FEDERAL COURT OF AUSTRALIA

REA Group Limited v Fairfax Media Limited (No 2) [2017] FCA 884

ORDERS

THE COURT DECLARES THAT:

1.    From about 11 February 2016 to about 29 February 2016, the Respondent, through its wholly owned subsidiary Domain Group (“Domain”) in trade or commerce:

(a)    engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 18 of the Australian Consumer Law contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (“Australian Consumer Law”); and

(b)    made false or misleading representations about the goods or services of Domain being of a particular standard, quality, value or grade in contravention of section 29(1) of the Australian Consumer law,

by publishing or causing to be published advertisements in the Sydney Morning Herald and on billboards in Sydney containing statements to the effect that Domain has the “#1 property app in Australia” in combination with “the most property listings in Sydney are on Domain”, and thereby represented that:

(a)    the Domain app and website have more property listings in Sydney than any other comparable app or website, when in fact at the time the advertisements were published there were more total property listings in Sydney available on the app and website published by the Applicant (“REA”) than on the Domain app and website; and

(b)    the Domain app is the “#1 property app in Australia” because it allows users to view “the most property listings in Sydney”, when in fact, at the time the advertisements were published, there were more property listings in total available on the REA app and website than on the Domain app and website.

THE COURT ORDERS THAT:

2.    Until further order, the Respondent be restrained, whether by itself, its servants or agents or howsoever otherwise from publishing or causing to be published any advertisement containing a representation to the effect that the most property listings in Sydney, or in any other geographic region, are on Domain, without prominently identifying a source for the claim which provides evidence that there are more total property listings in the relevant region available on the Domain app and website than on any other comparable app or website (including the REA app and website).

3.    The Respondent is released from the undertakings recorded in paragraph (b) of the orders made by the Honourable Justice Moshinsky on 17 February 2016, by which the Respondent by its counsel undertook that until the determination of the proceeding or further order, it would not publish or cause to be published the following phrases or any phrases which convey the same or similar meanings in relation to the website domain.com.au and the application knowns as the Domain app:

(a)    “#1 property app in Australia”;

(b)    “The most property listings in Sydney are on Domain”; and/or

(c)    “The best property listings in Melbourne are on Domain”.

4.    The Applicant pay the Respondent’s costs incurred in cancelling, removing or changing any of the advertisements the subject of its undertakings dated 12 February 2016 and 17 February 2016 which were not found to be misleading or deceptive in an amount to be agreed or, in default of agreement, determined by the Court.

5.    The Respondent pay 75 percent of the Applicant’s costs of and incidental to the proceeding.

6.    The Applicant pay 25 percent of the Respondent’s costs of and incidental to the proceeding.

7.    The costs referred to in orders 5 and 6 be netted off against each other.

8.    The Applicant’s application for orders in relation to the Amended Statement of Charge dated 2 March 2016 be listed for hearing on 10 August 2017.

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

REASONS FOR JUDGMENT

MURPHY J:

1    On 13 February 2017 I delivered reasons for judgment on liability in this proceeding. I held that the respondent, Domain, engaged in misleading or deceptive conduct in contravention of the Australian Consumer Law (ACL) by publishing the Second and Fifth Advertisements which conveyed representations that:

(a)    “the Domain app and website has more property listings in Sydney than any other comparable app or website” (the Most Listings Representation); and

(b)    the Domain app is the “#1 property app in Australia” (the No.1 Property App Claim) because it allows the user to view “the most property listings in Sydney” (the Combined Representation).

2    I found that the Most Listings Representation and the Combined Representation were misleading. The Domain app and website did not have more property listings overall in Sydney than the REA app and website in the relevant period, although it did have a greater number of listings of “established properties”. The footnote which explained and qualified the dominant message of the Advertisements was (deliberately) hidden away on the Second Advertisement, and would not have been taken in by readers of the Fifth Advertisement. In neither case was the footnote sufficiently prominent.

3    I directed the parties to confer in an attempt to agree on draft minutes of orders to reflect those reasons. The parties were unable to agree on appropriate declarations, nor in relation to injunctive relief, corrective advertising or costs. I heard the parties in that regard on 14 June 2017 and I delivered short ex tempore reasons on that day. I now publish reasons, revised from the transcript where appropriate. At the time I did not provide reasons for my decision in relation to costs, and to that extent these revised reasons are entirely fresh.

Declarations

4    The considerations relevant to the exercise of discretion to order declaratory relief pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (the FCA) are uncontroversial and it is unnecessary to restate them. The discretion is wide.

