Complete Technology Integrations Pty Ltd v Green Energy Management Solutions Pty Ltd [2011] FCA 1319 (18 November 2011)

Last Updated: 25 November 2011

FEDERAL COURT OF AUSTRALIA

Complete Technology Integrations Pty Ltd v Green Energy Management Solutions Pty Ltd [2011] FCA 1319

Citation:	Complete Technology Integrations Pty Ltd v Green Energy Management Solutions Pty Ltd [2011] FCA 1319
Parties:	COMPLETE TECHNOLOGY INTEGRATIONS PTY LTD (ACN 097 753 458) v GREEN ENERGY MANAGEMENT SOLUTIONS PTY LTD (ACN 141 454 266), RAYMOND DAVID WHALING, SANDRA ANN WHALING and DEAN AARON WADE
File number:	VID 1023 of 2010
Judge:	KENNY J
Date of judgment:	18 November 2011
Catchwords:	PRACTICE AND PROCEDURE – summary judgment application pursuant to s 31A(1) Federal Court of Australia Act 1976 (Cth) – applicable test – where respondent company in liquidation – whether individual respondents have no reasonable prospect of success – allegations of trade mark infringement – use of applicant’s registered trade marks on advertising materials and associated business paraphernalia including website and metatag use – consideration of relevant principles – consideration of what constitutes “use as a trade mark” under s 120(1) of the Trade Marks Act 1995 (Cth) – strong prima facie case of trade mark infringement by first respondent – allegations of passing off – first respondent’s use of applicant’s business name and trade marks would lead customers to the false belief that businesses were in some way connected – whether individual respondents joint tortfeasors – misleading and deceptive conduct pursuant to ss 52 and 53(d) of the Trade Practices Act 1974 (Cth) – first respondent’s use of applicant’s business name and trade marks was likely to mislead and deceive consumers – first respondent represented that its business was affiliated with applicant’s contrary to s 53(d) – liability of individual respondents considered in relation to s 75B as persons involved – findings made against second and fourth respondent – no finding against third respondent – allegations of copyright infringement – applicant claimed copyright in template quotation letter as a ‘literary work’ for the purposes of Copyright Act 1968 (Cth) – original work created by managing director – no clear and distinct evidence of contract of service – no reproduction of a substantial part of copyright work established – breaches of employment contracts relating to second and fourth respondents only – employment contracts contained non-competition and confidentiality clauses – evidence demonstrated a prima facie case that second and fourth respondents acted in breach of those clauses – breaches of confidence and fiduciary duties – unnecessary to determine on summary judgment application – summary judgment application granted in part COSTS – consideration of circumstances in which order for costs taxed and paid forthwith will be made – order made
Legislation:	Trade Practices Act 1974 (Cth) Federal Court of Australia Act 1976 (Cth) Corporations Act 2011 (Cth) Trade Marks Act 1995 (Cth) Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth) Consumer and Competition Act 2010 (Cth) Copyright Act 1968 (Cth)
Cases cited:	Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 QS Holdings Sarl v Paul’s Retail Pty Ltd (2011) 92 IPR 460 GM Holden Ltd v Paine (2011) 281 ALR 406 Matheson Engineers Pty Ltd v El Raghy [1992] FCA 417; (1992) 37 FCR 6 Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd [1994] FCA 1222; (1994) 123 ALR 681 Australian Competition and Consumer Commission v Black on White Pty Ltd [2001] FCA 187; (2001) 110 FCR 1 Global Brand Marketing Inc v YD Pty Ltd [2008] FCA 605; (2008) 76 IPR 161 The Shell Co of Australia Ltd v Esso Standard Oil (Australia) Ltd [1963] HCA 66; 109 CLR 407 Australian Woollen Mills Ltd v FS Walton & Co Ltd [1937] HCA 51; (1937) 58 CLR 641 Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 Registrar of Trade Marks v Woolworths Ltd [1999] FCAFC 1020; (1999) 45 IPR 411 Food Channel Network Pty Ltd v Television Food Network GP [2010] FCAFC 58; (2010) 86 IPR 437 Aristoc Ltd v Rysta Ltd [1945] AC 68 Crazy Ron’s Communications Pty Ltd v Mobileworld Communications Pty Ltd [2004] FCAFC 196; (2004) 209 ALR 1 de Cordova v Vick Chemical Co (1951) 68 RPC 103 Jafferjee v Scarlett [1937] HCA 36; (1937) 57 CLR 115 Sports Café Ltd v Registrar of Trade Marks (1999) 42 IPR 552 Saville Perfumery Ltd v June Perfect Ltd (1939) 58 RPC 147 Mars Australia Pty Ltd v Sweet Rewards Pty Ltd [2009] FCA 606; (2008) 81 IPR 354 Sports Warehouse Inc v Fry Consulting Pty Ltd [2010] FCA 664; (2010) 186 FCR 519 Mantra Group Pty Ltd v Tailly Pty Ltd (No 2) [2010] FCA 291; (2010) 183 FCR 450 Brother Industries Ltd v Dynamic Supplies Pty Ltd [2007] FCA 1490; (2007) 73 IPR 507 Pioneer Computers Australia Pty Ltd v Pioneer KK [2009] FCA 135; (2009) 176 FCR 300 Kailash Center for Personal Development Inc v Yoga Magik Pty Limited [2003] FCA 536 Brookfield Communications, Inc v West Coast Entertainment Corporation 174 F.3d (9th Cir. 1999) Roberts-Gordon, LLC v Superior Radiant Products, Ltd, 85 F. Supp. 2d 202 (W.D.N.Y. 2000) S&L Vitamins, Inc v Australian Gold, Inc 521 F. Supp. 2d 188 (E.D.N.Y. 2007) Reed Executive Plc v Reed Business Information Ltd [2004] EWCA Civ 47; [2004] RPC 40 Coca-Cola Co v All-Fect Distributors Ltd [1999] FCA 1721; (1999) 96 FCR 107 Reckitt & Coleman Products Ltd v Borden Inc [1990] UKHL 12; [1990] RPC 341 TGI Friday’s Australia Pty Ltd v TGI Friday’s Inc [1999] FCA 304; (1999) 45 IPR 43 Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157; (2002) 55 IPR 354 Nutrientwater Pty Ltd v Baco Pty Ltd [2010] FCA 2; (2010) 265 ALR 140 ConAgra Inc v McCain Foods (Aust) Pty Ltd [1992] FCA 159; (1992) 33 FCR 302 Peter Bodum A/S v DKSH Australia Pty Ltd (2011) 280 ALR 639 McCormick & Co Inc v McCormick [2000] FCA 1335; (2000) 51 IPR 102 Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) (2011) 279 ALR 609 Mars Australia Pty Ltd v Sweet Rewards Pty Ltd [2009] FCA 606; (2009) 81 IPR 354 Hansen Beverage Co v Bickfords (Australia) Pty Ltd [2008] FCAFC 181; (2008) 79 IPR 174 IceTV Pty Ltd v Nine Network Australia Pty Ltd [2009] HCA 14; (2009) 239 CLR 458 Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 Antocks Lairn Ltd v I Bloohn Ltd [1972] RPC 219 Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1 Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195 Root Quality Pty Ltd v Root Control Technologies Pty Ltd [2000] FCA 980; (2000) 177 ALR 231 Allen Manufacturing Co Pty Ltd v McCallum & Co Pty Ltd [2001] FCA 1838; (2001) 53 IPR 400 Cooper v Universal Music Australia Pty Ltd [2006] FCAFC 187; (2006) 156 FCR 380 Keller v LED Technologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449 Compaq Computer Australia Pty Ltd v Merry [1998] FCA 968; (1998) 157 ALR 1 Optus Networks Pty Ltd v Telstra Corporation [2010] FCAFC 21; (2010) 265 ALR 281 Coles Supermarkets Australia Pty Ltd v FKP Ltd [2008] FCA 1915 Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172; (2007) 73 IPR 326 Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VicRp 17; [1979] VR 167 Courtenay Polymers Pty Ltd v Deang [2005] VSC 318 Faccenda Chicken Ltd v Fowler (1985) 6 IPR 155 I F Asia Pacific Pty Ltd v Galbally [2003] VSC 192; (2003) 59 IPR 43 Prime Creative Media Pty Ltd v Vranjkovic [2009] FCA 1030 Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 Australian Agricultural Co Ltd v AMP Life Ltd [2003] FCA 1134

Date of hearing:	29 August 2011
Date of last submissions:	2 September 2011
Place:	Melbourne
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	129
Counsel for the Applicant:	Mr B Gardiner
Solicitor for the Applicant:	Actuate Legal
The Respondents are self-represented:	The third and fourth respondents appeared by telephone for themselves and the second respondent

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 1023 of 2010

BETWEEN:	COMPLETE TECHNOLOGY INTEGRATIONS PTY LTD (ACN 097 753 458) Applicant
AND:	GREEN ENERGY MANAGEMENT SOLUTIONS PTY LTD (ACN 141 454 266) First Respondent RAYMOND DAVID WHALING Second Respondent SANDRA ANN WHALING Third Respondent DEAN AARON WADE Fourth Respondent

JUDGE:	KENNY J
DATE OF ORDER:	18 NOVEMBER 2011
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. On or before 2:15 pm on Monday, 21 November 2011, the applicant file a minute of proposed orders to give effect to the reasons for judgment delivered on Friday, 18 November 2011.
2. The second and fourth respondents pay the applicant’s costs of and incidental to the applicant’s notice of motion filed on 29 July 2011.
3. The costs payable by the second and fourth respondents to the applicant pursuant to Order 2 above be taxed and payable forthwith.
   

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 1023 of 2010

BETWEEN:	COMPLETE TECHNOLOGY INTEGRATIONS PTY LTD (ACN 097 753 458) Applicant
AND:	GREEN ENERGY MANAGEMENT SOLUTIONS PTY LTD (ACN 141 454 266) First Respondent RAYMOND DAVID WHALING Second Respondent SANDRA ANN WHALING Third Respondent DEAN AARON WADE Fourth Respondent

JUDGE:	KENNY J
DATE:	18 NOVEMBER 2011
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

INTRODUCTION

1. On 26 November 2010, the applicant, Complete Technology Integrations Pty Ltd (“CTI”), instituted proceedings for trade mark and copyright infringement, contraventions of ss 52 and 53 of the Trade Practices Act 1974 (Cth) (“the TPA”), passing off, breach of contract, breach of confidence, and breach of fiduciary duties.
2. By notice of motion dated 29 July 2011, CTI applied for leave to file an amended application in order to seek declaratory, injunctive and other relief against the second, third and fourth respondents (“the individual respondents”) and summary judgment under s 31A(1) of the Federal Court of Australia Act 1976 (Cth) (“the Federal Court Act”) against them on issues of liability only. CTI did not seek relief against the first respondent, Green Energy Management Solutions Pty Ltd (“Green Energy”), since that company went into liquidation on 13 July 2011 and, as a result, the proceeding was stayed against it. CTI, represented by counsel, maintained that the individual respondents have no reasonable prospect of successfully defending relevant parts of the proceeding and, by way of the amendment, sought declaratory and injunctive relief and other orders against them.
3. CTI was given leave to file an amended application at the hearing on 29 August 2011. For the reasons that follow, CTI has substantially succeeded on its summary judgment application against Mr Whaling and Mr Wade.
4. Whilst the respondents were legally represented until 16 June 2011, thereafter they were self-represented. Mr Whaling sent an undated letter to CTI that contained the following matters (omitting formal parts):

I am writing to you on behalf of all 4 respondents.

