JDP Australasia Pty Ltd v Pneumatic Systems International Pty Ltd
[1999] WASC 14
•12/05/1999
JDP AUSTRALASIA PTY LTD -v- PNEUMATIC SYSTEMS INTERNATIONAL PTY LTD & ORS [1999] WASC 14
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [1999] WASC 14 | |
| 12/05/1999 | |||
| Case No: | CIV:1433/1999 | 5 MAY 1999 | |
| Coram: | SCOTT J | 12/05/99 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Injunction granted. | ||
| PDF Version |
| Parties: | JDP AUSTRALASIA PTY LTD (ACN 080 673 472) PNEUMATIC SYSTEMS INTERNATIONAL PTY LTD (ACN 066 203 834) DAVID CASELLA HENRY SKLARZ |
Catchwords: | Injunctions Considerations upon which Court exercises discretion Publication of material to plaintiff's distributors said to be defamatory and false Principles considered. |
Case References: | Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 Edelsten v John Fairfax & Sons Ltd (1978) 1 NSWLR 685 Gabriel v Lobban [1976] VR 689 Harper v Whitby (1978) 1 NSWLR 35 Swimsure (Laboratories) Pty Ltd v McDonald (1979) 2 NSWLR 796 Nil. |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
PNEUMATIC SYSTEMS INTERNATIONAL PTY LTD (ACN 066 203 834)
First Defendant
DAVID CASELLA
Second Defendant
HENRY SKLARZ
Third Defendant
Catchwords:
Injunctions - Considerations upon which Court exercises discretion - Publication of material to plaintiff's distributors said to be defamatory and false - Principles considered.
Legislation:
(Page 2)
- Result:
Injunction granted.
Representation:
Counsel:
Plaintiff : Mr I A Morison
First Defendant : Mr M L Bennett
Second Defendant : Mr M L Bennett
Third Defendant : Mr M L Bennett
Plaintiff : Kott Gunning
First Defendant : Bennett & Co
Second Defendant : Bennett & Co
Third Defendant : Bennett & Co
Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148
Edelsten v John Fairfax & Sons Ltd (1978) 1 NSWLR 685
Gabriel v Lobban [1976] VR 689
Harper v Whitby (1978) 1 NSWLR 35
Swimsure (Laboratories) Pty Ltd v McDonald (1979) 2 NSWLR 796
Case(s) also cited:
Nil.
(Page 3)
1 SCOTT J: The plaintiffs in this action have applied for an interlocutory injunction seeking to restrain the defendants from stating, or causing to be stated in an manner to any person whom the defendants know, or have grounds to believe are:
(a) suppliers or potential suppliers of the plaintiff;
(b) distributors or potential distributors of the plaintiff;
(c) customers or potential customers of the plaintiff;
(d) consumers or potential consumers of the plaintiff's goods.
To the effect that
(e) the plaintiff has infringed the intellectual property rights of the defendant;
(f) the plaintiff is insolvent;
(g) alleging that Mr John Doubleday, director of the plaintiff is engaged in criminal or fraudulent activity, or disclose that he is charged with criminal offences, or has a criminal record.
2 The application is for an interlocutory injunction in those terms, pending the hearing of the action.
3 There have been many affidavits filed in support of the application and others in opposition to it.
4 In order to understand the basis of the application, it is necessary firstly to outline some of the factual matters which lie behind the action. There is evidence to suggest that the first defendant Pneumatic Systems International ("PSI") conducted the business of developing, designing and manufacturing certain pneumatic tools largely connected with the cleaning of pipes. PSI deposes that it has applied for, and in some cases obtained, patents and trademarks for systems and products which it has developed. There is a dispute between the parties as to whether PSI will ultimately obtain patents in respect of other products where patents have been applied for. The reason for that, the plaintiff deposes, is that other companies have used similar technology for a considerable time and there is nothing novel about the system developed by PSI. That, however, is another matter for another day.
