Castrol Australia Pty Ltd v Valvoline (Australia) Pty Ltd
[1997] FCA 1559
•19 DECEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 289 of 1997
BETWEEN:
CASTROL AUSTRALIA PTY LIMITED (ACN 008 459 407)
APPLICANTAND:
VALVOLINE (AUSTRALIA) PTY LIMITED (ACN 000 446 855)
RESPONDENT
JUDGE:
LINDGREN J
DATE:
19 DECEMBER 1997
PLACE:
SYDNEY
REASONS FOR JUDGMENT
(ex tempore)
This judgment is being delivered on the last day of Term. It is important that the matter be dealt with now, although the reasons which I will give will not be as well expressed as they would be if I reserved my judgment.
The proceeding was commenced on 18 April 1997. By its application filed on that date, the applicant (“Castrol”) sought injunctions, orders for corrective advertising and damages against the respondent (“Valvoline”). The parties are competitors in the business of selling automotive lubricants and related products. Castrol complains that certain advertising of Valvoline is misleading and deceptive in contravention of s 52 of the Trade Practices Act 1974 (Cth).
The nature of Castrol's case is now found in an amended application filed on 28 November 1997 and an amended statement of claim filed on 21 November 1997. Castrol complains of Valvoline's advertising in a number of forms. First, it complains of what is referred to as "the Porter statement". This expression is derived from the name of Michael Brek Porter, the Managing Director of Valvoline. The Porter statement is a statement allegedly made by Mr Porter on 14 March 1997 broadcast by Radio Station 2UE in the course of an interview conducted by Mr John Laws. The statement is:
“We just conducted a market survey right across Australia and Valvoline in the packaged goods industry now is Number 1 in Australia.”
Castrol’s first complaint is that the Porter statement implies that it is supported by a comparison between Castrol's and Valvoline's respective shares of that portion of the automotive lubricant market comprised of those persons who buy automotive lubricants and related products for the purpose of servicing their own vehicles. Apparently, these people are called "Do It Yourselfers", the acronym "DIY" is used to refer to them, and they constitute a “DIY sub-market”. The amended statement of claim also refers to a “Mechanics sub-market” - a reference to a sub-market of mechanics who, in workshops, use automotive lubricants and associated products in, for example, servicing other people’s vehicles.
The second aspect of Valvoline's advertising of which Castrol complains is a television advertisement called the “Workshop Advertisement”. A copy of the transcript of the Workshop Advertisement is annexure A to the amended application. I need not set it out. At the risk of some inaccuracy, the Workshop Advertisement can be conceived of as suggesting that Valvoline is much used by top workshop mechanics. The amended statement of claim alleges that by the Workshop Advertisement, Valvoline expressly or impliedly represents that it has a certain share of the Mechanics sub-market, by comparison with Castrol’s share of that sub-market.
The third advertisement is also a television advertisement called the “DIY Advertisement” which, of course, is an advertisement directed to the Do It Yourselfers. A copy of the transcript of the DIY advertisement is annexure B to the amended application. It is as follows:
“Banner:Valvoline is now Australia’s No 1 oil for do-it-yourselfers.
Because we give you the highest quality oil.
And offers like this:
6 litres for the 5 litres price.
Male voice-over: Thanks, Australia, for making Valvoline No 1.
Banner: Hurry, limited offer.
[End]”
The amended statement of claim alleges that the DIY Advertisement involves a comparison between Valvoline's and Castrol's respective shares of the DIY sub-market.
The fourth, fifth and sixth complaints turn upon three respective sections of a document entitled “Proposal to Supply Oils, Lubricants and Associated Products” issued by Valvoline. This document has been called, shortly, “the Supply Proposal”. The three sections of which complaint is made are the “Consumer Acceptance”, “Brand Performance” and “Brand Loyalty” sections of the Supply Proposal. Copies of those sections are annexures BB, C and D respectively to the amended application. Again, the amended statement of claim complains that the Supply Proposal suggests a comparison between the automotive lubricants and related products of Valvoline and of Castrol, and between Valvoline's and Castrol's respective shares of the Mechanics sub-market.
Valvoline says that its advertising is not misleading or deceptive. It says that its advertising has been based on market surveys of various kinds conducted and documented for it by John Williamson & Associates (“Williamsons”). These are a “1996 Oil Usage and Attitude Study” dated May 1996, a “1996 Mechanics Study” dated December 1996, and an older “1994 Oil Usage and Attitude Study” dated November 1994. The problem which has arisen is that while Valvoline seeks to support the correctness of its advertising by reference to these studies by Williamsons, it is unwilling to produce the totality of them for inspection by the officers of Castrol, saying that it has paid much money for the surveys and that they contain confidential information. As a result of sensible discussions between the parties over a period, Valvoline has been willing to reveal the content of the surveys on a limited basis, but, as will appear, the parties have not been able to resolve one outstanding issue.
