Leafbusters Pty Ltd v Four Seasons Gutter Protection Pty Ltd
[2006] FCA 1056
•16 AUGUST 2006
FEDERAL COURT OF AUSTRALIA
Leafbusters Pty Ltd v Four Seasons Gutter Protection Pty Ltd [2006] FCA 1056
INTERLOCUTORY INJUNCTION – copyright injunction
LEAFBUSTERS PTY LTD (ACN 059 092 214) AND POLYMESH AUSTRALASIA GROUP PTY LTD (ACN 086 158 321) v FOUR SEASONS GUTTER PROTECTION PTY LTD (ACN 105 248 191) & ORS
V930 OF 2004FOUR SEASONS GUTTER PROTECTION PTY LTD (ACN 105 248 191), DEREK MURPHY AND MICHELLE MURPHY v LEAFBUSTERS PTY LTD (ACN 059 092 214) AND THEOFANI TSIORIS
V889 OF 2004HEEREY J
16 AUGUST 2006
MELBOURNE
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V930 OF 2004
BETWEEN:
LEAFBUSTERS PTY LTD (ACN 059 092 214)
First ApplicantPOLYMESH AUSTRALASIA GROUP PTY LTD (ACN 086 158 321)
Second ApplicantAND:
FOUR SEASONS GUTTER PROTECTION PTY LTD (ACN 105 248 191) & ORS
Respondent
V889 OF 2004
BETWEEN:
FOUR SEASONS GUTTER PROTECTION PTY LTD (ACN 105 248 191)
First ApplicantDEREK MURPHY
Second ApplicantMICHELLE MURPHY
Third ApplicantAND:
LEAFBUSTERS PTY LTD (ACN 059 092 214)
First RespondentTHEOFANI TSIORIS
Second Respondent
JUDGE:
HEEREY J
DATE OF ORDER:
16 AUGUST 2006
WHERE MADE:
MELBOURNE
Upon the applicants in V930 of 2004 by their counsel undertaking to abide by any order that this Court may make as to damages sustained by the first to third respondents and GSF Holdings Australia Pty Ltd (“GSF”) by reason of this order, the Court orders that:
1.Until further order or the final determination of the proceeding, the first to third respondents in proceeding No V930 of 2004 (namely Four Seasons Gutter Protection Pty Ltd, Derek James Murphy and Michelle Lorraine Murphy) and GSF whether by themselves or by their servants and agents are restrained from reproducing, publishing, distributing or otherwise communicating in any manner the following documents in the 2006 Four Seasons Franchise Opportunity Folder (Annexure A to the Affidavit of Elizabeth Guerra-Stolfa sworn 13 July 2006) or a substantial part thereof:
(i)Four Seasons Flip Chart Manual Presentation;
(ii)Four Seasons Specification Manual; and
(iii)GSF Franchise Agreement.
2.Notice of this Order be given to Messrs Ebsworth and Ebsworth solicitors.
3.The costs of the motion are reserved.
4.This order be entered by the order being authenticated in Court in accordance with Rule 36.07(1).
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
V930 OF 2004
BETWEEN:
LEAFBUSTERS PTY LTD (ACN 059 092 214)
First ApplicantPOLYMESH AUSTRALASIA GROUP PTY LTD (ACN 086 158 321)
Second ApplicantAND:
FOUR SEASONS GUTTER PROTECTION PTY LTD (ACN 105 248 191) & ORS
RespondentV889 OF 2004
BETWEEN:
FOUR SEASONS GUTTER PROTECTION PTY LTD (ACN 105 248 191)
First ApplicantDEREK MURPHY
Second ApplicantMICHELLE MURPHY
Third ApplicantAND:
LEAFBUSTERS PTY LTD (ACN 059 092 214)
First RespondentTHEOFANI TSIORIS
Second Respondent
JUDGE:
HEEREY J
DATE:
16 AUGUST 2006
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
Leafbusters Pty Ltd and Four Seasons Gutter Protection Pty Ltd are competitors in the business of selling and installing gutter protection systems. When fitted in roof gutters, such systems prevent the blocking of the gutters by leaves and other debris. Mr Derek Murphy and his wife Mrs Michelle Murphy own and operate Four Seasons. They were previously associated with Leafbusters as distributors and licensees of its products, first in New Zealand and later in Australia.
In seeking to recruit franchisees Four Seasons has been using documents which Leafbusters says infringe its copyright and disclose its confidential information.