5 It is common ground that a director of the plaintiff, John Doubleday ("Doubleday") met a director of PSI, one David Casella ("Casella") while each was in Casuarina prison. Doubleday was at that time serving a term of imprisonment for armed robbery.
(Page 4)
6 Upon Doubleday's release from prison, he and Casella set up a company JDP Australia Pty Ltd ("JDP Australia") which was incorporated for the purposes of selling the first defendant's products. For that right, JDP Australia was to pay to PSI, $750,000. It is common ground that the money was not paid. PSI eventually cancelled JDP Australia's contract and as a consequence, JDP Australia was wound up.
7 Following the winding up of JDP Australia Pty Ltd, the present plaintiff, JDP Australasia Pty Ltd was incorporated. That company is referred to in these reasons as "JDP". JDP then set about developing its own products to perform the same kind of work as the products developed by the first defendant, PSI. The evidence indicates that the business conducted by the plaintiff was successful and at the time of swearing his affidavit of 29 April 1999, Doubleday deposes to the fact that the plaintiff now employs some 30 people in Western Australia and 250 world-wide.
8 JDP sought to distribute its products in England and dealt with a company Cable Management Centre Ltd with a view to distributing JDP's products. Doubleday deposes to the fact that in the course of seeking to set up that distributorship, representatives of a company incorporated in the United Kingdom, Pneumatic Systems (UK) Ltd ("PSUK") purported to disrupt the plaintiff's attempts to set up that distributorship. There is evidence to suggest that PSUK was 50% owned by the first defendant. Subject to that consideration however, there is no other evidence to suggest that the first defendant had anything to do with distributors in the United Kingdom.
9 There is affidavit evidence advanced for the plaintiffs to suggest that the plaintiffs also sought to enter into a distribution agreement in the United States with a company called Cummins Utilities Supplies ("Cummins"). Doubleday deposes to the fact that pursuant to their arrangements with Cummins, orders in excess of $3 million were placed with the plaintiff. Some of those orders have been met and the plaintiff has been paid the sum of $US1.1 million. The remaining order to a total of $2.7 million remains to be completed. There is evidence to suggest that Cummins does not intend to progress those orders, at least until a substantial proportion of the product which it has already purchased is disposed of. In that respect a copy of an e-mail, being exhibit JD12 to the affidavit of John Doubleday of 29 April 1999, said to have come from Steve Hitt ("Hitt") of Cummins says:
"As regards the open purchase orders you refer to, I communicated with Annette, in early February, that we will not
(Page 5)
- be accepting any more product until at least 60% of the existing $2 million plus inventory has moved. Our distribution agreement with you does not obligate us to take on an unlimited amount of inventory. We have made a substantial investment in JDP products based on sale projections that have not materialised to date. We cannot sit on an investment of this nature, nor add to it, without more movement of the product."
10 From that copy e-mail it is plain that the reason why Cummins has not proceeded with the more recent order is because stock that it has already purchased, has not been sold. In that e-mail there is no suggestion that any information provided to Cummins by the defendants, has brought about Cummins' decision with respect to the further order.
11 The injunction which the plaintiff seeks, as can be seen from the terms referred to earlier, is directed at restraining the defendants from making certain representations to parties with whom the plaintiff is dealing. In that respect, having examined the representations and statements said to have been made by the first defendant to the parties with whom the plaintiff is dealing, the evidence leads towards the following tentative conclusions:
(a) There is no evidence to suggest that the first defendant has anything to do with any action that may have been taken in the United Kingdom by PSUK. Such evidence as there is, suggests only that persons involved with that company, a different corporate entity to the first defendant, may have been involved in communications with the plaintiff's distributor in that country. That being the case there is nothing to suggest that the plaintiff has an arguable case in relation to anything which it is said that the first defendant has done in the United Kingdom.
