Buttrose and Anor v The Senior’s Choice (Australia) Pty Ltd and Anor (No.2)
[2014] FCCA 1853
•21 August 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| BUTTROSE & ANOR v THE SENIOR’S CHOICE (AUSTRALIA) PTY LTD & ANOR (No.2) | [2014] FCCA 1853 |
| Catchwords: PASSING OFF – Assessment of damages – exemplary damages. |
| Legislation: Copyright Act 1968, ss.36, 115(2), 115(4) Competition and Consumer Act 2010, s.236 |
| Aristrocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd Flashback Holdings Pty Ltd v Showtime DVD Holdings Pty Ltd (No 6) (2010) 158 FCR 444 Microsoft Corporation v Easy Loans (2004) 63 IPR 54 Placer (Granny Smith) Pty Ltd v Theiss Contractors Pty Ltd (2003) 77 ALJR 768 Sony Computer Entertainment Australia Pty Ltd v Stirling [2001] FCA 1852 Tolmark Homes Pty Ltd. v Paul (1999) 46 IPR 321 |
| First Applicant: | ITA BUTTROSE |
| Second Applicant: | ITA BUTTROSE PTY LTD |
| First Respondent: | THE SENIOR'S CHOICE (AUSTRALIA) PTY LTD |
| Second Respondent: | ANDREW PHILPOT |
| File Number: | MLG 1053 of 2013 |
| Judgment of: | Judge O'Dwyer |
| Hearing date: | 3 March 2014 |
| Date of Last Submission: | 3 March 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 21 August 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr Rivette |
| Solicitors for the Applicant: | Hunt & Hunt |
| For the First Respondent: | Mr Philpot, Director |
| The Second Respondent: | Self Represented |
ORDERS
The Respondents pay the First Applicant the sum of $225,000.
The Respondents pay the Second Applicant the sum of $200,000
The Respondents pay the Applicants’ costs.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 1053 of 2013
| ITA BUTTROSE |
First Applicant
| ITA BUTTROSE PTY LTD |
Second Applicant
And
| THE SENIOR'S CHOICE (AUSTRALIA) PTY LTD |
First Respondent
| ANDREW PHILPOT |
Second Respondent
REASONS FOR JUDGMENT
Introduction
This proceeding returns to Court for an assessment of damages after summary judgment was entered against the Respondents on
11 November 2013.
The Applicant sought damages for:
(a)the infringement of copyright under s.36 of the Copyright Act 1969 ("the Copyright Act”) for which, under s.115(2) of the Copyright Act, the Applicants are entitled to compensatory damages;
(b)passing off; plus
(c)exemplary damages for passing off and additional damages under s.115(4)(b) of the Copyright Act.
The Second Respondent represented himself and also indicated that he represented the First Respondent. He was invited to partake in the proceeding in that he was permitted to ask questions of the Applicants’ witness and make submissions as to appropriate penalties. He availed himself of the opportunity to cross-examine the witness, but asked very few questions – the nature of which were irrelevant to the issues before the Court.
The Applicants’ witness provided an unchallenged affidavit setting out the evidence supportive of the orders sought.[1] On the basis of that evidence, on the balance of probabilities, I am satisfied the Applicants have suffered damages as a consequence of passing off the First Applicant as endorsing the Respondents’ business and for an infringement of the Second Applicant’s copyright in the photograph of the First Respondent.
[1] Affidavit of Winston Franklin Elliott Broadbent sworn 27 February 2014 (“Broadbent Affidavit”)
Other orders were made after judgment was entered which were designed to have the Respondents discover pertinent documentation relevant to the assessment of damages.
Because of the lack of compliance with those orders on the part of the Respondents and their failure to produce documentary evidence as required, the Court is unable to assess appropriate damages by an account of profits and has to rely on an assessment of damages in accordance with the principles set out below. The Applicants have abandoned their attempt to have an account of profits. It has been a lengthy and expensive process for them and they wish to bring the matter to an end.
