Business Boost Pty Ltd v Passions Pty Ltd & Anor [1998] FCA 1369 (20 October 1998)

Last Updated: 3 November 1998

CATEGORY: NO QUESTION OF PRINCIPLE

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG1073 of 1998

BETWEEN:	BUSINESS BOOST PTY LTD Applicant
AND:	PASSIONS PTY LTD First Respondent And THERESA MILOSEVIC Second Respondent

JUDGE:	WILCOX J
DATE:	20 October 1998
PLACE:	SYDNEY

EXTEMPORE REASONS FOR JUDGMENT

WILCOX J: This is an application for an interlocutory injunction. The applicant offers the usual undertaking as to damages.

The applicant seeks to restrain the publication of a particular television advertisement, which has been published by the first respondent at the initiative of its director, the second respondent. The advertisement is similar in format, and to a considerable extent in detail, to an advertisement currently being screened by the applicant.

Both advertisements involve the sale of second-hand computers, together with computer software. Anyone who, without knowledge of the prior relationship between the second respondent and the applicant, simply looked at the two advertisements, one after the other, would, I think, be inclined to say there is such a degree of similarity between them as to suggest the later advertisement, in date of production, must have been produced by somebody who had knowledge of the earlier. I say this particularly because of the high correspondence between the prices of various items.

No doubt it is correct to say, as Ms Robinson did on behalf of the respondents, that there are limits to ingenuity in the selling of computer equipment; so I do not place much weight upon the fact that both advertisements follow a similar format, with a speaker surrounded by computer equipment and software packages appearing from off screen, to be piled up on the table as the sales pitch increases in tempo. However, if one looks at the prices, one would have to conclude it would be a striking coincidence if each advertisement was compiled in ignorance of the other.

The similarity in prices does not mean the publication of the second advertisement constitutes misleading conduct within the meaning of s 52 of the Trade Practices Act 1974 . It is perfectly legitimate for a trader to copy the prices of a competitor, even to offer the same items at exactly the same prices; this is the essence of the notion of competition. Conduct is only misleading or deceptive if the format or structure of the second advertisement is such as to mislead a viewer into wrongly believing there is an association between the two advertisers. I do not think the respondents' advertisement offends that canon. If I looked at the two advertisements one after the after, without any knowledge of any past association between Ms Milosevic and the applicant, I would simply say one of the advertisements has been produced with knowledge of the other, but the advertisers are different people. On the face of the advertisements, there is no reason for assuming a link.

However, the evidence discloses Ms Milosevic was employed by the applicant from 15 June 1998 until 25 September 1998. It seems there was a meeting between Ms Milosevic and Mr Perry Tate, the managing director of the applicant company, on or about 4 September 1998 at which it was decided Ms Milosevic's employment should come to an end on 25 September. There is some conflict in the evidence as to what was said on 4 September. This does not matter. What is important is that it was agreed Ms Milosevic would leave on 25 September but, in the meantime, would continue to be employed and do various tasks. During that period, , about 13 September, the applicant's current advertisement (exhibit B) first went to air. Ms Milosevic finished her employment on Friday, 25 September. On the following Monday, 28 September, the advertisement which is currently being screened by the first respondent (exhibit C) was produced. It was first screened on Thursday, 1 October; as it happens during the same program, "Good Morning Australia", as was used for the applicant's advertisement. Ms Milosevic says she had nothing to do with the choice of that screening time and I have no reason to reject what she says.

It is apparent the respondents' advertisement was prepared after the applicant's advertisement was already on air and within a very short time after Ms Milosevic left the applicant's employment. It is difficult to doubt that preparation for production preceded Ms Milosevic's termination of employment; that is, the day she actually ceased to work. The script had to be written; arrangements had to be made for shooting the film; approval of the advertisement by the Federation of Australian Commercial Television Stations had to be obtained; and no doubt there were other matters as well.

Amongst other provisions, the applicant relies upon s 232(5) and (6) of the Corporations Law. Those subsections provide:

"(5) An officer or an employee of a corporation or a former officer or employee of the corporation must not in relevant circumstances make improper use of information acquired by virtue of his or her position as such an officer or employee to gain directly or indirectly an advantage for himself or herself or for any other person or to cause detriment to the corporation.

(6) An officer or an employee of a corporation must not in relevant circumstances make improper use of his or her position as such an officer or an employee to gain directly or indirectly an advantage for himself or herself or for any other person or to cause detriment to the corporation."

I think the more relevant provision, for present purposes, is subs (5). The essence of the charge made against Ms Milosevic is that she has made improper use of information, acquired by virtue of her position as an employee of the applicant, to gain an advantage for herself or her company, the first respondent.

