Lumley Life Ltd v IOOF of Victoria Friendly Society

[1990] FCA 744

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JUDGMENT NO.	../ ?.o-	i
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CATCHWORDS	i
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TRADE PRACTICES - Damages - Assessment of damages arising from	.
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an undertaking as to damages and the grant of an interlocutory	r
injunction - whether advertising expenditures wasted as a result	! -
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of injunction - principle to be applied when quantification
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difficult.	I
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LUMLEY LIFE LIMITED v IOOF OF VICTORIA FRIENDLY SOCIETY G354 of 1989
LOCKHART J. 21 DECEMBER 1990
SYDNEY

I N THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES D I S T R I C T REGISTRY NO.

GENERAL D I V I S I O N

BETWEEN:  LUMLEY L I F E LIMITED

A p p l i c a n t

AND:  IOOF O F VICTORIA FRIENDLY
SOCIETY

R e s p o n d e n t

JUDGE MAKING ORDER:	LOCKHART J.
WHERE ORDER MADE:	SYDNEY
DATE ORDER MADE:	2 1 NOVEMBER 1990

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MINUTE OF ORDER

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THE COURT ORDERS THAT:

1.         T h e m a t t e r be stood over t o a date t o be fixed.

IN THE FEDERAT, COURT OF AUSTRALIA	)
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NEW SOUTH WALES DISTRICT REGISTRY )	No. G354 of 1989

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GENERAL DIVISION 1

BETWEEN:  LUMLEY LIFE LIMITED

Applicant

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AND:	IOOF OF VICTORIA FRIENDLY	L
SOCIETY	I
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Respondent I

21 December 1990

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REASONS FOR JUDGMENT	I
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LOCKHART J.	...
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This is the hearing of a motion by the respondent, IOOF of Victoria Friendly Society ("IOOF"), for an order that the applicant, Lumley Life Limited ("Lumley"), pay to it compensation for loss and damage alleged by IOOF to have been sustained by it in consequence of the undertaking as to damages given to the Court by Lmley on 10 July 1989 when the Court granted	I
restraining IOOF, pending the final hearing of the proceeding,	interlocutory injunctions, on the application of Lumley,
from engaging in certain conduct in alleged contravention of ss. 52 and 53(c) of the Trade Practices Act 1974 and passing off.
Following the giving of the undertaking as to damages and the grant of interlocutory relief, directions were given by the Court and the matter came on for final hearing. I gave judgment

on 16 November 1989 when I dismissed the application of Lumley

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except for the purpose of hearing any motion of IOOF with respect	/ '
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to damages, if any, resulting from the grant of interlocutory
relief. IOOF later filed thls motion for damages which I heard	1:
recently.	l::
The relevant facts include those stated in my reasons for judgment of 16 November 1989 and need not be restated. Lumley	l-
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and another company, Drake & Eades Pty. Limited, sought to
restrain IOOF from using the name "Flexibond" or "Flexi Bond" or
any deceptively similar name as part of its name or otherwise in
the conduct of its activities as a friendly society. The claims	1
were based on alleged contraventions of ss. 52 and 53(c) of the
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Act and passing off. Drake & Eades Pty. Limited was not a party	I
to the proceeding at the time of the granting of the
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interlocutory injunctions on 10 July 1989, so the only	I
undertaking as to damages was given by Lumley.
and of the undertaking given to the Court by Lumley were as

The terms of the orders made by the Court on 10 July 1989

follows:

"Upon the applicant, by i t s counsel, giving t o the Court an undertaking to pay t o the respondent or t o investors or potential investors who on or before 10 J u l y 1989 have received the respondent's brochure, exhibit RGH 2 to the a f f idav i t o f Ross Sinclaire Greenwood o f 7 July 1989, such compensation

(if any) as the Court thinks just, i n such

manner a s the Court directs.