We refer to the Court Orders made by Justice Kenny on 17 June 2011.

Order 1 required that on or before 1 July 2011 the respondents inform the applicant by letter as to whether or not they intend to contest the applicant’s claim in the proceeding.

We write to fulfil that obligation and advise that we will not be contesting the applicant’s claim in the proceeding.

However, we do require to be served with the material refered to in order 2 and reserve our right to file material in accordance with order 3.

5. At least one of the individual respondents (representing himself and the others) has been present by telephone at all interlocutory matters since 16 June 2011. Mr Wade and Mrs Whaling were present by telephone at the hearing of the motion with which I am now concerned. The respondents also relied on an affidavit of Raymond David Whaling affirmed on 4 August 2011, in opposition to the motion. CTI’s numerous objections to parts of this affidavit were dealt with at the hearing.
6. CTI relied on the following affidavits in support of its motion:
   • the affidavit of Peter Bruce Camden Garrett affirmed on 27 July 2011;
   • the affidavit of Scott Andrew Warren affirmed on 27 July 2011;
   • the affidavit of Colin Lee Shin Cheung affirmed on 27 July 2011;
   • the affidavit of Joel Brady Masterson sworn on 15 July 2011; and
   • the affidavit of Johanna McPherson affirmed on 25 August 2011.

RELEVANT FACTS AND CIRCUMSTANCES

7. CTI is a company incorporated since 7 August 2001. CTI provides automated electronic controls for residential and commercial buildings. The controls are used primarily for lighting but also for audio visual systems, air-conditioning and other building functions. From the beginning, CTI has operated under its own name “Complete Technology Integrations Pty Ltd” and the business names “CTI” and “CTI Australia”. In about July/August 2001, CTI also registered the domain names ctia.net.au and ctiaustralia.net.au. CTI’s primary customers have been (and remain) electrical contractors who have engaged CTI to provide the automation component within broader electrical contracts. CTI has used products sourced from various suppliers (including Clipsal Australia Pty Ltd (“Clipsal”)), to design automation solutions. Although CTI has not sold automation systems directly to end users (generally, tenants and building owners) CTI has provided maintenance services directly to them. Further, CTI has been awarded work after end users directed their electrical contractors to engage CTI.
8. CTI’s business has grown very well since its beginning in 2001. In 2010, CTI employed 47 employees and has now a substantial national turnover.
9. CTI established that it is the owner of eight registered trade marks (being 1148516, 1148523, 1148527, 1162007, 1162008, 1162009, 1162010, 1162011) for the words: CTI, CTI Australia, Complete Technology Integrations, CTI Energy Management, and CTI Building Automation (“CTI’s Registered Trade Marks”). The respondents admitted ownership by CTI of CTI’s Registered Trade Marks: see Amended Defence, par [11].
10. There was evidence that CTI has engaged in a variety of advertising and marketing activities in order to promote its business, including the publication and distribution of “case studies” about CTI’s work on various projects and newsletters to a significant number of persons, including consultants, builders, developers, architects and end users across Australia. CTI has sponsored a boat race, racing cars, and the Hornsby RSL Football Club. CTI has also exhibited at trade shows, including “DesignEX” – a very widely-attended industry show for architects, consultants, builders, developers and others in the building trade. CTI has arranged for its own public relations and advertising campaigns, including, since 2009, the use of a public relations/advertising company and, in 2010, the engagement of another enterprise to run a direct marketing campaign. CTI has also used marketing folders for use in presentations to contractors and consultants, which prominently displayed the trade marks of CTI (including “CTI Australia”, “CTI”, “CTI SmartHome”, “CTI Energy Management” and “CTI Building Automation”). Altogether, CTI’s expenditure on advertising and marketing in each of the past five years has been substantial.
11. When CTI opened an office in Canberra on about 28 September 2006, CTI employed the second respondent, Raymond Whaling, to set up and run its Canberra operations. At this time, Mr Whaling’s title was Business Development Manager for the Australian Capital Territory (“ACT”). In this capacity, Mr Whaling had ultimate responsibility for all operations and decisions. He was also the first contact for any new projects or business opportunities. Mr Whaling was CTI’s most senior employee in Canberra from September 2006 until he left CTI on 17 March 2010.
12. Mr Whaling’s employment was pursuant to a formal letter of offer dated 28 September 2006 and an accompanying “Employee Confidentiality Agreement”. These documents together set out the terms of his employment. Mr Whaling accepted CTI’s employment offer by signing both the letter of offer and the Employee Confidentiality Agreement and returning them to CTI. I refer to these collectively below as the “Whaling Employment Agreement”.
13. The Whaling Employment Agreement included terms (in the Employee Confidentiality Agreement) that Mr Whaling:
    1. would not, during the term of his employment, “employ or in any other manner whatsoever, directly, or indirectly, carry on or be engaged in or concerned with or interested in ... any person, persons, firm ... company or corporation engaged in or concerned with the operation of any business that is competitive with any business carried out by” CTI (Clause 2.1);
    2. would not, if CTI so directed, “solicit orders from or do any work for” any customer of CTI in his own capacity or as an employee of another company for 3 months after the termination of his employment (Clause 5.1);
    100. would maintain the confidence of, and would hold on trust for the benefit of CTI only, information relating to CTI’s business (including customer lists) (defined as “confidential information”) or “any information acquired during the course of his ... employment” (Clause 3.1); and
    4. would return CTI’s confidential information on termination of his employment (Clause 8.3).
14. For around the first eight months of Mr Whaling’s employment, the business of CTI was conducted via a phone number (“the original CTI Canberra Phone Number”) connected in CTI’s name at Mr Whaling’s home. At that time, Mr Whaling operated the Canberra business from his home using a telephone line, internet connection and mobile phone service provided by CTI. CTI used the original CTI Canberra Phone Number in CTI’s advertising and on products installed by CTI, as well as on Mr Whaling’s business cards. When, in 2007, CTI set up an office in Fyshwick, a suburb of Canberra, the original CTI Canberra Phone Number was diverted to a recorded message advising of CTI’s new phone numbers. After about six months, the original CTI Canberra Phone Number was disconnected.
15. Dean Wade, who is the fourth respondent, was employed by CTI as a senior technical employee in CTI’s Canberra office on about 6 September 2007. Mr Wade – a neighbour of Mr Whaling in a Canberra residential suburb – was employed by CTI at Mr Whaling’s suggestion. Mr Wade reported directly to Mr Whaling.
16. Like Mr Whaling, Mr Wade was employed pursuant to a formal letter of offer dated 6 September 2007 and an accompanying “Employee Confidentiality Agreement”, which together set out the terms of Mr Wade’s employment. Mr Wade accepted CTI’s employment offer by signing both the letter of offer and the Employee Confidentiality Agreement and returning them to CTI. I refer to these collectively below as the “Wade Employment Agreement”.
17. In the same way as the Whaling Employment Agreement, the Wade Employment Agreement included the terms set out at par [13] above.
18. According to CTI’s managing director, Mr Garrett, Mr Wade (like Mr Whaling) was “privy to commercially sensitive and confidential information that was provided to Mr Wade for the purposes of him carrying out his role”. I accept this evidence. There was no real contest about this matter. This information included: (i) technical drawings, design drawings and internal product information that would assist CTI in the time taken to program projects; (ii) project files located on the server and within project files in the office, including all client information, invoices, deliveries, contact details and quotes; and (iii) customer lists including clients who were “on credit hold” for non-payment of accounts.
19. On 17 February 2010, Mr Whaling (by letter bearing that date) and Mr Wade (by letter dated 15 February 2010) resigned from employment at CTI. Mr Whaling had telephoned Scott Warren, a CTI director, on 15 February 2010, and told him that he and Mr Wade intended to resign. There were meetings between Mr Whaling, Mr Wade, Mr Warren, and Mr Garrett on 16 February 2010 about their resignations.
20. Mr Garrett wrote to Mr Whaling and Mr Wade on 19 February 2010, stating (amongst other things) that:

Your offer to work a further two weeks is noted, however given your role within the organisation and the sensitivity, at this stage we will require you to work through to the 17th March 2010 which will allow for a graceful, professional and complete handover of projects, sales and operations.

Obviously CTI expects confidentiality regarding all company matters, its customers, any projects and opportunities (sales or otherwise) obtained whilst you are employed by CTI.

Mr Garrett (on behalf of CTI) met with Mr Whaling and Mr Wade on 23 February 2010. Mr Garrett also corresponded by email with them both up until 17 March 2010, when they met one another again. In these emails, Mr Garrett drew Mr Whaling’s and Mr Wade’s attention to their obligations under their employment contracts, noting that no unauthorised contact was to be made with CTI customers, consultants or suppliers and that they owed CTI obligations of confidentiality.

21. By email on 14 March 2010, Mr Whaling informed Mr Garrett that he and Mr Wade intended to “pursue the maintenance of the DALI Control product” (to which Mr Garrett replied that this was supported by CTI) and assured him that they did not intend “to compete with CTIA in respect of clients currently serviced, and products currently provided, by CTIA to them”.
22. By email on 15 March 2010, Mr Garrett expressly requested from Mr Whaling the return of certain CTI property, including quotes, project files, documents, paperwork, and any “CTI project files, databases etc”.
23. CTI’s employment of Mr Whaling and Mr Wade formally ended on 17 March 2010. By letters dated 17 March 2010 addressed to Mr Whaling and Mr Wade respectively, Mr Garrett reminded them both of their obligations under their contracts of employment, expressly referring to the confidentiality and non-competition provisions, and repeating his request for the return of “any confidential information (such as customer/supplier lists, pricing information and job information)”. In particular, Mr Garret said:

When, or around when, you handed in your letter of resignation you informed us that you were planning on establishing a business following termination of your employment which will be in competition with the Company. We have subsequently learned that the business has already been established and, while still employed by the Company, you have been forwarding details of your business to customers and suppliers of the Company. We believe that this conduct is in clear breach of your obligations under clause 2.1 of your employment contract.

The Company requires that you ... abide by the requirements of clause 5.1 of your employment agreement pursuant to which you will not, for a period of 3 months from the date of termination of your employment, solicit orders from, or do any work within Australia for, any customer of the Company.