(b) In relation, however, to the company Cummins Diesel, there are a number of documents purporting to be signed by the second defendant Casella which may come within the categories of conduct challenged by the plaintiff in the statement of claim. In that respect, whilst the letter from Casella to the Chief Executive Officer of Cummins Diesel (being exhibit JD5 to the affidavit of John Doubleday sworn 29 April 1999) is couched in strong terms, the only area in which it is said that a false representation is made is the reference to Doubleday using "fraudulent means" to gain advantage for his products.
(Page 6)
12 Having perused the affidavits provided by all of the parties in this action, in my opinion there is little or no evidence to suggest that the plaintiff has used "fraudulent means" to advantage the distribution of its product. In reaching that view, I have considered the evidence provided by the defendants which suggests that they have already made proper legal claim to the intellectual property which the first defendant claims to have developed. In addition I have taken into account the evidence provided by the defendants which suggests that the plaintiff acquired the intellectual property of the first defendant during the period in relation to which JDP Australia was to act as its distributor. Nonetheless, there is nothing beyond that, which in my view can justify the claim that the plaintiff has used any fraudulent means to advance the sale of its products.
13 The plaintiff, in a schedule, has set out the seven causes of action which it says it has against the defendants and the elements of each of those causes of action. The plaintiff says that it will seek to establish the following causes of action:
1. Defamation (libel);
2. Interference with contractual relations;
3. Unlawful interference with trade or business (including intimidation);
4. Conspiracy;
5. Injurious falsehood (incorporating slander of goods, trader libel, disparagement);
6. Misleading and deceptive conduct (Trade Practices Act ss82 and 52);
7. Groundless threats of legal proceedings contrary to s202 of the Copyright Act 1968.
14 I have examined each of those alleged causes of action and the elements of each. At this stage it is not possible to make any forecast as to whether any, or all of those causes of actions will be made out. In any event it is inappropriate to comment on the merits of the action at this stage of the proceedings.
15 The terms of the injunction which the plaintiff seeks, would have the effect of limiting the freedom of speech of the defendants. To the extent that it is said that the defendants' statements to the persons with whom the plaintiff is dealing are defamatory, there are considerable difficulties for the plaintiff to overcome in establishing its right to an interlocutory
(Page 7)
- injunction: see Gabriel v Lobban [1976] VR 689; Edelsten v John Fairfax & Sons Ltd (1978) 1 NSWLR 685 per Yeldham J and Harper v Whitby (1978) 1 NSWLR 35 per Maxwell J and Swimsure (Laboratories) Pty Ltd v McDonald (1979) 2 NSWLR 796 per Hunt J. Those decisions demonstrate the difficulty that arises when an action of this sort seeks to limit the right of free speech. Those cases also illustrate the difficulty in determining at an interlocutory stage, whether the defendants have a defence such as justification or privilege. In this case the problem is further accentuated by the fact that it is conceded with one exception that, those things said about the plaintiff by the defendants are not said to be false. The plaintiff argues that it is not insolvent but there is evidence to suggest that it faces financial difficulties. The arguable exception, is the allegation that the plaintiff used fraudulent means, to which I have earlier referred. In the case of Swimsure (Laboratories) Pty Ltd v McDonald (supra) the court considered a case similar to the present. The plaintiff in that case was a manufacturer and wholesaler of an algaecide used in domestic swimming pools. The marketing manager of a well-established similar product contacted two organisations with which the plaintiff had made arrangements to market its products and advised them not to handle the plaintiff's products because it was alleged the product was unsuitable for the purpose for which it was intended. Other criticisms of the plaintiff's products were made by the defendant. The plaintiff obtained an interlocutory injunction restraining publication of the alleged statements and an application to extend the injunction came before Hunt J in the Common Law Division of the Supreme Court of New South Wales. In his judgment, Hunt J said at 800:
"The special exception to the 'balance of convenience' rule is not, of course, restricted to newspaper cases. In Quartz Hill Consolidated Gold Mining Co v Beall (1882) 20 Ch D 501 the Court of Appeal upheld an appeal against the grant of an injunction where the matter complained of consisted of a circular to the shareholders of a company urging its dissolution or reconstitution and expressed to have been published in order to protect the common interests of the defendant's clients, who were shareholders, and the persons to whom it was published. The principal reason for the decision, agreed to by each of the three members of the court, was the difficulty of deciding whether the occasion of the publication was privileged upon an interlocutory application.