THE COURT ORDERS THAT:

1 . Until the final determination o f t h i s

proceeding or further order, the Respondent

be restrained from, i n trade or commerce:

( a ) publicising,

promoting or o f fer ing any

investment product under or i n

association with the name Flexibond or any name which i s substantially identical with or deceptively similar t o Flexibond;

(b)	accepting or receiving or processing any application for investment or any investment i n any such investment product ;
( c )	representing i n any way whatsoever that any o f the respondent ' S investment

products have any association or a f f i l i a t i o n with the applicant or the applicant's products; or

( d )	representing i n any way whatsoever that
p r o d u c t s h a v e p e r f o r m a n c e any o f the respondent's investment
characteristics or benef i ts they do not have.
2.	The costs o f the motion for

interlocutory injunctive r e l i e f be costs i n

the proceeding. "

No investors or potential investors sought t o a v a i l

themselves o f the benef i t o f the undertaking as t o damages given
by Lumley.

In support o f i t s motion for damages IOOF relied on certain o f the evidence before the Court on the hearing for interlocutory injunctive r e l i e f and the later hearing for f inal r e l i e f . Additional evidence was also given t o the Court on the hearing

o f the motion by a f f i dav i t and orally.

On the hearing of the motion for damages important evidence was given in affidavit form and orally by three expert witnesses. Professor J.H. Roberts, an Associate Professor of marketing at the Australian Graduate School of Management in the University of New South Wales and Director of the Centre for Applied Marketing in that University was called by IOOF. Professor R.J.A. Layton, a Professor of Marketing and Head of the School of Marketing of the University of New South Wales was called by Lumley. Mr. J.A.N. Tregoning, Managing Director of Communication People Pty. Limited, trading as "F.C.R." a leading consultancy in Australia specialising in the development and management of communications programs for companies in the financial services industry was called by Lumley.

Much of the evidence (except the evidence of the experts) was not disputed and in the main related to the steps taken by IOOF and Leonardi & Curtis Advertising Pty. Limited, an advertising agency retained by IOOF, in developing, launching and managing the advertising campaigns for "IOOF Flexi Bond" and

the expenditure incurred by IOOF in support of its claim for	later "IOOF Superchoice". Also, detailed evldence was given of
damages.
The primary area of conflict between the parties arises from the evidence of the experts.
Both Professor Layton and Mr. Tregoning were impressive witnesses and each was an expert in a relevant field. There was no dispute by I O O F about Professor Layton's expertise and the relevance of the field of his expertise but there was a submission by counsel for I O O F that Mr. Tregoning did not have expertise in what he submitted was the relevant area of expertise, namely advertising, although this challenge was made in final address and not to the giving of his evidence. I reject the submission. Mr. Tregoning was a most experienced and
impressive witness and it is plain to my mind that the sphere of
his expertise is one of direct relevance to this case. His firm
(F.C.R.) is a leading consultant in Australia specialising in the
development and management of communications programs for companies in the financial services industry. F . C . R . advises and coordinates strategies forpromotingmajor financial institutions and their products and this strategy includes advlce as to what advertising, general public relations or direct marketing techniques should be used by a company in order to promote its financial products. I accept Mr. Tregoning as a reliable witness
and his evidence as being both relevant and convincing.
I also accept the substance of the evidence of Professor Layton, a highly qualified and skilled man in his field of marketing. Although there were some differences in the evidence of Professor Layton and Mr. Tregoning, they were mainly of emphasis and none of the differences would have affected the conclusions which I have reached in this case.

Professor Roberts is also a highly qualified expert and in

a number of areas there is substantial correspondence between the

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evidence of the two professors. Where there is a conflict	t
between the evidence of the professors I prefer to accept the	1 -' I
evidence of Professor Layton which impressed me as the more	l :
convincing and more in accord with common sense and the realities	1.
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of the business world. I do not seek to disparage the evidence . 1 : I *

of Professor Roberts, but it was more dependent upon theories and

learned periodicals than the evidence of Professor Layton and	1 -:
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much of it did not strike me as being realistic or in accordance	I
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with the probabilities or the practices in the finance industry	i;
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with which this case is concerned. It was, however, Mr.	t
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Tregoning's evidence that impressed me as being most in accord	1:
with the practicalities of the situation, the probabilities and
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common sense. I should say that Mr. Tregonlng's conclusions were

of the kind which, if I did not have the benefit of expert	1:
evidence, would have appealed to me as the sensible and practical	1 !'
conclusions.	I
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There was some attempt to discredit Mr. Tregoning on the

basis that he had previously acted for IOOF and that they parted

company last year in circumstances which would have led Mr.	1,
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Tregoning to bear ill will towards IOOF or colour his evidence	1 I
against it. The point was not pursued in final address, and	!
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rightly so because it is plain that Mr. Tregoning did not bear	1
any ill will towards his former client and that his evidence was	t
dispassionate and objective.	1

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I do not propose to state the evldence given by each of the experts, but slmply to state the conclusions which I draw from their evidence in the light of my preferences for the witnesses as indicated earlier.