In light of your conduct to date, the Company also requires that you immediately sign, and return to the Company, the attached form of undertaking reaffirming your obligations under your employment contract. Refusing to sign the undertaking will be regarded as a clear indication that you do not intend to abide by your contractual obligations to the Company. In such an instance the Company will have little choice but to approach the courts to obtain immediate injunctive relief requiring [that] you comply with your contractual obligations.

We also take this opportunity to remind you of your obligations under clause 8.3 of your employment contract which requires that you return to us all Company property in your possession or control on termination of your employment including but not limited to any confidential information (such as customer / supplier lists, pricing information and job information).

We recommend that you obtain immediate independent legal advice in respect to your obligations under your employment contract and the attached undertaking. However, if we have not received an executed copy of the undertaking by 5.00pm on Friday 19 March 2010, we will have no other option than to approach the courts to enforce the Company’s contractual rights.

24. Mr Garrett gave Mr Whaling and Mr Wade these letters at a meeting with them on 17 March 2010. Mr Garrett deposed that, at the meeting, he asked: “Have you decided what you will do next?” Mr Wade responded: “No. We may set up a mobile bar business.”
25. By email dated 19 March 2010, Mr Whaling and Mr Wade informed Mr Garrett that they did “not intend to compete with [CTI] in its current business” and that they “intend[ed] to honour [their] employment agreements”.
26. Green Energy was incorporated on 13 January 2010, with Mr and Mrs Whaling and Mr Wade as its directors and shareholders.
27. CTI has sought to demonstrate that Mr Whaling and Mr Wade began working for Green Energy while they were still employed by CTI. CTI adduced evidence intended to show that both men, while still bound by employment contracts with CTI, had solicited clients, provided services akin to those of CTI, contacted CTI’s clients, and used CTI’s pro forma client letter and trade marks.

CTI’S CLAIMS AGAINST THE INDIVIDUAL RESPONDENTS

28. By its statement of claim dated 29 November 2010, CTI alleged that the respondents’ conduct in setting up business in competition with it gave rise to the following causes of action:
    • trade mark infringement – the individual respondents being liable as joint tortfeasors with the first respondent;
    • breaches of ss 52 and 53 of the TPA – the individual respondents being liable pursuant to s 75B in respect of relevant breaches by the first respondent;
    • passing off infringement – the individual respondents being liable as joint tortfeasors with the first respondent;
    • copyright infringement – the individual respondents being liable as joint tortfeasors with the first respondent;
    • breaches of contracts of employment by the second and fourth respondents;
    • breaches of confidence by the second and fourth respondents; and
    • breaches of fiduciary duties by the second and fourth respondents.

TEST FOR SUMMARY JUDGMENT

29. Pursuant to s 31A(1) of the Federal Court Act, the Court may give judgment for an applicant against a respondent in relation to the whole or any part of a proceeding if the Court is satisfied that the respondent has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. For these purposes, a proceeding or part of a proceeding need not be “hopeless” or “bound to fail” for it to have no reasonable prospect of success. Section 31A does not limit any other powers that the Court may have: see s 31A(4).
30. Section 31A relevantly provides:

(1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a) the first party is prosecuting the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.

(2) ...

(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a) hopeless; or
(b) bound to fail;

for it to have no reasonable prospect of success.

(4) This section does not limit any powers that the Court has apart from this section.

(5) ...

31. The High Court considered s 31A in Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 (“Spencer”). After noting (at 139 [53]) that “s 31A departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered”, Hayne, Crennan and Bell JJ said (at 141 [60]):

The Federal Court may exercise power under s 31A if, and only if, satisfied that there is “no reasonable prospect” of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to “no reasonable prospect” can best proceed in the same way as content has been given, through a succession of the decided cases, to other generally expressed statutory phrases, such as the phrase “just and equitable” when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes.

32. Accordingly, for there to be summary judgment under s 31A, the Court must be satisfied that the individual respondents have no reasonable prospect of success in defending the claims upon which CTI relies in making its summary judgment application. As the above discussion and s 31A(3) shows, this does not mean that the Court must necessarily be satisfied that their defences are hopeless or bound to fail.
33. As I said in QS Holdings Sarl v Paul’s Retail Pty Ltd (2011) 92 IPR 460 (“QS Holdings”) at 465 [16]:

No hard and fast rule can be laid down as to when summary judgment is available. Much depends on the case at hand. Nonetheless, generally speaking, summary judgment would appear appropriate when well-established propositions of law deny the prospect of success. Summary judgment would appear inappropriate where there are “factual issues capable of being disputed and in dispute”. See generally Spencer 132 [25] per French CJ and Gummow J. Generally speaking, it also remains true to say, as Gordon J did in Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd [2008] FCAFC 60; (2008) 167 FCR 372 ... at 407 [127] that “it is inappropriate in defence of a claim for judgment made under s 31A of the Federal Court Act to seek to defend by merely putting a claimant to formal proof”. There are, of course, a variety of circumstances that may attract summary judgment under s 31A of the Federal Court Act and, on each occasion, the critical question is that set by the statute – has the moving party persuaded the Court that the opposing party has no reasonable prospect of success?

CONSIDERATION

34. To establish the individual respondents are liable as pleaded, CTI seeks relevant findings against Green Energy. It is open to the Court to make a finding of trade mark infringement (as well as findings that Green Energy engaged in passing off, contravened the TPA and infringed copyright: see below) notwithstanding that, since Green Energy has gone into liquidation, the proceeding against it is stayed: see GM Holden Ltd v Paine (2011) 281 ALR 406 (“GM Holden”), Matheson Engineers Pty Ltd v El Raghy [1992] FCA 417; (1992) 37 FCR 6 at 9, Richardson & Wrench (Holdings) Pty Ltd v Ligon No 174 Pty Ltd [1994] FCA 1222; (1994) 123 ALR 681, Australian Competition and Consumer Commission v Black on White Pty Ltd [2001] FCA 187; (2001) 110 FCR 1 at 14 [48], and Corporations Act 2011 (Cth), s 500(2).

The first respondent’s trade mark infringement

35. By its statement of claim, CTI alleged that Green Energy had infringed CTI’s trade marks and that each of the individual respondents was liable for the infringements as joint tortfeasors. Section 120(1) of the Trade Marks Act 1995 (Cth) (“TMA”) provides:

A person infringes a registered trade mark if the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered.

36. Whether a sign is being used as a trade mark is referable to the definition of a trade mark in s 17, which states:

A trade mark is a sign used, or intended to be used, to distinguish goods or services dealt with or provided in the course of trade by a person from goods or services so dealt with or provided by any other person.

As Sundberg J said in Global Brand Marketing Inc v YD Pty Ltd [2008] FCA 605; (2008) 76 IPR 161 at 171 [45], in the context of goods:

Use “as a trade mark” in s 120(1) is use of the mark as a “badge of origin” in the sense that it indicates a connection in the course of trade between goods and the person who applies the mark to the goods. See Johnson & Johnson Aust Pty Ltd v Sterling Pharmaceuticals Pty Ltd [1991] FCA 310; (1991) 30 FCR 326 at 341 and 351 ... That is the concept embodied in the definition of “trade mark” in s 17.

37. In considering whether two trade marks are substantially identical, they should be compared side by side, with their similarities and differences being noted and assessed, “having regard to the essential features of the registered mark and the total impression of resemblance or dissimilarity that emerges from the comparison”: see The Shell Co of Australia Ltd v Esso Standard Oil (Australia) Ltd [1963] HCA 66; (1963) 109 CLR 407 (“Shell Co”) at 414.
38. The question of deceptive similarity requires a different comparison to be made. There is no side by side comparison. Section 10 of the TMA states:

For the purposes of this Act, a trade mark is taken to be deceptively similar to another trade mark if it so nearly resembles that other trade mark that it is likely to deceive or cause confusion.

39. In considering deceptive similarity, the comparison is between the impression based on the recollection of the applicant’s mark that “persons of ordinary intelligence and memory would have” and the impression that such a person would have from the defendant’s alleged use: see Shell Co at 415; Australian Woollen Mills Ltd v FS Walton & Co Ltd [1937] HCA 51; (1937) 58 CLR 641 at 658; Southern Cross Refrigerating Co v Toowoomba Foundry Pty Ltd (1954) 91 CLR 592 at 594-595; Registrar of Trade Marks v Woolworths Ltd [1999] FCAFC 1020; (1999) 45 IPR 411 at 428 [50]; and Food Channel Network Pty Ltd v Television Food Network GP [2010] FCAFC 58; (2010) 86 IPR 437 at 460-463. It is sufficient if persons who only know one of the marks and have perhaps an imperfect recollection of it are likely to be deceived: Aristoc Ltd v Rysta Ltd [1945] AC 68 at 86-87. Whilst it is necessary to show a tangible danger of deception or confusion, it is enough if an ordinary person entertains a reasonable doubt. See Crazy Ron’s Communications Pty Ltd v Mobileworld Communications Pty Ltd [2004] FCAFC 196; (2004) 209 ALR 1 (“Crazy Ron’s”) at 17-19 [73]-[79].
40. Members of the public are more likely to recall the general impression created by the mark. To quote Lord Radcliffe in de Cordova v Vick Chemical Co (1951) 68 RPC 103 at 106, “in most persons the eye is not a accurate recorder of visual detail, and ... marks are remembered rather by general impressions or by some significant detail than by any photographic recollection of the whole”. If the impugned mark incorporates the idea or the essential features of the registered trade mark, it may infringe that registered trade mark. See Jafferjee v Scarlett [1937] HCA 36; (1937) 57 CLR 115 at 121-122; Sports Café Ltd v Registrar of Trade Marks (1999) 42 IPR 552 at 559; and Saville Perfumery Ltd v June Perfect Ltd (1939) 58 RPC 147 at 174. In assessing deceptive similarity, questions of aural impression may be important: see Crazy Ron’s at 17-18 [75]. If a registered trade mark includes words that can be regarded as an essential feature of the mark, another mark that incorporates those words may well infringe the registered trade mark: Crazy Ron’s at 19 [79]. See also Mars Australia Pty Ltd v Sweet Rewards Pty Ltd [2009] FCA 606; (2008) 81 IPR 354 at 375-376 [95]- [96].
    41. By their amended defence (at par [15]) the respondents admitted that Green Energy registered the following business names in the following places at the following dates:
        • CAPITAL TECHNOLOGY INTEGRATIONS in New South Wales on 28 January 2010;
        • CTI in New South Wales 28 January 2010;
        • CTI CANBERRA in the Australian Capital Territory on 5 February 2010; and
        • CAPITAL TECHNOLOGY INTEGRATIONS in the Australian Capital Territory on 23 February 2010.
42. The New South Wales registrations identify the nature of Green Energy’s business as “PROGRAMMING OF BUILDING AUTOMATION SYSTEMS FOR COMMERCIAL AND DOMESTIC HOMES ETC”.
43. The respondents applied to cancel the New South Wales registrations on 22 December 2010: see amended defence, par [15]. The ACT registrations were cancelled on 23 December 2010: see amended defence, par [15].
44. CTI did not argue, however, that mere registration of a business name was sufficient to constitute trade mark infringement. Instead, CTI relied on other uses of CTI’s Registered Trade Marks, as detailed in the following two paragraphs.
45. In their amended defence (at par [15]), the respondents admitted that:
    1. Prior to on or about July 2010, Green Energy used stickers about 20cm × 5cm with the words “GEMSol ... CTI, Saving our Earth by Saving your Energy, www.gemsol.com.au”;
    2. Prior to on or about July 2010, Green Energy used stickers about 7.5cm × 4cm with the words “GEMSol ... CTI: Green Energy Management Solutions – GEMSol; Capital Technology Integrations – CTI”;
    100. Prior to on or about 17 November 2010, Green Energy used stickers about 7.5cm × 4cm with the words “GEMSol ... CTI: Green Energy Management Solutions – GEMSol; Capital Technology Integrations – CTI”;
    4. Prior to on or about July 2010, Green Energy used business cards for Mr Whaling and Mr Wade, which included the text “GEMSol”, “Wholly Owned Divisions: GEMSol, Capital Technology Integrations, CTI, CTI Canberra”;
    5. Prior to on or about 17 November 2010, Green Energy used business cards for Mr Whaling and Mr Wade, which included the text “GEMSol”, “Wholly Owned Divisions: GEMSol, Capital Technology Integrations, CTI, CTI Canberra”;
    6. Prior to on or about 24 June 2010, Green Energy used letterhead, which included the text “GEMSol: CTI”, “GEMSol/CTI Canberra” and “Wholly Owned Divisions: GEMSol, Capital Technology Integrations, CTI, CTI Canberra”;
    7. Prior to on or about 17 November 2010, Green Energy used letterhead, which included the text “Wholly Owned Divisions: GEMSol, Capital Technology Integrations, CTI, CTI Canberra”;
    8. Prior to on or about 18 June 2010, Green Energy used email sign-offs, which included the text “GEMSol ... CTI” and “Capital Technology Integrations – CTI”;
    9. Prior to on or about 17 November 2010, Green Energy’s website, www.gemsol.com.au included metatags of “CTI”, “cti”, “CTI Canberra” and “capital technology”; and
    10. Prior to on or about 17 November 2010, Green Energy “used and gratuitously handed out to some clients, suppliers and friends A5 pads with the words “GEMSol ... CTI” and “Capital Technology Integrations—CTI” and after that date the same pads were used internally by Green Energy.
46. In addition to the above uses, CTI adduced evidence that Green Energy used one or more of CTI’s Registered Trade Marks on:
    1. quotations and invoices (where “CTI” and “CTI Canberra” are listed as “Wholly Owned Divisions”) issued by Green Energy to:

