FEDERAL COURT OF AUSTRALIA

Energizer Australia Pty Ltd v Procter & Gamble Australia Pty Ltd [2016] FCA 347

ORDERS

THE COURT DECLARES THAT:

1.    The respondent is guilty of the acts of contempt set out in charges 1 to 23 of the statement of charge filed in this proceeding in that the respondent caused to be broadcast the television commercial for Duracell Ultra battery products containing the words “Australia’s #1 Longest Lasting Alkaline Battery” 954 separate times on 23 consecutive days between 19 April 2015 and 11 May 2015 inclusive, in breach of order 2 of the orders made by Justice Nicholas on 10 November 2014 in proceeding NSD 1121 of 2014.

THE COURT ORDERS THAT:

2.    The respondent pay a fine in the amount of $40,000 to the Registrar of the Federal Court of Australia within 21 days of the date of this order.

3.    The respondent pay the applicant’s costs of this proceeding on an indemnity basis.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

NICHOLAS J:

INTRODUCTION

1    Before me is an amended originating application filed by the applicant seeking a declaration that the respondent is guilty of contempt. The applicant also seeks an order that the respondent be punished by way of fine for its contempt and that it pay the applicant’s costs on an indemnity basis. The statement of charge details 23 charges arising out of the broadcast of a television commercial (“the Ultra TVC”) for Duracell Ultra batteries between 19 April 2015 and 11 May 2015 contrary to an order made by me on 10 November 2014.

2    On 10 November 2014 I made various interlocutory orders in proceeding NSD 1121 of 2014 (“the 2014 proceeding”) between the applicant and the respondent. Order 2 was an injunction in these terms:

The respondent whether by its servants, agents or otherwise, cease broadcasting the “Ultra TVC” (being the television commercial reproduced on the CD forming Annexure “A” to the Originating Application), insofar as it contains the words “Australia’s #1 Longest Lasting Alkaline Battery”, by midday on Thursday, 13 November 2014.

3    Nothing turns on the precise form of the order which, although intended to operate until further order, was not expressed in such terms. The order was made on Monday, 10 November 2014 in the form agreed between the parties after I gave my ruling on the applicant’s interlocutory application at the conclusion of the hearing on Friday, 7 November 2014.

4    On 12 May 2015 I made final orders in the 2014 proceeding. These included a permanent injunction restraining the respondent from broadcasting the Ultra TVC. I was informed at the time by the applicant that the respondent appeared to have contravened the interlocutory injunction.

5    It is accepted by the respondent that it contravened the interlocutory injunction on multiple occasions between 19 April 2015 to 11 May 2015 when the Ultra TVC was broadcast a total of 954 times over 23 consecutive days on free-to-air and digital television channels in various capital cities including Sydney, Melbourne and Brisbane. It is also accepted by the respondent that it should pay the applicant’s costs of this proceeding on an indemnity basis. The argument before me was primarily concerned with whether the respondent should also be required to pay a fine and, if so, in what amount.

BACKGROUND FACTS

6    On 11 May 2015, the applicant’s solicitors informed the respondent’s solicitors that the Ultra TVC had been seen on free-to-air television by Ms Natalie Artinian, a Senior Brand Manager employed by the applicant, and that the respondent appeared to have breached the interlocutory injunction. The respondent’s solicitors then contacted Mr Benjamin Mak, who was, at all relevant times, the Senior In-House Counsel for the respondent.

7    On the same day, after speaking by telephone with Mr Mak, Mr Suraen DeSilva then the Group Business Manager for the respondent, took steps to stop any further broadcasts of the Ultra TVC. He spoke to the Assistant Brand Manager for the Duracell brand for the respondent, Ms Katim Tsui, who contacted the respondent’s media agency, MediaCom Australia (“MediaCom”), and the respondent’s creative agency, Grey Singapore (“Grey”) and requested that they take steps to ensure the Ultra TVC was not broadcast again. The last broadcast of the Ultra TVC occurred on 11 May 2015 at 5.35pm in Perth. The relevant events, which we are not in dispute, are described in affidavits filed on behalf of the respondent made by the respondent’s employees and employees of MediaCom and Grey.