It is difficult, if not impossible, to see how these concepts of free speech and discussion and the liberty of the press can be involved
(Page 8)
- in the ordinary slander of goods action. The conflict in defamation actions between the plaintiff's right to his unblemished reputation, and the defendant's right publicly to discuss all matters of public interest simply does not arise in an action for slander of goods. The issue is not whether the defendant, in disparaging the plaintiff's goods, had a right or a privilege to do so, but rather whether he has done so maliciously and whether, in so doing, he has caused actual damage to the plaintiff.
- In framing its action as one for slander of goods, so far as the matter complained of consists of a disparagement of its product in this case, the plaintiff is not avoiding an action for defamation, and the special exception to the 'balance of convenience' rule in granting interlocutory injunctions. No such action is fairly open to the plaintiff in relation to that disparagement, although clearly it has an arguable case in defamation so far as its own conduct is also disparaged. An injunction limited to the disparagement of the plaintiff's goods does not, in my opinion, have the effect of an injunction which the Court would not grant in defamation. There is, as I have said, no question of free speech and discussion and no question of the liberty of the press involved.
Some of the other categories of the tort of injurious falsehood may not similarly be exempt from the 'balance of convenience' rule; what I have said must be understood as being limited in its application to the particular tort of slander of goods.
In the present case I must, therefore, address myself to the two main inquiries to be considered in applications for interlocutory injunctions in any case other than defamation.
The first is whether the plaintiff has made out a prima facie case, in the sense that the degree of probability or likelihood of the plaintiff's success at the trial of the action is sufficient, in the circumstances of the case, to warrant preservation of the status quo. In considering this question, I am not required to undertake a preliminary trial, and to give or withhold interlocutory relief upon a forecast as to the ultimate result of the case. The second inquiry is whether the inconvenience or injury which the plaintiff would be likely to suffer, if an injunction were refused, outweighs or is outweighed by the injury which the defendants would suffer, if an injunction were granted. I refer, without
(Page 9)
- quoting from them, to the cases of Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; World Series Cricket Pty Ltd v Parish (1977) 16 ALR 181 and Shercliff v Engadine Acceptance Corporation Pty Ltd [1979] 1 NSWLR 729."
16 Of significance also in the context of this case is the judgment of Menhennitt J in Gabriel v Lobban [1976] VR 689 which involved an allegation of publication of a libel, published by way of a circular to the shareholders of a company. The injunction sought was to restrain re-publication of the circular. That case concerned an allegation of the publication of defamatory material in relation to persons rather than products, but nonetheless the principles enunciated by Menhennitt J are important. His Honour said at 690:
"I shall refer presently to other bases upon which the courts have proceeded; but I proceed first on the strictest basis in accordance with general principles as to what the plaintiffs must establish. It appears to me that if the defendants in a defamation action establish by evidence, in accordance with the ordinary rules, a prima facie defence, whether it be justification, fair comment or privilege, then the position is left at the end of the case that the plaintiffs have not made out a prima facie case, in the sense that they have not made out an actionable case. They may have established that the words are defamatory; but once the defendants establish a prima facie case on one of the three defences I have mentioned – or any other defence – then the position is left that the balance has not been tipped in favour of the plaintiffs; and, accordingly, that the plaintiffs have not made out a prima facie case."
17 Menhennitt J went on to refer to the defence of truth which in that case the defendants were seeking to raise and said at 693:
"In Bryanston Finance Ltd v De Vries [1975] 2 All ER 609 at p 620 Lord Denning MR put it in these terms: 'When a plaintiff is complaining of defamatory statements on an occasion which is not privileged, the courts will not restrain further publication of it when the defendant says he intends to justify it or to make fair comment on it: see Fraser v Evans [1969] 1 QB 349, 360. When a plaintiff is complaining of a defamatory statement on an occasion which is privileged, I do not think the courts should restrain a defendant from saying it again on a privileged occasion when he honestly believes it to be true.'"