i. O’Donnell Griffin for work performed at the Canberra International Airport;

ii. Brindabella Homes Pty Ltd for work performed at a private residence;

3. Clipsal for work to be conducted at the Farrer Primary School;
4. Project Lighting Pty Ltd for work performed at a private residence;
5. Switched On for work performed at the Qantas Multi-user Terminal (MUT) and Lounges at the Canberra International Airport;
6. Steve Patrick Electrical Pty Ltd for work performed at the Conder Primary School;
7. Nexus Electrical Pty Ltd for work conducted at the Marybyrnong Primary School; and
8. O’Donnell Griffin for work to be conducted at the Level 4 Qantas MUT Carpark.

b. advertising on the Bing search engine where the relevant text read:

MORE ON THIS PAGE

Also known as CTI, GEMS and Gemsol. GEMSol Canberra contracts building lighting automation solutions, lighting management, energy control and energy management. GEMSOL’s head office is based in Canberra, Australia.

c. Green Energy’s website located at www.gemsol.com.au where the relevant text read:

“Green energy management solutions incorporating capital technology integrations, Canberra, ACT. Also known as CTI, GEMS and Gemsol. GEMSol Canberra contracts building lighting automation solutions, lighting management, energy control and energy management.

47. In this case, if Green Energy has used any CTI’s Registered Trade Marks as a trade mark, there is no dispute that the mark was used in relation to goods or services in respect of which the trade mark is registered. That is, the use was in relation to electrical, communication, security and automation services, which are the services in respect of which CTI’s Registered Trade Marks are registered.
48. The use of CTI’s registered trade mark “CTI” on the Green Energy website was capable of being regarded as use of the sign “CTI” as a trade mark: compare Sports Warehouse Inc v Fry Consulting Pty Ltd [2010] FCA 664; (2010) 186 FCR 519 (“Sports Warehouse”) at 549 [127]. In this case, I accept that it was so used since it was apparently intended as a “badge of origin” used in the course of trade to connect the services on the webpage with the person who has applied the “CTI” mark to those services. That is, I accept that, as CTI argued, the use of the sign “CTI” was in context indicative of a trade source.
49. The use of CTI’s registered trade mark “CTI” in advertising on the Bing search engine was also use of the sign “CTI” as a trade mark since the use was as a “badge of origin”, which in the course of trade purported to connect the advertised services with a particular trade source.
50. As indicated above, Green Energy issued quotations that bore the words “CTI”, as well as “CTI Canberra” and “Capital Technology Integrations” (the latter two expressions under the heading “Wholly Owned Divisions”). The use of these words was use as trade marks – that is, as signs used in the course of trade to connect the quoted services with the person who applied the mark, thus distinguishing them from services of the same kind provided by other persons. The use of the signs in question was indicative of a particular trade source.
51. For much the same reasons, the use of the words – “CTI”, “Capital Technology Integrations” on stickers; “CTI”, “Capital Technology Integrations”, “CTI Canberra” on business cards and on letterhead, as well as the use of the words “CTI” and “Capital Technology Integrations” on email sign-offs – constituted use of the signs in the course of trade as trade marks. The use of the signs was indicative of a particular trade source – namely, the person who applied the marks: see Mantra Group Pty Ltd v Tailly Pty Ltd (No 2) [2010] FCA 291; (2010) 183 FCR 450 (“Mantra Group”) at 462 [50] (b).
52. For the same reasons, the use of the words “CTI” and “CTI Canberra” (under the heading “Wholly Owned Divisions” on invoices issued by Green Energy would also amount to use as trade marks, providing that the use was in the course of trade: see TMA, s 17. For the reasons that follow, I consider that the use was in the course of trade.
53. In Sports Warehouse the Court held (at 559 [170]) that the use of the relevant trade mark upon invoices was not in the course of trade for the purposes of s 17 of the TMA, because, by the time an invoice left the supplier with the articles to which it related, the customer had paid for the purchase and the articles had been consigned to the customer. The circumstances under consideration in Sports Warehouse were, however, different from those under consideration in this case.
54. In other commercial contexts, the use of a sign as a trade mark on an invoice has been held to constitute a use in the course of trade: see, for example, Brother Industries Ltd v Dynamic Supplies Pty Ltd [2007] FCA 1490; (2007) 73 IPR 507 at 518-522 [40]- [57] and Pioneer Computers Australia Pty Ltd v Pioneer KK [2009] FCA 135; (2009) 176 FCR 300 at 306 [25] and 337 [185]. CTI maintained that the industry in which it operated was small – especially in Canberra; and that, in consequence, the use of the relevant signs on the final invoices were relevant to potential future business and, in this sense, remained in the course of trade. This may well be so, although it is unnecessary to determine the point on this summary judgment application. What Green Energy’s invoices made clear was that, in many cases, the invoices were interim invoices, amounting to the use of the relevant sign as a trade mark in the course of on-going trade, as opposed to trade that was, as in Sports Warehouse, completed.
55. Further, the individual respondents adduced no evidence as to the commercial context in which Green Energy issued its invoices, including the stage or stages during a project when it invoiced its customer in respect of its services. In my view, it was incumbent on them in the circumstances of the case to adduce some such evidence: see par [33] above. For present purposes, therefore, I am satisfied that there was a sufficient showing that the use of the words “CTI” and “CTI Canberra” (under the heading “Wholly Owned Divisions”) on invoices issued by Green Energy amounted to use as trade marks.
56. I am not, however, persuaded that the gifts of A5 pads with the words “GEMSol ... CTI” and “Capital Technology Integrations—CTI” and/or the subsequent use of the pads within Green Energy should be regarded as a trade mark use. In so far as the articles were supplied as gifts or used internally within Green Energy, for the purposes of this summary judgment application, I am not sufficiently persuaded that their use was in the course of trade: see Sports Warehouse at 558 [164].
57. CTI also argued that the use by Green Energy’s website of the metatags of “CTI”, “cti”, “CTI Canberra” and “capital technology” amounted to use of these signs as trade marks. Metatags are words placed in the source code of the website and its pages by the person in charge of the website. When users of the internet with an interest in services of the kind offered by CTI search the internet for any of these names (“CTI”, “cti”, “CTI Canberra” and “capital technology”) the metatags capture the search and throw up the website or the page in respect of which the metatags have been placed as part of an answer to the search: see Kailash Center for Personal Development Inc v Yoga Magik Pty Limited [2003] FCA 536 at [19], [33]. Metatags are not displayed on the website itself. Rather, they are used by search engines (such as Google) to assist in indexing and ranking websites when displaying search results: see Mantra Group at 456-7 [27]-[28].
58. In written submissions filed before the hearing, CTI argued that Green Energy had “used the words as metatags to attract customers who were looking for a particular commercial source of services by reference to the name ‘CTI’” and therefore used the words as a trade mark. CTI provided further written submissions, with leave, after the hearing.
59. Counsel for CTI was unable to refer me to any Australian authority on the question whether the use of a registered trade mark as a metatag in the source code of a website constitutes use “as a trade mark”. Instead, counsel referred me to some United States decisions (Brookfield Communications, Inc v West Coast Entertainment Corporation 174 F.3d (9th Cir. 1999) (“Brookfield”); Roberts-Gordon, LLC v Superior Radiant Products, Ltd, 85 F. Supp. 2d 202 (W.D.N.Y. 2000); and S&L Vitamins, Inc v Australian Gold, Inc 521 F. Supp. 2d 188 (E.D.N.Y. 2007) (“S&L Vitamins”)); and to a decision of the English Court of Appeal (Reed Executive Plc v Reed Business Information Ltd [2004] EWCA Civ 47; [2004] RPC 40 (“Reed”)).
60. As counsel for CTI noted, the United States authorities must be treated with some caution since they concern the application of a different statutory regime from that in this country. The plaintiff in a US trade mark infringement case must, it seems, demonstrate that the impugned use “is likely to cause confusion ... as to the affiliation, connection or association of [the defendant] with [the plaintiff], or as to the origin, sponsorship, or approval of [the defendant’s] goods, services, or commercial activities by [the plaintiff]”. See 15 U.S.C. § 1125(a)(1)(A). Contrast TMA, s 120(1), set out at par [35] above. Under the United States federal statute, the US Court of Appeals, Ninth Circuit, held in Brookfield (at 1065) that a trade mark infringement was constituted through metatag use. This approach is not universal throughout the United States. Thus, in S&L Vitamin, a judge of the Second Circuit District Court (Seybert J) observed (at 199) that: “the general rule in this Circuit is that use of a trademark in keywords and metatags, where the use is strictly internal and not communicated to the public, does not constitute ... ‘use’ and, therefore, does not support a[n] [infringement] claim”, although “[c]ourts in other circuits ... have generally found ‘use’ to exist in such situations”. In S&L Vitamin, the Court held (at 202) metatag use was not ‘use’ of a trade mark for trade mark infringement purposes.
61. In Reed, the Court of Appeal upheld an appeal (see [2002] EWHC 1015; [2003] RPC 12) against a finding that there was infringement by the use of the plaintiff’s registered mark as a metatag, having regard to the evidence adduced at trial. The Court of Appeal did not decide the question whether or not the use of a registered mark in a metatag could amount to “use as a trade mark”, although, in obiter, suggested that it would not.
62. I accept that the use of CTI’s Registered Trade Marks as a metatag could assist Green Energy to gain benefit from CTI’s goodwill. However, s 120(1) of the TMA requires “the person uses as a trade mark a sign that is substantially identical with, or deceptively similar to, the trade mark in relation to goods or services in respect of which the trade mark is registered” before there can be an infringement. I do not accept that the use of any of CTI’s Registered Trade Marks in Green Energy’s metatags would constitute a trade mark infringement for the purposes of s 120(1). Metatags are invisible to the ordinary internet user, although their use will direct the user to (amongst other websites) Green Energy’s website. Once at the Green Energy website, then, in the ordinary course, the internet user will be made aware that the website is concerned with Green Energy’s services. It cannot, therefore, be said that the use in a metatag of CTI’s Registered Trade Marks is a use that indicates the origin of Green Energy’s services. Thus, metatag use is not use as a trade mark: compare Coca-Cola Co v All-Fect Distributors Ltd [1999] FCA 1721; (1999) 96 FCR 107 at 115-6 [20].
63. I am satisfied that the mark “CTI” as used by Green Energy (discussed above) is substantially identical with one of CTI’s Registered Trade Marks, namely trade mark 1162008 for the word “CTI” for services in Class 37. Further, having regard to the evidence, the mark “CTI Canberra” is also substantially identical with CTI’s mark 1162008. The addition of “Canberra” is wholly descriptive and does not relevantly distinguish the marks.
64. Further, having regard to pars [38]-[40] above, I am satisfied that the mark “CAPITAL TECHNOLOGY INTEGRATIONS” is deceptively similar to one of CTI’s Registered Trade Marks, namely trade 1148516 “COMPLETE TECHNOLOGY INTEGRATIONS”. This is because both marks consist of three words; the last two words are identical; and the first words of both marks start with the same letter and are visually and aurally similar. Both first words are words of common English usage (as opposed to made-up words) and they are both used descriptively in a laudatory sense. That is, the word “CAPITAL” as used in Green Energy’s mark has two meanings – one, geographical/political (and non-distinctive) and the other, qualitative. Having regard to the evidence as to their use, an ordinary person, who only knew one of the marks and had an imperfect recollection of it, would be likely to be deceived.
65. Having regard to the matters discussed above, I am satisfied that there has been a clear prima facie infringement by Green Energy of CTI’s Registered Trade Marks. The respondents have not pleaded any substantive defences to the infringement claim.

