondents pay its costs on an indemnity basis.  Except that they are specific to each respondent, the statements of charge filed in support of the notices of motion are identical.  After setting out certain preliminary information, including the orders set out in [3] above, they state:

‘5.        In breach of order 4 of her Honour Justice Stone’s orders of 22 July 2003, the … Respondent failed, within 7 days of the date of the order (ie before 30 July 2003), to procure the transfer to the Applicant of the telephone number 1800 13 13 49.

6.         In breach of order 5 of her Honour Justice Stone’s orders of 22 July 2003, the … Respondent failed, by 4 pm on 28 July 2003, to file and serve an affidavit made by a director of the First Respondent setting out, to the best of his or her knowledge, information and belief, full details of the following:

(a)        the identity of any person who has directly or indirectly provided or disclosed to the Respondents or either of them any copy of the whole or any part of the Customer Master File or any of the information contained therein;

(b)        the identity of any person who has directly or indirectly provided or disclosed to the Respondents or either of them any copy of any document (including but not limited to electronic copies) that constitutes or records any listing of any of the Applicant’s metropolitan service agents, country service agents or other spare parts customers;

(c)        the identity of any person to whom the Respondents or either of them have distributed or made available any advertising and marketing material (including, without limitation, at the website of the First Respondent) in the forms which appear at Annexures D and K to the Affidavit of David Paul Buck sworn 18 July 2003 and the pages which form part of Exhibit DPB-9 and upon which appears the footer “https://secure.ibpa.com.au/wdirect/cart/"; and

(d)        the identity of any person to whom the Respondents or either of them have disclosed or provided (directly or indirectly) any copy of the whole or any part of the Customer Master File or any of the information contained therein. 

7.         On or about 30 July 2003, the Respondents or one or other of them caused to be filed an affidavit purportedly affirmed by David Austin on 28 July 2003 which by its terms did not comply with order 5 of her Honour Justice Stone’s orders of 22 July 2003 or any part thereof and, in particular, which, in breach of such order, did not set out to the best of the deponent’s knowledge, information or belief any of the information referred to in each of sub-paragraphs (a), (b), (c) and (d) of order 5 of her Honour Justice Stone’s orders of 22 July 2003. 

8.         The breaches of her Honour Justice Stone’s orders of 22 July 2003 referred to in paragraphs 5, 6 and 7 above were wilful and contumelious and occurred in circumstances where a copy of her Honour Justice Stone’s orders of 22 July 2003 had been personally served on the … Respondent.’ 

6                     On 31 July 2003 I had ordered that the notices of motion concerning the alleged contempt and any supporting affidavits be served on the respondents by 4 pm on 7 August 2003 and set the motions down for hearing on 14 August 2003.  On that day there was, once again, no appearance for either respondent but I was satisfied from the evidence that Electrolux put before the Court (including a number of affidavits of service) that, with two exceptions, the respondents were served with all documents in accordance with my orders.  The two exceptions are affidavits of Mr Tom Kam and Mr David Buck, both sworn on 7 August 2003.  These affidavits were served on the first respondent on the morning of 8 August 2003, and on the second respondent on 14 August 2003.  In the circumstances I do not consider that this delay resulted in any difficulty or unfairness for the respondents and they did not allege otherwise.  The affidavits in question were directed to filling a technical gap in the chain of proof of the applicant’s case rather than to the substance of this matter.  For these reasons I proceeded to hear the notices of motion in the respondents’ absence. 

7                     On the afternoon of 14 August 2003, after the hearing of the motions had concluded, the applicant’s solicitor forwarded to the Court a facsimile which had apparently been received from Mr Austin at 2.54 pm that day.  Although Mr Austin did not contact the Court, on 15 August 2003 counsel for the applicant, Mr Nicholas SC, wrote to the Court and suggested that the matter be re-listed to provide Mr Austin with a further opportunity to be heard in relation to the motion.  The motion was listed for further hearing on 21 August 2003 at which time Mr Austin appeared from Adelaide by video link.  He was given leave to represent the first respondent on that occasion only; see Federal Court Rules O 4 r 14(2) and O 9 r 1(3). 