5    REA sought a form of declaration that by publishing the Advertisements Domain engaged in conduct that was misleading or deceptive or likely to mislead or deceive, and made false or misleading representations, in contravention of the ACL.

6    Domain did not oppose the making of a declaration, but it opposed the form of the declaration proposed. It argued that the proposed declaration did not accurately or faithfully reflect the Court’s findings. It proposed an alternate form of declaration, revised during oral submissions, which it submitted better reflected the Court’s finding that the relevant Advertisements would not have been misleading had the footnote to the Advertisements been sufficiently prominent to qualify the false primary message.

7    I prefer the form of declaration proposed by REA to the form of declaration proposed by Domain, although with some small changes which I raised with the parties during submissions. I consider the declaration I have made reflects the Court’s findings, serves to clearly identify the contravening conduct, publicises the type of advertising that constitutes a contravention and constitutes a warning to businesses not to engage in misleading or deceptive conduct or to make false or misleading representations: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (No 2) [2012] FCA 629 (TPG) at [14].

Injunctive relief

8    REA sought a permanent injunction pursuant to s 232 of the ACL to restrain Domain from making the claim that it has more property listings in a particular region, without prominently identifying the source of the claim. REA initially sought an injunction also to restrain Domain from making that claim in conjunction with the No.1 Property App Claim. However, in submissions it accepted that this limb of the injunction was unnecessary when the vice in the impugned Advertisements was not the No.1 Property App Claim itself. It is unnecessary for the injunction to go beyond the Most Listings Representation.

9    The principles in relation to a grant of injunctive relief are uncontroversial, and I will not reiterate them.

10    Domain contended that the injunction sought by REA is unnecessary and inappropriate because:

(a)    the proposed injunction required the prominent identification of a source in every instance where Domain claimed to have the most property listings in a geographic region. In the event that claim was accurate it argued there would be no reason for a qualifying statement or a source to be included. The injunction would therefore put Domain’s obligations to identify the source of its claim higher than under the ACL;

(b)    having regard to the above, to enjoin Domain in such terms would not properly educate the public on the requirements of the ACL;

(c)    the proposed injunction does not specifically deal with the impugned conduct. It requires identification of a source for every claim to have the most property listings in a geographic region, and not just where a qualifying statement is required;

(d)    the permanent nature of the injunction is inappropriate where there is a possibility Domain may soon surpass REA in total property listings in Sydney; and

(e)    Domain has taken its obligation to comply with the ACL and undertakings seriously. There is no utility in the injunction when the representations have not been published since February 2016.

11    I do not accept the thrust of Domain’s contentions. In my view, the injunction REA proposed (with the modification indicated above) is appropriate in circumstances where:

(a)    in the Second Advertisement Domain deliberately indicated the qualifying information to the misleading Most Listings Representation in a small, barely discernible caret and it put the footnote on the following page. I infer that Domain deliberately took that course;

(b)    Domain remains an active advertiser and the competition for property listings between it and REA is intense. Having regard to the evidence of marketing by both Domain and REA I fear that such competition might again lead Domain to contravene the ACL. The evidence tends to show that Domain’s marketing (and REA’s marketing) sails close to the edge of what is acceptable under the ACL; and

(c)    Domain published advertisements in breach of an undertaking to the Court given in resolution of REA’s application for an interlocutory injunction.

12    I am not satisfied that the risk of repetition of contravening conduct by Domain is so low that a grant of interlocutory relief lacks utility, or that such relief does not serve the public interest. There is little force in Domain’s contention that the requirement to identify a source for its claim puts its obligations under the injunction higher than its obligations under the ACL. The injunction reflects the finding that by conveying the false primary representations that it did, without sufficiently qualifying those representations, Domain breached the ACL, and it restrains a repetition of such conduct. That is appropriate in the circumstances. I note also that the injunction does not restrain Domain from making a claim to have the most property listings in a particular geographical region, but only to require it to prominently identify a source for the claim which evidences the basis for it.

13    While the injunction REA sought may properly be described as permanent, I have granted the injunction only “until further order”. If at some point in the future it eventuates that Domain has more property listings than REA in a particular region Domain can apply to the Court for an order to lift the injunction.

