George (Melbourne) Pty Ltd v Mitchell
[2006] FMCA 464
•31 March 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GEORGE (MELBOURNE) PTY LTD v MITCHELL & ANOR | [2006] FMCA 464 |
| TRADE PRACTICES – Misleading and deceptive conduct – claim for contravention of s.52 Trade Practices Act 1974 arising from misrepresentation – representation about intention to make payment and capacity to make payment – claim made out. COPYRIGHT – Breach of copyright –advertising campaign and materials developed by applicant for company owned by first respondent – copyright still vested in applicant as full payment not received – relief to prevent use of copyrighted material sought – injunction granted. EQUITY – Breach of confidence – confidential information – interim injunctions – injunctions granted. |
| Copyright Act1968 Trade Practices Act 1974, s.52 |
| Applicant: | GEORGE (MELBOURNE) PTY LTD |
| First Respondent: | STUART RITCHIE MITCHELL |
| Second Respondent: | ESUS PTY LTD |
| File Number: | MLG 360 of 2006 |
| Judgment of: | Riethmuller FM |
| Hearing date: | 31 March 2006 |
| Date of Last Submission: | 31 March 2006 |
| Delivered at: | Melbourne |
| Delivered on: | 31 March 2006 |
REPRESENTATION
| Counsel for the Applicant: | Mr S.J. Minahan |
| Solicitors for the Applicant: | Anderson Rice |
ORDERS
Pending trial of this proceeding or further order that each of the Respondents:
(a)whether by himself or (as the case may be) itself, its directors, officers, employees, agents or servants or in any manner whatsoever, is restrained from infringing the applicant’s copyright in the artistic works set out in annexure “A” attached to this order and exhibited as “GT-4” and “GT-5” to the affidavit of George Tomeski sworn 14 March 2006 filed and and served in this proceeding ;
whether by himself or (as the case may be) itself, its directors, officers, employees, agents or servants or in any manner whatsoever, is restrained from exposing, offering or importing for sale or letting for hire, manufacturing or otherwise promoting or distributing footwear or apparel by reference to the “esus”, brand or the artistic works set out in annexure “A” attached to this Order and exhibited as “GT-4” and “GT-5” to the affidavit of George Tomeski sworn 14 March 2006 filed and and served in this proceeding or any deceptively similar brands or artistic works.
Order 1 shall take effect upon service of a copy of this order upon each of the Respondents and service by ordinary pre-paid post to each of the Respondents at 249 Auburn Road Hawthorn, Victoria 3122 for the First Respondent and unit 5/221 Williams Road, South Yarra Victoria 3141 for the Second Respondent shall be sufficient.
The Applicant have leave to file and serve an amended Application if so advise, and to file and serve and further affidavits in support of its claim on or before 21 April 2006, such service to be effected as provided for in paragraph 3 hereof unless the Respondents or either of them are represented by a solicitor on the record, in which case the usual rules concerning service are to apply.
This Application be fixed as an unopposed matter for hearing at Melbourne on Thursday 4 May 2006 at 10.15 a.m., for a duration of one day.
Applicant’s costs of this motion are reserved.
There be liberty to apply on 48 hours written notice reserved to the parties.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 360 of 2006
| GEORGE (MELBOURNE) PTY LTD |
Applicant
And
| STUART RITCHIE MITCHELL |
First Respondent
| ESUS PTY LTD |
Second Respondent
REASONS FOR JUDGMENT
(revised from transcript)
This is an application for injunctions and damages reliant upon allegations of breach of s.52 of the Trade Practices Act 1974, a breach of copyright and a breach of confidence at equity. The claims, the subject of the application before the court, arise out of a contract for the supply of what could loosely be described as advertising services.
The contract is a written document executed on 22 November 2005 between the applicant and a company, Northstar Corporation Pty Ltd, ACN 084 220 342, signed on behalf of Northstar by the first respondent in these proceedings. The advertising services relate to an advertising campaign including logos and a large variety of material with respect to the promotion of a new type of football boot.