8                     As Mr Austin had not been in Court when the applicant put its case, on 14 August 2003, counsel for the applicant summarised the charges and the evidence for Mr Austin’s benefit.  Mr Austin requested that the matter be adjourned to allow the respondents time to seek legal advice.  The applicant opposed this application and, given the delay since the applicant first sought urgent relief, the unexplained failure of the respondents to appear on previous occasions and the absence of any explanation as to why legal advice could not have been sought earlier, I was not prepared to grant an adjournment.

Order 5(d)

9                     At the hearing the applicant did not press the charge of non-compliance with order 5(d) admitting that, in the absence of any response from either respondent, it was not in a position to prove that either respondent disclosed or provided any information from or copy of the CM File to any other person.  Although, on 21 August, Mr Austin did make some submissions about this order it is not necessary to pursue the issue further.

Order 4

10                  The charge of non-compliance with order 4 of 22 July 2003 can also be dealt with briefly.  The applicant’s national number for service calls for Electrolux white goods is 13 13 49.  The telephone number which is the subject of order 4 is 1800 13 13 49.  It is a ‘toll free’ facsimile number that appears on advertising flyers distributed under the name of the first respondent.  In seeking the interlocutory order the applicant alleged that, among other things, those flyers are misleading and deceptive in that they imply there is a commercial relationship between the applicant and the first respondent and endorsement of the first respondent by the applicant.  The use of a toll free number so similar to the Electrolux national service number would, in the applicant’s submission, add to the misleading impression created by the flyer and has the potential to allow the applicant to tap into Electrolux’s client base.  These allegations have yet to be made out however there was sufficient substance in them to convince me, on 22 July 2003, to make order 4 set out at [3] above. 

11                  Strictly speaking of course this background is not relevant to the issue before me now.  The respondents are obliged to observe the orders of the Court irrespective of whether they believe the orders are justified.  Mr Austin admitted that neither respondent had made any attempt to comply with order 4 saying, by way of explanation, that the number ‘doesn’t belong to anyone but me’.  This submission suggests that Mr Austin has failed to appreciate the gravamen of the applicant’s complaint, which is concerned with misrepresentation rather than ownership.  In any event, Mr Austin’s submissions should have been made before interlocutory relief was granted.  His indignation at the Court making an order in no way justifies his ignoring it. 

Orders 5(a), (b) and (c)

12                  Mr Austin submitted that, by providing the Austin disk and by filing the affidavit he affirmed on 28 July 2003, he complied with orders 5(a) and 5(b) and that he was unable to comply with order 5(c) because he ‘wouldn’t know who looked at the website’.

13                  Electrolux submits that the respondents have not made any bona fide attempt to comply with these orders.  It submits that such action as has been taken is, at best, only a colourable attempt to comply. 

14                  In relation to order 5(a) Mr Austin referred to his affidavit of 28 July 2003 in which he states,

‘the identity of persons who have from time to time over several years passed information concerning names and addresses which may or may not appear on the Customer Master File would be as follows….’

He then lists a number of names and states that names and addresses were ‘visible for anyone to see’ at the applicant’s dispatch areas and could be seen on printouts and computer monitors at the applicant’s premises.  Mr Austin also referred to ‘country distributors and individual goods repair technicians’ who telephoned him during 2002. 

15                  Mr Austin said that, on his instructions, the Austin disk was burnt by one of his employees and contained a copy of a floppy disk that had been sent to him along with some Electrolux products.  He said that he understood that the floppy disk had come from Electrolux but he did not know from whom.  Mr Austin admits he knew that the floppy disk contained names and addresses of Electrolux’s customers, although he said he did not know that they came from any particular file.  The evidence shows that the file on the Austin disk contains some 5,000 names and addresses.  Mr Austin said that not all of them came from the floppy disk as some names and addresses from the Yellow Pages had been added to the file on the Austin disk by one of his employees.

16                  The applicant submitted affidavit evidence from Mr David Buck, general manager of the Service & Spare Parts Division of Electrolux and Ms Kerrie Dease, Electrolux’s ‘marketing manager-spare parts’.  Both Mr Buck and Ms Dease have full access to the books and records of Electrolux and are familiar with the CM File, which is an important part of the computer database maintained by Electrolux in connection with its spare parts business.  According to Mr Buck the CM File contains ‘significant information in relation to each of Electrolux’s approximately 2,000 active spare parts customers’ including contact details and pricing and other marketing details. 

