FEDERAL COURT OF AUSTRALIA
Key Logic Pty Ltd v Blue Groper Investments Pty Ltd [2019] FCA 63
ORDERS
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. On or before 14 February 2019 the applicants file and serve:
(a) short minutes of the orders which they claim should be made in light of the reasons published today; and
(b) related submissions of not more than five pages in support of the proposed orders.
2. In default of the respondents signifying their agreement to the proposed minutes of orders by signing a consent order:
(a) on or before 21 February 2019 the respondents file and serve:
(i) short minutes of the orders which they claim should be made in light of the reasons published today; and
(ii) related submissions of not more than five pages in support of the proposed orders.
(b) the proceedings be listed for a further hearing on 27 February 2019 at 9:30am.
3. Costs reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
DERRINGTON J:
Introduction
1 The first applicant, Key Logic Pty Ltd (Key Logic), and its subsidiary, Key Wholesalers Pty Ltd (Key Wholesalers), are engaged in the business of manufacturing and selling solar bollard lights under the name “Solar Bollard Lighting”. They pursue the respondents for damages for infringement of their copyright interests as well as for misleading and deceptive conduct. The action arises from the preparation and distribution by the respondents of a document which purportedly compared products sold by the applicants with those supplied by the first respondent, Blue Groper Investments Pty Ltd (Blue Groper). The respondents’ products were sold under the brand name “Sun Wizard”. The applicants complain that in the preparation of the document the respondents infringed their copyright in certain images of their products and the document, as produced, contained material which was misleading or deceptive. Blue Groper is the distributor of competing solar bollard lights, some of which are manufactured by a related company being the third respondent, Karmic Lighting Pty Ltd (Karmic). Two persons, Mr Fry and Mr Scutter, are directors of Karmic and Blue Groper respectively.
2 The action has had a somewhat tortured history during its interlocutory phases. It appears that underlying acrimony between the parties and business competition has meant that neither sought to engage in this matter in a way which was consistent with ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). It was only shortly prior to and during the trial that the parties, now represented by Counsel, were prepared to make appropriate concessions.
Background and claims
Background facts
3 Key Wholesalers trades under the name “Solar Bollard Lighting”, and operates an established business of designing, manufacturing and distributing solar bollard products for outdoor lighting. Its market is both domestic and international. In the years since 2005, Key Wholesalers, and another company Exlites Pty Ltd (Exlites), have sold various iterations of the applicants’ solar bollard lighting towers. The product consists of a solar powered light mounted on a fabricated steel tower. The towers were of various heights, although those which were most regularly referred to in this matter were about one metre tall.
4 From December 2005, Key Wholesalers and Exlites at various times designed, manufactured and sold several versions of their solar bollard light. From 2005 it was the “Gen 1” bollards. Since mid-2012, it was the “EXSB (first model) 2012” (Model 1), from 2013, the “XSB upgrade (second model) 2013” (Model 2) and, from 2014, the “SBL series (third model) 2014” (Model 3). It is to be noted that Exlites was placed into administration on 15 November 2013 and sometime prior to that it had ceased its involvement in the business.
5 Mr Fry, who is now a director and shareholder of Karmic, had been engaged by Exlites in around late 2009. He accepted the offer of Mr Arieni, who has variously been a director of each of the applicant companies and Exlites, to join Exlites for the purpose of overseeing the physical production of the solar lighting bollard tower product which Exlites had been developing. In January 2010, he was appointed as a director of Exlites and assumed the role of managing production, assembly and logistics for its business. During the course of his employment and directorship of Exlites, Mr Fry worked mainly on the solar bollard towers, but familiarised himself with all aspects of Exlites’ solar lighting systems in order to streamline and improve the assembly process. During the early years of his directorship Exlites produced the Model 1 version of the bollard.
6 In or around 2012, Mr Fry and Mr Arieni, who at the time were both directors of Exlites, passed a resolution adopting and approving a business plan which had been first produced in 2011. That plan envisaged the company group structure would include Exlites and a separate IP/R&D company, which was to hold all relevant intellectual property rights and engage in research and development work. By around mid-2012, Exlites had fully developed the Model 1 bollard and had commenced selling it. In the second half of that year, Mr Arieni began developing the idea of integrating the bollard’s power control module (PCM) into the circuitry of the printed circuit board (PCB). Naturally enough Mr Fry was aware of this development.
7 Having developed the idea of integrating the PCM into the PCB, by 10 October 2012 Exlites placed an order for solar bollard power units of that nature. The configuration meant that the PCM and PCB were enclosed in the polyurethane cap which fitted at the base of the solar light head and was referred to as the “base cap”. Again, Mr Fry was aware these integrated units had been ordered. He was also aware, as was the fact, they would take time to arrive and then to integrate them into a new model solar bollard.
8 In late 2012, Mr Arieni raised a concern with Mr Fry relating to his perception that the Model 1 bollard then being sold had unsatisfactory heat shrink material and end cap sealing. The “end cap” is a hard circular disk which was placed at either end of the battery and was enclosed with the battery in heat shrink plastic. On the original Model 1 bollard the heat shrink material encased the power unit or battery and the PCM. Mr Arieni subsequently sourced new heat shrink material and end caps for the purpose of better enclosing and sealing the battery and PCM. These new materials were thereafter applied to the Model 1 bollards. Mr Arieni claimed that the modified heat shrink and end caps were transitional measures only and were utilised until the integrated PCM / PCB units arrived for production of the Model 2 bollard.
9 In late February or early March 2013, Mr Arieni instructed his solicitors to draft the deed of assignment between Exlites and Key Logic by which all intellectual property rights held by the former company would be assigned to the latter.
10 On 18 March 2013, Key Logic held a shareholders meeting. One of the issues which was to be addressed was a proposal to allocate shares in Key Logic to Mr Fry. Although Mr Fry had been invited to attend the meeting, he declined to do so. A few days later he resigned as a director of Exlites although his intention to do so had not been previously disclosed to Mr Arieni.
11 On 27 March 2013, both Exlites and Key Wholesalers held directors meetings. At those meetings it was resolved to transfer Exlites’ intellectual property to Key Logic and for Key Logic to licence the use of the intellectual property back to Exlites. The companies executed documents giving effect to those transactions. It was accepted by all parties to the litigation that the assignment occurred and, for the purposes of this case, the respondents accepted that the relevant intellectual property rights in the solar light heads and photos of the same vested in Key Logic. On the evidence before the Court there was no doubt about the validity of this assignment despite Exlites’ subsequent insolvency. At the time of the assignment it appears that Exlites was engaged in substantial business activities and had $2.7m worth of future orders to fulfil. There is no evidence to suggest there was any reasonable apprehension of impending insolvency at the time.
12 In about late March or early April 2013, the integrated PCM / PCB units arrived at Exlites. A significant advantage of incorporating the PCM into the PCB was that the latter was encased in the polyurethane base cap and was practically impervious to water and air. These were introduced into the production process and the Model 2 bollard which incorporated them began to be sold around mid-2013. To that point in time the stock of Model 1 bollards was being run out. Although Mr Fry had resigned by this time, he had been aware of the ordering of the integrated base caps.
13 In July 2013, a further improvement to the solar bollards was introduced and Exlites ordered micro-vents to replace the gauze vents in the base caps of the bollard globes. This further limited the entry of moisture into the light head.
14 On 14 August 2013, Mr Arieni used the camera to take a number of photographs of a damaged light head of a Model 1 solar bollard. Two of those photographs are the subject of the copyright infringement claim. They are the first and third photograph identified in paragraph 10 of the Second Further Amended Statement of Claim (2FASC). Mr Arieni had taken the photographs in relation to an alleged warranty claim which had been submitted to Exlites. The uncontested evidence was that the units had been damaged as a result of being submerged in flood water and subsequently infested with ants. Mr Arieni claimed that he took the photographs in the course of his duties as an employee of Exlites and in the course of his duties as a director of Key Logic and/or Key Wholesalers. There is no reason to disbelieve him on that evidence. He was not contradicted on it during cross-examination and, in the circumstances of the case, his evidence on this topic is inherently logical.
15 On 21 August 2013, Mr Arieni sent an email to all Exlites’ distributors attaching photographs of the damaged Model 1 bollard units. It would appear that it was a result of this the photographs came into the possession of the respondents. Although on the pleadings the ownership of these photos was in issue, by the time of trial it was not seriously disputed that they had been taken and produced by Mr Arieni. Whilst the applicants asserted in the 2FASC that they held the intellectual property rights in relation to a third photograph which had been used in the Evaluation Document, they had abandoned that claim by the time of trial.
16 In about October 2013 a major supplier of certain component parts to Exlites, Red Hot Welding, went into liquidation with the result that Exlites was unable able to fulfil its contractual obligations with its customers. Moreover, Red Hot Welding had previously supplied some towers of inadequate quality which Exlites had incorporated into product which had been supplied to consumers. This resulted in Exlites having to respond to the claims of customers who had received the defective product. It was not, however, in a financial position to do so. As a result, in November 2013, Mr Arieni put Exlites into voluntary administration. From that time the business of manufacturing and supplying solar bollards was conducted by Key Wholesalers.
17 As has been indicated above, from around 2014 Key Wholesalers manufactured and sold the Model 3 solar bollard light which had the PCM incorporated into the PCB which, itself, was encapsulated in the polyurethane base cap.
18 At some time prior to late April 2015, Mr Arieni received correspondence from a Mr Annear of Combined Electrical NT Pty Ltd inquiring as to the type of solar bollard lights which had been installed at the RAAF Base at Darwin in the Northern Territory. The applicants, or one of them but most likely Exlites, had previously supplied solar bollard lights for installation at that site. On 27 April 2015, Mr Arieni, then acting on behalf of Key Wholesalers, sent an email response to Mr Annear in which he identified the type of bollards which had originally been installed at the Airforce Base as being their Model 1 bollards. He further explained that there were important differences between that version and the new models of the solar bollards but, also, that it was possible to install new solar light heads on the existing bollard towers.
19 As a result of that correspondence Mr Annear submitted a quote to Transfield Services (later known as Broadspectrum) for the replacement of 116 “older Gen 1 LED Bollard light heads” at the RAAF Base Darwin and for the proposed ongoing maintenance of them. The evidence before the Court was that Broadspectrum was contracted to the Department of Defence to provide maintenance services for that base along with other defence force facilities. In his quote Mr Annear explained that the proposed work involved upgrading the solar bollard light heads from the existing ones to the new model and he identified some of the main differences between the products. On 8 July 2015, Mr Annear sent an email to Mr Arieni attaching a purchase order for 116 Model 3 bollard light heads to use in fulfilling his contract. An invoice was issued by Key Wholesalers in respect of that order. It would appear that at around that time Combined Electrical NT Pty Ltd fulfilled the contract to replace the solar bollard lights at the RAAF Base.