I shall now state certain of my findings of fact for the purposes of determining the present motion. These findings are additional to those made on 16 November 1989 and must be incorporated with those reasons and read together with them. I shall make other findings of fact later when dealing with the evidence of expert witnesses.

Leonardi & Curtis was retained by IOOF to develop, launch and manage the advertising campaign for IOOF's product "IOOF Flexi Bond". Mr. R.V. Curtis had the responsibility for the IOOF account at Leonardi & Curtis. Leonardi & Curtis was also retained by IOOF to launch the product under the name "IOOF Superchoice" followingthe grant of the interlocutory injunction.

The "IOOF Flexi Bond" was launched on 31 May 1989 when a document headed "Newsflash", together with an accompanying brochure, was forwarded by IOOF to its 3,000 agents throughout Australia. At the beginning of June 1989 the brochure was sent to IOOF members throughout Australia.

The week ended 9 June 1989 was the first week in which IOOF received applications for "IOOF Flexi Bond". Mr. Curtis was responsible for designing the advertising campaign to launch the

" I O O F Flexi Bond" and he resolved at the outset to present the

advertisements as part of a multi-staged campaign, the object being to launch the product and preserve it in the minds of the investment advisers and the public by reminding them of it. He gave evidence that it was important therefore to separate each stage of the campaign by a period which did not permit the people to whom the advertisements were directed to forget the product. Also the campaign was to create an impression that the product was an ongoing investment which was successful. Hence he considered that, following the launch of the product, being the first stage, each subsequent stage should be separated by a period of between six and ten weeks and that any period much in excess of twelve weeks might lead to it being forgotten to the extent that investment advisers and the public would have to make a conscious effort to recall the product and also might create the impression that the product was less than successful. He held the view that each subsequent stage of a multi-staged advertising campaign was dependent upon the previous stages,

commencing with the launch. Most advertisements promoting	investments in a managed investment fund, in Mr. Curtis's
experience, extend over a multi-staged advertising campaign. He decided to carry out the first stage of the advertising campaign over a period of five weeks between June and July 1989, and, in consequence, advertisements were published in June and July 1989 in newspapers circulating in the States of New South Wales, Victoria and Queensland promoting the product "IOOF Flexi Bond".
I am satisfied that, if the interlocutory injunctions had not been granted, Mr. Curtis would have recommended to IOOF that it commence the second stage of its advertising campaign some time in late August or September 1989 and that it would have followed that advice.
Following the grant of the interlocutory injunction on 10 July 1989 IOOF decided that it was necessary to relaunch the product previously known as "IOOF Flexi Bond" under the name "IOOF Superchoice". The reason for the change of name was said by IOOF's witness to be that this was necessary to ensure that the product could obtain maximum market penetration before a similar product could be launched in the investment product marketplace by one of its competitors. As the product had already been launched under the name of "IOOF Flexi Bond" its essential features had been made public and it was thought by IOOF that there was a distinct probability that a competitor would endeavour to launch a competing product within a relatively short period of time with similar features. In particular it was decided by IOOF that it could not leave the "IOOF Flexi Bond" product "in limbo" pending the final hearing of the proceeding
because, in its perception, both investors and investment advisers in the investment product industry are very conservative with respect to the placement of investment funds and will usually avoid placing funds in any product that is considered to have difficulties. Also, IOOF perceived that if it did not immediately relaunch the product under another name, its inaction

in doing so would result in a loss of confidence in the product

and make any future relaunch of it very difficult.