The relevant information is not the content of the applicant's advertisement; anybody who cared to watch television would see the applicant's advertisement; anybody who cared to tape it could obtain a video copy to study at leisure and length. If that person was a competitor of the applicant, that person could decide to offer similar goods, at similar or lower prices, and even to offer the same blandishments and use the same method of sale as the applicant. Once the applicant's advertisement went to air, some weeks before the respondent's advertisement was created, its content was within the public domain.

However, what the television viewer would not know are the reasons for inserting particular items in the applicant's advertisement. There is unchallenged evidence by Mr Tate, who has been engaged in telemarketing for some time, about the techniques required for the successful telemarketing of items like computers. His affidavit is lengthy and I do not purport to summarise it, but the gist of what he says is that successful telemarketing is a trial and error experience.

Mr Tate worked with the former owner of the business now operated by the applicant and learnt what was successful, and what was unsuccessful, in relation to telemarketing techniques. When he took over the business, there was an advertisement (PT2 to his affidavit) that had apparently been very successful. He was responsible for devising a substitute program (PT3 to the affidavit) but it proved unsuccessful. Mr Tate held a series of meetings, attended by the applicant's key people including Ms Milosevic, at which there was discussion and analysis of the critical ingredients in the successful advertisement, ex PT2, and a comparison with those features of ex PT3 which appeared to have failed. The combined wisdom and ideas of the people who attended the meetings was then used in devising ex B. In other words, the advertisement which has been substantially copied by Ms Milosevic was an advertisement created with the benefit of the expertise, experience and ideas of key personnel employed by the applicant. Although I suppose there was no one element of the successful package that was unique, or a matter of confidentiality, the combination of these ideas would not have been generally known. It would not have been obvious to a viewer of the advertisement, even one who taped and analysed it. It was something known to Ms Milosevic. In deciding what elements of ex B to copy in creating ex C, she was able to apply the information about successful elements that she had acquired as an employee of the applicant.

In essence, it seems to me the strength of the charge against Ms Milosevic is that she appropriated to herself the collective experience and wisdom of officers of the applicant as to what makes a good tele-advertisement for computer hardware and software. She took the information about that experience and wisdom, which she had gained as an employee of the applicant, and turned it to her own advantage. It seems to me there is a serious question to be tried in favour of the proposition that she thereby committed a breach of s 232(5) of the Corporations Law.

If this was a case of two advertisements created by people who had no prior association with each other, I would not take the view there was a case worthy of trial. However, having regard to the uncontroverted fact that Ms Milosevic was privy to the thinking of the applicant in regard to the ingredients of a successful advertisement, and has taken those ingredients into her own advertisement, it seems to me fairly clear there is a case which warrants the description of a serious question. Accordingly, I decide that issue in favour of the applicant.

As to the question of balance of convenience, I think that there is not much doubt about the proper conclusion. If the applicant's complaint is well founded, it is suffering competition from a person who has abused her position as employee. In the nature of things, it would be almost impossible for the applicant ever to know what damage that has caused it, either in terms of lost sales or goodwill. There is some evidence, admittedly only a scintilla, of confusion about the advertisements. But the real problem, from the applicant's point of view, is that it could never know the number of potential buyers who were diverted from contacting it by the respondents' advertisement. The impossibility of quantifying damages gives to the applicant a strong case in respect of the balance of convenience.

So far as the respondent is concerned, it is no doubt correct to say that, if the advertisement cannot be used, it will put the first respondent out of business, at least for the moment. I see no reason why Ms Milosevic should not eventually engage in telemarketing, using her own experience and not drawing on the applicant's expertise; but undoubtedly there will be a serious loss.

However, an undertaking as to damages is offered. The respondents' advertisement has already run for nearly three weeks. The respondents no doubt have information about its degree of success. If the applicant fails at trial, the respondents will be in a position to seek an order for compensation. Although the task will not be easy, it should be possible for the Court to assess the damage the respondents have suffered because of their compliance with the injunction. In my view this is a case for an interlocutory injunction.

I note the undertaking given to the Court by the applicant to pay, to such persons as the Court may require, such compensation as may be assessed by the Court in respect of any damage sustained by reason of the orders that follow. On the basis of that undertaking, and pending further order of the Court, I order that the respondents, and each of them, their servants and agents be restrained from publishing an advertisement in the form of the advertisement exhibit C in this proceeding, or in a form that is substantially similar to the advertisement of the applicant that is exhibit B in this proceeding. I order the costs of the application, be applicant's costs in the principal proceeding.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox

Associate:

Dated: 20 October 1998

Counsel for the Applicant:	P Jacobson QC
Solicitor for the Applicant:	Aitken McLachlan & Thorpe
Counsel for the First and Second Respondents:	Mrs L Robinson
Solicitor for the First and Second Respondents:	Salmon Connolly Doyle
Date of Hearing:	20 October 1998