History of proceeding and earlier findings
The background to the proceeding is that the First Respondent used a photograph of the First Applicant in the promotion of its business without her approval. The Second Respondent was the controlling mind behind the First Respondent, and claims to have inspired the concept of the business; which was the provision of home care services to the elderly. The business model on which profit was to be made was the sale of “licences” at $75,000 to people to have the right to partake in the delivery of such services under the auspices and name of the First Respondent.
The Second Respondent, on behalf of both Respondents made enquiries of the Applicants’ agent as to the cost of having the First Applicant endorse the business, which was in its infancy and at that stage lacked standing and a profile in that business sector; namely, the provision of services for the aged.[2] Having been advised of the cost of such an endorsement, they declined to engage the Applicants, but nonetheless used the First Applicant's image on the First Respondent’s website and on SEEK. Their earlier action of enquiring about the cost of the First Applicant’s endorsement is clear acknowledgement that the First Applicant’s reputation was valuable and that the business had something to gain by using her image in promotional media; that is, an endorsement by the First Applicant would have particular significance and benefit to the Respondents having regard to the First Applicant's high profile with the elderly, particularly in respect of Alzheimer's disease. At the time she was also The Australian of the Year. It is beyond issue that the First Applicant has a very high public profile within the broader Australian community because of her activities in publishing and her philanthropic activities. Her reputation has come through a lifetime of hard work and from her charitable work. She was at the time, and still is, a national identity and as such her reputation has commercial worth. In those circumstances an endorsement of the business would have given it significant credibility.
[2] ibid [10] – [20]
It is important to note, however, that the Applicants would not have endorsed the business should such a proposal have been put to them[3]. They have not lost the opportunity therefore of endorsing the business, but the First Applicant has suffered a loss of reputation by having been associated with the First Respondent.[4] This is significant in respect of the calculation of damages as set out below.
[3] ibid [8], [24] and [25]
[4] ibid [23], [24]
The Respondents did not comply with orders of the Court that a letter be composed and sent to the Applicants that confirmed the First Applicant had not endorsed the business, nor did they publish a statement to that effect on the website.[5] Indeed, they failed to comply with any of the significant number of orders made in interlocutory applications. They have wantonly and contumeliously disregarded these proceedings.
[5] Broadbent Affidavit [25]
There is evidence that the reputation of the First Applicant had been damaged as a consequence of her association with the First Respondent and the apparent endorsement of the First Respondent's business.[6]
[6] Ibid, [23]
Because of the damage to reputation to the First Applicant, the Second Applicant (and indeed the First Applicant) potentially may have lost the future opportunity to associate her name with reputable businesses operating in the aged care sector. The damage is potentially continuing.
Damage to reputation – First Applicant
In my view, the damage to the First Applicant's reputation has been established by the evidence. It is this aspect of the Respondents’ behaviour that warrants substantial damages. As the Bard said:
"O! I have lost my reputation. I have lost the immortal part of myself, and what remains is bestial"[7]
Reputations are hard earned and precious, but can be easily destroyed by the corrosive action of others. The standing of the First Applicant was very high and any damage to that reputation must, as a consequence, attract greater community odium and warrants a high level of compensation.