20 On around 11 April of the following year, Mr Brownrigg, a contractor who worked on defence contracts at the RAAF Base in Darwin, sent an email to Mr Scutter of Blue Groper and Karmic in which he made enquiries as to the type and quality of the solar bollards which were then installed at the base. He referred to and attached a copy of the quotation which had been provided to Broadspectrum by Combined Electrical NT Pty Ltd. In subsequent correspondence he sent to Mr Scutter a photograph of one of the bollard lights at Darwin. It is apparent that, at this time, Broadspectrum was a potential purchaser of solar bollard lights to be used in further updating the lighting at the RAAF Base.
21 At around this time it seems that Mr Fry also sent a series of photographs of the applicants’ Model 1 solar bollard to Mr Scutter. Presumably, this was done at the latter’s request for the purposes of preparing the comparison document which he did. It is also apparent that Mr Scutter wished to promote the Sun Wizard brand to Mr Brownrigg and Broadspectrum.
22 On 13 April 2016, Mr Scutter prepared the document which purported to compare the applicants’ solar bollard lights with those manufactured and/or supplied by the respondents. It is the production, publication and distribution of that document (referred to herein as the “Evaluation Document”) which is at the centre of these proceedings.
23 It is common ground that the applicants did not authorise any of the respondents to reproduce their photographs of the Model 1 solar bollard light or any of their photographs. It is also not in contention that Broadspectrum is one of the head contractors engaged by the Defence Force in Darwin and the RAAF Bases in other States for the maintenance of military bases.
24 The parties have agreed that Mr Scutter prepared the Evaluation Document so that he could give to Mr Brownrigg of Broadspectrum and other interested contractors a document incorporating what he considered to be an independent and objective overview of the different enhanced features of the Sun Wizard bollard product.
25 Apart from being provided to Broadspectrum, the Evaluation Document was also passed on to a number of other potential purchasers of solar bollard lights being:
(a) Mr Mark Sullivan and Mr Annear of Combined Electrical NT Pty Ltd which was a distributor of Key Wholesalers’ products prior to them receiving the Evaluation Document;
(b) Ms Tara Kay of Aurecon;
(c) Mr Steven Smith of Broadspectrum; and
(d) Mr Sam Hatzizaisamis of the Darwin Waterfront Company.
26 On 14 April 2016, Mr Arieni became aware of the existence of the Evaluation Document when it was forwarded to him by Mr Alan Siggs of Aurecon. It is not clear how Mr Siggs came into possession of the document, though it evidences that data files of this nature are easily and quickly transferred amongst participants in particular markets.
27 On 4 May 2016, Mr Scutter also sent the Evaluation Document to Mr Brad Whitehouse of Dice Australia. It is inferred that Dice Australia was also an entity which may have purchased solar bollard lights.
28 By the end of the trial it was not in contention that the applicants’ Model 3 bollard won the prize for the most innovative product of the year award at the Australian Smart Lighting Summit in 2016. Despite the title of that award there was no evidence as to the nature and extent of the competition for it. Nevertheless, this evidence suggests that the product had some degree of approbation from industry participants.
29 The essential point derived from the evidence is that, at the time when the Evaluation Document was distributed, it represented the applicants’ Model 1 product as being their current model bollard whereas, at that time, they were selling and supplying the Model 3 version. It may well have been that some Model 1 products remained in situ at the RAAF Base in Darwin, but it is also clear that a large number of Model 3 light heads had also been installed.
The pleaded case
30 The case as presented at trial had its foundation in the 2FASC. As best as can be ascertained from the pleadings, the following appears to have been alleged and put in issue.
The Second Further Amended Statement of Claim
31 The periods during which the various iterations of the bollards were sold by Key Wholesalers is important. It is alleged that since 2012 Key Wholesalers (or Exlites) sold the following bollards under the name Solar Bollard Lighting:
(a) the “EXSB (1st Model) 2012” (the Model 1 bollard);
(b) the “EXSB Upgrade (2nd Model) 2013” (the Model 2 bollard); and
(c) the “SBL Series (3rd Model) 2014” (Model 3 bollard).
32 It is alleged that Mr Fry assembled or was involved in the assembling of the Model 1 bollard whilst an employee or director of Exlites. As mentioned, that does not appear to be in contention.
Allegations concerning the creation and distribution of the Evaluation Document
33 The applicants complain of the production and distribution of the Evaluation Document from at least 13 April 2016. It is alleged that Blue Groper and Mr Scutter created and distributed it.
34 A central allegation is that the Evaluation Document purported to compare a solar bollard product known as the Sun Wizard with an alternative solar bollard product described as the “current bollard”. That reference appears to be a reference to the applicants’ current bollard or the bollard currently in place at the RAAF Base. Either way it was incorrect. It is said that the document made a number of representations about the “current bollards”. In general terms it is alleged that bollards which had been purchased by the recipient under the Solar Bollard Lighting name were deficient for the following reasons:
(a) the battery and battery management analogue circuit were exposed to moisture, salts and ants;
(b) were susceptible to damage from exposure to moisture, salt and ants in their ordinary day-to-day use;
(c) by reason of the above those bollard lights were susceptible to failure;
(d) that the cause of the defects in the bollard lights purchased under the Solar Bollard Lighting name were due to reliance on silicone to seal and bond compartments and other design deficiencies;
(e) that the damage to the identified “current bollards” visible in the photographs was illustrative of the nature of damage that bollards purchased under the Solar Bollard Lighting name will be susceptible to or will suffer if exposed to moisture, salts and ants;
(f) that the “current bollards” depicted in the Evaluation Document refer to the Solar Bollard Lighting products manufactured and sold by Key Wholesalers under the Solar Bollard Lighting name; and
(g) that any bollards purchased by the recipient of the Evaluation Document are or would be the model depicted in the photographs or there is no difference between the bollards depicted and those purchased by the recipient.
As can be seen, these representations were contextualised in the circumstances of a particular customer who appeared to be the purchaser or owner of the bollards used at the RAAF Base in Darwin.
35 The Statement of Claim also asserted that in the Evaluation Document the reference to “current bollards” was a reference to all solar bollards produced and sold by Key Wholesalers or Exlites.
36 It is further alleged that the Sun Wizard evaluation was sent to at least one of Key Wholesalers’ existing customers that had held, distributed or had specified Key Wholesaler’s solar bollard products.
37 The gravamen of the complaint appears to be that the criticisms were referable to an early version of the applicants’ solar bollards (the Model 1) and represented that this was the version which the applicants currently produced and supplied whereas they, in fact, produced and supplied a much more sophisticated version, being the Model 3 bollards. Indeed, the representations wrongly asserted that the bollards then in situ at the RAAF Base were Model 1 bollards whereas they were, in fact, Model 3.
Claims in respect of the third and fourth respondents
38 The substance of the applicants’ complaints in this respect is that Mr Fry, as a former employee and director of Exlites, was familiar with the proposed design modifications for the Model 2 bollard at the time he left Exlites’ employment in 2013. It seems to be alleged, perhaps inferentially, that when he sent to Mr Scutter and/or Blue Groper an email providing comparison information between the Sun Wizard product and the Solar Bollard Lighting bollards he was aware of that fact. It is then said that when he was asked by Mr Scutter to send photographs of the applicants’ bollards for the purposes of the creation of a document comparing the Sun Wizard product with the applicants’ product, he sent the photographs of the Model 1 (which are identified in paragraph 10 of the 2FASC) which had been superseded. From the facts identified above it can be readily accepted that Mr Fry would have been able to tell from the photos he sent to Mr Scutter that they depicted the unimproved version of the applicants’ product. They clearly show the PCM separate to and not incorporated into the base cap.
39 It is further alleged that Mr Fry assisted the first and second respondents in creating the Evaluation Document.
Copyright infringement
40 By the time of trial it was asserted that Key Logic was the owner of the copyright subsisting in only the first and third of the three photographs identified in paragraph 10 of the 2FASC and that Key Wholesalers was the exclusive licensee of that copyright. As mentioned, the applicants have abandoned any claim with respect to copyright in the second of the three photographs.
41 The basis on which Key Logic claimed ownership of the photographs was that the first and third photographs were taken by Mr Arieni in the course of his employment with or as a director of Key Logic, Key Wholesalers or Exlites. It was claimed that all intellectual property created in the past or future in connection with the business of Exlites of Key Wholesalers was irrevocably transferred to Key Logic in 2006 and that Key Wholesalers was the current exclusive licensee of that intellectual property.
42 The applicants asserted that no right to reproduce the photographs was granted to any of the respondents. That was not denied. Consequently it was alleged that the use of the photographs infringed Key Logic’s copyright in the photographs.
Breach of the Australian Consumer Law – misleading or deceptive conduct
43 The applicants also alleged that the representations in the Evaluation Document were misleading or deceptive. The general thrust of that allegation was that the criticisms made of the applicants’ solar bollards were referable to the Model 3 bollards, and were inaccurate. At this point it is apt to interpose the observation that the Evaluation Document appeared to compare the currently sold Sun Wizard product with the Model 1 version of the Solar Lighting Bollard but did so in a manner which represented that the Model 1 version was the current versions of solar light bollards then being supplied by the applicants. It is, therefore, said that the criticisms made of the bollard as being the “current bollard” were inaccurate. That was particularly so in relation to the PCBs and PCMs of the Model 3 bollards which were completely encapsulated in a moulded ABS base cap and sealed, whereas the Evaluation Document represented to the contrary. The applicants also complained that the allegations in that document that the battery and battery management analogue circuit of the solar bollards were exposed to moisture, salt and ants were false. They also cavilled with the representation that the damage visible in the photographs in the Evaluation Document was illustrative of the damage which the applicants’ bollards would suffer from in ordinary use. That was so even in relation to the Model 1 bollards depicted in the document which had been submerged in flood water although no mention was made of that fact. A variety of alleged misrepresentations were said to have been made in the Evaluation Document but, generally, they centred on the general description of the applicants’ bollards, when that description was only apt of the Model 1 bollard.
44 It was alleged that these several representations by Blue Groper and Mr Scutter were misleading or deceptive or likely to mislead and deceive or otherwise contravened the Australian Consumer Law (ACL) because they were false or misleading representations about the applicants’ bollards.
45 At paragraph 17A of the 2FASC a pleading is made that Karmic Lighting and Mr Fry were involved in the contraventions of the ACL.