Valvoline has made the surveys available, subject to confidentiality undertakings to Castrol’s legal representatives and its expert, Professor Mark David Uncles of the School of Marketing at the University of New South Wales, who has sworn an affidavit dated 20 October 1997 filed on behalf of Castrol. That affidavit is the only affidavit evidence filed by Castrol to date. Exhibited to Professor Uncles' affidavit as Exhibits MDU3, MDU4 and MDU7 are copies of the survey reports. Professor Uncles analyses the surveys, and by the use of statistical techniques, seeks to support the view that they are misleading or deceptive. The problem is that to date, his affidavit and the various surveys that are exhibits to it have been available for inspection only by Professor Uncles himself and the legal representatives of Castrol. The result has been a course of correspondence (which is in evidence) and the present motion.
By its notice of motion filed on 21 November 1997, Castrol seeks the following orders:
“1.That the orders made by the Court on 20 June 1997 and varied on 28 August 1997 be varied to permit the solicitors for the Applicant to disclose:
(a)the affidavit of Professor Mark David Uncles filed and served on 20 October 1997 and Exhibits MDU3 to MDU5 and MDU7; and
(b)documents 36, 141, 146 and 149 (other than the fourth paragraph in document 149) in the Respondent's List of Documents,
to each of the following officers of the Applicant:
(c) Mr David Scanlan, Chief Executive Officer;
(d) Mr Bronislaw Karcz, Director Sales and Marketing; and
(e) Mr Robert Vincent, Consumer Marketing Manager,
subject to the relevant officer first signing and delivering to the Respondent an undertaking in the form of the attached schedule.”
The form of undertaking in the schedule to the notice of motion is as follows:
“Undertaking
1 I am an officer of the Applicant in proceedings No NG289 of 1997.
2Subject to any further orders of the Court and to paragraph 3 of this undertaking, I undertake not to reveal or disclose to any person any information contained in the affidavit of Professor Mark David Uncles filed on 20 October 1997, Exhibits MDU3 to MDU5 and MDU7 and any other documents discovered by the Respondent which are disclosed to me (‘the Documents’) or to use, copy or otherwise deal with the Documents otherwise than for the sole purpose of these proceedings.
3 I may disclose any information contained in the Documents to:
(a) the solicitors and counsel for the Applicant;
(b) the Court;
(c) any expert retained by the Applicant in these proceedings; and
(d)each of David Scanlan [and] Bronislaw Karcz [and] Robert Vincent of the Applicant.
4In particular, subject to any further orders of the Court, I undertake not to reveal or disclose to any officer of the Applicant other than the officers referred to in paragraph 3(d) of this undertaking any information contained in the Documents.”
As a result of further discussion and correspondence, the parties have reached agreement in relation to par 1(b) above, and Castrol no longer presses for the order in par 1(e). Further, Castrol no longer seeks disclosure of the whole of Exhibits MDU3 to MDU5 and MDU7. Rather, it has identified what it perceives to be the critical parts of those surveys which are relevant to the alleged representations. Those parts constitute what was Exhibit KCE2 to the affidavit of Kathryn Cecilia Everett, a solicitor employed by Castrol’s solicitors, sworn 16 December 1997, and what is now Exhibit A2 on the motion. As well, by way of concession and compromise but without admission, Valvoline would be willing to allow Mr David Scanlan, the Chief Executive Officer, of Castrol, to inspect the documents, subject, of course, to his giving an appropriate “confidentiality undertaking”. Thus the issue before me becomes a narrow one, namely, whether Mr Karcz should also be allowed to inspect Exhibit A2 (formerly Exhibit KCE2) subject, of course, to his giving a “confidentiality undertaking” which he has proffered.