Leafbusters seeks an interlocutory injunction against Four Seasons, the Murphys and an associated company GSF Holdings Australia Pty Ltd (which is to be joined as a party) restraining them from:
(a)reproducing, publishing, distributing or otherwise communicating the following documents or a substantial part thereof
(i)Four Seasons Flip Chart Manual Presentation
(ii)Four Seasons Specification Manual
(iii)GSF Disclosure Statement
(iv)GSF Franchise Agreement
(b)representing
(i)that there are no judgments or penalty proceedings that could significantly affect the ownership or use of the intellectual property the subject of the Four Seasons franchise; or
(ii)that there are no civil proceedings in Australia in relation to the Four Seasons Gutter Protection System the subject of the Four Seasons franchise.
(i) The Flip Chart Manual Presentation
This document is to be compared with the Leafbusters’ Company Profile document. There are obvious signs that substantial parts of the former have been copied from the latter. For example, in the table of contents in the Four Seasons document one of the sections is headed, identically with the corresponding title in the Leafbusters’ document, “Leafbusters the ultimate in Gutter Protection”. The author has overlooked the need to change “Leafbusters” to “Four Seasons”. The titles “What are you looking for in Gutter Protection” are identical in the tables in both documents, as is the title “Fair Trading Award 1997” (in fact Four Seasons was not incorporated until 2003).
Leafbusters’ asserts ownership. There is a presumption as to the subsistence and ownership of copyright: Copyright Act 1968 (Cth) s 126. The proprietors of Leafbusters, Ms Thea Groom and her husband, created the documents, arguably at least on behalf of their company Leafbusters: s 35(6).
(ii) The Specification Manual
The copying here is particularly blatant. For example the table of contents in the Four Seasons’ document and the corresponding Leafbusters’ documents “Fact File and Specifications” is word for word the same. Thus under the heading “Benefits” the following appears in each document:
“Benefits
Pine needles
Pest proofing
Rainwater collection improves
Estimated 20 year life
Potential health problems alleviated
Safety issues”When one turns to the body of each document, under the heading “Pine needle problems” the Leafbusters document reads:
“The Leafbusters mesh will keep out 99% of pine needles. Our experience shows that some debris will stay on the mesh, and we recommend the mesh be swept twice a year. A rule of thumb: what stays on the roof stays on the mesh, but the gutters are still clean as a whistle.”
The only change in the Four Seasons document is the deletion of “Leafbusters” and the insertion of “Four Seasons”.
(iii) GSF Disclosure Statement
This document is a requirement of the Franchising Code of Conduct, which is a mandatory code of conduct under s 51AD of the Trade Practices Act 1974 (Cth). Leafbusters’ claim here is not based on copyright infringement or disclosure of confidential information but rather an alleged misleading and deceptive statement, contrary to s 52 of the Act:
(a)that there are no corporate associates, or associates that are not body corporates, of the franchisor (GSF);
(b)that there are no current proceedings alleging contravention of trade practices law or misconduct; and
(c)that there is not any judgment or pending proceeding that could significantly affect the ownership or use of intellectual property.
As to (a), I will assume that Four Seasons is a “corporate associate” of GSF. It is true that in the form against the words “Corporate associates or franchisor” and “Associates of franchisor that are not body corporates” appears the word “NIL”. Nevertheless the Disclosure Statement includes the words “GSF Holdings Australia Pty Ltd utilises the name “Four Seasons Gutter Protection” and Mr Murphy is disclosed as the sole director of GSF. An ASIC search shows that GSF was registered on 13 April 2004 and that as at 13 July 2006 it has the status “Strike-off action in progress”. However, I was not informed that GSF has by now been struck off. Nothing more seems to be made of this aspect. Also the names of Four Seasons (the company) and Mr Murphy are referred to in a statement about the litigation to which I shall shortly refer. Any inaccuracy in these representations is minor and technical and would not warrant an injunction restraining use of the whole document.
As to (b), the document includes the following statement:
“Note: The franchisor notes that in 2004 Four Seasons Gutter Protection Pty Ltd, Derek Murphy and Michelle Murphy instituted defamation proceedings against Leafbusters Pty Ltd and Theofani Tsioris in the Victorian division of the Federal Court of Australia. Also in 2004, Leafbusters later instituted Federal Court proceedings against Four Seasons Gutter Protection Pty Ltd, Derek Murphy and Michelle Murphy and their franchisees and sales consultants. These proceedings are ongoing. The judgments of the Court can be viewed by typing in Four Seasons on under the ‘Search Judgments’ option.”
Counsel for Leafbusters submitted that this did not “disclose the nature of the proceedings by Leafbusters, which include allegations of contravention of trade practices law and misconduct”. There is no substance in this point. As a matter of common sense there has been adequate disclosure of the current litigation. There has been no attempt to hide behind the fact that at the time the document was issued GSF was not a party to the litigation.