Flagrancy of the respondents’ conduct
46 The applicants claimed the breach of their copyright - as well as the breaches of the ACL - was flagrant because it was intentional or malicious and was calculated to injure and, indeed, has caused injury. It is further alleged that Blue Groper and Mr Scutter have refused to provide undertakings that they will not further engage in that conduct and have refused to take steps to remedy the damage caused by their previous contravening conduct. It is also alleged that Mr Fry and Karmic Lighting (being the third and fourth respondents) were aware that the photographs taken and provided to Mr Scutter and Blue Groper were not representative of the “current” versions of the bollards sold by the applicants, and that they would have known that the representations were misleading. Further, it is said that they did not make any attempt to clarify for Mr Scutter or Blue Groper what it was that the photographs depicted.
47 In the Originating Application and 2FASC the applicants sought damages, or an account of profits, in respect of the contraventions. They also sought injunctions and declarations in relation to the conduct which constituted those alleged contraventions.
The pleaded defence of the first and second respondents
48 In their defence Blue Groper and Mr Scutter admitted paragraph 4 of the 2FASC which was to the effect that Mr Scutter had been “involved in” the contraventions of the ACL pleaded against Blue Groper. On the Friday before the trial commenced on Monday, 30 July 2018 that admission was subject to an application to withdraw it. That application was refused for a number of reasons and, in particular, because of its lateness. Moreover, it is to be observed that Blue Groper and Mr Scutter otherwise admitted in their defence that they had created and distributed the Evaluation Document or caused it to be created and distributed. On the facts alleged by the applicants, if that document contained the misleading representations it would have been apparent that both respondents would have contravened the ACL to some extent. No application was made to set aside the admissions in this regard. That being so, one can only wonder why the application was made to withdraw the admission in respect of paragraph 4. By either avenue, liability would have rested with Mr Scutter if the misleading conduct and subsequent damage was established.
49 Blue Groper and Mr Scutter asserted that the circumstances leading up to the creation of the Evaluation Document affords them some degree of exculpation. They pleaded they were contacted by Mr Brownrigg of Broadspectrum Pty Ltd, which company had a contract to service facilities at the Defence Department’s Barracks in Darwin and certain RAAF Bases in Queensland, the Northern Territory, and other places. It was said that Mr Brownrigg informed Mr Scutter that he had been having difficulty with the solar bollards then currently installed at the RAAF Base and had sought information about them. It was further said that on or about 12 April 2016, Blue Groper provided a copy of the Evaluation Document to Broadspectrum and that the document had been created and delivered so as to provide to that company a comparison of the Sun Wizard product and solar bollards manufactured by Key Wholesalers which were then being used at the RAAF Bases at the time that the document was created. It is pleaded that Blue Groper gave the document to three other people.
50 Blue Groper and Mr Scutter asserted that the “current bollard” to which reference was made in the Evaluation Document was the EXSB or Model 1 supplied by the applicants. That is correct to the extent that the photographs which are the subject of the copyright claim actually depict a Model 1 bollard which was a second generation solar light. It was not, however, the model which was current or then currently in use at the RAAF Base. It would appear that the initial confusion occurred because Mr Brownrigg had sent photographs of what he described as the “current bollards” used at the RAAF Base in Darwin and they were forwarded to Mr Fry, who incorrectly identified them as being Model 1 bollards. In the course of the evidence at trial Mr Arieni positively identified it as a Model 2 or 3. He was not contradicted on that evidence. Nevertheless, Mr Fry had identified them as being the original solar bollards which had been installed at the RAAF Base and Mr Scutter had accepted that. As a consequence Blue Groper and Mr Scutter asserted in their defence that the comparisons in the Evaluation Document were as between the Model 1, which is referred to as “the current bollard”, and the Sun Wizard product, and that the representations were true.
51 The essence of the defence is that the representations were accurate criticisms of the Model 1 bollard and they were not referable to any other model of bollard produced by the applicants.
52 Otherwise much of the first and second respondents’ defence are non-admissions.
Response to the copyright allegations
53 In relation to the question of the use of the infringing photographs, Blue Groper and Mr Scutter claimed they asked Mr Fry to provide Blue Groper with photographs which could be used in a document to promote Sun Wizard solar lighting products by comparing them to the product manufactured by the applicants. They said that Mr Fry emailed copies of several photographs, including the allegedly infringing photographs, to Blue Groper and Mr Scutter who claim they reasonably believed that Mr Fry had the right to use them, or to licence their use and they reasonably believe that Blue Groper had a right to reproduce them. They asserted that they were not aware, and had no reasonable grounds to suspect, that any act constituting an infringement was an infringement of the applicants’ copyright.
54 Blue Groper and Mr Scutter denied any flagrancy in their conduct and said the intention was to provide a comparison between the Sun Wizard product and the EXSB model. They also asserted they took steps to investigate the applicants’ complaints and to retrieve and destroy copies of the Evaluation Document and that they have not subsequently used it.
55 In relation to the claims for damages and accounts of profit, Blue Groper and Mr Scutter denied that any damage was sustained or, indeed, that they made any profits as a result of the alleged contraventions. It should be mentioned that on the second day of trial the applicants abandoned any claim for an award of damages or an account of profits.
Defence of the third and fourth respondents
56 The defence of Karmic and Mr Fry largely mirrored that of Blue Groper and Mr Scutter. Some additional matters were initially raised concerning the previous relationship between Mr Fry and Mr Arieni, however, by trial those matters had dissipated.
Consideration of the causes of action
The misleading and deceptive conduct claim
57 As mentioned, the applicants’ claim founded upon misleading or deceptive conduct arose by reason of the assertions in the Evaluation Document as to the qualities of the second generation Model 2 and 3 solar bollards supplied by the applicants. In effect, the Evaluation Document purported to make a comparison between the Sun Wizard product and the applicants’ current bollards but in doing so incorrectly identified the Model 1 bollards as being “the current bollards” whereas the current bollards were the Model 3 lights which had substantial improvements and did not have the deficiencies alleged in the document.
58 It was acknowledged by the applicants that their first generation and Model 1 solar bollards had deficiencies when compared to subsequent models and, in particular, because the protection of the PCM from environmental factors was limited. In effect the PCM was separate to the PCB and located outside of the head of the bollard. The Model 2 and Model 3 bollards were constructed with the PCM in the bollard head and, indeed, encased in epoxy so as to be impervious to water, moisture and ants. At the time of the creation and publication of the Evaluation Document the Model 3 bollards had already been installed at the RAAF Base in Darwin and the Model 1 bollards were not being sold. The applicants’ complaint is that the Evaluation Document represented the Model 1 bollards, replete with their deficiencies, as the model then being manufactured and supplied by the applicants as at the time of the creation of the document.
59 In order to consider the applicants’ claim it is appropriate to set out in detail the manner in which the Sun Wizard evaluation document came about.
The creation of the Sun Wizard Evaluation Document
60 The circumstances leading to the making of the misrepresentations in the Evaluation Document in April 2016 commenced some years prior to its preparation.
61 The first relevant event occurred on 14 August 2013 when Mr Arieni, a director and/or employee of Key Wholesalers and Exlites, took photographs of a damaged Model 1 Bollard. The photographs were taken for the purposes of assessing a warranty claim in relation to a unit which had been submerged in flood waters. Two of these photographs are the first and third photographs replicated in paragraph 10 of the 2FASC.
62 On 21 August 2013, Mr Arieni sent an email to Exlites’ distributors attaching the two photographs. In it Mr Arieni, inter alia, explained to the distributors that the units were not designed to be submerged in water and that damage caused in that way was not covered by any warranty.
63 In early 2014, Key Wholesalers began the production and sale of the Model 3 Bollard, which had substantial design improvements over the earlier models, including the housing of the PCM in the polyurethane base cap.
64 In or around April 2015, Mr Annear of Combined Electrical NT Pty Ltd, a contractor, was apparently seeking to tender for work to replace the bollards, or bollard light heads, at the RAAF Base in Darwin. On 27 April 2015, Mr Arieni sent Mr Annear an email explaining the difference between the Model 1 bollards and the new SBL series, being the Model 3 Bollard. That included the statement that the PCM of the Model 3 is housed within the base cap (referred to as the PCBA in the email), such that it is internal and cannot be contaminated or damaged by water. Mr Arieni also identified that the Model 3 Bollard could be fitted to the posts which were already in place at the RAAF Base at Darwin, and described how that process should occur.
65 On 17 June 2015, Mr Annear sent an email to Mr Arieni with the subject line “Re: SBL series”. Mr Annear indicated he would like to discuss the project with Mr Arieni. Apparently a discussion took place, and Mr Arieni subsequently sent an email to Mr Annear identifying the characteristics of the bollards which ought to be included in a purchase order.
66 On 21 May 2015, Mr Annear of Combined Electrical sent to Mr Nathan Wills of Transfield Services (Aust) Pty Ltd (subsequently renamed “Broadspectrum”), a customer quotation to upgrade the solar heads at the RAAF Base with SBL210SW heads. In it, Mr Annear said that the Gen 1 LED bollard light heads had now been discontinued and spare parts were no longer available. He further outlined the perceived advantages of the new Model 3 light heads.
67 On 8 July 2015, Mr Annear sent Mr Arieni a purchase order for 116 LED bollard light heads SBL210SW. The alphanumeric code used in the order indicated that the bollards were Model 3 bollards.
68 In his affidavit, Mr Arieni deposed that the order for 116 SBL210SW light heads was completed and the light heads were shipped to Combined Electrical NT Pty Ltd’s premises. A tax invoice of Key Wholesalers in relation to that sale and an invoice from Shaw’s Darwin for transport of the lights were tendered in the evidence. It therefore appears that the new generation heads were sold to Combined Electrical and sent to Darwin for installation. That would generally imply that those bollard heads were, in fact, installed on the old bollard posts at the RAAF Base. Subsequent photographic evidence disclosed that was the case and, ultimately, this was not in dispute.
69 In early April 2016 there were several communications between Mr Scutter of Blue Groper and Mr Brownrigg concerning the solar bollards which were suitable for use in the Northern Territory. On 12 April 2016, and in the course of those communications, Mr Brownrigg sent two photographs of a solar bollard which was in situ at the RAAF Base. The photographs were taken from an elevation slightly higher than the bollard and show the solar panels on the top of the light head as well as the supporting post beneath. It is noted that the subject line of Mr Brownrigg’s email is “Bollard lights at RAAF Darwin”. By the end of the trial, it was no longer in dispute that the bollard heads depicted in the photographs were Model 3 Bollards, and Mr Arieni was able to clearly identify them as such due to the number of segments in the solar panel of the head.