The first respondent’s passing off and/or breach of the TPA

66. In Reckitt & Coleman Products Ltd v Borden Inc [1990] UKHL 12; [1990] RPC 341 at 406, Lord Oliver stated the three elements to be established in a passing off action are:

(1) that the plaintiff’s get-up, including any brand name, is recognised by the public as distinctive, specifically of the plaintiff’s goods or services;

(2) that there has been a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that the goods or services offered by the defendant are the plaintiff’s goods or services; and

(3) that the plaintiff has suffered or, in a quia timet action is likely to suffer, damage by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the defendant’s goods is the same as the source of those offered by the plaintiff.
This statement of elements was approved by a Full Court of the Federal Court in TGI Friday’s Australia Pty Ltd v TGI Friday’s Inc [1999] FCA 304; (1999) 45 IPR 43 at 50 [25] and Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd [2002] FCAFC 157; (2002) 55 IPR 354 (“Sydneywide Distributors”) at 371-372 [60]. See also Nutrientwater Pty Ltd v Baco Pty Ltd [2010] FCA 2; (2010) 265 ALR 140 (“Nutrientwater”) at 158 [79], citing ConAgra Inc v McCain Foods (Aust) Pty Ltd [1992] FCA 159; (1992) 33 FCR 302 at 356.

67. In passing off, there is no requirement to show actual subjective intention to mislead, although “proof of deliberate borrowing of the features or get-up of a rival’s product provides ‘evidential value’”: see Peter Bodum A/S v DKSH Australia Pty Ltd (2011) 280 ALR 639 (“Bodum”) at 683 [213]. There is also no requirement of actual deception: see Bodum at 683 [214]. Rather, the misrepresentation need only be likely to lead the public to believe that the goods are those of the plaintiff: see Bodum at 683 [214], Sydneywide Distributors at 372 [62], and Nutrientwater at 157-160 [78]-[83].
68. At the time Green Energy was incorporated on 13 January 2010, CTI had substantial sales nationally and in the Canberra market. This was established by Mr Garrett’s affidavit and confidential exhibit PG 21. Further, according to Mr Garrett (whose evidence was not contested) CTI had undertaken significant advertising and marketing by that date. I accept that, as CTI submitted, by January 2010, its sales and advertising had an order of magnitude that evidenced that CTI had developed a substantial reputation for the provision of automated lighting control services and related building automation services, which vested in the name “Complete Techology Integrations”, the acronym “CTI”, and the related name “CTI Canberra” – all of which CTI had used since 2001. Compare McCormick & Co Inc v McCormick [2000] FCA 1335; (2000) 51 IPR 102 at 129-130 [88].
69. None of the evidence as to reputation was challenged by the individual respondents. On the evidence before me, I am satisfied that CTI has invested significant resources in its brand and that goodwill resides in the words “Complete Technology Integrations”, “CTI”, “CTI Australia”, and in the CTI business.
70. Further, having regard to the substantial identity and/or deceptive similarity of Green Energy’s marks with CTI’s trade marks (as discussed above), Green Energy’s use of “CTI”, “CAPITAL TECHNOLOGY INTEGRATIONS” and “CTI Canberra” in the conduct of its business of providing automated lighting control services was likely to lead consumers of those services to the false belief that the Green Energy’s business was in some way connected or affiliated with CTI.
71. CTI submitted that it had suffered damage as a result of Green Energy’s use of these words, including damage to its reputation and loss of actual contracts. For present purposes, it is enough that there is some evidence of damage – assessment of the actual quantum being for another day. There is sufficient evidence before the Court, including in the invoices to which I refer above (and discuss further below), to constitute a prima facie case that Green Energy undertook work in direct competition with CTI, being work that CTI would likely otherwise have done. For present purposes, in the absence of contrary evidence (and there was none), this is sufficient to make out a prima facie case that CTI suffered damage by reason of the erroneous belief likely engendered in consumers by Green Energy’s misrepresentation that the source of its services was the same as the source of those offered by CTI.
72. Having regard to the foregoing, I find that, by its use of the words, “CTI”, “CAPITAL TECHNOLOGY INTEGRATIONS” and “CTI Canberra”, CTI made out a clear prima facie case that Green Energy passed off its services as having the same source as those offered by CTI.
73. CTI also seeks injunctive and pecuniary relief against the individual respondents for Green Energy’s breaches of ss 52 and 53 of the TPA. (The TPA was amended and partially renumbered by the Trade Practices Amendment (Australian Consumer Law) Act (No 2) 2010 (Cth) with effect from 1 January 2011. The same Act renamed the TPA as the Consumer and Competition Act 2010 (Cth). The TPA as in force immediately before 1 January 2011 continues to apply in this proceeding, however, because the proceeding was commenced before 1 January 2011: see Sch 7, item 7(1) of the amending Act. To the extent that CTI seeks injunctive relief, the proceeding is taken to be one for an injunction under s 232 of the Australian Consumer Law: see Sch 7, item 7(2) of the amending Act. This is relevantly the same as the former s 80 of the TPA: see Australian Competition and Consumer Commission v MSY Technology Pty Ltd (No 2) (2011) 279 ALR 609 at 611-2 [5]-[6].)
74. Section 52(1), as it stood prior to 1 January 2011, provided:

A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

75. The operation of s 52 is well known and the principles governing its application are well settled. Unlike the tort of passing off, s 52 is not restricted to the protection of goodwill. Section 52 requires the court to determine whether conduct is misleading or deceptive, having regard to all the contextual circumstances within which something was said or done: see Bodum at 678-679 [200] – [203]. In Bodum, Greenwood J (with whom Tracey J agreed) also said (at 679 [203]-[204]):

When that assessment is being made in the context of conduct said to involve representations to the public at large (or a section of the public) ... s 52 must be regarded as contemplating the effect of the impugned conduct on reasonable members of the class ...

In order to test whether a misconception has arisen or might arise among members of the relevant cohort by reason of the impugned conduct, the inquiry is to be made notionally of the hypothetical individual excluding “assumptions by persons whose reactions are extreme or fanciful” ... The question is “whether the misconceptions, or deceptions, alleged to arise, or to be likely to arise, are properly to be attributable to the ordinary and reasonable members of the class ...” ... The issue is not whether the impugned conduct simply causes confusion or wonderment but whether the conduct is or is likely to mislead or deceive ...
(Citations omitted.)