The contract sets out in some detail the services to be provided by the applicant at clause 2, which is in the following terms:
2. RETAINER SERVICES
Within this agreement there are two specific products identified for brand and product design:
1. The ‘AFL’ football boot
2. The ‘Touch’ football boot
‘george’ will undertake the following scope of work for ‘Northstar’ (previously referred to as ‘Azuma’) as part of its ‘retainer services’:
I.Strategy Development
II. Creative Development
III. Account Management
I.Strategy Development
‘George’ to identify strategies for:
·Branding
·Licensing
·Launching (product range to the Australian market)
·Communications Development
a) Communication Development
‘George’ will work with ARM (Amanda Ruben Media) to devise the most appropriate Communications and PR Strategies for the ‘Northstar’ brand. Specific developments will focus on:
ØLaunch
ØAdvertising
ØViral marketing
II.Creative Development
·Corporate Identity
·Product Design
a)Corporate Identity
‘George’ to engage in a four state development process of ‘Northstar’ corporate identity:
I.Brand Name Identification
Propose potential brand names in replace of ‘Northstar’. ‘George’ will also develop associated product names as required for the AFL football boot and the Touch football boot.
II.Identify Development
To develop the Corporate Identity if ‘Northstar’ offering various design alternatives.
III.Design Refinement
Refine the short listed corporate identities and their application – for example, business cards and signage.
IV.Design Application
The exploration of the final identity across various mediums, to assist the client in visualising how the design reflects their brand. The application of the brand mark may include (but is not limited to):
Ø Stationery, including:
·Business cards
·Letterhead
·Email templates
·With Compliments Slips
·Fax Template
The end result of the design process is approved graphic designs ready to apply to artwork production. Artwork production will be cost estimated to specific requirement.
b)Product Design
‘George’ will provide product and packaging visual design concepts for the AFL football boot and the Touch football boot around design and technical specifications as supplied by ‘Northstar’
Ø Product Visual Design:
·Colour palate
·Design/patters
·Materials
Ø Packaging Visual Design:
·Determine how the product will be packaged
·Colour palate
·Design/patterns
‘George’ will determine the ‘look & feel’ of the product while keeping to the company’s own brand identity.
III. Account Management
a)Account Director to co-ordinate:
·The preparation of accurate minutes of all meetings and contact reports between ‘george’ and ‘Northstar’.
·The preparation of reports of all current work in progress.
·The preparation of invoices for ‘Northstar’, including the validity and accuracy of invoices received from suppliers and maintaining adequate budget controls for production expenditure.
·At all stages of a project, ‘george’ will:
· update ‘Northstar’ at regular intervals and whenever required by ‘Northstar’, show significant activities;
· convene, chair, conduct and minute meetings to meet the requirements of the project;
· provide creative recommendation and production schedules and comply with requirements specified therein;
· monitor and co ordinate the delivery of a project on time and within ‘Northstar’ approved budgets to the extent such matters are within ‘georges’ control.
Contained within the contract is an agreement by the applicant to assign the intellectual property rights, with respect to the relevant work undertaken under the contract, to Northstar upon payment. Clause 4 provides for this in the following terms:
Upon payment in full by Northstar to George for the relevant work George agrees to assign to Northstar all intellectual property rights and any products and other advertising material developed for Northstar by George except in circumstances where such intellectual property rights are reserved by a third party.
Payment is provided for in clause 6, which incorporates a schedule of payments which runs from the date of the contract through until 1 March 2006. There are monthly payments which total a sum of $95,000 plus GST. The contract also provides for confidentiality in clause 7, which is in the following terms:
7.CONFIDENTIALITY
7.1 Northstar’s obligations
(a)Except as stated in this Agreement, Northstar much not and must not permit any of its employees, agents and contractors to use or disclose to any person any confidential information disclosed to it by or on behalf of George without prior written consent of George.
(b) Clause 7.1(a) does not apply to any information which:
(i)Is generally available to the public (other than as a result of wrongful disclosure in contravention of clause 7.1(a); or
(ii)Is required to be disclosed by law.