70 It is apparent from the communications that Mr Scutter was seeking to interest Mr Brownrigg in promoting Blue Groper’s products. Mr Brownrigg, through Broadspectrum, was in a position to facilitate the use of such products which were widely used at the defence forces facilities. It is apparent that Mr Scutter was intending to encourage him to promote the Sun Wizard product by preparing a document which favourably compared it to the applicants’ product. It is also apparent that, at around this time, Mr Scutter had a number of conversations with Mr Fry of Karmic Lighting, and was looking to him for assistance in the compilation of the document. On 12 April 2016 Mr Fry sent an email to Mr Scutter which had the subject line, “Light Comparison Photos” and which, in part, read, “I have attached light head comparison photos”. The 14 photographs attached were given names, two of which were called “Damage to exposed battery and electrics” and “Damage to exposed battery and connections”. These seem to be referable to the two photos which Mr Arieni had sent to distributors by his email of 21 August 2013, and which he described as having been damaged by submersion in water. Mr Fry did not include in his email any identification of the source of the photographs and nor did he identify that they had been damaged as the result of submersion in flood waters. It is relevant that in his evidence Mr Fry did not seek to suggest that he had sent the photographs in error, that he had not known that they were depictions of early model bollards, that he was not aware that the light heads had been damaged in flood waters or that he was not aware that the applicants were producing and selling upgraded versions. Given the circumstances and that he is involved in the industry, it would have been surprising if he was not aware of each of those matters.
71 It was acknowledged by the respondents, although only at trial, that two of the photographs sent by Mr Fry to Mr Scutter were photographs which had been taken by Mr Arieni and, in respect of which the copyright subsisted in Key Logic. Prior to the trial the respondents had vigorously denied that any of the applicants held any intellectual property rights in the photos.
72 On 13 April 2016 at 2:58pm, Mr Brownrigg of Broadspectrum sent an email to Mr Scutter enclosing a copy of the quotation of Combined Electrical of 21 May 2015 and making the inquiry, “Kym, Can you confirm if this is your product in the attached quote. Thanks”.
73 By an email of 13 April 2016 at 3:16pm, Mr Scutter responded by enclosing the Evaluation Document which he had recently prepared. In that document he purportedly compared the Sun-Wizard product with what was described as being the “current bollard”. For instance, when discussing the light which emanated from the respective bollards he wrote:
Sun Wizard provides 25% more light to the ground were [sic] it’s required as opposed to your current bollard
…
Sun Wizard incorporates 16 variable light output settings as opposed to one on your current bollard.
74 The use of the nomenclature “current bollard” in the Evaluation Document assumes importance in this matter. Ultimately, it was not seriously contended by the respondents that its use represented that the depicted bollard heads (being Model 1) were those which were then installed at the RAAF Base in Darwin whereas, in fact, they or at least many of them had been replaced with Model 3 heads. That was certainly the meaning which Mr Brownrigg would have understood the references to have and it is more than likely the manner in which the other parties to whom the document was distributed would have understood them. Equally, the reference can be taken as being a reference to the current model of the bollards produced by the applicants. Either way, the statements concerning the “current bollards” were inaccurate as they were actually referable to the light heads which had been replaced.
75 As the facts identified reveal, Mr Brownrigg had sent a photo of a bollard currently installed at the RAAF Base to Mr Scutter who had forwarded it to Mr Fry. Mr Fry had erroneously informed Mr Scutter that it was a Model 1 bollard whereas it was, in fact, a Model 3.
76 Once it is accepted that the “current bollard” at the RAAF Base was the Model 3 bollard the comparison in the Evaluation Document is undoubtedly misleading because it purports to ascribe to the Model 3 bollard the attributes of a Model 1. The deficiencies referred to the document which were said to exist in the “current bollard” were not, in fact, characteristics of the Model 3 bollard. It may have been that Mr Scutter was led into error in this respect by Mr Fry, however, when the facts are known it is clear that he was in error in describing the current model as being the Model 1 bollard which had the various identified deficiencies.
77 On page 3 of the Evaluation Document, Mr Scutter purported to compare in a table form the Sun Wizard product as against the “current bollard”. In relation to the digital circuitry, he said of the current bollard:
Battery and Battery Management analogue Circuit exposed to moisture, salts and ants etc
Relies on silicone to seal and bond compartments.
78 On page 5 of Mr Scutter attached three of the photographs sent to him by Mr Fry and above them wrote:
Your current bollard product demonstrating exposed and damaged battery and battery management analogue circuit which is exposed to moisture, salts and ants (etc) which relies on silicone to seal and bond compartments.
Falsity of the statements in the Sun Wizard evaluation document
79 It is apparent that the assertions in the Evaluation Document to the effect that the current bollards at the Darwin RAAF Base were the applicants’ Model 1 bollards were false. The light heads that had been installed were, as identified by Mr Arieni, Model 3. They had substantial design improvements over the Model 1 bollards and, in particular, the PCM and PCB were securely located between epoxy layers and were impervious to moisture, ants and salts. Whilst it may have been the case that the batteries themselves were not enclosed in epoxy or in the head, they were secure. There is no suggestion that the batteries in the Model 3 version of the applicants’ bollard heads were susceptible to damage by moisture, salt or ants. Indeed, the only evidence before the Court on that topic was that of an expert called by the applicants, being Mr Gilmore, who identified the batteries were well protected. Mr Gilmore, whose report is discussed below, gave clear and logical evidence and his opinions were not seriously challenged under cross-examination. His opinion that the battery in the Model 3 bollard light head was well protected and not susceptible to moisture salt or ants ought to be accepted. The respondents’ submissions did not articulate any substantive reason as to why his opinion should not be accepted.
80 Although it is patently clear on the evidence that Mr Scutter and Blue Groper made the misrepresentations by indicating that the bollards currently being produced by the applicants and which were installed at the RAAF Base were Model 1, the respondents’ case somewhat faintly suggested that this was of no matter because the Model 3 Bollard suffered from the same defects as those identified in the representations. There was no foundation for this suggestion and it was disproved by the evidence of Mr Gilmore which established that they did not have the suggested deficiencies.
The report of Mr Gilmore
81 Mr Gilmore, a qualified engineer, produced a report in relation to Models 1 to 3 of the applicants’ solar light heads. The light head referred to as Model 1 by Mr Gilmore is that which is identified in this case as being Model 1 of the second generation lights developed by the applicants, being that version where the PCM was held adjacent to the battery and covered in heat shrink plastic. Mr Gilmore identified that, in this configuration, the PCB was susceptible to moisture and ant ingress and was possibly susceptible to salts. Further, he considered that the mesh vent in the base cap of the light head would allow moist air to condense and create liquid within the housing of the light head. He also identified that the battery and the PCM were enclosed in the space in the bollard tower and were, therefore, potentially susceptible to damage by exposure to moisture, salt and ants. The coverings provided limited protection from the environmental contaminants.
82 However, Mr Gilmore observed the Model 3 bollard was a substantial improvement on the Model 1 in that the Model 3 PCM was contained in the sealed base cap and protected from the elements. He said that the epoxy plastic on the LED side and the polyurethane on the battery lead side completely sealed and encapsulated the internal cavity of the ABS cap apart from the vents. Those features protected the PCM and PCB from exposure to moisture, salt and ants.
83 Mr Gilmore identified the battery of the Model 3 bollard was not encapsulated within the light head and so not sealed by the base cap. It was not, therefore, as well protected as was the PCB. Nevertheless, it was well protected by three layers of heat shrink plastic with stiff “fibreboard” disc end caps. The probability of damage by moisture, salt and ants was much reduced when compared to the Model 1 due to manufacturing modifications in the shrink wrap.
84 In relation to the attributes of the Model 2 bollard, Mr Gilmore made comments similar to those he had made in relation to Model 3. He had not been given a physical version of that bollard light but was asked to assume the existence of differences which were identified in his instructions. For present purposes it is not necessary to consider the qualities of the Model 2.
85 The import of Mr Gilmore’s evidence was not affected by his cross-examination. The respondents did not adduce any contrary expert evidence. There is no reason not to accept his observations and opinions on this topic which were, in effect, unchallenged. The result of that is that the representations that the Model 3 light heads had the design deficiencies and the susceptibility to damage from salt, moisture and ants as alleged were not correct.
Damage to the light heads identified in the Evaluation Document
86 Another significant falsity advanced in the Evaluation Document was the implicit suggestion that the damage sustained to the light heads was the consequence of ordinary use and the exposure to moisture, salt and ants over time. Such implicit representations were not true. The evidence established that the damage to the Model 1 bollard light head depicted in the photos included in the Evaluation Document had been caused by the submersion of the bollard in flood water. Although that misrepresentation was not express, it was necessarily implicit and arises by the omission of Mr Scutter and Blue Groper to identify how the damage to the bollard light head came about. Again, the respondents did not submit to the contrary.
Concession as to existence of misrepresentations
87 In their written submissions for final addresses the respondents, quite properly, accepted that the Evaluation Document contained misleading or deceptive representations. At paragraph 67 of their written submissions they stated:
There is no plausible argument available to the First and Second Respondents by which they can contest that the representations made in the evaluation document were misleading or deceptive, or likely to mislead or deceive, or false.
88 As no other submission was made as to the nature or scope of the misrepresentations which were made, the concession can be taken as an acknowledgement that the various misrepresentations were made out. A slight difficulty with that is that the 2FASC was of such a poor quality that it is difficult to identify the exact scope of the alleged misrepresentations. Nevertheless, it can be said that the following misrepresentations, which have foundation in the pleading and which were agitated by the parties during the hearing, were made:
(a) That the Model 3 bollards were constructed in such a way that the battery and PCM were susceptible to damage from exposure to moisture, salt and ants. That was false in a number of respects, but particularly because the PCM was not exposed to such damage as alleged.
(b) That the Model 3 bollards were constructed in such a way that the battery and PCM were exposed to moisture, salt and ants. That too was false.
(c) That the componentry of the Model 3 bollards were exposed to moisture, salt and ants and susceptible to damage on account of design deficiencies and reliance on the sealing and bonding of components by the use of silicone.
(d) That the damage depicted in the photographs of the alleged current bollards was damage caused by moisture, salt and ants in ordinary operating conditions whereas the damage was the result of the bollards being submerged in flood water. As indicated above, this was necessarily implicit in the comparison which was made.
(e) That the Model 3 Bollards then being currently produced and sold by the applicants were the same as those depicted in the photographs and had the same design deficiencies and susceptibility to damage. This misrepresentation arose as a result of the use of the expression “current bollard”.
89 It follows that the Evaluation Document contained representations which would have been perceived by any reader and, in particular, by Mr Brownrigg who had an acute interest in ascertaining any differences between the two products. Any reader would have understood the identification of the design deficiencies as being referable to the Model 3 Bollard, or the latest bollard manufactured and sold by the applicants. All those representations were misleading and false. No argument was advanced by the respondents to the contrary.