76. While there is no express requirement to prove reputation for a claim under ss 52 or 53 of the TPA, reputation in a particular mark, sign or logo will usually be an element in a showing that consumers are likely to be misled or deceived by the use by the respondent of a similar mark, sign or logo: see Mars Australia Pty Ltd v Sweet Rewards Pty Ltd [2009] FCA 606; (2009) 81 IPR 354 (“Mars Australia”) at 360 [22] and Hansen Beverage Co v Bickfords (Australia) Pty Ltd [2008] FCAFC 181; (2008) 79 IPR 174 (“Hansen Beverage Co”) at 174 [1]-[2], 182 [37] (Tamberlin J), 184 [51] (Finkelstein J), 188 [67] (Siopis J). As Perram J said in Mars Australia (at 360 [22]), in the context of a claim under s 52, “the reputation in those features ... is the springboard for the argument that consumers are deceived by a particular imitation”. In Hansen Beverage Co, Tamberlin and Siopis JJ agreed that the appropriate test to be applied in determining whether the impugned conduct contravened s 52 of the TPA was “whether a not insignificant number of persons in the Australian community, in fact, or by inference, have been misled, or are likely to be misled”: see Hansen Beverage Co at 188 [66] (Siopis J).
77. As indicated above, CTI also relied on s 53(1), as it stood prior to 1 January 2011, which provided that “[a] corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services ... (aa) falsely represent that goods or services are of a particular standard, quality, value or grade; ... (c) represent that goods or services have sponsorship, approval, performance characteristics, accessories, uses or benefits they do not have; (d) represent that the corporation has a sponsorship, approval or affiliation it does not have”. The requisite analysis for the application of these provisions resembles s 52, discussed above.
78. For the reasons already stated, I am satisfied that, by the relevant date, CTI had a substantial reputation, which attached to the marks “Complete Techology Integrations”, “CTI”, and “CTI Canberra”. Having regard to the evidence before the Court, Green Energy’s use of the same or deceptively similar words for services of the same kind as CTI provides is, prima facie at least, likely to mislead or deceive a not insignificant number of ordinary consumers familiar with CTI’s services to believe that its services and those in fact provided by Green Energy are associated or affiliated in some way, having regard to their likely state of knowledge of CTI’s services. Thus, for example, as stated above, Green Energy used “CTI” on their business cards, website, letterhead, quotations and the like.
79. CTI has, therefore, established a clear prima facie case of breach by Green Energy of s 52 and s 53(d) of the TPA. The individual respondents did not seek to adduce any evidence to the contrary. Nor has any individual respondent sought to explain how Green Energy came to “borrow” CTI’s marks, which, in the circumstances, they must have known were clearly associated with CTI. It is difficult, in the circumstances, to resist the inference that the “borrowing” occurred because the individual respondents (all the only directors and shareholders of Green Energy) aimed to capitalise on CTI’s reputation and goodwill by misrepresenting to potential clients that Green Energy was in some way associated or affiliated with CTI. The position of the individual respondents is discussed further below.
80. For present purposes, therefore, I am satisfied that, for summary judgment purposes, there was a sufficient showing, that, in the circumstances of the case, by using the words “CTI”, “CTI Canberra” and “COMPLETE TECHNOLOGY INTEGRATIONS”, Green Energy has, in trade and commerce, engaged in conduct that is misleading or deceptive or is likely to mislead or deceive in breach of s 52 of the TPA and has represented that it has an affiliation it does not have in breach of s 53(d) of the TPA.

The first respondent’s copyright infringement not made out

81. Section 32 of the Copyright Act 1968 (Cth) (“CA”) provides that:

(1) Subject to this Act, copyright subsists in an original literary, dramatic, musical or artistic work that is unpublished and of which the author:

(a) was a qualified person at the time when the work was made; or
(b) if the making of the work extended over a period – was a qualified person for a substantial part of that period.

(2) Subject to this Act, where an original literary, dramatic, musical or artistic work has been published:

(a) copyright subsists in the work; or
(b) if copyright in the work subsisted immediately before its first publication – copyright continues to subsist in the work;
if, but only if:
(c) the first publication of the work took place in Australia;
(d) the author of the work was a qualified person at the time when the work was first published; or
(e) the author died before that time but was a qualified person immediately before his or her death.

(3) ...
(4) In this section, qualified person means an Australian citizen or a person resident in Australia.

82. By its statement of claim, CTI claimed copyright in a form letter created for the purpose of providing quotations to clients (“the template quotation letter”). CTI sought to rely on the presumptions as to subsistence and ownership set out in s 126 of the CA. I do not consider that it was open to CTI to do so. This is because, in their amended defence, the respondents did not admit ownership or subsistence, both of which were therefore put in issue. Relevantly, the respondents’ limited admissions were that, prior to 23 December 2010, “quotes issued by [Green Energy] included words in the final two pages under the heading “Terms and Conditions”, which words were mostly taken from quotes issued by [CTI]”. They also admitted that “[t]he use of these words was not licensed, approved or authorised by [CTI]”.
83. In IceTV Pty Ltd v Nine Network Australia Pty Ltd [2009] HCA 14; (2009) 239 CLR 458 (“IceTV”), the High Court explained the principles relating to the subsistence and ownership of copyright. Relying on this explanation in IceTV, QS Holdings (at 470 [40]) stated that, in order to succeed in a copyright infringement claim, the copyright owner must:

(a) identify with precision the work in which the owner alleges that copyright subsists (“the copyright work”) and the author of the copyright work;

(b) establish that the author of the copyright work was a qualified person for the purpose of the CA;

(c) establish that the copyright work is a “work” for the purpose of the CA;

(d) establish that the copyright work is an “original” work; and

(e) prove the foundation of the claim to own that work.

84. CTI has identified with precision the work in which it alleges copyright subsists. Mr Garrett’s unchallenged evidence is that he created the template quotation letter for CTI in his capacity as managing director of CTI in about November 2008. I accept that Mr Garrett was a qualified person within s 32, since he was, on the evidence, an Australian resident at the time the work in question was first published in Australia.
85. The onus of showing that the alleged infringer does not have the licence of the copyright owner lies on the copyright owner: see QS Holdings at 472 [49] and the authorities there cited. Mr Garrett’s unchallenged evidence was that the alleged reproduction occurred without CTI’s (or his) consent. The respondents admitted lack of consent for their use of the “Terms and Conditions” pages. If I was otherwise persuaded that CTI had made out its copyright infringement claim, I would be satisfied to the requisite degree as to the lack of consent. I note here too that the respondents did not purport to rely on any substantive defence under the CA.
86. Assuming that the template quotation letter is relevantly a work, can it be said that it is an original work for the purposes of s 32 of the CA? The originality referred to in s 32 is the originality of the form of expression, and not of the idea itself. Originality also requires that the work in question originated with the author. It is immaterial that the result is not novel, or that anyone else could have produced the same result. If the form of expression involves some independent intellectual effort that will be sufficient: see IceTV at 474 [33], 479 [48].
87. As already noted, Mr Garrett’s unchallenged evidence was that he created the template quotation letter. Whilst CTI’s submissions focussed on the first page, fairly considered, CTI’s template quotation letter consists of some eight pages, designed not only to offer but to explain CTI’s services and the terms on which CTI would provide them. I generally accept Mr Garrett’s evidence as to authorship, subject to the fact that the last two pages, headed “Conditions and Terms”, were unlikely to be his work. The creation of these pages necessarily involved a lawyer’s skill, which Mr Garrett did not apparently possess. The authorities establish, however, that it is wrong to seek to isolate parts of a work that are not original from parts that are original with a view to confining the copyright: see, for example, Ladbroke (Football) Ltd v William Hill (Football) Ltd [1964] 1 WLR 273 at 277, 291 (“Ladbroke”). For the purposes of summary judgment, Mr Garrett’s evidence and the template quotation letter itself sufficiently established that the template quotation letter was an original work in that it originated from the independent intellectual effort of Mr Garrett.
88. CTI relied on s 35(6) of the CA, in support of the proposition that it was the owner of the copyright in the template quotation letter. Under s 35(6), where a work is made by an author in pursuance of the terms of his or her employment by another person under a contract of service, copyright in the work is owned by that other person – the employer. Thus, in order for s 35(6) to apply, the work must have been made under a contract of service and pursuant to the terms of the author’s employment. These requirements can give rise to difficulty in the case of a managing director, such as Mr Garrett. In Antocks Lairn Ltd v I Bloohn Ltd [1972] RPC 219 (“Antocks Lairn”), it was held (at 221-2) that certain drawings of furniture made by a managing director of a furniture company were not made pursuant to a contract of service with that company, as this was not part of his normal management activities for the company. There was in that case, as in this, no clear and distinct evidence of any service agreement between the employer company and the managing director, and it was also unclear whether the work fell with the managing director’s usual management activities. Mr Garrett deposed that his role in the company “has always involved and continues to involve overseeing ... CTI’s day to day operations”, but there was no evidence that the preparation of the template quotation letter fell within his usual oversight of operations activities. Nor was there any clear and distinct evidence of a service agreement between him and CTI. Of course, as noted in Antocks Lairn, in the absence of a service agreement, the managing director would, in such a case, hold the works he made in trust for the company. There is no evidence, however, that Mr Garrett has assigned copyright to CTI. For these reasons, I am not persuaded that the CTI has made out a prima facie case that it, as opposed to Mr Garrett, actually owns the copyright in the template quotation letter. In this context, the lack of evidence, which CTI could have given, prevents CTI from making out a prima facie case of copyright infringement, as alleged.
89. Even if I were satisfied that CTI had sufficiently established its claim to own the work, there is a further reason why I would not be satisfied that it had made out a prima facie case of copyright infringement. Section 31(1)(a) of the CA relevantly provides that, “for the purposes of this Act, unless the contrary intention appears, copyright in relation to a work, is the exclusive right ... in the case of a literary ... work” “to reproduce the work in a material form”. Section 36 relevantly provides that copyright is infringed “by a person, who, not being the owner of the copyright, and without the licence of the owner of the copyright, does in Australia ... any act comprised in the copyright”. CTI argued that Green Energy’s quotation letter reproduced substantial parts of CTI’s template quotation letter and, therefore, Green Energy infringed CTI’s copyright in the template quotation letter. For the following reasons, I reject this proposition.
90. As explained herafter, I am not persuaded that Green Energy reproduced a substantial part of the copyright work. Considered in its entirety, Green Energy’s quotation letter is not identical to CTI’s template quotation letter, although Green Energy’s letter is similar in a number of respects. As the respondents admitted, Green Energy’s last two pages include most of the last two pages of CTI’s letter. In both cases, these are the “Terms and Conditions” pages. I have already remarked, that, in the absence of further evidence, I consider it unlikely that CTI’s “Terms and Conditions” pages were the product of Mr Garrett’s independent effort.
91. There is, however, a more important consideration relating to the degree of originality in the expression of the template quotation letter. In IceTV at 476 [40], French CJ, Crennan and Kiefel JJ noted that the authorities “direct attention to the degree of originality in the expression of the part of the work reproduced” and also observed that:

The same point is made in the current edition of Copinger and Skone James on Copyright [Garnett, Davies and Harbottle, Copinger and Skone James on Copyright, 15th ed (2005), vol 1, p 385 [7-27(c)]:

“[T]he more simple or lacking in substantial originality the copyright work, the greater the degree of taking will be needed before the substantial part test is satisfied.”

The same point is well made by Lord Pearce in Ladbroke (at 293), when he said

The reproduction of a part [of a copyright work] which by itself has no originality will not normally be a substantial part of the copyright and therefore will not be protected. For that which would not attract copyright except by reason of its collocation will, when robbed of that collocation, not be a substantial part of the copyright and therefore the courts will not hold its reproduction to be an infringement.