8    The Ultra TVC was part of an integrated advertising campaign for the respondent’s alkaline battery product, the Duracell Ultra. The creative for the Ultra TVC was developed by the respondent in conjunction with Grey.

9    Grey assigned the Ultra TVC a unique key number – GGDU0151709 (“the Ultra TVC Key Number”) – which was subsequently provided to MediaCom and the respondent after the Commercial Acceptance Division of Free TV Australia allocated that number to the Ultra TVC. Whilst the Ultra TVC Key Number was used internally by Grey and MediaCom to identify the Ultra TVC, the respondent’s employees usually referred to the Ultra TVC using the code “Halley”. This was the name first given to the Ultra TVC by Grey prior to the allocation of the key number.

10    The 2014 proceedings were commenced shortly after the Ultra TVC was first broadcast. The applicant’s application for interlocutory relief was heard by me on 7 November 2014. The day before the hearing, the respondent sought to ensure that there were arrangements in place to stop further broadcasts of the Ultra TVC if so ordered by the Court. In consultation with Mr DeSilva, Ms Tsui informed MediaCom and Grey they should be available throughout the day of 7 November 2014 in case any action was required of them.

11    Late on Friday, 7 November 2014, Mr DeSilva and Ms Tsui both received a phone call from Mr Mak. During these conversations Mr Mak informed them of the Court’s decision and that the claim “Australia’s #1 Longest Lasting Alkaline Battery” (“the Longest Lasting claim”) had to be removed from the Ultra TVC. On Saturday, 8 November 2014, Mr Mak sent an email that was copied to a number of people including Mr DeSilva and Ms Tsui. Mr Mak’s email included the following:

Suraen and Katim, please find attached the draft orders which the court will finalise by Monday morning. Please shout if you have any queries, concerns or comments. Do note in particular the timelines for removal of the claim from the various advertising materials as discussed yesterday. As advised, please ensure that communication and instructions to third party agencies, merchandisers and stores are clearly documented in writing in no uncertain terms, and compliance (in particular for the POSM) is tracked store by store. Please let me know if you need any assistance in this regard. Thanks.

(emphasis original)

12    In the afternoon of 10 November 2014 Mr Mak sent another email to Ms Tsui which was copied to Mr DeSilva attaching a copy of the orders made by the Court. Mr Mak’s email included the following:

Again, please ensure all communication to remove / replace is in writing with clear reference to the above timelines – court-ordered deadlines cannot be missed regardless of whether we have an alternative claim ready to go or not.

(emphasis original)

13    On 10 November 2014, Ms Tsui contacted Grey to arrange for an alternative TVC known as “Mars Unexpected” (promoting a different battery) to be broadcast in the pre-booked spots originally intended for the Ultra TVC. She also sent an email to various people at MediaCom who were asked to “triple check that the TVC has been swapped from Halley to Mars today”. Her email was copied to various other people at MediaCom, including Ms Marie Fox who was, at all relevant times, employed by MediaCom as a Media Buying Assistant. From 13 November 2014 to 18 April 2015 inclusive (ie. approximately five months) the Ultra TVC was not broadcast.

14    In the weeks following the interlocutory hearing, the applicant developed a revised version of the Ultra TVC (“the Revised Ultra TVC”) without the Longest Lasting claim. The Revised Ultra TVC was also assigned a unique key number – GGDU0151868 (“the Revised Ultra TVC Key Number”) – which Grey notified to the respondent and to MediaCom. However, the respondent and MediaCom continued to refer to the Revised Ultra TVC internally as the “Halley” creative.

15    On 14 April 2015, Ms Fox of MediaCom emailed Ms Tsui and asked if the respondent wished to fill some of the respondent’s pre-booked television advertising spots with “Halley’s [sic] creative”. She specifically referred in her email to the Ultra TVC Key Number. Ms Tsui incorrectly assumed Ms Fox was referring to the Revised Ultra TVC when Ms Fox used the words “Halley’s creative”. In her affidavit Ms Tsui said that she did not check which TVC the key number specified in Ms Fox’s email was for because she assumed that it was for the Revised Ultra Key Number. Ms Tsui said in her affidavit:

At that time, I did not check which television commercial the key number Ms Fox was referring to because I assumed that it was the Revised Ultra TVC Key Number. Because MediaCom, including Ms Fox, were aware of the Court issues associated with the Ultra TVC and Ms Fox had earlier, on 19 November 2014, been provided with Revised Ultra TVC Key Number and had been copied into correspondence in February and March 2015 which contained the key numbers for the TVCs, I assumed that Ms Fox was referring to the Revised Ultra TVC when she used the words “Halley’s creative”.