14    I had some concerns as to the requirement for Domain to “prominently” identify the source for any claim to have the most property listings in a region, essentially because what is or is not prominent is somewhat uncertain. However, the evidence shows that Domain has no real difficulty understanding what “prominently” means in the present context. It made settlement offers which included an offer to undertake to the Court “in a prominent manner and on the same page or image” the precise basis of any claim to have the most listings in any geographic region including by reference to the source of the data supporting that claim. That further indicates the overreach in Domain’s contention that the injunction goes too far.

Corrective advertising

15    REA sought an order, pursuant to s 232 of the ACL, that Domain publish corrective advertisements. Domain opposed such an order as unnecessary and inappropriate in the circumstances.

16    As I said in TPG at [143] and [153]-[154], various rationales may underpin the making of orders for corrective advertising, including to:

(a)    alert consumers to the fact that there has been misleading and deceptive conduct: Medical Benefits Fund of Australia Ltd v Cassidy (2003) 135 FCR 1 (Medical Benefits Fund) at [53] (Stone J); Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [22] (French J);

(b)    protect the public interest by dispelling the incorrect or false impressions that were created by the… advertising campaign: Medical Benefits Fund at [49]; Australian Competition and Consumer Commission v On Clinic Australia Pty Ltd (1996) 35 IPR 635 at 641 (Tamberlin J);

(c)    support the primary orders and assist in preventing repetition of the contravening conduct: Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc (1999) 95 FCR 114 (Real Estate Institute of WA) at [49] (French J); and

(d)    to bring the outcome of the litigation to public attention so that those in the market have a broad understanding of the ways in which contraveners have had to change their conduct: Real Estate Institute of WA at 133.

17    REA contended that the relevant Advertisements were very prominent and formed the opening message in an extended campaign for the Domain app, reinforced by a number of media reports in the Fairfax press throughout the trial of the proceeding and after the initial judgment. I accept, as REA submitted, that there can be no set period of time beyond which it is inappropriate to order corrective advertising. The lapse of time is merely one consideration and its significance will depend upon the facts of the case: Medical Benefits Fund at [49] and [58]. I accept too that REA prosecuted its case with expedition and the delay is not of its own making.

18    The authorities upon which REA relied are relevant, but to a significant extent they turn on their own facts. In the circumstances of the present case I consider the corrective advertising sought by REA to be inappropriate and unnecessary and it would tend to have a punitive rather than corrective effect. It is relevant that:

(a)    the Second Advertisement was only published once (albeit prominently) and the Fifth Advertisement was only published on four billboards in Sydney from 11 February 2016 to 29 February 2016. That is, the relevant Advertisements were published over a short period and one of them had quite limited geographical reach;

(b)    the contravening conduct ceased about 16 months ago and it is likely that the false impression conveyed to the target audience by the Most Listings Representation in the Second and Fifth Advertisements, and by the Combined Representation in the Second Advertisement, would have dissipated;

(c)    the No.1 Property App Claim is a central claim in the first advertising campaign, which I did not find to be misleading. While I doubt that the claims in the Second and Fifth Advertisements have any continuing effect in the minds of the target audience, if they do, it is more likely that the effects of the No.1 Property App Claim subsist. That claim does not require correction; and

(d)    News Ltd outlets gave widespread publicity to the fact that the Court found some of Domain’s Advertisements to be misleading. REA also sent an email to approximately 5,500 principals of residential real estate agencies informing them of the Court’s decision. It is correct, as REA submitted, that Fairfax published a Sydney Morning Herald newspaper article with a misleading headline which claimed that Domain had won the case. However, the thrust of that article was essentially accurate.

19    In all the circumstances I decline to order corrective advertising.

Costs

20    The principles in relation to the power to award costs under s 43 of the FCA are well established. The discretion of the Court in relation to costs is broad but the usual rule is that, in the absence of special circumstances justifying some other order, costs follow the event: Hughes v Western Australia Cricket Association (Inc) [1986] ATPR 40-748 (Hughes) at 48,136 (Toohey J); Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271. In Hughes Toohey J referred in a summary way to the effect of decisions of Australian and English courts and explained:

1    Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.

2    Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.

3    A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them. In this sense, “issue” does not mean a precise issue in the technical pleading sense, but any disputed question of fact or of law.

(Citations omitted.)

21    Those principles are subject to the caveat, referred to in Hughes, expressed in Cretazzo v Lombardi (1975) 13 SASR 4 at 16 by Jacobs J who said that:

The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.

22    In Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5] Finkelstein and Gordon JJ said:

Costs are in the court’s discretion. Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied. It is not suggested that such an approach requires a precise arithmetical apportionment of the costs as between the winner and loser of discrete issues. No doubt the assessment will often be rough and ready. But it will have the virtues of both fairness and reasonableness, which are often lacking in the application of the traditional rule.