As to (c), the prescribed form only requires disclosure as to any judgment etc that could affect “the intellectual property”. In a previous answer “the relevant intellectual property” has been described as the words “Four Seasons Gutter Protection” and logo and patents pending as to the Four Seasons mesh in respect of which Four Seasons holds a licence from the manufacturer Tapex Pty Ltd. There is, as far as the evidence discloses, no judgment or pending proceeding that could affect the intellectual property of Four Seasons as so defined. As I have said, the present litigation has been adequately disclosed.
There is not a serious issue to be tried in respect of the GSF Disclosure Statement.
(iv) GSF Franchise Agreement
The GSF Franchise Agreement is a straight, word for word copy of a complex 43 page legal agreement used by Leafbusters. In the non-competition covenant the name of GSF appears but with an ACN that is Leafbusters’.
The Leafbusters agreement was prepared by Ebsworth and Ebsworth in about October 1999 for the Leafbusters’ parties at a cost of approximately $50,000.
If Ebsworth and Ebsworth is the owner of the copyright for the purposes of an interlocutory injunction there is sufficient material to infer that arguably Leafbusters have an implied licence to sue for infringement on that firm’s behalf. In any event, I shall direct that notice be given of the injunction so that Ebsworth and Ebsworth may either seek to be joined as a party or formally authorise Leafbusters to sue on its behalf.
Misleading and deceptive representations
The alleged misrepresentations (see [3](b) above) have already been considered in connection with the GSF Disclosure Statement. I find that they do not raise a serious issue to be tried.
Serious issue to be tried
I conclude there is a serious issue to be tried for infringement of copyright in relation to the documents in [3] (a)(i), (ii) and (iv) above. It is not necessary to consider the claim for disclosure of confidential information.
Balance of convenience
Four Seasons’ use of the allegedly infringing documents will give it an advantage and a headstart compared with the time and expense that would be taken to develop such documents from scratch. There must be a finite number of franchises which can be sold. As the network of Four Seasons franchises and its market share increases, there will be a consequent increase in the value of the franchise and its commercial attraction to prospective franchisees. It would be problematic, and expensive, to quantify the loss suffered by Leafbusters.
Four Seasons did not put on any evidence as to uncompensable (or indeed any) hardship they might suffer were an injunction to be granted. In substance the only discretionary argument put was that of laches.
Four Seasons’ solicitor Dr Charles Birch deposed that by letter dated 13 October 2005 Leafbusters’ solicitors made the same assertions in relation to Four Seasons’ “2005 Four Seasons Franchise Opportunity Folder” which contained very similar documents to those in the 2006 version.
Dr Birch said in a letter dated 14 October 2005 that he would seek a copy of the Four Seasons Specifications Book from his clients and compare it with that of Leafbusters. (There was also correspondence at this time about the Disclosure Statement, but as this will not be the subject of injunctive relief no more need be said.)
By a letter dated 3 November 2005 Dr Birch forwarded a copy of the Four Seasons Specification Book to Leafbusters’ solicitors, but it is said they made no complaint until the service of the present notice of motion on 13 July 2006. It appears the 2006 Four Seasons Franchise Opportunity Folder came into possession of Leafbusters in late May/early June 2006.
Dr Birch’s forwarding of the Four Seasons Specification Book, in contrast to his forwarding of the Disclosure Statement on 2 November 2005, was not subject to a stipulation that Leafbusters’ solicitors not release it to this client.
Nevertheless, while delay is a relevant factor for the exercise of a discretion it is not conclusive. I take into account also:
·the blatancy of Four Seasons copying;
·the lack of any assertion of hardship by this application being brought now rather than last November; and
·the fact that at an earlier hearing in this litigation on 17 September 2004 counsel for Four Seasons stated that his clients “immediately agree to cease using any copyright material of Leafbusters that could be accurately identified”.
Orders
There will be an order for an interlocutory injunction in the terms indicated above
There will be an order that the costs be reserved. Although Leafbusters complain, with some justification of Four Seasons’ departures from its earlier assurances, the fact remains that this is an interlocutory hearing and final rights have not been determined.
I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate:
Dated: 16 August 2006
Counsel for the Applicants in V930/2004 and the Respondents in V889/2004: M Goldblatt Solicitors for the Applicants in V930/2004 and the Respondents in V889/2004: Cornwall Stodart Counsel for the Respondents in V930/2004 and the Applicants in V889/2004: G Dalton Solicitors for the Respondents in V930/2004 and the Applicants in V889/2004: Charles Birch Date of Hearing: 2 August 2006 Date of Judgment: 16 August 2006
0
0
0