I accept Ms Tsui’s evidence.

16    Ms Tsui forwarded Ms  Fox’s email to Mr DeSilva asking him if he was “aligned to switch to Halley”. Mr DeSilva confirmed he was. He too assumed that this was a reference to the Revised Ultra TVC. It was Ms Tsui’s and Mr DeSilva’s mistaken assumption that the key number referred to in Ms Fox’s email was the key number for the Revised Ultra TVC that led to the further broadcasts of the Ultra TVC and the contraventions of the interlocutory injunction that are the subject of this proceeding.

17    Ms Fox has explained in her affidavit that prior to sending the email, she accessed the MediaCom secure drive which contained the client folder for the respondent. She entered the client folder and mistakenly selected an email stored in the respondent’s folder with the subject line “RE: Approval from CAD – Australian Halley TVC” dated 10 October 2014. This email contained the Ultra TVC Key Number. Ms Fox simply copied the Ultra TVC Key Number into her email of 14 April 2015. She did not turn her mind to the interlocutory injunction despite having previously been made aware of it. In her affidavit, Ms Fox, after explaining her mistake, attested that it was never her intention to suggest that the respondent broadcast a television commercial in contravention of a court order. I accept Ms Fox’s evidence.

18    In his affidavit, Mr DeSilva refers to investigations he undertook to understand how the Ultra TVC came to be broadcast in contravention of the interlocutory injunction. He said in his affidavit, which was admitted without objection, that Mr Nick Thomas of MediaCom told him that the error occurred because the respondent did not give MediaCom any instruction to purge or delete the Ultra TVC which is why the Ultra TVC and the Revised Ultra TVC were both “in the system”. The evidence indicates that no such instruction was provided to MediaCom until 14 May 2015. Mr DeSilva said in his affidavit that he expected that MediaCom would have taken steps to isolate the Ultra TVC or communicated to its staff that it should not be broadcast. He also said that it was never his intention that the Ultra TVC should be broadcast in contravention of any court order. I accept Mr DeSilva’s evidence.

APPLICANT’S SUBMISSIONS

19    It was submitted by Mr Hennessy SC, who appeared for the applicant, that whilst the contravention of the interlocutory injunction may be as a result of inadvertence, it is no answer to a charge of contempt to say that the contemnor had no intention of breaching the order. Nevertheless, he did seek to characterise the respondent’s conduct as “careless” or “neglectful”. He submitted that the respondent had no proper system in place for the removal of contentious television commercials from media agencies which would have, as I understood the submission, ensured that an instruction to cease broadcasting a particular TVC would refer to the TVC by its unique key number rather than some other more generic description.

20    Mr Hennessey SC also argued that the number of times the Ultra TVC was broadcast was significant. The applicant stated in written submissions that it was broadcast during the relevant period almost as many times (954 times) as it was broadcast before the interlocutory injunction took effect (1,137 times) and that it was also broadcast more times than the Revised Ultra TVC was broadcast (867 times). Mr Hennessey SC referred to evidence that suggested the broadcasts would have reached a wide audience and that the Ultra TVC was seen on multiple occasions by a substantial proportion of the target audience.

21    Mr Hennessey SC also submitted that the respondent obtained a benefit from its contraventions of the interlocutory injunction. He submitted that the evidence revealed that there were significant increases in the sales of the respondent’s batteries during and following the 2015 broadcast of the Ultra TVC when compared to sales in the corresponding periods in the 2014 year.