[7] Shakespeare, Othello Act 2 Scene
A significant issue for the Court is to determine the quantum of the damages as a result of the First Applicant's loss of reputation. It is difficult to quantify where there is so little information emanating from the Respondents as to the conduct of the business. Nevertheless, as noted by Hayne J. (with whom Gleeson CJ, McHugh and Kirby JJ agreed) in Placer (Granny Smith) Pty Ltd v Theiss Contractors Pty Ltd:
"It may be that, in at least some cases, it is necessary or desirable to distinguish between a case where a plaintiff cannot adduce precise evidence of what has been lost and a case where, although apparently able to do so, the plaintiff has not adduced such evidence. In the former kind of case it may be that estimation, if not guesswork, may be necessary in assessing the damages to be allowed. References to mere difficulty in estimating damages not relieving a court from the responsibility of estimating them as best it can may find their most apt application in cases of the former rather than the latter kind.[8]
[8] (2003) 196 ALR 257 at 266 [38]
Again in Sony Computer Entertainment Australia Pty Ltd v Stirling Emmett J noted:
"If the court finds damage has occurred as a result of wrongful conduct that gives rise to a course of action, it must do its best to quantify the loss, even if a degree of speculation guesswork is involved.”[9]
His honour went on to say:
"In such a case, the court is, in effect, doing what is required of a jury but it may have to form conclusions on matters on slender material and to make allowances for contingencies, even to the extent of guesswork speculation. Uncertainty in the quantification of damage, even in the case of contracts, does not prevent an assessment, provided that some broad estimate can be made."
[9] [2001] FCA 1852 at [7]
Counsel for the First Applicant suggested one way I might quantify the compensatory damages for loss of reputation; namely, that on the evidence of the applicants’ agent, for a planned national campaign, the First Applicant would be paid $150,000 if she had endorsed the business and an extra $100,000 if the campaign utilising her name and photograph was for a 3 year period.[10] However, the First applicant freely admitted that she would not have endorsed the business.[11] Her measure of damage therefore cannot be quantified as being the same as the fee she may have missed out on. Nonetheless, a person of such standing within the community has suffered a loss of reputation by being associated with the First Respondent. That loss of reputation, however, is continuing because of the Respondents’ failure to comply with remedial orders.
[10] Broadbent Affidavit [5] – [9]
[11] ibid [8], [24] and [25]
In my view, therefore, taking into account the established loss of reputation and the likelihood of further loss of reputation into the future, an award of $200,000 is appropriate.
Exemplary Damages
The First Applicant also sought exemplary damages in the sum of $100,000. The Applicants relied upon what Brendan J. said in XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd to establish such a claim. There he said:
“As an award of exemplary damages is intended to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff's rights and to deter him from committing like conduct again, the considerations that enter into the assessment of exemplary damages are quite different from the considerations that govern the assessment of compensatory damages. There is no necessary proportionality between the assessment of the two categories. In Merest v Harvey (1814) 5 Taunt 442 (128 ER 761) substantial exemplary damages were awarded for trespass of a high-handed kind which occasioned minimal damage, Gibbs CJ saying:
‘I wish to know, in a case where a man disregards every principle which actuates the conduct of gentlemen, what is to restrain him, except large damages?’
The social purpose to be served by an award of exemplary damages is, as Lord Diplock said in Broome v Cassell& Co.,at p 1130, ‘to teach a wrongdoer that tort does not pay’."[12]
[12] [1985] CLR 448
In my view, exemplary damages should be paid, having regard to the conscious and contumelious disregard by the Respondents of the First Applicant's rights, knowing as they did that they required her permission for the use of the First Applicant’s photograph and also knowing that such use would benefit them. The Respondents cannot suggest they were ignorant of such rights having regard to the Second Respondent's earlier enquiries of the applicants' agent.[13] In this regard, I am of the view that exemplary damages should be set at $25,000.
[13] ibid [10] – [20]
Accordingly, I shall make an order that the Respondents pay the First Applicant the sum of $225,000, of which $200,000 is for compensatory damages and $25,000 for exemplary damages for passing off the First Applicant as endorsing the business.
Damages – Second Applicant
Damages for infringement of copyright
The Second Applicant has a contractual relationship with the First Applicant whereby it engages the First Applicant to undertake promotional activities and endorsements.[14] In the earlier judgment of Judge Jones on the question of liability, it was found that the Second Applicant had copyright in the First Applicant's photograph that was used by the Respondents for the promotion of the business. It was found that was in breach of s.36 of the Copyright Act. Accordingly, the Second Applicant sought compensatory damages in the sum of $250,000 for passing off and/or pursuant to section 236 of the Competition andConsumer Act 2010 and/or infringement of the Copyright Act.