(Page 10)
- Menhennitt J also at 693 said:
"The defendants having gone that far and particularized in the way they have their justification and then supported it by an affidavit in what I may call the standard form, it appears to me that, in accordance with the authorities, they have put forward the defence of justification in a bona fide way, with the result that an interlocutory injunction should not be granted."
19 In Equity Doctrines & Remedies (Meagher, Gummow and Lehane, 3rd Ed at para 2125) the authors cite a number of cases and then say:
"Recent decisions have confirmed the analysis set out above. In a series of decisions in New Zealand, including New Zealand Mortgage Guarantee Co Ltd v Wellington Newspapers Ltd [1989] 1 NZLR 4 and Ron West Motors Ltd v Broadcasting Corporation of New Zealand [1989] 3 NZLR 433 (on app) 520, the courts have adhered to the view that no interlocutory injunction should be granted against a defendant who raises a defence of justification. In Victoria, the Full Court of the Victorian Supreme Court has taken a similar view in National Mutual Life Association of Australasia Ltd v GTV Corporation Pty Ltd [1989] VR 747, stressing, however, that a defendant, in order to escape an interlocutory injunction, must do more than merely indicate a reliance, or proposed reliance on a defence of justification; he must also adduce material from which the court can infer that a properly instructed jury could find for the defendant on that issue. In New South Wales, in Chappell v TCN Channel Nine Pty Ltd [1988] 4 NSWLR 153, Hunt J stated the rules in a way slightly, but not significantly, more favourable to the plaintiff."
20 These cases and principles illustrate the difficulties that need to be overcome by a plaintiff in a case such as this in establishing the right to an interlocutory injunction of the kind sought, where the effect is to restrain the defendants from making statements or publishing information which is claimed to be truthful.
(Page 11)
21 The matters to be considered in determining whether or not to grant or refuse an interlocutory injunction, are set out in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 in the judgment of Mason ACJ at 153:
"The principles governing the grant or refusal of interlocutory injunctions in private law litigation have been applied in public law cases, including constitutional cases, notwithstanding that different factors arise for consideration. In order to secure such an injunction the plaintiff must show (1) that there is a serious question to be tried or that the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief; (2) that he will suffer irreparable injury for which damages will not be an adequate compensation unless an injunction is granted; and (3) that the balance of convenience favours the granting of an injunction."
22 In looking at those questions in the light of the principles to which I have referred, in my opinion it can only be said that any statement made by the defendants were false or unlawful to the extent that the plaintiff it is claimed used fraudulent means to promote its products. Beyond that, in my view, everything that is said to have been said by the defendants is not said to be unlawful or false. It follows, in my opinion, that the plaintiff has only established an arguable case to that extent. As to the second of the criteria in Castlemaine Tooheys to which I have referred, there is evidence provided by the plaintiff which suggests that if the defendants are not restrained, the plaintiff's substantial business will collapse. In that respect I am satisfied that the plaintiff has demonstrated that damages will not provide adequate compensation. As to the balance of convenience, to the extent that consideration is relevant, I accept that it favours the plaintiff in that if the injunction is granted in the terms sought, it will cause little hardship to the defendants. If the injunction is not granted, then the consequences to the plaintiff are likely to be disastrous in terms of the future of the plaintiff's business.
23 Having taken all of those matters into account however, I am of the view that the defendants should only be restrained from suggesting to the parties identified, that either John Doubleday or the plaintiff is engaged in fraudulent activity. I would not be prepared to grant the plaintiff an injunction in any wider terms as to do so would unnecessarily inhibit the defendants' right to freedom of speech.
(Page 12)
24 I will hear the parties further as to the formulation of an appropriate order to reflect these reasons.
1
7
0