7.2George’s obligations
(a)Except as stated this Agreement, George must not and must not permit any of its employees, agents and contractors to use or disclose to any person any confidential information disclosed to it by or on behalf of Northstar without the prior written consent of Northstar;
(b)Clause 7.2(a) does not apply to any information which:
(i)Is generally available to the public (other than as a result of wrongful disclosure in the contravention of clause 7.2(a); or
(ii)Is required to be disclosed by law.
The clause refers to confidential information which is defined earlier in clause 1.1 of the contract as follows:
Confidential information means information of every kind disclosed to Northstar in relation to this agreement.
The factual background to the agreement is set out in the affidavit of Mr Tomeski filed in the proceedings. Mr Tomeski is the managing director of the applicant and authorised to make the affidavit on the applicant's behalf. He sets out that the applicant conducts an advertising and marketing business in Melbourne which offers a variety of services including design and development of branding, logos and associated designs for products, planning and executing marketing and advertising strategies and campaigns.
He sets out that the applicant came in contact with the first respondent and that representations were made with respect to the business that Northstar was proposing to undertake. In summary, Northstar was to import a new style of football boot which incorporated what was said to be a new technology with respect to the boots and that there were global patent in place.
The new football boot was said to be significant in the same way that a boot designed by Craig Johnston, a former Australian international soccer player, was significant in the market some time ago. The first respondent claimed that a number of football boot manufacturers were seeking or bidding for, rights to manufacture the boots and that there were a number of investors, or potential investors, to participate in the company and the venture which was the marketing of the new type of boot.
It was represented that the services would be paid for if provided in accordance with the retainer. As a result of the representations, and in accordance with the agreement entered into between Northstar and George, a large amount of work was undertaken by George through its employees. A range of branding options were developed, including a plan for a brand identity described as Esus, in the form of logos and designs. Copies of these documents are annexed to the affidavit sworn by Mr Tomeski and are extensive. The work also included designing casual wear, street shoes, key rings, stationery, advertisements - even to the extent of designing a Christmas card.
Invoices were sent in accordance with the contract however, payments were not made in accordance with the contract and a significant sum remains due and owing under that contract.
It transpired that at the time that Northstar entered into the contract through its director, the first respondent, it was the subject of deregistration proceedings. By 29 January 2006 Northstar had been deregistered as a company. However, on 10 January 2006, a new company was registered with the name Esus Pty Ltd, the majority shareholding of which is held by the first respondent. A person named Roula Sumaris is described as the company's director. Her address is the same as that of the first respondent. Mr Tomeski says that he believes that she is the de facto partner of the first respondent. He says he was never informed that Northstar was in the process of being deregistered, nor of the existence of Esus Pty Ltd.
Mr Tomeski deposes that had he been aware that Northstar was not going to be able to afford to pay for the services to be provided, such services would not be provided. Demands have been made for the payments and the payments have not been forthcoming.
The affidavit of Mr Tomeski also sets out that the work undertaken is, in his opinion, far more valuable than the contract price and that the contract price was negotiated by the applicant on the basis that it was hopeful it would receive future work from a company that could have become a major client.
The proceedings in the matter were subsequently issued and served. Affidavits of service have been provided. Neither respondent has attended to oppose the application for interim injunctions. There is no doubt that the respondents are aware of the proceedings as they engaged a solicitor after service who wrote to the applicant on 22 March 2006 with respect to various matters the subject of the proceedings and then again wrote on 27 March 2006 advising that they had ceased acting for the respondents.
With respect to the claim under the Trade Practices Act1974, it is said that there was misleading and deceptive conduct by Northstar and that the second respondent was knowingly involved in that conduct. That conduct was with respect to the representations about the intention to make payment and the capacity to make payment for the work to be done. It appears to me that there is a prima facie case in this regard for a claim pursuant to the Trade Practices Act1974.
Secondly, it is said that there is a breach of copyright in that much of the material produced would be works within the meaning of the Copyright Act1968 which can be the subject of copyright. They were produced by employees of the applicant and therefore, prima facie, the copyright vests in the applicant. The copyright has not been transferred pursuant to the agreement and there is no other basis in the material to indicate a transfer of the copyright in the works.