RESPONDENT’S SUBMISSIONS

22    On behalf of the respondent, Mr Walker SC submitted that the respondent’s contraventions of the interlocutory order were not deliberate or careless, but the result of inadvertence. He said that the respondent accepts that there was scope for improvement in the systems used by it to ensure that television advertising which the respondent was enjoined from broadcasting was not broadcast in contravention of a court order. He said that the respondent has improved its internal systems to reduce the risk of similar incidents occurring in the future including establishing a suite of precedent emails and notices for use in the event of a court ordered injunction relating to advertising materials, setting up a “landing page” on the respondent’s intranet to register contentious advertising and putting in place and implementing compliance training for employees.

23    Mr Walker SC also submitted that there is no evidence to suggest that the respondent has previously been found guilty of contempt, that the evidence shows that the respondent has shown genuine remorse and contrition, and that it has also provided a detailed and candid explanation of how the contempt occurred.

24    With respect to the submission of the applicant that the broadcasts had a “material impact” on the respondent’s battery sales, Mr Walker SC submitted that the applicant’s evidence should be treated with caution. He referred me to Ms Tsui’s evidence which indicated that, in her experience, there are a number of factors that render the sales comparisons relied upon by the applicant unreliable and that, in any event, the increase in sales was quite moderate.

25    Mr Walker SC accepted that while it was open to the Court to impose a fine in this case, it was also open to it not to impose any fine at all. He submitted that if any fine was to be imposed, it should be modest. However, he did not suggest that the respondent could not pay whatever fine might be imposed upon it.

CONSIDERATION

26    The respondent accepts that it is guilty of contempt. In particular, the respondent has admitted to authorising the broadcast of the Ultra TVC 954 times between 19 April 2015 and 11 May 2015 in contravention of the interlocutory injunction. However, I am satisfied that the relevant authorisation was given by Ms Tsui and Mr DeSilva by mistake, and that the respondent was unaware that any of these broadcasts took place until 11 May 2015 when the applicant’s solicitors first drew the respondent’s solicitor’s attention to the possibility that the respondent had breached the interlocutory injunction.

27    The Federal Court of Australia Act 1976 (Cth) relevantly provides in s 31 that “the Court has the same power to punish contempts of its power and authority as is possessed in the High Court in respect of contempts of the High Court.” Section 24 of the Judiciary Act 1903 (Cth) provides “[t]he High Court shall have the same power to punish contempts of its power and authority as is possessed at the commencement of this Act by the Supreme Court of Judicature in England.”

28    An important question that arose in Australasian Meat Industry Employees Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98 was whether the Federal Court had power under s 31 to impose a fine in respect of a contempt consisting of “wilful” disobedience to an injunction. The plurality (Gibbs CJ, Mason, Wilson and Deane JJ) noted that the Judiciary Act commenced on 25 August 1903 and that, on that date, the Supreme Court of Judicature in England had power to punish for contempt and that this power extended to the imposition of fines for “wilful” disobedience of orders.

29    The English Court of Appeal’s decision in Fairclough & Sons v Manchester Ship Canal Co (No 2) (1897) 41 Sol J 225 was considered by the High Court in Mudginberri. In Fairclough Lord Russell CJ said at 225:

The plaintiffs are here seeking to sequestrate the property and effects of the defendant company. The ground of that application is that the defendants have committed a contempt of court by wilful disobedience of an order of the court. The case as if it were sought to commit a private individual to prison for contempt. We desire to make it clear that in such case no casual or accidental and unintentional disobedience of an order would justify either commitment or sequestration. Where the court is satisfied that the conduct was not intentional or reckless, but merely casual and accidental and committed under circumstances which negative any suggestion of contumacy, while it might visit the offending party with costs and might order an inquiry as to damages, it would not take the extreme course of issuing an order either of commitment or sequestration. To justify so serious a proceeding the court must be satisfied that a contempt of court has been committed – in other words, that its order has been contumaciously disregarded.

30    At the time of that decision the English Courts did not impose fines as punishment for what was characterised as civil contempt. This no doubt explains why Lord Russell CJ’s observations in the passage quoted were specifically directed to the use of sequestration and imprisonment as punishments for contempt by wilful disobedience of an order of the Court. Nevertheless, subsequent English authority, which explicitly recognised the power to fine for contempt by wilful disobedience, also suggested that a fine would not be imposed upon the contemnor where the breach of the court’s order was merely “casual or accidental and unintentional”. This appears to be how the English authorities considered in Mudginberri were interpreted by the High Court.