90 It was not suggested and nor could it be that the misrepresentations were not made in the course of trade or commerce. Blue Groper and Mr Scutter made the representations in the course of their business dealings and in an attempt to promote the sale of Blue Groper’s solar bollard in preference to the solar lighting bollards sold by the applicants.
Conclusions on misleading or deceptive conduct
91 It follows that, by producing and circulating the Evaluation Document, Blue Groper and Mr Scutter engaged in misleading or deceptive conduct in the course of trade and commerce in contravention to s 18 of the ACL. That misleading or deceptive conduct was engaged in predominantly by the sending of the Evaluation Document to Mr Brownrigg. That action by the first and second respondents must have had the most impact because it was in response to a query from Mr Brownrigg and related to a project in respect of which Mr Brownrigg and Broadspectrum were interested. The sending of the Evaluation Document to Mr Brownrigg occurred via email from Mr Scutter and Blue Groper. It is apparent that Mr Brownrigg forwarded that email to other persons being Mr Stephen Smith of Broadspectrum Australia, RAAF Base Darwin and Tara Kay from Aurecon Engineering Consultants in Darwin.
92 Mr Scutter also acknowledged that he gave the Evaluation Document to three other people. He claimed that he did so via the provision of it on a USB stick. Those three people were Mr Mark Sullivan of Combined Electrical, Mr Sam Hatzizaisamis of the Darwin Waterfront Corporation, and Mr Ryan Annear of Combined Electrical Services. He claimed that he had not circulated it to any other persons. His actions in providing the document on a USB stick to other persons was done in the course of the performance of his duties as a director of Blue Groper and, therefore, an act of the company as well. This conduct was a further breach of s 18.
93 Once the applicants had remonstrated with Mr Scutter about the inaccuracies in the Evaluation Document, he says that he has asked his contacts who did receive it to dispose of it and not to circulate it to any other person under any circumstances.
94 It cannot be denied that it was to the advantage of Blue Groper and Mr Scutter to disseminate the Evaluation Document. It provided a comparison of the Sun Wizard solar bollard with an old version of the applicants’ bollard, which was both out of date and out of production as well as being superseded by a new and improved product. It misleadingly identified that the applicants’ bollard, which was then current, was substantially inferior to Blue Groper’s bollard in certain respects and, indeed, that it had the attributes identified in the comparison.
95 It must be acknowledged that the impact of the misleading conduct on persons other than those familiar with the situation at the RAAF Base might have been relatively less serious as it is not apparent that they were immediately seeking to acquire solar bollard lights. Nevertheless, that was not entirely so and the Evaluation Document can be read as a general comparison of the Sun Wizard product with the applicants’ current bollard.
Contravention of s 29(1)(a) and (g)
96 The applicants also allege that the respondents’ conduct contravened s 29(1)(a) and (g) of the ACL. Those sections provide:
29 False or misleading representations about goods or services
(1) A person must not, in trade or commerce, in connection with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services:
(a) make a false or misleading representation that goods are of a particular standard, quality, value, grade, composition, style or model or have had a particular history or particular previous use; or
…
(g) make a false or misleading representation that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits; or …
97 The misrepresentations made by Blue Groper and Mr Scutter both contravened these provisions because they misstated the standard, quality, characteristics and performance of the applicants’ current solar bollard lights. The respondents made no submission to the contrary.
98 The evidence referred to above which established the misleading nature of the representations for the purposes of s 18 of the ACL is equally applicable in relation to the contravention of these provisions. The applicants only had to establish that the representations were misleading. They were not required to establish that they were false as well: REA Group Ltd v Fairfax Media Ltd [2017] FCA 91; Comité Interprofessionel du Vin de Champagne v Powell (2015) 330 ALR 67. In any event, for the reasons identified, the representations made by Blue Groper and Mr Scutter in this case were false.
99 It follows that by the making of the statements in the Evaluation Document, Blue Groper and Mr Scutter also contravened s 29(1)(a) and (g) of the ACL.
Those who were involved in the contraventions.
100 It is alleged that Mr Scutter was involved in the misleading or deceptive conduct of Blue Groper. That seemed to have been admitted by the respondents although, as indicated above, shortly prior to the hearing they applied to withdraw that admission. That application was refused and during the course of the trial the respondents withdrew the submission that the first and second respondents had not admitted that Mr Scutter was involved in Blue Groper’s contraventions of the ACL. That is, perhaps, not surprising given his direct and personal involvement in the contravention and, given that he used email to distribute the Evaluation Document, he would have been caught by the extended operation of the ACL in any event. It followed that Mr Scutter was involved in the contravention and is subject to the remedies which are available to the applicants.
101 The position of Mr Fry and Karmic is more difficult. The allegation is that they were involved in the contravention of the ACL by Blue Groper and Mr Scutter. As pleaded, the facts on which this claim arose are that Mr Fry and Karmic sent the photographs of the damaged Model 1 light to Blue Groper and Mr Scutter. It was also pleaded that Mr Fry assisted Mr Scutter in the production of the Evaluation Document. Whilst I accept that there must have been discussions between those two persons about the photographs, the substance of those discussions was not adduced by either party save that Mr Scutter gave evidence to the effect that he asked Mr Fry for photographs of the applicants’ products which could be used in a product evaluation document to provide to Mr Brownrigg. He further said that he received the photographs of the water damaged Model 1 lights although he was not informed of the circumstances in which they were damaged. On the evidence it would appear that Mr Fry was aware that the photographs depicted lights which had been damaged by being submerged in flood water, although he did not disclose that somewhat important fact to Mr Scutter.
102 The case which the applicants sought to advance against Mr Fry (and derivatively against Karmic) was that he was aware of the purpose for which the photographs were to be put and he sent them to Mr Scutter but withheld information about the circumstances which caused the damage to the light heads. However, the difficulty with that is that there is no evidence that Mr Fry was aware of the manner in which the photographs would be used or the nature of the representations which might be advanced in respect of them. It may have been the case that he was so aware from conversations he had had with Mr Scutter, although there was no evidence to that effect, he was not cross-examined on this point and it was not put to him. It is to be kept in mind that the allegation that a person was involved in a contravention of the ACL is a serious one involving allegations akin to intentionally engaging in the contravening activity, and as such, any such case ought to be put squarely and fairly to the person so accused: Browne v Dunn (1893) 6 R 67, which is “to the effect that the cross examiner of a witness in adversarial litigation must put to a witness the nature of the case on which the cross examiner’s client proposes to rely in contradiction to that witness”: Bailey v Broadsword Marine Contractors Pty Ltd (2017) 353 ALR 45, 81 [150].
103 The consideration of the liability of Mr Fry and Karmic on the basis that they were “involved” in Blue Groper and Mr Scutter’s contraventions of the ACL is rendered even more difficult by the inadequacy of pleading of this cause of action in the 2FASC. The allegations there made eschewed any attempt to satisfy the requirements of such a plea. Those requirements, which are well known and have been identified regularly, were recently repeated by the Full Court in Stefanovski v Digital Central Australia (Assets) Pty Ltd [2018] FCAFC 31:
[70] In this case, where much of the liability of the appellants is founded upon them being “knowingly concerned” in TK Signs’ statutory contraventions, there are no pleaded allegations of the knowledge which is a necessary prerequisite to such a claim. It is well established that accessorial liability rests upon the intentional participation by a party in the contravention and such knowledge must be expressly pleaded against the party from whom relief is sought. The allegation that a person was “knowingly involved” in a contravention is a serious one and is akin to dishonesty. A party against whom such a claim is made is entitled to have the allegation clearly pleaded such that they might defend it. In Wyzenbeek v Australasian Marine Imports Pty Ltd [2017] FCA 1460 Derrington J referred to the relevant principles in the following discussion:
[96] In relation to the second matter, there is substantial weight in the submissions of the respondents that the pleading in paragraph 56 does not plead a reasonable cause of action against Mr Gay based on him being “knowingly concerned” in the alleged breaches of the TPA and ACL. An essential requirement of any plea of this nature is that the person against whom the claim is made knew of the matters which make up the essential elements constituting the contravention in question. Such allegations are necessary to establish that the person intentionally participated in that contravention. Where accessorial liability is alleged in relation to misleading or deceptive conduct, the party alleging the same must assert that at least the respondent knew of the making of the representation, that it was made in trade or commerce and that it was misleading or deceptive (see Yorke v Lucas (1985) 158 CLR 661 at 667). In Australian Competition and Consumer Commission v Online Dealz Pty Ltd [2016] FCA 732 Markovic J identified the now well accepted positon which flows from Yorke v Lucas. Her Honour said:
[163] It is necessary to show an intentional participation in and actual knowledge of the essential elements of the contravention. However, it is not necessary to show that the person appreciated that the conduct constituted a contravention. In Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [48] a majority of the High Court confirmed that the trial judge had rightly held that it was necessary to find that the relevant individuals participated in, or assented to, the companies’ contraventions with “actual knowledge of the essential elements constituting the contraventions” and that in order to “know the essential facts, and thus satisfy s 75B(1) of the Act and like provisions, it is not necessary to know that those facts are capable of characterisation in the language of the statute”.
[164] In Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17 a Full Court of this Court held at [133] that for a person to be involved in a contravention pursuant to s 75B(1)(c) of the Trade Practices Act, the person must be an “intentional participant in the contravention, the necessary intent being based upon knowledge of the essential elements of the contravention” relying on Yorke v Lucas. The Court went on to say that while it was not necessary to establish that the individual respondents had “knowledge that there was such a contravention … of the Act, it is necessary to demonstrate that each individual respondent had knowledge of each of the essential elements of the contravention” …
104 Here the 2FASC does not plead the material facts which support a claim of accessorial liability against Mr Fry and Karmic. The allegations are all of a conclusory nature. Had the respondents made an application to strike out the claim in this respect it surely would have been granted. It is not clear why such an application was not made. However, given that the pleading remained in the 2FASC, if the evidence adduced established any cause of action within the broad ambit of the pleading, the applicants would have been entitled to judgment in that respect. Here, the respondents chose to run the risk that, by the end of the hearing, there would be insufficient evidence to make out such a claim.
105 At one stage the respondents seemed to acknowledge in their written submissions that Karmic was liable because it was involved in Blue Groper and Mr Scutter’s misleading or deceptive conduct. As Mr Fry was the only relevant actor on behalf of Karmic, this submission could also be taken as an acknowledgement of his liability. They submitted:
Similarly, the Fourth Respondent [Karmic] has no plausible argument available to it that it was not involved in those contraventions (SOC 17A) on the basis that its director, Mr Fry provided Mr Scutter with the first and third photographs knowing that they depicted a water damaged bollard that was damaged as a result of it being submerged in flood waters, and knowing that Mr Scutter intended to reproduce them in the evaluation document in a manner said to be representative of a different type of damage, being from exposure to moisture, salts and ants.