As a result any use by the respondents of the works is, prima facie, a breach of copyright under the Copyright Act1968 which specifically provides for a power to provide relief by way of an injunction. Whilst the material does not set out details of copying that has occurred it appears from the facts and circumstances in the material, and the current name of the first respondent and the conduct of the second respondent, that there is a very real risk, if not likelihood, of a breach of copyright in these works occurring. In this regard, I therefore find that there is a prima facie case for an injunction to prevent a breach of copyright.
The next matter is allegations with respect to a breach of confidence. It appears to me that the information that was the subject of the contract has the quality of confidential information about it. The subject matter is advertising campaigns, logos, names and designs generated to have an impact upon a marketplace for the purpose of selling products. It is a matter of commonsense that the impact of the campaigns would be significantly reduced if the material was not confidential until its planned release, and that if it were used by another, it would destroy its value.
It is also clear that the information was imparted in circumstances which import an obligation of confidence in that the agreement specifically provides for confidentiality. In any event, the nature of the material and the relationship of the parties indicates that such a confidential relationship was intended.
There is nothing to indicate that the use of the information by any person other than Northstar has been authorised and it is apparent, on the basis of a prima facie case, that some of the information has been viewed or utilised in that a new company has been incorporated using the word ‘Esus’ which is central to the advertising campaign information that was developed.
It appears to me there is a prima facie case of detriment to the applicant if others use this information. If such use is made, the applicant would be unable to utilise the work or material for any other client. As the material was produced pursuant to a contract for which they were to be paid, and they have not been remunerated in accordance with that agreement to date, any unauthorised use would leave them without any recompense for the work undertaken.
I am satisfied that the material can be identified with a sufficient degree of specificity to allow orders to be made with respect to a breach of confidence. I am also satisfied that there is a prima facie case that orders and remedies for a breach of confidence are reasonable in the circumstances of this case. Whilst there is not a direct relationship between the applicant and Esus Pty Ltd, nor does it seem that there is a direct contractual link as between the applicant and the second respondent, an action for a breach of confidence does not (at least nowadays) depend upon a direct relationship between the parties.
There is a strong prima facie case that Esus Pty Ltd would have been aware of the confidential nature of the material, not only from its very nature but also the involvement of the first respondent, and there can be no doubt that the first respondent was aware of the nature of the material from the way in which the contract (which he signed on behalf of Northstar) was framed.
Having made the above observations I note that I have, at present, only material from the applicant before me and there may well be significant other evidence impacting upon this case in due course. However, material that is currently before me shows a strong prima facie case for relief.
I must also consider the balance of convenience. Injunctions in the style sought by the applicant preserve the rights of the applicant and the value of the work undertaken by them. I have no evidence before me to show any significant detriment to the respondents. There is no evidence that Esus Pty Ltd has utilised the advertising material or been actively promoting the goods, utilising the name Esus. In the circumstances I find that the balance of convenience favours interim injunctive relief.
I now turn to determine the terms of the injunctive relief that ought to be granted. In this case counsel for the applicant has provided a draft order for the injunctions sought. However that order is, in some ways, slightly different to the terms of the application. As the respondents did not appear they do not have notice of any variation to the orders sought beyond that set out in the application.
In these circumstances, other than for purely procedural matters or minor or incidental matters, it appears to me that it is not appropriate to go beyond the terms of the application in making injunctions in this case. I also note from the material that the references to the brands ‘Four Q’ and ‘Peak’ need to be deleted as they were not developed by the applicant, although that does not extend to the works of the applicant that have been produced to assist with the marketing with respect to these brands.
I also note that there are two images that came from an image library and to which the applicant only has a licence for use and therefore cannot obtain an injunction with respect to those images as a result of any alleged breach of copyright.
In the circumstances, I therefore propose to make orders for interim injunctions in terms of the application with those necessary deletions and reserve the costs of the current application until the next hearing date.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Riethmuller FM
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