17                  Ms Dease provided a copy of the CM File to Mr Jared Cowie, a solicitor assisting the solicitor for the applicant.  The copy had been made on the instructions of Mr Buck by Mr Tom Kam, a computer programmer who worked for the applicant.  Mr Cowie compared the contents of the Austin disk with the CM File.  According to Mr Cowie the contents of the Austin disk appeared to be a direct copy of large parts of the CM File.  Mr Cowie annexed to his affidavit a table comparing a number of entries in the CM File and in the Austin disk file that showed identical typographical errors.  For example, in both sources the word ‘electrical’ had been variously misspelt as ‘electrial’ and ‘electical’.  Similarly the word ‘appliance’ had been misspelt as ‘applianmce’, ‘applince’ and ‘appiance’ in both files.  There were a number of similar common errors.  Another table showed a list of entries from the Austin disk file consisting of names of Electrolux customers each followed by an ‘MSA number’.  An MSA number is part of a numerical code that Electrolux uses to identify its metropolitan service agents. 

18                  Ms Dease also compared the two files using a function of Microsoft Excel, a spreadsheet program.  She described how that program was used to compare the CM File and the file on the Austin disk and identify ‘cells’ in each file containing identical information.  In her affidavit of 6 August 2003 Ms Dease stated that this process identified 4678 of the 4977 name and address entries in the Austin disk file as identical to entries in the CM File.  Ms Dease pointed to a number of entries in the CM File that had account numbers or other comments that are specific to the applicant’s business and showed that these numbers or comments also occurred in the corresponding entries in the Austin disk file. 

19                  Mr Neil Johnston is the proprietor of an appliance and electrical services business, trading as ‘Gastech Repairs’, that is a metropolitan service agent for Electrolux.  Mr Johnston received an envelope in the mail in early June 2003 containing an advertising flyer promoting the first respondent’s products.  The address on the envelope was followed by the MSA number that appears on all mail he receives from Electrolux.  Mr Johnston also testified that the typeface and font of the address were similar to the typeface on mail that he receives from the applicant.  The flyer sent to Mr Johnston conspicuously displayed the name of the first respondent and contained pictures of various spare parts.

20                  Mr Austin’s own evidence shows that he was fully aware of and understood the orders made on 22 July 2003.  It also shows that he chose not to obey order 4, seemingly because he felt it was unfair, despite not availing himself of the opportunity to state his own case or that of the first respondent.  Mr Austin’s evidence also shows that he knew that the floppy disk which was copied onto the Austin disk contained names and addresses obtained from Electrolux.  Moreover I am satisfied from the evidence of Mr Cowie and Ms Dease that the CM File was, directly or indirectly, the source of the information on the Austin disk.  Mr Austin’s evidence is that the information that was copied to the Austin disk was received by the respondents in the form of a floppy disk.  The only attempt made by either respondent to comply with order 5(a) by identifying the person who provided the floppy disk was Mr Austin’s affidavit of 28 July 2003.  For present purposes I am prepared to accept that the affidavit could be attributed to Mr Austin acting personally and as a director of the first respondent.  The affidavit, however, does not address the issue in a manner indicative of a bona fide attempt to comply with the Court’s orders.  It does not refer to the floppy disk but implies that such information of the applicant’s customers as the respondents had obtained was sent to the respondents piecemeal over a number of years or was in the public domain. 

21                  I am satisfied that both the CM file and the floppy disk record the listing of the applicant’s metropolitan service agents, country service agents or other spare parts customers.  In relation to order 5(b) however, the question arises whether the electronic form of the CM File and the floppy disk that contained a copy of the CM file are documents.  Mr Austin did not take issue on this point but given the seriousness of a charge of contempt and that the respondents were not legally represented the point should be considered.

22                  In Grant v Southwestern and County Properties Ltd [1975] 1 Ch 185 Walton J determined that a tape recording was a document for the purposes of the Supreme Court Rules in England.  His Honour considered a number of authorities in which the scope of the word ‘document’ was considered and said, at 193:

‘I think it fair to say that all these cases, in different ways, stress that the essential feature of a document is the information thereby conveyed’.

His Honour also referred, at 197, to documents that required the use of an instrument to read the information and commented:

‘A litigant who keeps all his documents in microdot form could not avoid discovery because in order to read the information extremely powerful microscopes or other sophisticated instruments would be required. Nor again, if he kept them by means of microfilm which could be read without the aid of a projector.’