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IOOF reinforced its fear that a competitor would launch a competing product by pointing to the fact that in late December	I
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1989 a friendly society in Victoria known as the OST Friendly
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Society launched a competing product under the name "OST Flexi	! 1
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Umbrella Bond", the principal characteristics of which were	i.
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slmilar to those of "IOOF Superchoice".
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IOOF asserts that, when it initially launcned "IOOF Flexi Bond", before the grant of the interlocutory injunction, it	1. t .
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incurred expenditure which was primarily directed towards	1;
establishing an independent identity for the product both within the overall market for single premium life insurance based products and with respect to other major IOOF products. IOOF claims also that, when it was decided to relaunch the product, it became necessary to establish a new separate identity and re- establish in the minds of investment advisers the particular	advantages of the new product "IOOF Superchoice". IOOF asserts	further that all the expenses incurred by it in launching the
product under the name "IOOF Flexi Bond" were thrown away by the granting of the interlocutory injunction; and that, in order to minimise its loss and damage from the inability to effectively market the product, a separate advertising campaign had to take place using the name "IOOF Superchoice" for the product.
IOOF gave particulars of its claim for loss and damages alleged to be suffered as a consequence of the interlocutory injunctions, but the formulation of those particulars changed from time to time after the filing of the notice of motion. Some of the changes were merely of a machinery nature, but others were of substance. The claim as finally formulated appears in three documents, namely, those described as documents 7 and 8 being part of exhibit 31 and a document which is exhibit PJM9 to the affidavit of Peter James Meehan sworn on 26 April 1990 to which I shall return later. Documents 8 and PJM9 are in certain respects alternatives to some of the claims particularised in the principal document which is document 7 in exhibit 31.
Between the date of the grant of interlocutory injunction and 11 August 1989 IOOF received 49 applications for the "IOOF Flexi Bond". In view of the terms of the injunction IOOF returned each of those applications with an accompanying letter.
Details of the date of return of those applications, the number of investors who reinvested in "IOOF Superchoice", the	number of applications still outstanding and the number of people
who had advised IOOF that they would not be reinvesting are set out in paragraph 6 of Mr. Meehan's affidavit of 11 August 1989 in these terms:

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Date	NO.	Still O/S Advised Not
Returned	Returned	Re-investinq

One person, namely, Miss Julie-Anne Bilata, who had invested
$2,500 on 13 July 1989 told IOOF that she did not propose to

reinvest because she was then experiencing financial

difficulties .

IOOF put its claim for loss and damage in three ways. In

its first claim the items comprising the total claim for loss or damage of $368,803.17 fall broadly into two categories. First, it claims the whole cost of the advertising, brochures and posters which commenced on 31 May 1989 and concluded following the grant of the interlocutory injunction. This claim is

particularised in paragraphs 1 to 7 of Document 7 (exhibit 31). IOOF asserts in its claim that, by reason of the interlocutory injunctions, it was restrained from promoting its investment product under the name "IOOF Flexi Bond", that it launched this product on 31 May 1989 in the brochure sent to members called "Newsflash" and in large scale advertising campaigns conducted in New South Wales, Victoria and Queensland during June and July 1989, that it received about 5,800 responses to the circular and advert~sing campalgn from its existing members and 150 responses to the circular and advertising campaign from members of the public, of whom 58 had applied to invest $730,000 in the "IOOF Flexi Bond" investment product. Another 49 persons had applied to invest in the product after the making of the interlocutory injunctions. In short, IOOF says that the interlocutory injunctions deprived it of the benefit of the advertising and brochure campaigns conducted between 31 May and a date in July 1989 which precedes the granting of interlocutory injunction. The claim is for the expenses said to have been thrown away as a result of conducting the campaign to promote "IOOF Flexi Bond".

The second part of the claim is for monies paid by IOOF after the interlocutory injunction was granted, being items numbers 8 to 12 in Document 7, claims for lost management fees, interest, incidental administration costs and certain legal expenses.

I shall summarise the particular items claimed.

Item 1 claims $6,321.59 for a series of costs such as printing, mailing, postage and fees paid to public relations consultants, all concerning the "Newsflash" launch of the "IOOF Flexi Bond" product to agents on 31 May 1989.