106 If the factual matters referred to in the submission were correct it might have been that Mr Fry was a person who was “knowingly concerned” in the making of the misrepresentations. However, there was no evidence that he was aware that the photographs would be used to represent that the damage sustained to them resulted from the ordinary exposure to moisture, salts and air rather than the extraordinary sequelae of being submerged in floodwater. Relevantly, all the evidence revealed was that Mr Fry was aware that they would be used in an evaluation document to provide to Mr Brownrigg dealing with one particular model of bollard, the damage depicted by the photographs occurred as a result of them being submerged and he was unsure as to whether he had brought the cause of the damage to Mr Scutter’s attention. Importantly, in the course of cross-examination it was elucidated from Mr Fry that he did not pass on the photographs to be used to address the whole range of Key Wholesaler’s bollards and that he did not ever suggest that when the PCM was contained in the housing it would be susceptible to moisture.
107 The brief cross-examination of Mr Fry exonerated him and Karmic from liability for being knowingly concerned in Blue Groper and Mr Scutter’s contraventions. Not only was it not put to him that he had any relevant knowledge of the representations which were to be made, he was invited to admit, and he did, that he did not know that the photographs would be used to depict all of the applicants’ bollard lights. It was that matter which was the essence of the alleged misrepresentations.
108 After some discussion between Mr Travis for the applicants and the Bench during the course of the applicants’ address as to how they might justify the assertion that Mr Fry was involved in the contravening conduct, Mr McEniery for the respondents withdrew the above written submission. Even if he had not, given the available evidence it is not a submission which could legitimately have been accepted. On the evidence which was adduced to the Court, Mr Fry was not aware of the representations which were to be made in the Evaluation Document. He knew in general terms that the photographs were sought for the comparison purposes, but there is not a skerrick of evidence he knew what representations were to be made in that regard. It was not suggested that he was aware of how the photographs were to be used, what descriptions would be given to them, or what words might be used to generate implications in respect of them. In essence, the applicants have failed to establish, as against Mr Fry and Karmic, any of the elements of “involvement” as identified by Markovic J in Australian Competition and Consumer Commission v Online Dealz Pty Ltd [2016] FCA 732.
109 It follows that the claims under the ACL against Mr Fry and Karmic must be dismissed.
Relief for contravention of the ACL
110 The primary relief sought by the applicants in relation to the contraventions of the ACL is for declarations of infringement by the first and second respondents. Further relief is sought by way of injunction restraining the respondents from further contravening the Act and by way of a mandatory injunction requiring the sending of a corrective notice. Relief is also sought by way of an adverse publicity order pursuant to s 247 of the ACL.
111 Whilst relief in the way of damages arising because of the misleading or deceptive conduct were initially sought, it was abandoned by the end of trial once it had become clear that there was insufficient evidence to establish a causal link between the contravening conduct and the diminution in the value of the sales of the applicants’ products in the Northern Territory. That, however, does not equate to a conclusion that the contravening conduct engaged in by Blue Groper and Mr Scutter was not likely to cause loss and damage. On the contrary, it was no doubt engaged in solely for the purpose of causing customers to use Blue Groper products rather than the applicants’ and that was a very probable consequence. The conduct was constituted by a form of comparative advertising which sought to influence the market for the sale of solar bollards by using misleading statements. The form of the Evaluation Document, being an electronic data file, was easily transmitted from person to person and, as would have been expected, it was passed to a number of persons in what is likely to be a rather small trading community. There was little doubt that the representation of discontinued and out of date bollards as being the applicants’ current bollards and that they had significant design deficiencies was likely to cause loss or damage to the applicants. It follows that the contravening conduct was likely to cause loss and damage.
Injunctions
112 The power of the Court to grant injunctions pursuant to s 232 of the ACL is broad and is enlivened where the Court is satisfied that a person has engaged, or is proposing to engage in, conduct that would constitute, inter alia, a contravention of Chapter 2. Pursuant to s 232(4) the power to grant injunctions may be exercised whether or not it appears to the Court that the person intends to engage again, or to continue to engage in conduct of a kind referred to in sub-s (1) and whether or not there is imminent danger of substantial damage to any person.
113 Undoubtedly, before an injunction is ordered the Court must consider that it is appropriate, both in law and in fact, and any injunction granted must have a nexus with the conduct which constituted the relevant contraventions. I accept the observations of Gray J in Australian Competition and Consumer Commission v GO Drew Pty Ltd [2007] FCA 1246 that, as a matter of principle, if an injunction is to be granted where the contravening conduct has ceased and there is no real threat of it continuing, the injunction ought to be limited precisely to preventing a repetition of the contravening conduct which had occurred.
114 Initially the respondents submitted that there was “no reason for the court to not grant the declaratory and injunctive relief sought or the adverse publicity order sought”. That concession was probably a reflection of the manner in which the evidence emerged and that this was a case where a competitor had sought to gain a commercial advantage by engaging in misleading conduct directed towards customers and potential customers. Although the respondents subsequently sought to withdraw that submission, it mattered not because it was somewhat correct and a conclusion to similar effect which would have been independently reached.
115 Here, Blue Groper and Mr Scutter did engage in misleading conduct in contravention of s 18 and ss 29(1)(a) and (1)(g) of the ACL for the purposes of advancing their own interests at the expense of the applicants’. Additionally, they did so without making any reasonable consideration of the type of bollards which were, in fact, in use at the RAAF Base in Darwin or that the depicted lights were the “current bollards” being produced and sold by the applicants. They had in their possession photos of the bollard light heads which were in use, but they incorrectly identified them as the applicants’ Model 1 bollards. The process in which they engaged was a form of comparative advertising which, whilst is not inappropriate in itself, necessitates the person engaging in it being careful to correctly describe the comparator products. Here that did not occur. Indeed, by reason of the admission that Mr Scutter was involved in conduct of Blue Groper, it necessarily follows that he was aware of the circumstances which rendered the conduct misleading or deceptive. Necessarily, he was aware that the document incorrectly identified the applicants’ current bollards as being the Model 1 bollards such that the representations contained in the Evaluation Document were misleading. The document was sent to Mr Brownrigg who had considerable influence in the market for the products in question and there can be little doubt that they had a distorting effect on his view of the applicants’ products. The representations were intended to diminish the reputation of those products in comparison to the respondents’ and there can be little doubt that they did. That was clearly the intention of Mr Scutter and Blue Groper. Although he suggested in evidence that he did not intend that to be the case, in that respect he dissembled and I reject his evidence. The making of the misrepresentation could only have that effect and it was the natural and probable consequence of it. Mr Scutter did not explain how it was that he thought that the Evaluation Document would not damage the sale of the applicants’ products.
116 Although Blue Groper and Mr Scutter claim to have destroyed all copies of the Evaluation Document and have asked anyone to whom it was sent to destroy it, given its dissipation it is likely that it has not been fully retrieved. It is possible that at some time a copy of the document will find its way back into the hands of Blue Groper or Mr Scutter. It is far from being unlikely that other people in the future will contact Mr Scutter or Blue Groper in reference to it.
117 In those circumstances it is not inappropriate to grant an injunction restraining Blue Groper and Mr Scutter from further publishing, distributing or disclosing the Evaluation Document in any way. That injunction ought to be framed in such a way that it is limited to restraining any repetition of the conduct which has been identified in these reasons as contravening the ACL.
118 The parties may agree upon the terms of such an order or, failing agreement, a further hearing will be held.
Declarations
119 Although the respondents admitted that there was no reason why declaratory relief should not be given, the applicants made very few submissions which supported the making of declarations of contravention in the circumstances. The Court undoubtedly has wide discretionary power under s 21 of the Federal Court of Australia Act 1976 (Cth) to make a declaration in relation to a contravention of the ACL: Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 at 437-438; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-582; even though the ACL does not make that relief available under its own provisions: RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164.
120 Here the consequence of the contraventions by Blue Groper and Mr Scutter was the probable damage to the reputation of the applicants’ products in a somewhat limited market. Indeed, that was the intended consequence of the misleading conduct and, in a general sense, the evidence shows that they suffered a loss of sales in the Northern Territory where the contraventions took place. Necessarily, substantial work will be required by the applicants in order to restore their erstwhile market status.
121 In these circumstances the making of declarations as to contravention is warranted and will go some way to remediating the negative impact of the misleading conduct. Again, such declarations must be specific and referable to the contravening conduct engaged in by Blue Groper and Mr Scutter.
Mandatory injunction
122 The applicants also seek a mandatory injunction as against the respondents requiring them in effect, to send a corrective notice in relation to the contravention. Given that the publication and dissemination of the evaluation document was to enhance the interests of Blue Groper and Mr Scutter in the market at the expense of the applicants, there is much force in the submission that the Court should make such an order. On the basis that the representations were misleading and will have infected the market in ways which are perhaps not ascertainable at this stage, a corrective notice of sorts will go some way to remediating that damage. However, any notice will have to be precise in identifying the contravention and in the provision of the correct information. The giving of the corrective notice should be limited to the persons to whom the Evaluation Document is reasonably believed to have been given, being the persons are entities identified in these proceedings.
123 Additional machinery orders requiring the respondents to provide information as to the persons contacted are also appropriate.
124 At the hearing the parties agreed that if the applicants were entitled to such relief the terms of the orders might be agreed between the parties or in the course of a separate hearing.
Adverse publicity order
125 The applicants initially sought an adverse publicity order pursuant to s 247 of the ACL. Relief of that nature is misconceived because it is only available on the application of the regulator and those circumstances do not exist in the present case. Mr Travis for the applicants accepted that this relief was not available to his clients in the present matter.
Claims under Copyright Act 1968 (Cth)
126 By the end of the trial it was only Key Logic which claimed that the respondents had infringed its copyright in the photographs of the Model 1 bollard lights. It also limited its claim to two of the three images which had been pleaded. It further alleged that Mr Fry had authorised that infringement. As the evidence emerged it is apparent that Mr Arieni took the two photographs on 14 August 2013 and did so in his capacity as a director and employee of, at least, Exlites. He sent those photographs to various Exlites distributors on 21 August 2013 and they came into possession of Mr Fry. On 12 April 2016, in his capacity as the director and employee of Karmic, Mr Fry reproduced the photographs by including them in an email to Mr Scutter to allow him to use them in the communication to Mr Brownrigg. In turn, Mr Scutter and Blue Groper reproduced two of them in the Evaluation Document which was sent by email to Mr Brownrigg. Mr Scutter also reproduced the photographs by downloading the Evaluation Document onto USB sticks and distributing them to several people in the industry.