31    Reference was made by the plurality in Mudginberri to the decisions in Stancomb v Trowbridge Urban District Council [1910] 2 Ch 190 at 194 and In re Mileage Conference Group of the Tyre Manufacturers’ Conference Ltd’s Agreement [1966] 1 WLR 1137. The latter case was described by the plurality as a case in which substantial fines were imposed on companies for contempt by the non-contumacious breach of an undertaking and in which the views of Warrington J in Stancomb were accepted as correct. Their Honours, approving what was said by Warrington J in Stancomb, said at 112:

In Mileage Conference [[1966] 1 WLR at p 1162; [1966] 2 All ER at p 861-862], the members of the Restrictive Practices Court accepted as correct the view of the law expressed by Warrington J. in Stancomb [[1901] 2 Ch at p 194] namely, that it is no answer to proceedings for contempt “to say that the act was not contumacious in the sense that, in doing it, there was no direct intention to disobey the order”. Thus, it would suffice that the relevant act or omission was wilful even if, in a case where the breach was constituted by an act or failure to act by a servant or agent, the act or omission of the servant or agent was “through carelessness, neglect, or even in dereliction of his duty”: per Warrington J. in Stancomb. In Mileage Conference [[1966] 1 WLR 1137; (1966) 2 All ER 849] itself, substantial fines were imposed on companies for contempt by breach of undertaking which was not merely non-contumacious but was committed reasonably on legal advice.

The correctness of the approach outlined in the preceding paragraph was indorsed by the House of Lords in Heatons Transport [(St. Helens) Ltd. v. Transport and General Workers' Union] [1973] AC at p 109]; their Lordships explicitly citing Steiner and Mileage Conference as precedents for the imposition of a fine in a case of disobedience to an order which is more than casual, accidental or unintentional. This indorsement was evidently based on the reasoning in the decisions to which we have referred, including an appreciation of the unsatisfactory consequences which would flow from the adoption of the view that there is no power to fine in such cases. To those reasons we would add the comment that lying behind punishment for a contempt which involves wilful disobedience to a court order, is the very substantial purpose of disciplining the defendant and vindicating the authority of the court. In our view the reasons supporting the recent decisions are compelling and they should be accepted by this Court. It follows that a deliberate commission or omission which is in breach of an injunctive order or an undertaking will constitute such wilful disobedience unless it be casual, accidental or unintentional. It is immaterial that the existence of the power to impose a fine for wilful disobedience to a court order may not have been explicitly recognized in 1903.

32    In Witham v Holloway (1995) 183 CLR 525, McHugh J said at 541 that Mudginberri authoritatively determined that the Court has power to fine for civil contempt where (citing Fairclough) the breach has not been the result of “casual or accidental and unintentional disobedience.” His Honour also said at 541:

If, therefore, the breach has been wilful, it is no answer “to say that the act was not contumacious in the sense that. in doing it, there was no direct intention to disobey the order”. Thus, if the act or omission that constitutes the breach was done wilfully, the contemnor is now liable to be fined even if the breach was not contumacious.

(citations omitted)

33    It is clear from Warrington J’s observations in Stancomb, as approved by the plurality in Mudginberri, that a fine may be imposed if the contemnor’s non-contumacious breach of the court order is the result of the contemnor’s carelessness or neglect. The decision of Heerey J in Mobileworld Communications Pty Ltd v Q & Q Global Enterprise Pty Ltd [2004] FCA 1200 is an example of a case in which the contemnor was fined for its breach of an injunction involving what his Honour described at [30] as “negligence of a substantial degree”.

34    A party is under a duty to take adequate and continuing steps to ensure that it complies with an injunction made against it. In the case of a corporation, this extends to ensuring, through its responsible officers, that they, or anyone to whom they may delegate matters relating to compliance with the injunction, do not forget, misunderstand or overlook the obligations imposed by it: In re Galvanized Tank Manufacturers’ Association’s Agreement [1965] 1 WLR 1074 at 1090 per Megaw J (sitting as a member of the Restrictive Practices Court).