Item 2 claims $2,572.48 representing the printing of 130 "IOOF Flexi Bondu posters.	.
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Item 3 is for $28,971.88 being the cost of printing 20,000 "IOOF Flexi Bond" disclosure documents including cost of artwork	1 ;
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and printing.	I
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Item 4 is for $164,703.67 and has a number of components all related to the advertising campaign for "IOOF Flexi Bond". The	I
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claim includes costs of advertisements in the press for the	I
product, aavertising costs of the Brisbane Courier Mail totalling $31,232.81, cost of advertisements in the Sydney Daily Mirror, Sydney Daily Telegraph and the Sydney Morning Herald of $68,396.58, press production advertising in the Melbourne Sun of $290.25, press campaign in Victoria totalling $3,655 and advertising costs for advertisements placed in the Melbourne Age and the Melbourne Sun totalling $55,019.79.	I.,
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Item 5 is a claim for $69,336.20 described in the member base" being postage charges, business reply postages, mail	particulars as a "Direct marketing campaign for 'Flexi Bond' to
processing costs, typesetting and printing letters, collecting direct mail responses, key punching responses, production of "IOOF Flexi Bond" mailing, letters to members and response cards. Item 6 claims costs of mailing and postage of various documents totalling $10,796.94.

Item 7 is a claim for $1,406.09 in relation to press

releases.

Item 8 claims the cost of reprinting of posters with the "Superchoice" heading, $1,528.65.

Item 9 claims the cost of artwork changes to certain
documents to include "Superchoice". This claim is for $1,838.25.

Item 10 relates to the alteration to advertisements in Queensland to name "Superchoice" $661.13.

Item 11 claims the cost of $2,112.96 in respect of production and printing costs, mailing and administration costs and postage of a "Newsflash" letter to agents of IOOF informing them of the change of name from "IOOF Flexi Bond" to "IOOF Superchoice".

Item 12 claims $260 as the cost of "copyrighting" of the change from the name "IOOF Flexi Bond" to "IOOF Superchoice"

through public relations consultants.

Item 13 claims $3,828 as management fees lost as a consequence of cancellation by various applicants for investment with IOOF or not proceeding with applications consequent upon the receipt of the letter despatched by IOOF following the injunction.

due to inability to sell the product during July 1989.

Item 15 is for $3,393.33 as interest payable by IOOF to reimburse members for interest lost as a consequence of the Court	, .
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order where investors with IOOF decided to reinvest in "IOOF	1
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Superchoice" after receiving notification pursuant to the Court
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order. This is interest whlch IOOF sought to pay the various applicants for investment which they say would have been payable by Lumley to the investors themselves directly pursuant to the	i
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undertaking as to damages.
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Item 16 claims incidental administration costs of $2,000.

Item 17 claims legal costs incurred in settling correspondence

to members informing them of the change of name from "IOOF Flexi	i
Bond" to "IOOF Superchoice" and totalling $2,000.	i'
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Lumley concedes that IOOF is entitled to be compensated in respect of items 8, 9, 10, 11 and 12 but disputes its liability	I

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for all the other items; though as to items 13 and 15 Lumley	1:
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concedes that in principle it is liable to compensate IOOF for	-
these items. It disputes the amount of these claims.

As an alternative to its prmary claim, IOOF claims	I-:
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$133,909.93 as the cost of launching the first stage of the	I .~
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"Superchoice" product.	In this alternative claim IOOF also	1
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claims those items of the first claim which do not relate to the

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launching of "IOOF Flex1 Bond". IOOF submitted that in essence the only difference between the first two alternative claims is that the first claim seeks the costs of the launching of the "Flexi Bond" product whereas the second claim seeks the costs of launching the "Superchoice" product.

IOOF's third alternative claim was for the total sum of $316,411.18. This claim incorporates the expenses associated with the promotion of "Flexi Bond" as in the first claim, and other miscellaneous expenses. The distinguishing feature as compared to the first claim is that, rather than claiming the opportunity cost resulting from IOOFfs inability to sell "Flexi Bond" during July, IOOF claims the opportunity cost of a twelve week delay in the product life cycle. In essence this is simply a more sophisticated way of accounting for the same loss. IOOF submitted that the evidence of Professor Roberts supported the assumption of a twelve week delay in the product life cycle.