Valvoline’s case for saying that inspection by Mr Karcz should not be allowed rests on two affidavits of Mr Porter sworn 20 June 1997 and 5 December 1997. In his first affidavit, Mr Porter gives an account of how the surveys came into existence and indicates why he considers that the information in the surveys is confidential. In the second affidavit he responds to affidavits which, in the meanwhile, had been filed on behalf of Castrol. This second affidavit also contains, in part of par 9 and pars 10, 11, 13 and 15, what might be described as the essence of Valvoline's case on the present motion. That material is as follows:
“10.The information contained in the surveys is of a type that notwithstanding any form of confidentiality agreement or undertaking which might be completed by Castrol’s officers, they, after having had access to the documents, could not avoid having knowledge of Valvoline’s strategies and planning, and the reasons for its success, and of certain facts relating to Valvoline’s competitors and using such knowledge for Castrol’s benefit and Valvoline’s detriment. To allow the executives of Castrol, who may or may not be responsible for Castrol’s marketing or strategic planning, access to the documents, would arm Castrol’s executives with information they could not ignore or forget in considering Castrol’s future market strategies and forward planning. Castrol’s officers, when they come to direct market strategy or design market advertisements could not, either consciously or unconsciously ignore this information.
11.As far as I am aware, Valvoline is the only substantial supplier of automotive lubricants which has spent the time, considerable money and trouble to commission surveys of particular segments of the oil/lubricants market and I do not wish to share this information which is secret and confidential with Valvoline’s main competitor, especially when so far as I am aware, Castrol has not commissioned any similar surveys. I have no objection to the expert retained by Castrol, or Castrol’s legal representatives having access to the documents, subject to execution of appropriate confidentiality agreements but I cannot agree to Castrol’s officers accessing the information.
12.I have been advised by my Solicitors that Castrol has issued Subpoenas to Produce Documents to the firm, John Williamson & Associates, which has carried out Valvoline’s most recent surveys, and Milne and Partners Advertising Pty Limited and Stephen Gordon Milne and Brigitte Kim Milne trading as Milne and Partners, Valvoline’s advertising agency. I am most concerned that access not be granted to Castrol’s officers to see the documents produced pursuant to these Subpoenas, particularly by Milne and Partners which contain particularly sensitive information concerning Valvoline’s strategies and advertising for the forthcoming twelve months and longer.
13.So far as Valvoline’s advertising over the last four years is concerned, that advertising campaign has been guided in part by the results of these surveys. Valvoline has expended some $18,000,000.00 on advertising in the last four financial years. Valvoline has also planned its advertising campaign for the next twenty four months, based on the material in these surveys, and Valvoline’s projected advertising expenses over the next twenty four months would be in the vicinity of $10,000,000.00.
14.I am afraid that if access is granted, it is open for Castrol to discontinue these proceedings, pay Valvoline’s costs, and thereafter be armed with Valvoline’s market history and strategy for the immediate future.
15.The corporate entity of Castrol does not act through its officers but through its Board of Directors. The Board usually acts on the advice of its Chief Executive and if this Court was minded to grant access, it should only grant access to Castrol’s Chief Executive and not any other of Castrol’s officers.”
Castrol’s case is supported by an affidavit of Ms Everett sworn on 16 December 1997, an affidavit of Mr Scanlan, sworn 17 December 1997, and an affidavit of the same date of Mr Karcz. Mr Karcz is the Director - Sales and Marketing of Castrol.
I proceed now to refer to what seem to be some of the salient issues on the motion. I should say at once that I consider that the remaining issue between the parties is finely balanced.
The evidence shows that Castrol would be better placed in preparing for and conducting the hearing if Mr Karcz, as well as Mr Scanlan, had access to the material in question. This is because he is the “hands on” officer of Castrol in the marketing area and will be the officer engaged in the day to day running of the hearing. He has been employed in sales and marketing in the lubricants and related products industry for approximately eight years and knows the industry well. He would be better placed than Mr Scanlan is in instructing, and conversing with, Professor Uncles and Castrol's solicitors. This is not to say that it would be impossible for Castrol to run its case without his seeing the material, but it would not be convenient for it to do so.
What would be necessary would be for Mr Scanlan to become conversant with the particular area of Castrol's activity with which Mr Karcz is already familiar. It was suggested that Mr Scanlan could achieve that familiarity within perhaps one hour of reading time. I think it would take longer than that, but I do not think the length of time that it would take is conclusive. It would perhaps be difficult for Mr Scanlan, even with many hours of study, to acquire the total familiarity with marketing that Mr Karcz already has.