[14] Ibid [3]
Section 115(2) of the Copyright Act provides for relief in the nature of compensatory damages for the depreciation in the value of the copyright as a consequence of an infringement of copyright.[15]
[15] Aristrocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (2007) 157 FCR 564
The more usual method of calculating compensatory damages for the infringement of copyright is to award the fees or licence fee that would have applied had there been agreement as to its use by the copyright owner. As indicated earlier, some difficulties arise having regard to the evidence that the Second Applicant would not have allowed the use of the copyright. [16]
[16] Australasian Performing Right Assn. Ltd v Grebo Pty Ltd (1978) 23 PC ACTR 30; LED Builders Pty Ltd v Eagle Homes Pty Ltd (1999) 44 IPR 24; Tolmark Homes Pty Ltd. v Paul (1999) 46 IPR321; Columbia Pictures Industries Inc v Luckins (1996) 34 IPR 504
Because of the recalcitrance of the Respondents in regard to the provision of material relating to the business, I face the same difficulties in calculation as I did with the First Applicant. Perram J in Flashback Holdings Pty Ltd v Showtime DVD Holdings Pty Ltd (No 6) set out eight points of reference to be considered when quantifying damages. One reference refers to an entitlement to at least nominal additional damages on proof of an infringement; another refers to Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd; and another, when calculating lost profits, to the need to employ "a degree of speculation and, at times, the calculations involved may be rough and ready". The Second Applicant has given evidence that a fee between $100,000 and $250,000 would be applicable to the use of the First Applicant’s name and photographs to endorse a product. The exact fee would depend on the nature and level of the advertising program proposed. Be that as it may, the claim for S250,000 does give a datum point, so to speak, from which an assessment of compensatory damages could be made. However, as the Applicants would not have entered into an agreement with the Respondents the level of compensation claimed should be discounted. In my view, an award of $100,000 is appropriate for this breach of copyright.
Additional damages
The Second Applicant asked for additional damages pursuant to section 115(4) of the Copyright Act. That section provides:
(4)Where, in an action under this section:
(a)an infringement of copyright is established; and
(b)the court is satisfied that it is proper to do so, having regard to:
(i)the flagrancy of the infringement; and
(ia) the need to deter similar infringements of copyright; and
(ib) the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff’s copyright; and
(ii)whether the infringement involved the conversion of a work, or other subject matter from hard copy or analogue form into a digital or other electronic machine readable form; and
(iii)any benefits shown to have accrued to the defendant by reason of the infringement; and
(iv)all other relevant matters;
the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.
The infringement of copyright has been established and I am satisfied that it is proper to make an award for additional damages. In regard to the various considerations under s.115(4)(b), the Respondents' conduct has been flagrant, having a calculated disregard for the Applicants’ rights in a cynical pursuit of benefit (s.115(b)(i)).
In my view, and I give significant weight to this aspect of the assessment of damages, the need to deter similar infringements of copyright is an important aspect in assessing the additional damages in this case (s.1115(b)(ia)).
The conduct of the Respondents in first ignoring correspondence from the Applicants and thereafter ignoring all of the remedial Court orders attracts significant damages as provided in s.115(4)(b)(ib). As Stone J in Microsoft Corporation v Ezy Loans said:
“[infringers] are not encouraged to think that by ignoring court proceedings they can escape the consequences of infringements of rights of others in pursuit of profits.”[17]
[17] (2004) 63 IPR 54 at [95]
Having taken all of the above matters into consideration I am of the view that the Second Applicant should be awarded additional damages in the sum of $100,000.
Conclusion
For the reasons set out above there will be an award of $225,000 for the First Applicant (being $200,000 compensatory damages and $25,000 for exemplary damages), and in respect of the Second Applicant, there will be an award of $200,000 (being $100,000 for infringement of copyright and $100,000 as additional damages).
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Judge O'Dwyer
Associate:
Date: 21 August 2014
0
7
3