The principles governing the award of damages upon an undertaking given by an applicant who obtains an interlocutory	injunction and ultimately fails in the proceeding are stated by
the High Court in A i r Express L imi ted v A n s e t t Transpor t
I n d u s t r i e s ( O p e r a t i o n s ) P t y . L imi ted (1981) 146 CLR 249. Gibbs
J. said at 311-312:

"The o b j e c t of r e q u i r i n g a p l a i n t i f f who

s e e k s an i n t e r l o c u t o r y i n j u n c t i o n t o e n t e r

i n t o an under taking o f t h i s k i n d i s t o

a t t e m p t to ensure t h a t a defendant w i l l

receive compensation f o r a n y l o s s which he

su f fers by reason o f the grant o f the injunction i f it appears i n the event that the p la in t i f f was not entit led t o obtain i t . . . . However, i t i s perfect ly clear, and i t appears from the words o f the undertaking themselves, t h a t the only damages to which a defendant i s entit led are those which he has sustained by reason o f the grant o f the i n junction. The generally accepted view i s that the damages must be confined t o loss which i s the natural consequence o f the injunction under the circumstances o f whlch the party obtaining the injunction has notice ... However, i n the present case the question i s not whether loss caused by an injunction was a natural consequence o f making i t , b u t whether any loss which the appellant suffered was caused by the making o f the injunction. "

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Gibbs J. said at 313:  I.

"The Court should no doubt scrutinize with care an assertion by a p la in t i f f that loss which has been suffered by a defendant has	I	, ,
resulted from the l i t igat ion rather than
from the making o f the interlocutory order,	/
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since a p la in t i f f should not be allowed	t o
evade payment o f the price he has agreed t o	i
pay for the grant o f the injunction.	In the

end however the question becomes one o f	i	::
fact: d i d the making o f the order cause the	i
loss? The onus o f proof must, i n accordance defendant who asserts that he sustained	I .,

with general principles, l i e on the l

seeking t o enforce the undertaking must show

damage by reason o f the order . . . The party

that the making o f the order was a cause	/
without which the damage would not have been	i -.

suffered. "

Mason J. said at 324:  1. :

"The distinction between damage caused by	I-.:
the injunction and damage which flows from	j :
the l i t igat ion i s , I think, well founded on
the language i n which the usual undertaking	, 1 :

a s t o damages i s expressed. The party

seeking damages m u s t show that he has	1 ,,
sustained damage	' b y reason o f the Order'.

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The words connote a causal connexion between

the damage and the interim injunction."

I am satisfled that the factors which would be most significant in determining whether consumers would invest in	L
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IOOF's product "IOOF Flexi Bond" or "IOOF Superchoice" or some
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other financial product are:-	I
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1.	The reputation of IOOF as the fund manager of the product;	I
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2.	The attributes of the product;	, ,
3.	The availability of the product in the sense of the ease	1 '
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with which potential investors can gain information about	I
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4 .	The advertising, promotion or support given to the product; and
5.	The name of the product.

The least important of these five factors is the last. The k.: i '

press advertisements for IOOF's product give more prominence to	I .
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the name of "IOOF" itself than to the name of the product and	r L '
they make some mention also of the attributes or qualities of the	I
products. IOOF's advertising in June 1989 and August to November
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1989 have created an awareness of the product amongst the general	b
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public and generated enquiries from them to IOOF, investment
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advisers and financial intermediaries. The focus of these enquiries was with respect to the strengths of IOOF itself and	L
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the qualities and attributes of its products.	Whether enquiries	1;
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were made in regard to the product depended very little on the

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name of the product itself. The change of name from "IOOF Flexi	,_.
Bond" to "IOOF Superchoice" had only a negligible effect on the
effectiveness of the advertising in generating consumer	1,
familiarity and comfort with the product and in generating sales
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of the product. There is a correlation between advertising
expenditure and sales of the product of IOOF indicating that IOOF	! . ! r .
gained a substantial benefit from its advertising in respect of	I
the product in June 1989 as well as November 1989. Persons who	i -
had already invested with IOOF before the product in question was
advertised and promoted and were thinking of investing more money	I .
with IOOF would have been unlikely to do so solely as a result	1-
of the marketing or promotion by it of the particular name of the	l :
IOOF product.
Professor Layton prepared a number of documents based on information provided in the affidavits of witnesses called by
IOOF from which he made calculations and assessments of various
kinds and drew graphs. One such graph is annexure "I" to his
affidavit sworn on 26 July 1990 which compares the figures for	L .