127 It is axiomatic that in order to establish liability for infringement, Key Logic must demonstrate that there was subsistence of copyright in the photographs, it had ownership of the copyright in the photographs and that the respondents reproduced the photographs or authorised their reproduction.
128 In its final submissions the respondents conceded both subsistence and ownership of copyright in Key Logic. It was also admitted that on 13 April 2016, Mr Scutter, in his capacity as the director of Blue Groper, created and distributed the Evaluation Document and that:
(a) Mr Scutter’s reproduction of those photographs in the Evaluation Document was a copyright infringement by Blue Groper; and
(b) each email attaching the Evaluation Document that Mr Scutter sent was a further copyright infringement by Blue Groper.
129 They also conceded that Mr Fry’s infringement, by emailing the first and third photographs to Mr Scutter on 12 April 2016, was a copyright infringement by Karmic.
130 These concessions were rightly made. That said, given the evidence surrounding these issues was both straightforward and always apparent to the respondents, it is concerning that they were not made earlier in the proceedings.
Claims against Mr Fry and Mr Scutter personally
131 The central issue remaining was whether Mr Scutter and Mr Fry were liable to Key Logic for their own respective commissions of each element of the copyright infringement or were joint tortfeasors with their respective companies. A separate question which arose was whether Mr Fry was also liable for authorising the infringement of the copyright by Mr Scutter or Blue Groper.
Personal liability
132 The applicants claimed that both Mr Fry and Mr Scutter are personally liable for copyright infringement and that their liability is separate to that which has been conceded by Blue Groper and Karmic. The submission was that the individual liability arose because each, personally, performed all of the acts which constituted the copyright infringement. In one sense the position might be more apparent in the case of Mr Scutter who admitted in his defence that he “created and/or distributed, or caused to be created and/or distributed” the Evaluation Document.
133 The respondents argued that neither Mr Scutter nor Mr Fry were liable because they acted solely in their capacities as directors or employees of their respective companies and on that basis liability rests with the company and not with the individuals concerned.
134 The leading authority concerning whether a director or an employee of a company might be a joint tortfeasor along with the company in relation to the infringement of intellectual property rights is that of Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 (Keller). That case concerned allegations that certain companies had infringed another’s registered designs by importing, selling and distributing certain rear lights for motor vehicles. It was alleged that the directors of the importing companies at the time of the alleged infringements should be liable for those infringements as joint tortfeasors with their companies. At first instance the primary judge had found that the directors had been aware of the other company’s designs at the time of the conception, design, manufacture and importation of the infringing products and that they had therefore deliberately, wilfully and knowingly pursued a course of conduct likely to constitute an infringement. At the very least, their conduct reflected a conscious indifference to the risk of infringement and that was sufficient to ground liability. The directors had contended that their conduct was merely the normal fulfilment of their roles as directors and more was required to make them liable as joint tortfeasors.
135 Unfortunately, there is little coherence in the reasons of the members constituting the Court in that case and little assistance was provided in the course of submissions as to the effect of that decision. Each judge identified a slightly different touchstone as the foundation for rendering a director liable as a joint tortfeasor with the company in relation to the infringement of intellectual property rights.
136 To some extent the test identified by Emmet J required a more significant mental element than that identified by the other members of the Bench. Emmet J stated at [83]-[84] that:
[83] A company cannot act other than through a natural person. In considering whether a natural person is a joint tortfeasor with a company, it is necessary to show something more than that the company acted through that person. Where a person is acting in the capacity of a director, the person will not be liable for the act of the company unless it can be shown that, in so acting, the director was doing something more than acting as a director. The person must do something that makes him or her, in addition to the company, an invader of the victim’s rights (see O’Brien v Dawson (1942) 66 CLR 18 at 32-33). The mere fact that a company is small and that the director has control over its affairs is not, of itself, sufficient to make the director a joint tortfeasor with the company (see C Evans & Sons Ltd v Spriteband Ltd [1985] 1 WLR 317 at 329).
[84] Infringement by a principal actor, of course, is an objective matter. For a director of a company to be held to be invading the rights of a victim of the company, by reason of the actions committed in the capacity of a director, there must be some mental element involved. Thus, in circumstances where a director can be shown to be making use of a corporation or company as an instrument whereby infringement is perpetrated, such that the director can be seen to be hiding behind the corporate veil, it may be thought that that director is going beyond actions performed merely in the capacity as director. If a company is merely the alter ego of a director, such that there is no real difference between the mind of the officer and the mind of the company, there may well be circumstances where it will be appropriate to conclude that the officer is invading the rights of a victim of the company.
137 The reasons of Besanko J suggested something less than knowledge of the wrong or that the conduct might infringe another’s rights was required in order for the director to be jointly liable with his company. At [291] his Honour stated:
A close personal involvement in the infringing acts by the director must be shown before he or she will be held liable. The director’s knowledge will be relevant. In theory, that knowledge may range from knowledge that the relevant acts are infringing acts to knowledge of an applicant’s registered designs to knowledge of acts carried out by others.
138 The difficulty in identifying an appropriate principle was identified by Jessup J at [401] where his Honour stated:
It has likewise been observed on occasion that there is no reason why a person should be immune from liability, pursuant to general rules of the kind to which I have referred, merely because he or she happens to be a director of the company which is the direct wrongdoer. This seems clear as a matter of principle, but there is a sense in which it goes no further than to beg the question in a situation in which the director himself or herself was the human agency through which the company acted in committing the wrong. I am, of course, here dealing not with cases in which the director would be directly liable for something done by him or her in the service of the company (such as negligently driving the company vehicle so as to cause injury to a pedestrian), but with cases in which there would be no wrong at all but for the acts of the company (such as the importation of goods in infringement of design). What is it about the position of the director whose actions have caused the company to commit the wrong which should make him or her liable in addition to the company?
139 His Honour subsequently identified what he perceived to be the appropriate distinction at [404] where he said:
For a director to be liable because he or she directs or procures his or her company to commit a wrong, the context must be such that the director is effectively standing apart from the company and directing or procuring it as a separate entity. There must be a sense in which the director is using the company as the instrument of his or her own wrong. This is, as I have explained earlier, the original sense in which Atkin LJ’s words in Performing Right are to be understood, at least to the extent that they drew upon what Lord Buckmaster had earlier said in Rainham Chemical. Likewise with a joint enterprise, unless the director is conceptually separate from the company, there is, it seems to me, no “jointness” about the enterprise at all, but merely a one-person wrong in which the company is actor.
140 At [405] his Honour endorsed the proposition that there was “a requirement of liability that the director should make the tort his or her own”. His Honour saw this as a formula which highlighted the crucial distinction between acts which are done for and in the service of the company on the one hand and acts which are done in the director’s own personal capacity on the other.
141 It is fair to say the divergent views expressed by the members of the Court in Keller have given rise to some uncertainty in this area. Some clarity has, however, been provided by the analysis of Beach J in Flexopack SA Plastics Industry v Flexopack Australia Pty Ltd (2016) 118 IPR 239 at [333]–[340]. There, his Honour sought to isolate and identify the principles for attribution of personal liability to an individual director as a joint tortfeasor with his company. His Honour said:
[333] Let me first deal with what is required to establish that an individual director is a joint tortfeasor with the company. Keller v LED Technologies Pty Ltd (ACN 100 887 474) (VID 167 of 2009) (2010) 185 FCR 449; 268 ALR 613; 87 IPR 1; [2010] FCAFC 55 (Keller) elaborates on a number of different approaches to establishing such joint liability. They are variously that the alleged joint tortfeasor must have:
(a) done something more than acting as a director and been involved in invading the applicant’s rights (at [83] and [84] per Emmett J);
(b) had a close personal involvement in the infringing acts of the company (at [291] per Besanko J); or
(c) made the company’s tort his own (at [405] per Jessup J).
[334] The variation between these particular formulations is of little moment in the present case although I note that there are conceptual differences but generally broad consistency (see Sporte Leisure Pty Ltd (ACN 008 608 919) v Paul’s International Pty Ltd (ACN 128 263 561) (No 3) (2010) 275 ALR 258; 88 IPR 242; [2010] FCA 1162 at [108]–[118] per Nicholas J).
[335] In Complete Technology Integrations Pty Ltd v Green Energy Management Solutions Pty Ltd [2011] FCA 1319 at [94]–[105], Kenny J accepted (albeit in the context of a summary judgment application) that there was a strong prima facie case that two of the directors of the respondent who were “in effective control of the business of [the company]” and who were “intimately involved in the company’s activities” were liable as joint tortfeasors and as persons involved in contraventions of applicable consumer law provisions. Relevantly, Kenny J found that the directors knew that the company’s use of the applicant’s trade mark on business cards and letterhead was, or was likely to be, infringing. Her Honour concluded that there was a strong case that the directors were personally involved in the trade mark infringements, passing off and statutory breaches of the applicable consumer law provisions by the company and used the company for their own wrongdoing.
[336] Similarly, in Taleb v GM Holden Ltd (ACN 006 893 232) (2011) 286 ALR 309; 94 IPR 459; [2011] FCAFC 168 at [18]–[23] per Finn and Bennett JJ, the Full Court upheld the conclusion of the primary judge that the appellant was liable as a joint tortfeasor for the trade mark infringement and passing off of the company. The appellant had established the business and directly controlled it until his son took over its day-to-day management.
[337] A further example of the manner in which these principles have been applied can be found in Bob Jane. Besanko J found that there was sufficient evidence to find both Mr Jane (who set up the companies) and Mr Rigon (who oversaw the impugned website), both directors of the relevant company, to be joint tortfeasors. His Honour summarised the various formulations in Keller at [142]–[148] and considered the liability of Mr Jane to follow from his involvement in the company to be “quite plain”, his Honour apparently applying his preferred formulation of “a close personal involvement”.
142 A useful example of the application of the principles in Keller can be seen in Truong Giang Corp v Quach (2015) 114 IPR 498 (Truong). The decision of Wigney J in that matter concerned, inter alia, whether the sole director, secretary and shareholder of a company which had contravened another party’s trademark was also personally liable. At [80] his Honour identified that he did not have to decide between the tests because the sole responsibility for all of the acts amounting to the contravention were performed by the one director. His Honour said:
[80] Whatever test may ultimately prove to be the correct test, here the evidence clearly reveals that Mr Quach [the director] was solely responsible for all of the acts that amount to wrongdoing by New Leaf [the company]. He had a close personal involvement in and knowledge of the acts that constituted the passing off. He effectively made the tort his own in the sense that he was doing something more than acting as a director. He was, rather, using New Leaf as an instrument for his wrongdoing. In that sense, at least, he was himself invading TG Corp’s rights. He was, therefore, a joint tortfeasor with New Leaf.