92. Since quotation letters, like that of CTI’s template quotation letter, have an entirely practical and commercial purpose, they ordinarily include the same kind of information and the scope for varied expression is limited. Copyright in the CTI’s template quotation letter lies in the whole work and the degree of originality in the expression falls to be considered in the context of the whole work. Whilst there are clear similarities between the expression of CTI’s template quotation letter and the Green Energy quotation letter, including in the first page as well as in the last two pages of the “Terms and Conditions”, there are clear differences between the expression in CTI’s template quotation letter and Green Energy’s letter, when considered as a whole. The similarities are in part a product of the nature of the work; and, given the nature of the work, the differences are important. Having regard to the nature of the copyright work especially that most of the similarities between the CTI and Green Energy works called for no particular mental effort, CTI has failed to show that the Green Energy’s quotation letter is, relevantly, a reproduction of a substantial part of the copyright work.
93. Having regard to the matters discussed above, for the purposes of summary judgment, I am not satisfied that CTI has shown, or made out a prima facie case showing, that there has been an infringement by Green Energy of CTI’s copyright in its template quotation letter.

Liability of the individual respondents in respect of the trade mark infringements and passing off

94. The individual respondents were Green Energy’s only directors and shareholders. The law concerning the liability of directors for corporate wrongdoing has been debated. Broadly speaking, there is:
    1. the test in Performing Right Society Ltd v Ciryl Theatrical Syndicate Ltd [1924] 1 KB 1 (“Performing Right Society”) at 15;
    2. the Canadian test propounded in Mentmore Manufacturing Co Ltd v National Merchandising Manufacturing Co Inc (1978) 89 DLR (3d) 195 (‘Mentmore’); and
    3. the test advocated by Finkelstein J in Root Quality Pty Ltd v Root Control Technologies Pty Ltd [2000] FCA 980; (2000) 177 ALR 231 (“Root Quality”) at 268 [146]
95. Full Courts of this Court have considered the tests: see Allen Manufacturing Co Pty Ltd v McCallum & Co Pty Ltd [2001] FCA 1838; (2001) 53 IPR 400, Cooper v Universal Music Australia Pty Ltd [2006] FCAFC 187; (2006) 156 FCR 380 (“Cooper”) and Keller v LED Technologies Pty Ltd [2010] FCAFC 55; (2010) 185 FCR 449 (“Keller”).
96. In Cooper, Kenny J, with whom French J agreed, indicated agreement with the Root Quality approach. More recently, in Keller Emmett J said (at 469 [83]) that “[w]here 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”. Also in Keller Besanko J said (at 513 [291]) that “[a] close personal involvement in the infringing acts by the director must be shown before he or she will be held liable”. In the same case, Jessup J (at 542 [405]) favoured the test in Mentmore in so far as it made it a requirement of liability that the director should make the tort his own. See also GM Holden Ltd v Paine 420-421 [52]-[59].
97. None of the individuals is alleged to have infringed CTI’s trade marks or engaged in passing off other than as joint tortfeasors. There is evidence that Mr Whaling and Mr Wade were intimately involved in the company’s activities, including acts of trade mark infringement and passing off. Each of them directed and procured the relevant acts. Given their history of employment by CTI, the inference that Mr Whaling and Mr Wade knew that Green Energy’s use of CTI’s Registered Trade Marks was, or was likely to be, an infringing use is almost irresistible. Further, on the evidence, it is difficult to resist the inference that they deliberately borrowed CTI’s get up or branding to divert CTI’s reputation to their own business use. CTI has made out a strong prima facie case that Mr Whaling and Mr Wade were personally involved in the trade mark infringements and in passing off, and used the company as an instrument of their own wrongdoing.
98. There is some limited evidence that Mrs Whaling was also personally involved in Green Energy’s activities (see par [103] below), but the extent of her involvement and knowledge is less clear than in the case of Mr Whaling and Mr Wade. Mrs Whaling was not a former employee of CTI; and nor was there any clear evidence that she acted on a day-to-day operational basis in Green Energy’s business. Indeed, there was evidence to the contrary. For example, the company’s business cards were not in her name but, rather, in those of Mr Whaling and Mr Wade.
99. For the reasons stated, I am satisfied that, on any of the approaches in Keller (or, indeed, on any of the tests mentioned in par [94] above, there is a strong prima facie case that Mr Whaling and Mr Wade are liable as joint tortfeasors in the first respondent’s passing off and trade mark infringements. I am not so satisfied with respect to Mrs Whaling. CTI has made out its case for summary judgment in connection with these claims only as against Mr Whaling and Mr Wade.

Liability of the individual respondents in respect of breaches of the TPA

100. Section 75B(1) of the TPA relevantly provided:

A reference in this Part to a person involved in a contravention of a provision of Part IV, IVA, IVB, V or VC or of section 95AZN, shall be read as a reference to a person who:

(a) has aided, abetted, counselled or procured the contravention;
(b) has included, whether by threats or promises or otherwise, the contravention;
(c) has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention; or
(d) has conspired with others to effect the contravention.

101. As Finkelstein J said in Compaq Computer Australia Pty Ltd v Merry [1998] FCA 968; (1998) 157 ALR 1 at 4-5:

A contravention of s 52(1) of the Trade Practices Act can occur regardless of whether the corporation is acting honestly or reasonably: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191 at 197 ... But where it is sought to make a person liable as an accessory to a contravention of s 52(1) based on s 75B it is necessary to establish that the person has intentionally participated in the contravention. To establish intentional participation it must be proved that the person has knowledge of the essential matters that make up a contravention of s 52(1): see generally Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 ...; Edwards v R [1992] HCA 19; (1992) 173 CLR 653 ... In this regard “knowledge” means actual and not constructive knowledge.

102. Each of the individual respondents admitted to being “in effective control of the business of the first respondent”, “aware of the conduct of the first respondent” and “instrumental in the actions of the first respondent”. Mr Whaling, Mrs Whaling and Mr Wade were each one of the three directors of Green Energy. Each of them owned one of the three shares in Green Energy. Mr Whaling was the company Secretary.
103. Mr Whaling resided with Mrs Whaling at an address listed as the trading address for Green Energy. There was evidence that Mr Whaling and Mr Wade had signed several of the quotes issued by Green Energy, and were, plainly enough, involved in the running of its business. There is very limited evidence that Mrs Whaling was involved in Green Energy’s business, in that there was evidence that she was involved in the cancellation of business names and in organizing a trade charity evening with a representative of Clipsal.
104. From the admissions and the evidence before the Court, I would infer that Mr Whaling and Mr Wade each knew of the matters that constituted the breach by Green Energy of s 52(1) and s 53(d) of the TPA. The inference is a strong one. That is, the circumstances disclosed in the evidence support an inference of actual knowledge of the matters constituting the breaches discussed above. There is therefore a strong prima facie case against Mr Whaling and Mr Wade that they were persons involved in Green Energy’s breaches of the TPA and liable as such. There was no evidence from either of them tending to contradict such a finding. CTI has made out its case for summary judgment in this regard. I am, however, not persuaded that there is a prima facie case established against Mrs Whaling, since, notwithstanding the respondents’ pleading, the actual evidence of her day-to-day involvement in the company’s business was slim and would not support an inference of actual knowledge.
105. For the reasons already stated, I am satisfied that Mr Whaling and Mr Wade have no reasonable prospect of successfully defending CTI’s claims that they are liable as joint tortfeasors in respect of Green Energy’s trade mark infringement and passing off claims; and that they are liable, as persons involved (within s 75B of the TPA (as it was)) for Green Energy’s breaches of ss 52 and 53(d) of the TPA.

The liability of Mr Whaling and Mr Wade for breach of contract

106. As indicated earlier, Mr Whaling and Mr Wade each had a contract of employment with CTI, which included the following clauses:

Clause 2.1 No Competitive Interests During Employment

During the term of his / her employment Employee shall not either individually or in conjunction with any person or persons, association, syndicate, company or corporation as principal, agent, shareholder (other than minority shareholder in a publicly owned company), employ or in any other manner whatsoever, directly or indirectly, carry on or be engaged in or concerned with or interested in or advance, lend money to, guarantee the debts or obligations of any person or persons, firm, association, syndicate, company or corporation engaged in or concerned with the operation of any business that is competitive with any business carried out by Company.

Clause 3.1 Confidential Information

All inventions, improvements and discoveries, Customer Lists and other information and improvements relating to the business of Company, and all knowledge and all information pertaining thereto, which Employee may acquire during his/her employment (collectively the Confidential Information) shall be held by Employee in trust for the benefit of Company only, and Employee agrees that he/she will not divulge either during the time he/she are so employed or afterwards, knowledge of the said inventions or discoveries, or any information acquired in the course of his/her employment under this Agreement, or any Confidential information concerning Company’s business that he/she may acquire otherwise.

Clause 5.1 No Competition

Company shall have the right, as it so directs and Employee agrees to abide by said directive that in the event of his employment being terminated for any cause, he will not hereafter, for a period of three (3) months after leaving the said employment, solicit orders from or do any work for any Customer of Company for such business as is then carried on by Company, for his/herself, or as an Employee of any other corporation within the Country of Employment as defined in Item 8. ...

107. CTI argued that Mr Whaling and Mr Wade breached the terms of their employment contracts:

(a) by establishing and operating Green Energy’s business in competition with CTI’s business during their employment by CTI;

(b) by soliciting orders from, providing quotes to and completing work for customers of CTI within three months of the termination of their employment with CTI; and

(c) by providing CTI’s confidential information (such as customer details and details of quotes provided to prospective customers by CTI) to third parties, including Green Energy and Clipsal.

108. The evidence adduced by CTI established a strong prima facie case that Mr Whaling and Mr Wade had breached clause 2.1, which was unanswered by contrary evidence. In particular, there was evidence that:
     • Green Energy was incorporated on 13 January 2010, with the individual respondents as directors, over a month before Mr Whaling and Mr Wade tendered their resignations to CTI and well before their employment formally ceased.
     • Green Energy was established for the purpose of “programming of building automation systems for commercial and domestic homes etc”.
     • Green Energy/Mr Wade quoted, by quote dated 1 March 2010, for work at Farrer Primary School, whilst Mr Wade and Mr Whaling were still in CTI’s employment. CTI itself had quoted for this project in November 2009.
     • Green Energy/Mr Whaling quoted, by quote dated 3 March 2010, for L4 CIA Carpark, also whilst Mr Wade and Mr Whaling were still in CTI’s employment.
109. The evidence adduced by CTI also established a strong prima facie case that Mr Whaling and Mr Wade had breached clause 5.1. This case too went unanswered by evidence from them. In particular, there was evidence that Mr Whaling and Mr Wade quoted for or completed work at the following locations within the three months after the termination of their employment by CTI:
     • Canberra airport;
     • TOP Block A – FaHCSIA;
     • Canberra Hospital CT Suite L2;
     • ANU “Fulton Muir” Building Gnd and L1;
     • Belconnen Police Station;
     • 2 Constitution Ave; and
     • Level 4 Qantas MUT Carpark.
110. At the hearing, CTI relied on Clipsal’s business records as evidencing that Mr Whaling and Mr Wade had sought Clipsal’s assistance to provide their quotes to potential clients during the non-competition period in breach of clause 5.1. For example, this appeared in an email from Mr Whaling to a Stuart McWhinney at Clipsal dated 15 April 2010, in which Mr Whaling wrote, amongst other things:

Don’t want to over step the line, but we do appreciate your help. The 18 June cant come quick enough!