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advertising expenditure of IOOF on the product with what the

Professor described as the "filtered" sales figures of the

product. I am satisfied that it is unlikely that there was any

downturn in sales of the product as a result of the granting of

the interlocutory injunction on 10 July 1989. An immediate sales

benefit was obtained from the marketing of "IOOF Flexi Bond".	I
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I am also satisfied that there is a correlation between the amount which was spent by IOOF on advertising and the sales figures for the product. There is a discernlble trend that expenditure by IOOF c2 advertising was followed by an increase in sales of the product within one to four weeks of the date of the advertising. The correlation between advertising expenditure and sales of the product by the IOOF indicates that IOOF gained a substantial benefit from its advertising in respect of the product in June 1989 and August/November 1989. The growth of the sale figures for the product does not appear to be significantly greater in the period since the product was promoted under the name "IOOF Superchoice" than the earlier period when it was promoted under the name "IOOF Flexi Bond" and there is no reliable basis for the conclusion that the momentum in the growth of the sales figures was interrupted by the granting of the interlocutory injunction in July 1989.
I am not persuaded that the introduction by IOOF of its product "IOOF Flexi Bond" and later "IOOF Superchoice" can truly be described as an innovative product. IOOF's product represents to my mind a further entry into an existing product category
turns on it, it seems to me that "Superchoice" would be at least	rather than an innovative product. Also, although I think little
as attractive a name as "Flexi Bond" for the IOOF product. Indeed, "Superchoice" was the name that was initially favoured by IOOF before it decided on "Flexi Bond".
I am satisfied that the advertising of the IOOF product in June 1989, before the injunction was granted, introduced the product to the general publlc, to members of IOOF and to
financial and investment advisers and that it generated an awareness of IOOF as the sponsor of the product, of its key attributes and of the name "Flexi Bond". Following the initial four weeks campaign it is likely that there was a continuing awareness of the name of IOOF as the sponsor of the product and of its key attributes that substantially spllt over into the period following the grant of the injunction (described in the evidence sometimes as the "carry over effect").

I do not accept that an effect of the interlocutory

injunction was to substantially or materially, if at all, negate

the "carry over" effect of the initial advertising campaign. Professor Layton gave detailed evidence in support of this conclusion and I found it convincing.

Although there may have been some difficulty resulting from

the change of name in the minds of some potential customers (I

consideration was the continuing presence of IOOF and the am not persuaded that there was), by far the most important	continuing unchanged benefits offered by the product. The fact
that each campaign referred to a different product name was of little consequence to those who were contemplating investment in the product sponsored by IOOF.
It is likely that the major effect of IOOF's "Flexi Bond" and "Superchoice" advertising campaigns was to promote the IOOF

name. I am satisfied that, in the financial services and investment industry, institutions gain a greater benefit from building a brand image (i.e. in this case the IOOF name) rather than a product image because investors tend to base their investment decisions upon the institution and not the particular product. Indeed, I note with interest the statement in paragraph 6 of the affidavit of Mr. R.R. James sworn on 4 August 1989, a witness of IOOF, and read at the trial last year that:

"the name of the particular product is, from my experience, of very little importance. Rather, the name of the fund manager is of critical importance in selling the product. Of secondary consideration is the type of product. The name of the product is only of importance for identifying the product within a fund manager's range of product. The name of the fund manager is always used

in conjunction with the product name. "

This passage from Mr. James's evidence was a consistent
theme in the case adduced by IOOF before the Court on the final

hearing of the matter last year, a view which I should add was

accepted by me in substance in my reasons for judgment of 16

November 1989. I said to counsel in the course of argument on the hearing of the motion and at earlier directions hearings more than once that it seemed to me that the stance adopted by IOOF at the final hearing may be inconsistent with the stance adopted by it on the hearing of the motion for damages. I mentioned this matter so that IOOF could give full consideration to its position. It is my view that there is an inconsistency in

approach. However, I have not based my findings on this. I

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simply note that it is interesting confirmatory material of the