35    The power to fine for careless or negligent breach of a court order is not limited to cases in which the contemnor’s carelessness or neglect amounts to recklessness or gross negligence. A fine may be imposed if the breach of the court’s order results from the contemnor’s less than diligent attitude toward compliance. A contempt is neither casual nor accidental if it could have been avoided by the exercise of the high level of diligence which a party is expected to exercise for the purpose of ensuring compliance with the court’s order.

DISPOSITION

36    In the present case it is common ground that the considerations relevant to the determination of an appropriate penalty to be considered include:

(a)    The nature and circumstances of the contempt;

(b)    The effect of the contempt of the administration of justice;

(c)    The contemnor’s culpability;

(d)    The need to deter the contemnor and others from repeating contempt;

(e)    The absence or presence of a prior conviction of contempt;

(f)    The contemnor’s financial means; and,

(g)    Any contrition and apology.

37    Other factors relevant to the determination of a penalty that are of particular relevance in this case are the steps taken by the contemnor to eliminate or minimise the risk of any future contempt, and the burden imposed upon the contemnor by an order for indemnity costs if such an order is made.

38    I accept that this is the first time the respondent has committed a contempt of court. I also accept that the respondent’s contempt was not intentional and that there was no element of contumacy involved. Nevertheless, I am satisfied that the respondent, by its employees, Ms Tsui and Mr DeSilva, failed to act with reasonable diligence to ensure that the Court’s order was not contravened.

39    In the email sent by Mr Mak copied to Mr DeSilva and Ms Tsui on 8 November 2014, Mr Mak emphasised the need for instructions to third party agencies to be clearly documented in writing and conveyed in “no uncertain terms”. That email was admittedly written some months before Ms Fox’s email of 14 April 2015 was written and responded to by Ms Tsui. Nonetheless, Mr Mak’s email correctly stressed the need to ensure that instructions given to third party agencies should be communicated in clear and unambiguous terms.

40    In her email of 14 April 2015 Ms Fox identified the TVC which was to be broadcast by reference to its unique key number. Neither Ms Tsui nor Mr DeSilva checked the key number referred to in the email to ensure that the correct version of the “Halley” TVC was to be broadcast. Had they done so, they would have realised that Ms Fox was referring to the key number for the Ultra TVC rather than the Revised Ultra TVC. Their failure to check the key number referred to by Ms Fox resulted in a serious contravention of the Court’s order that continued over a number of weeks, with the Ultra TVC being broadcast across a large number of channels watched by large audiences.

41    I am not persuaded that the respondent derived any financial benefit from its contravention of the Court’s order. In particular, there is nothing to show that the respondent’s sales during the relevant period would have been any different from what they were had the mistake not occurred. If the mistake had not occurred, the Revised Ultra TVC (which did not include the Longest Lasting claim) would have been broadcast in place of the Ultra TVC that was the subject of the interlocutory injunction. The applicant’s submissions assumed that the increase in sales was attributable to the presence of the Longest Lasting claim in the Ultra TVC broadcast in breach of the interlocutory injunction, something which the applicant made no attempt to prove and about which no inference can be drawn.

42    Whilst the respondent has shown genuine contrition and remorse and has also taken timely and meaningful steps to ensure that a similar breach of the Court’s orders does not occur again, I think the magnitude of the respondent’s contravention of the Court’s order that occurred as a result of the respondent’s lack of diligence warrants the imposition of a fine. In this case I think a fine should be imposed in order to vindicate the Court’s authority and to bring home to the respondent and other litigants that are bound by an injunction that they must take adequate and continuing steps to ensure that the injunction is complied with. However, I accept Mr Walker SC’s submission that, given the circumstances in which the contempt occurred and the other mitigating factors to which I have referred, the fine imposed on the respondent should be relatively modest. Had there been any element of intention or recklessness present, the fine imposed on the respondent would have had to be much more substantial than that which I propose to impose.

43    In fixing the amount of the fine I am mindful that the respondent accepts that it should pay the applicant’s costs of this proceeding on an indemnity basis. In my view, in addition to paying indemnity costs, the respondent should also be required to pay a fine in the amount of $40,000. I will make orders accordingly together with a declaration generally in the form sought by the applicant.

Associate:    

Dated:    12 April 2016