But the very familiarity with the marketing of lubricants that Mr Karcz has built up over the years and his ongoing marketing role within Castrol lend emphasis to the difficulty on which Valvoline relies, that is, that for the foreseeable future he will be working in the marketing area on behalf of Castrol and may, with the best will in the world, unconsciously use to Castrol’s advantage the information that he acquires by reading Valvoline’s surveys reports and Professor Uncles’ affidavit. In his affidavit Mr Karcz says that he understands the undertaking which he would be asked to give to the Court. I have observed him in the witness box and in the short time that he was there, he impressed me as a person who would conscientiously seek to guard against using, even in a minor way, information which he might acquire. But the fact is that Mr Karcz will simply be unable ever to put the information, once acquired, out of his mind completely. Indeed, the problem with this kind of case is that a situation can develop in which there is an awkward conflict, or at least a tension, between the undertaking given and the obligation which a company officer owes to serve the interests of his or her employer. Mr Karcz said that if a difficult situation arose he would discuss it with Mr Scanlan. Although there is no reason to doubt that Mr Scanlan would seek to give appropriate guidance, the very necessity for the discussion, coupled with Mr Scanlan’s own duty to act in Castrol’s interests, reveals the kind of problem that can arise.
On the other hand, when I consider the material in question, although I accept that there is confidential material in it and therefore a weighing exercise is required, I do not think that the case for confidentiality is a strong one. The surveys, as one would expect, describe the method which was adopted by Williamsons, and, although, no doubt, Valvoline would prefer Castrol not to know the method which was adopted, it is not suggested that there is anything unique in it. The surveys are simply marketing surveys. Of course the results are confidential, but this brings me to the fact that Mr Porter has, himself, revealed some of the results. Another point to bear in mind is that some of the survey material is not recent. I refer, in particular, to the 1994 Oil Usage and Attitude Study. Moreover, the claim made for confidentiality is made in very general terms by Valvoline, which, as I have said, refers to the substantial money expended on the surveys. Some of the results have already been revealed indirectly to Castrol and are in fact annexed to its amended application. Mr Porter, in giving evidence, acknowledged that some of the other results had been despatched to, I think, some 60-80 people as part of the Supply Proposal.
In the result, although I think that there is material in the survey reports which remains confidential to Valvoline, I do not think that the case for confidentiality, and concomitantly for damage to Valvoline by disclosure, is so strong that it is not adequately met by the very limited disclosure sought and by the undertaking proffered. I think that Castrol should succeed on the motion.
However, I would not make an order that Valvoline pay Castrol's costs. The reason is that I regard the kind of relief which Castrol seeks and will obtain as an aspect of the judicial management of the case. It is too simple to say that on any finely balanced issue such as this, the unsuccessful party must pay costs. In any event, the order for disclosure will be limited by reference to Exhibit A2 on the motion (formerly Exhibit KCE2), not the whole of Exhibits MDU3 to MDU5 and MDU7 referred to in the notice of motion. Accordingly, I will not make any order for costs.
The orders of the Court are as follows: first, that the orders made by the Court on 20 June 1997, and varied on 28 August 1997, be further varied to permit the solicitors for the applicant to disclose: (a) the affidavit of Professor Mark David Uncles sworn 20 October 1997, and Exhibit A2 on the motion (formerly Exhibit KCE2 to the affidavit of Kathryn Cecilia Everett, sworn 16 December 1997); and (b) documents 36, 141, 146 and 149 (other than the fourth paragraph in document 149) in the respondent's list of documents, to each of David Derrick Scanlan and Bronislaw Kazimierz Karcz, subject to his first signing and delivering to the respondent an undertaking in the form below. Next, I note that there will be no order for costs on the motion.
“Undertaking
1 I am an officer of the Applicant in proceedings No NG289 of 1997.
2Subject to any further orders of the Court and to paragraph 3 of this undertaking, I undertake not to reveal or disclose to any person any information contained in the affidavit of Professor Mark David Uncles filed on 20 October 1997, the extracts from Exhibits MDU3, MDU4 and MDU7 contained in Exhibit KCE2 to the affidavit of Kathryn Cecilia Everett sworn 16 December 1997 and any other documents discovered by the Respondent which are disclosed to me (‘the Documents’) or to use, copy or otherwise deal with the Documents otherwise than for the sole purpose of these proceedings.
3I may disclose any information contained in the Documents to:
(a)the solicitors and counsel for the Applicant;
(b)the Court;
(c)any expert retained by the Applicant in these proceedings; and
(d)David Scanlan/Bronislaw Karcz of the Applicant.
4In particular, subject to any further orders of the Court, I undertake not to reveal or disclose to any officer of the Applicant other than the officers referred to in paragraph 3(d) of this undertaking any information contained in the Documents.”
I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren
Associate:
Dated: 19 December 1997
Counsel for the Applicant: Mr J T Gleeson Solicitors for the Applicant: Freehill Hollingdale & Page Counsel for the Respondent: Mr P J McEwen SC Solicitors for the Respondent: Worthington Storey Date of Hearing: 19 December 1997 Date of Judgment: 19 December 1997
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