I accept that, as CTI argued, the “18 June” was probably a reference to the end of the non-competition period under the contract of employment. The individual respondents adduced no evidence to the contrary. Mr Garrett deposed that, in relation to the 15 April 2010 email, the relevant customer was at that time one of CTI’s customers. Having regard to this and several other emails to similar effect, it appears likely that Mr Whaling and Mr Wade knew that in some cases CTI had already quoted on the same job; that they were contractually precluded from quoting for the work; and that they were having their quotes channelled through someone at Clipsal, in order to disguise breaches of their employment contracts.

111. Having regard to the evidence adduced by CTI, there is a strong prima facie case that the conduct of Mr Whaling and Mr Wade amounted to flagrant breaches of their contracts of employment and, in particular, clause 5.1.
112. In their amended defence, the individual respondents denied that Green Energy was incorporated for the purpose of conducting a business in competition with CTI and said that Mr Whaling:

... had been advised that [CTI] was no longer supporting the “DALI Control”. Subsequently, [Mr Whaling] arranged for the incorporation of [Green Energy] for the purpose of conducting a business engaged in programming of building automation systems, lighting control systems and the provision of energy management services for commercial and domestic buildings in order to support “DALI Control”. This purpose has been broadly reflected in the business run by [Green Energy].

113. Whilst proffering an explanation, the respondents’ statement in their amended defence involves an admission that Green Energy was established for the purpose of providing the same type of services as those provided by CTI. The unchallenged evidence of Mr Garrett, for CTI, was that, although CTI ceased, from a date in 2009, to promote a particular Clipsal DALI product, CTI continues to sell, install and support other DALI technologies. Further, there was evidence that Mr Garrett informed Mr Whaling of CTI’s position in this regard by emails on 15 March 2010 and 16 March 2010. There was no evidence from Mr Whaling or Mr Wade to the contrary.
114. Having regard to the evidence adduced by CTI, I am persuaded that Mr Whaling and Mr Wade have no reasonable prospect of successfully defending CTI’s claims that they breached clause 5.1 and clause 2.1 of their contracts of employment. Even if CTI had ceased to sell and support the DALI Control product, the provision of building and lighting automation services by Mr Whaling and Mr Wade would still have been in direct competition with CTI’s services and in breach of these clauses. CTI has therefore made out an entitlement to summary judgment on this part of its contract claim.
115. The evidence adduced by CTI also established a strong prima facie case that Mr Whaling and Mr Wade had breached the confidentiality clause 3.1 by providing CTI’s confidential information to third parties, including Clipsal and Green Energy.
116. For the purposes of summary judgment CTI’s evidence established (amongst other things) that:
     1. Information as to CTI quotes (“the CTI Quotes”) was used by Mr Whaling and Mr Wade to secure contracts for their own business interests (at the locations listed in i to v below and at Level 4 Qantas MUT Carpark). Relevantly, CTI’s quotes related to work to be conducted at:

i. the Canberra International Airport;

2. Farrer Primary School;
3. Qantas Multi User Terminal (MUT) and Lounges;
4. Conder Primary School;
5. Maribyrnong Primary School; and
6. two private residences.

2. Information extracted from an internal CTI email was sent by email by Mr Whaling to three employees of Clipsal on 19 January 2010 with the subject line “confidential info”.

100. Information regarding a CTI quote for “FaHCSIA Blk A” was emailed by Mr Wade to an employee of Clipsal on 20 April 2010.

4. Information regarding a quote for work to be completed at 2 Constitution Ave was emailed by Mr Whaling to an employee of Clipsal on 28 May 2010.
5. Information regarding a quote for work to be completed at the Canberra Airport was requested from Mr Whaling by an employee of Clipsal by email on 29 March 2010 and Mr Whaling responded by indicating that he would send a copy of CTI’s initial tender to the Clipsal employee and later that day did so, with the covering comment “this is highly confidential. I don’t have this info, and you didn’t get it either!”

117 CTI’s unchallenged evidence established that the information detailed above was of a commercial in confidence kind. There was unchallenged evidence that this information was made available to Mr Whaling and Mr Wade in the course of their employment. On the evidence, it is clear that they appreciated, or would necessarily have appreciated, the confidential quality of it. With respect to the breaches of clause 3.1 constituted by the disclosure of this information, I am satisfied that Mr Whaling and Mr Wade have no reasonable prospect of successfully defending CTI’s contractual claim for breach of confidence. CTI are entitled to summary judgment in respect of this part of its claim.

118. I am not persuaded that CTI established a similarly strong prima facie case for breach of clause 3.1 in relation to other alleged disclosures of its information, which would not therefore support the summary judgment sought by it.

Other bases of liability

119. CTI also relied on the principles set out in Optus Networks Pty Ltd v Telstra Corporation [2010] FCAFC 21; (2010) 265 ALR 281 (“Optus Networks”) regarding equitable obligations of confidence. Whether or not an equitable obligation of confidence exists along side a comparable contractual duty of confidence is not without difficulty. There is authority to the effect that, if there is a contractual obligation that covers the field, then there would be no occasion for equity to intervene to impose its own obligation: see Coles Supermarkets Australia Pty Ltd v FKP Ltd [2008] FCA 1915 at [63]; Del Casale v Artedomus (Aust) Pty Ltd [2007] NSWCA 172; (2007) 73 IPR 326; Deta Nominees Pty Ltd v Viscount Plastic Products Pty Ltd [1979] VicRp 17; [1979] VR 167 at 195 – discussed in Optus Networks at 289-290 [34]-[38]. There are also authorities to contrary effect: see Optus Networks at 290 [38] and the cases there cited. Optus Networks decided that, where the governing contract contemplated an account of profits as an available remedy, an equitable obligation of confidence co-existed with a contractual obligation of confidence, with the consequence that the injured party might seek an account of profits for breach of the equitable obligation.
120. Whilst the proposition advanced by CTI in written submissions – that equitable obligations of confidence and contractual obligations of confidence may co-exist – can be accepted, CTI directed no argument to the proposition that they did co-exist in this case. As explained, this question is not without difficulty. In the absence of argument on the point, CTI have failed to persuade me that Mr Whaling and Mr Wade have no reasonable prospect of successfully defending this particular aspect of CTI’s claim against them.
121. Finally, CTI relied on the duty of fidelity and the duty to avoid conflicts of interest, which are discussed in such cases as Courtenay Polymers Pty Ltd v Deang [2005] VSC 318 at [90]- [91] (concerning duties of a director); Faccenda Chicken Ltd v Fowler (1985) 6 IPR 155 at 164-165 (general principles); I F Asia Pacific Pty Ltd v Galbally [2003] VSC 192; (2003) 59 IPR 43 at 80-81 (on trade secrets); and Prime Creative Media Pty Ltd v Vranjkovic [2009] FCA 1030 (information on a database prepared by an employee).
122. Other than referring to these authorities, CTI did not develop its argument as to the operation of the relevant principles in the present case. In view of this, I doubt that I should be satisfied that CTI is entitled to summary judgment on this aspect of its claim against Mr Whaling and Mr Wade. There was little said at the hearing, or in CTI’s written submissions, in support of the proposition that they have no reasonable prospect of defending themselves against these claims. Further, CTI’s counsel conceded at the hearing that the claimed breaches of these duties added little, if anything, to the claims that I have already considered. Accordingly, I would not consider them further.

DISPOSITION

123. Save as already mentioned, the individual respondents have not pleaded any substantive defences or adduced any evidence from which such defences might emerge. Instead, these respondents sought to oppose summary judgment by putting CTI to proof on its claims. For the reasons stated, CTI are entitled to summary judgment against Mr Whaling and Mr Wade:

(a) as joint tortfeasors in Green Energy’s passing off and trade mark infringements as alleged by CTI;

(b) as persons involved (within s 75B of the TPA) for Green Energy’s breaches of s 52 and s 53(d) of the TPA (as it was formerly called);

(c) for breaches of the terms of their employment contracts in that they:

(i) established and operated Green Energy’s business in competition with CTI’s business during their employment by CTI;

(ii)) solicited orders from, provided quotes to and completed work for customers of CTI within three months of the termination of their employment with CTI; and

(iii) disclosed CTI’s confidential information to third parties.

I would order that CTI file a minute of orders that it considers would give effect to these reasons for judgment.

124. CTI has sought its costs, upon the basis that they be taxed and be made payable forthwith. At the hearing Mr Wade, on behalf of the individual respondents, submitted that, in the event that CTI succeeded on its application, no award of costs against the respondents should be taxed and made payable forthwith, since, so he said, such an award was likely to be significantly higher than any award of damages; and costs ought to be taxed and made payable after damages had been assessed.
125. Although s 43 of the Federal Court Act confers a broad discretion on this Court with respect to costs, the exercise of the discretion is guided by settled principles. Generally, the discretion is exercised in favour of the successful party; and in this case the discretion ought to be exercised in favour of CTI. Generally, an award of costs is not taxed and paid until the completion of the proceeding.
126. CTI’s submission that there be a departure in this regard from the usual course relied on a number of factors, including its anxiety about its ability to recover its costs since the individual respondents’ assets were not particularly substantial and Green Energy was in liquidation. I have put this consideration aside, because there were two other relevant considerations to which CTI referred that in this case properly justify an order that CTI’s costs be taxed and made payable forthwith.
127. In Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 at 4-5, Barrett J identified three classes of cases in which courts might make such an order, including where the decision on the application determines a separately identifiable matter or may be viewed as the completion of a discrete aspect of the matter; and where there is likely to be a considerable lapse of time between the determination of the application and the final determination of the proceeding. In Australian Agricultural Co Ltd v AMP Life Ltd [2003] FCA 1134, Sackville J also treated the existence of these two considerations as justifying an order that costs be payable forthwith. CTI relied on both these considerations in this case, especially in supplementary written submissions on costs dated 29 August 2011.
128. In the present case, I consider that the application for summary judgment is fairly regarded as a self-contained part of the proceeding. CTI’s successful application for summary judgment entitles it to judgment against Mr Whaling and Mr Wade in respect of its principal claims. As already noted, the proceeding is stayed as against Green Energy. Unless an order is made for the payment of costs forthwith, as my docket now stands, CTI is unlikely, in the ordinary course of events, to recover its costs against Mr Whaling and Mr Wade in respect of its summary judgment application for some lengthy period.
129. In these circumstances, the interests of justice are best served by a departure from the general practice. Accordingly, I would order that Mr Whaling and Mr Wade pay CTI’s costs of its summary judgment application taxed and be made payable forthwith.
     

I certify that the preceding one hundred and twenty-nine (129) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.

Associate:

Dated: 18 November 2011