143 A slightly different approach was adopted by Davies J in Insight Radiology Pty Ltd v Insight Clinical Imaging Pty Ltd (2016) 122 IPR 232. There her Honour seemed to identify an element of knowledge as being part of the rationale for concluding that the director was a joint tortfeasor with the company.
144 Although there is no need in this case to decide the question, it would appear that a distinction must be drawn between those circumstances where a director is to be found jointly liable as a tortfeasor with the company which they control where they have not directly committed the civil wrong (Keller [400] per Jessup J) and where all of the acts constituting the tort have been committed by the one person. In the first situation it is apparent that some additional element, probably requiring some degree of knowledge of the purpose and consequences of the director’s acts, should be required. In the latter scenario, there is no justification for relieving a director who committed a tort from liability merely because he did the relevant acts in his capacity as a director.
Application to the facts of this matter
145 In the circumstances of this case both Mr Scutter and Mr Fry were joint tortfeasors with their companies in relation to the infringement of Key Logic’s copyright. The circumstances of this case are akin to those in Truong in that each of the directors were, for their respective companies, the relevant agent who performed or did all of the acts which constituted the respective infringements. In the case of Mr Fry it can be observed that he was aware that the photographs which he copied and forwarded to Mr Scutter had been sent by Mr Arieni, whom he knew to be the director of Key Logic. He must have been on notice that his copying and sending of the photographs may have infringed the rights of the applicants or any of them. He must have known that he had no claim to any copyright in the photos. He was the only person on behalf of Karmic which engaged in the conduct constituting the contravention and, regardless of what principles might be applied, he is liable as a joint tortfeasor.
146 Mr McEniery for the respondents sought to deflect any element of intention on the part of Mr Fry on the basis that he may have thought that the copyright in the images was vested in Exlites which had been deregistered. There was no evidence to that effect and there was no evidence of him having any such belief.
147 In the case of Mr Scutter the admission by him of paragraph 6 of the 2FASC is probably determinative. By that paragraph the applicants alleged that Blue Groper and he had “created and/or distributed, or caused to be created and/or distributed” the evaluation document. Whilst there is no evidence that he knew that, by his conduct, he might infringe the copyright of the applicants, that would not appear to matter. The principles adopted by Besanko and Jessup JJ in Keller do not require that element of knowledge. It might also be observed that no attempt was made to suggest that he held a positive belief that he was entitled to use the photos in the sense that he had made inquiries for the purposes of ascertaining who owned the intellectual property rights in them. That being so, this is a case where Mr Scutter undertook all of the acts which constituted the infringement giving him a close personal involvement in that and making the company’s tort his own. I accept that this case is on all fours with that in Truong.
148 Mr McEniery suggested that it was relevant that Mr Scutter would have “had no reasonable grounds for suspecting, that the act constituting the infringement was an infringement of the copyright” when considering this issue. That is derived from s 115(3) of the Copyright Act although its concern relates to the applicant’s entitlement to damages. That does not seem to be relevant in the present circumstances. Whilst Mr Scutter’s absence of knowledge might relieve him of liability for damages, it says nothing about whether he can be said to have committed the infringement on his own behalf.
149 It follows that Mr Scutter was a joint tortfeasor with Blue Groper in the infringement of Key Logic’s copyright in the photographs. Similarly, Mr Fry was a joint tortfeasor with Karmic in respect of its infringement of Key Logic’s copyright in the photos.
Authorisation
150 The applicants also alleged that Mr Fry and Karmic authorised Blue Groper and Mr Scutter to reproduce the infringing photographs for the evaluation document.
151 Section 36(1A) of the Copyright Act identifies the matters which must be taken into account in ascertaining whether or not a person has authorised the doing in Australia of any act comprised in the copyright in a work. They are:
(a) the extent (if any) of the person’s power to prevent the doing of the act concerned;
(b) the nature of any relationship existing between the person and the person who did the act concerned;
(c) whether the person took any reasonable steps to prevent or avoid the doing of the act, including whether the person complied with any relevant industry codes of practice.
152 It must be kept in mind that the use of the word “authorised” as it is used in s 36 of the Copyright Act is given its ordinary dictionary meaning of “sanction, approve, countenance”: University of New South Wales v Moorhouse (1975) 133 CLR 1; Roadshow Films Pty Ltd v iiNet Ltd (2012) 248 CLR 42.
153 Of significance here is that Mr Fry was aware that Mr Scutter and Blue Groper wished to utilise the photographs for the purposes of a preparing comparison document to provide to potential purchasers of solar bollard lights. It sufficiently appeared that he was aware that Mr Scutter would use the Evaluation Document by delivering it to people interested in acquiring solar bollard lights. In this sense he sent the infringing photographs to Blue Groper and Mr Scutter with his tacit approval or sanctioning or countenancing of their incorporation in any comparison document. In terms of the criteria of s 36(1A) he had the power to prevent the infringement of the copyright in the photographs by not sending them to Mr Scutter and Blue Groper. That would have prevented their use and the subsequent infringement. He also had the power to inform Blue Groper and Mr Scutter of their origin which would have enabled the seeking of authorisation from the owner of the copyright.
154 It is also relevant, as the applicants submitted, that Mr Scutter and Blue Groper were distributors of Karmic Lighting’s product and they sought Mr Fry’s assistance in addressing an enquiry from Mr Brownrigg who was a potential purchaser. There was an obvious commercial advantage in Mr Fry assisting Blue Groper and Mr Scutter in their compilation of the Evaluation Document.
155 It is also clear that Mr Fry took no steps, reasonable or otherwise, to prevent or avoid the doing of the infringing act. In fact, it was he who personally performed the act of reproducing the photographs and sending them to Mr Scutter and Blue Groper.
156 It was submitted that Mr Fry had no opportunity to control the use of the photographs after their delivery to Blue Groper and Mr Scutter. Whether that is so or not need not be determined although it is doubtful given his relationship with Mr Scutter. Nevertheless, there was no suggestion he attempted to prevent Blue Groper or Mr Scutter using the photographs after he sent them.
157 The above considerations all point in the one direction, namely that Mr Fry and Karmic authorised Blue Groper and Mr Scutter to reproduce the photographs in the Evaluation Document and they thereby infringed the copyright in those photographs which was owned by Key Logic. The conduct was of Karmic and, for the reasons identified above, of Mr Fry. He performed the conduct both as director and on his own behalf.
Relief for breach of copyright
158 In the course of addresses the applicants indicated that they would not be seeking an account of profits in relation to the breaches of copyright which were established. That was a proper concession albeit, perhaps, somewhat late in the proceedings. As mentioned, the applicants had abandoned all claims for damages as well.
159 The remaining relief sought was for declarations as to breaches of copyright and the granting of injunctions. Initially the respondents had no submissions to make with respect to the granting of such relief and, indeed, submitted that there was no reason not to make the orders sought. However, they belatedly submitted that there was no utility in granting injunctions as the infringing conduct had ceased.
160 Neither party made any substantial submissions as to the principles on which the Court should act when determining whether to grant an injunction to restrain an infringement of copyright. The power of the Court to grant such relief arises primarily under s 115(2) of the Copyright Act. In this case the prior infringements have been established, although there was little evidence suggesting that the respondents would breach Key Logic’s copyright in the photographs in the future. That said, the use of the photos by the respondents was intentional and calculated to achieve a commercial advantage.
161 In Australasian Performing Right Association Ltd v Tolbush Pty Ltd [1986] 2 Qd R 146, de Jersey J held that as he was not given any satisfactory assurance that the copyright infringements would not occur in the future, he would grant an injunction to restrain any future infringement.
162 Mr Travis for the applicants submitted that injunctions should be granted in this case because the respondents have contested the alleged infringements and have not given undertakings that they will refrain from engaging in similar conduct in the future. That submission ought to be accepted as far as it goes. On the other hand, the evidence before the Court was generally to the effect that Mr Scutter had contacted all the persons to whom he believed the Evaluation Document had been given and asked them to destroy it. That evidence was not contested and ought to be accepted save that it was somewhat vague and it did not go so far as to assert that all persons who had actually received the document had been contacted and told to destroy it.
163 In the circumstances where there is no unequivocal undertaking not to engage in further infringements it is appropriate injunctions, limited to the type of conduct which gave rise to the past infringements, ought to be granted. That is especially so in circumstances where the respondents failed to make appropriate concessions as to the existence of the infringements until at or around the time of trial. The facts of this case were not complex and knowledge of the infringement must have been known to the respondents from an early stage. Despite that, they sought to obfuscate the question of infringement for their own interests and that undermines any confidence that the Court might have that they will abstain from similar infringing conduct in the future.
164 The respondents did acknowledge that the making of declarations of infringement would follow in a case of this nature and it is appropriate that they be made. The identified infringements and authorisation of such should be the subject of declarations. In the course of address Mr Travis submitted that the terms of the declarations should be the subject of submissions after the provision of reasons. That is appropriate in this case and an order will be made for the parties to attempt to agree upon the terms of the declaration of infringement which have been identified in these reasons, failing which that issue will be the subject of a short hearing.
The form of relief and costs
165 It follows that there should be judgment for the applicants against the respondents in relation to the claims for contravention of s 18 and s 29(1)(a) and (g) of the ACL including against those who were involved in the contraventions. The applicants are entitled to declarations and injunctions of the types referred to in these reasons. The injunctions granted are to restrain Blue Groper and Mr Scutter from further disseminating the Evaluation Document and to require those respondents to send a corrective notice to the persons to whom the Evaluation Document is reasonably believed to have been given as identified in these reasons. The parties are to attempt to agree on the form of orders which should be made on the basis of the conclusions reached in the above reasons. If agreement cannot be reached a further hearing will be required.
166 Similarly, the applicants are entitled to declarations and injunctions in relation to the infringement of their copyright in the photos which were taken by Mr Arieni and which were the subject of the dispute at trial. The declarations should extend to the infringements arising from the authorisation by Mr Fry and Karmic of Blue Groper and Mr Scutter’s use of the photographs. Mr Scutter and Blue Groper ought to be restrained from engaging in any further infringement of Key Logic’s intellectual property rights by the use or reproduction of the photographs.
167 Given that the applicants did not succeed in securing all of the relief which had been sought the parties should be given the opportunity to make submissions as to the question of costs.
I certify that the preceding one hundred and sixty-seven (167) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Derrington. |
Associate:
QUD 605 of 2016 | |
KARMIC LIGHTING PTY LTD ACN 600 193 404 |