The application for indemnity costs

23    Domain sought indemnity costs based upon an offer set out in a Calderbank letter it sent dated 11 March 2016. In summary, Domain offered that the proceeding be dismissed with no order as to costs, that Domain would provide an undertaking to the Court not to publish a claim to have the most property listings in any geographical region unless it could show three months of leadership based on all property listings not just those relating to established properties, and Domain would forego any damages arising from the undertaking given as to damages. REA rejected the offer.

24    Domain contended that it had achieved a result in the litigation more favourable than the offer it made. I do not accept that contention.

25    It is correct that Domain offered to provide an undertaking to the Court in roughly similar terms to the injunctive relief obtained by REA, but otherwise the result REA achieved is better than Domain’s offer:

(a)    REA obtained a declaration that Domain had engaged in misleading or deceptive conduct, when Domain’s offer did not include any public acknowledgement that its claim to have the most property listings in Sydney was false;

(b)    Domain’s offer sought to resolve the whole of the issues in dispute between the parties, including the question of contempt. REA’s application for a finding of contempt remains on foot and it appears that Domain accepts that (in a limited way) it breached the undertaking given to the Court; and

(c)    Domain’s offer did not include costs and, as I explain below, I consider REA is entitled to an order for costs.

It is also worth noting that Domain’s offer did not include any financial compensation and REA continues to seek damages. It is not clear what those damages may be, but this may be a further basis for REA’s rejection of the offer.

26    In my view there is no proper basis for an order of indemnity costs in favour of Domain.

The application for an apportionment of costs

27    In the alternative, Domain sought an order for apportionment of costs, pursuant to which Domain would be entitled to 75% of its costs and REA entitled 25% of its costs, with those orders netted off against each other.

28    Domain argued that:

(a)    REA alleged that Domain engaged in 18 separate instances of misleading and deceptive conduct across six impugned Advertisements in relation to which REA was only successful in establishing three. That is, that Domain was successful in 15 out of 18 instances of the alleged misleading conduct;

(b)    REA alleged that Domain engaged in misleading or deceptive conduct in six Advertisements. Domain was successful in four of the six impugned Advertisements;

(c)    REA alleged that four phrases used in the impugned advertisements were misleading or deceptive. Domain was successful in relation to three of the four phrases.

29    REA submitted that, having been successful in the litigation, it was entitled to its costs and that there were no special circumstances that operated to disentitle it. It sought an order for costs without any discount or apportionment for those parts of its claims on which it was unsuccessful. It argued that:

(a)    it established that the Most Listings Representation and the Combined Representation were misleading or deceptive, which it said were the primary claims in the proceeding; and

(b)    it was successful in most of the factual disputes between the parties, including the primary dispute as to the number of property listings on the parties’ respective platforms, as well as subsidiary disputes about usage of the respective apps, the reliability and independence of app ratings and the relevance of industry awards.

It also submitted that to the extent that REA was unsuccessful in its claims it was only unsuccessful on the basis the Court took a different view of consumer reactions to the Advertisements, which were questions upon which reasonable minds may differ and which involve questions of impression and degree.

30    If the Court was minded to order an apportionment of costs, REA argued that the Court should take into account the above matters as well as the fact that the issues upon which REA was unsuccessful occupied little Court time. It argued (and I accept) that there was little evidence or argument directed towards the Best Listings Representation and that the three Advertisements in the second phase of the advertising campaign were all dealt with together. It submitted that the great bulk of case preparation and Court time concerned the Most Listings Representation and the Combined Representation upon which REA was successful. Domain argued against this submission.

31    I consider the Most Listings Representation and the Combined Representation in the Second and Fifth Advertisements took up significantly more time and expense in case preparation and trial than the representations upon which Domain was successful. In my view the Most Listings Representation was the primary battleground between the parties. I do not, however, accept REA’s contention that the Most Listings Representation was the main claim in the proceeding. The other main claim was the No.1 Property App Claim upon which REA did not succeed.

32    In my view REA should have most of its costs of the proceeding, with an apportionment reflecting some of the issues on which it failed. Taking a somewhat rough and ready approach, as the authorities permit, I consider REA is entitled to an order that Domain pay 75% of its costs and Domain is entitled to 25% of its costs, with each costs entitlement netted off against the other. I have made orders accordingly.

Associate:

Dated:    2 August 2017