23                  Walton J rejected the contrary decision of McInerney J in Beneficial Finance Corporation Co Ltd v Conway [1970] VR 321 preferring the decision of Hoare J in Cassidy v Engwirda Construction Co [1967] QWN 16.  Counsel for the applicant referred to a number of other cases in which members of the High Court had implied or expressed a preference for the conclusion to which Walton J came rather than that in Beneficial Finance Corporation Co Ltd v Conway; see Australian National Airlines Commission v Commonwealth of Australia (1975) 132 CLR 582 at 594 per Mason J and Butera v Director of Public Prosecutions for the State of Victoria (1987) 164 CLR 180 at 193 per Dawson J.

24                  In my view both the authorities and common usage support the conclusion that the word ‘document’ in the orders includes the electronic form of the CM File and the floppy disk that contained a copy of the CM file.  The use of electronic media to store information that might in earlier times have been written on paper is now so common that, in the absence of an applicable restrictive definition of the word, I do not think that there is any sensible argument to the contrary.  Both the rules of the Federal Court (O 1 r 4) and the definition in Pt 1 of the Evidence Act 1995 (Cth) confirm this use.

25                  At the hearing on 14 August 2003 that Mr Austin failed to attend, I raised a concern in relation to order 5.  The order imposes an obligation on ‘a director of the First Respondent and the Second Respondent’ to file an affidavit that provides the information sought in the subparagraphs.  The issue is whether the order is directed to the first respondent or merely to one of the two directors.  Counsel for the applicant submitted that the order should be read as requiring the first respondent, by a director, to make, file and serve an affidavit.  It was submitted that the order was not ambiguous but merely inelegantly expressed and that it was not reasonable to assume that anyone would be confused by it.  Ultimately I accept that submission.  Mr Austin did not suggest that there was any confusion about what was required and clearly viewed his affidavit of 28 July 2003 as having been made both in his personal capacity and in his capacity as a director of the first respondent.

26                  In his defence Mr Austin was not able to point to anything that either respondent had done which showed a bona fide attempt to comply with orders 5(a), (b) and (c).  His affidavit makes no reference to any attempt to ascertain to whom the advertising material, that is referred to in order 5(c), had been sent or who had access to it.  On cross-examination Mr Austin admitted he had made no such attempt saying that it would have been useless.

27                  I am satisfied beyond reasonable doubt that the respondents made no serious attempt to comply with orders 5(a), (b) and (c) of the orders made in this proceeding on 22 July 2003 and are therefore in contempt.  This brings me to the question of penalty.

28                  Mr Austin expressed no contrition either personally or on behalf of the first respondent.  He did not attend Court on 22 July 2003 or dispute that he was properly notified of the necessity to do so.  He clearly understood the orders made on 22 July but chose not to comply.  As mentioned earlier, he rejected the obligation imposed by order 4 because he did not agree with it.  In relation to orders 4, 5(a), (b) and (c) he made a colourable attempt to comply by filing one, grossly insufficient, affidavit on behalf of both respondents. 

29                  Mr Austin said that he attempted to obtain legal advice from one firm of solicitors but those solicitors could not advise him because of a conflict of interest.  He made no further attempt to obtain legal advice and offered no explanation as to why.  It would seem that Mr Austin hoped that if he ignored the court proceedings they would go away.  This is not acceptable behaviour.  However, although disobedience of a Court order is a very serious matter, I do not find that in these circumstances there has been contumacious breach of the Court’s orders.  Rather, I think that Mr Austin did not fully appreciate the seriousness of the offence and that, rather than face the matters confronting him, he decided to ignore them. 

30                  In the circumstances it is appropriate that both respondents should be subject to a fine and, as I see no basis on which to differentiate between their liability, they will each be fined $3,500, to be paid to the Registrar within 28 days of the date of this order.  They must also pay the applicant’s costs on an indemnity basis.  In imposing a fine at the lower end of the scale I am mindful of the comments of Moore J (with whom Tamberlin and Goldberg JJ generally agreed) concerning the appropriateness of taking the indemnity costs order into account when fixing a penalty; Construction, Forestry, Mining & Energy Union v BHP Steel (AIS) Pty Ltd [2003] FCAFC 13. 

Associate:

Dated:              24 September 2003