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view which I have adopted of the evidence.	1
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Items 1 to 7 in IOOF's first claim are said by IOOF to be based on the assumption that IOOF obtained no benefit from its expenditure in marketing "IOOF Flexi Bond" in the period May to June 1989 and that this failure to obtain any benefit was due to the granting of the injunction on 10 July and the consequent change of name which occurred shortly thereafter. This proposition is not supported by the evidence and is, indeed, contrary to it. As mentioned earlier, the evidence shows that IOOF obtained sales of its "IOOF Flexi Bond" and "IOOF Superchoice" product whenever advertising was placed promoting that product and whenever marketing expenditure was made. Professor Layton's analysis was discussed at length with h ~ m in cross examination and it established the consistent correlation between advertising expenditure and sales. The advertising and marketing activity engaged in for "IOOF Flexi Bond" was initially sending circulars to existing members of IOOF at the end of May
or disclosure documents were then sent out to those members who	1989 to which a proportion of members replied and prospectuses
had replied. Shortly thereafter newspaper advertisements were published during the period 10 to 26 June including a coupon which the reader was invited to return. Alternatively, the reader was invited to discuss the matter with his investment adviser or telephone and speak to IOOF directly. Again the evidence indicates that responses were obtained and investments

resulted because of the advertising activity of this kind. The injunction was granted on 10 July and people who had already sent money in were refunded their money and invited to reinvest in "IOOF Superchoice". The overwhelming majority accepted the invitation, only a small number did not. IOOF obtained a significant benefit from the expenditures which form items 1 to 7.

It follows from this that none of IOOF's three alternative claims for loss and damage can be accepted in their entirety. Whilst these claims were submitted as alternatives, they all depend on IOOF's primary proposition that the benefit of the "Flexi Bond" campaign was wasted such that, if it were not for the injunction, either the amounts expended on the promotion of "IOOF Flexi Bond" or on "IOOF Superchoice" would not have been necessary. As explained earlier I do not accept this proposition.

Given that none of the three claims can be accepted as a whole, it is necessary to consider the individual elements of the	claims to determine the extent to which they represent losses
incurred as a result of the injunction.
As set out earlier, items 8, 9, 10, 11 and 12 of the first claim relate to expenses incurred in altering artwork and
documents to incorporate the name "Superchoice" instead of "Flexi
Bond". These are clearly costs that would not have been incurred ,
if the injunction had not been granted, and are the subject of a concession by Lumley. I am satisfied that IOOF is entitled to recover these items as damages resulting from the grant of the interlocutory injunction on 10 July 1989.
Counsel for Lumley also conceded that in principle IOOF should be entitled to recover management fees lost as a result of investors cancelling or not proceeding with their "IOOF Flexi Bond" investment after receiving the letter dispatched by IOOF following the making of the injunction. Item 13 is an attempt to quantify such losses. The objection by Lumley to item 13 is that it does not adequately recognise the expenses which IOOF would incur in earning the management fees.
During cross-examination Mr. Meehan agreed that to some extent the imposition of an "upfront" fee of 4 per cent and an ongoing annual fee of 1 per cent reflected IOOF's obligation to incur certain administrative expenses in managing the fund. As a result, IOOF reduced the amount claimed in item 13 to take into
account such expenses.
Whllst it is true that the evidence on this point is unsatisfactory, there is a well established principle in assessment of damages that the difficulty of ascertaining the

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amount of damages does not warrant their denial.	As reaffirmed	i
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by Aickin J. in Air Express, this proposition was established at	1 _,
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least by the time of the decision in Chaplin v Hicks [l9111 2 KB	.	L..
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786 and equally applies to the ascertainment of damages suffered
as the result of an interlocutory injunction.

Aickin J. went on to say at 2 8 4 :

"On	the o t h e r hand	the ascer ta inment	o f
damage	i s n o t an	exercise	i n imagina t ion .

I t i s t h e r e f o r e n e c e s s a r y t o examine the

m a t e r i a l i n o r d e r t o see what assumpt ions

a r e i n v o l v e d and, i n s o f a r a s they a r e n o t

j u s t i f i a b l e , t o see whether ad ju s tmen t s can

be made whlch would enab l e a reasonable

a p p r o x i m a t ~ o n t o be obtained."

In this claim the key assumption in dispute is that 50 per cent of gross revenues from management fees would be retained as net income after expenses. This is admittedly a fairly arbitrary figure, but one which can probably be accepted in the circumstances. Whilst undoubtedly there are ongoing administrative expenses directly attributable to particular investors, many of the expenses incurred in earning the management fee, particularly the "upfront" fee, would be fixed

in the sense that they are not affected by the number of	investors or the total sum invested. In these circumstances,
even if it were possible for IOOF to adduce evidence of its average profit margin, I am not satisfied that this would provide a better estimate of IOOF's actual losses. Therefore, I accept that IOOF is entitled to recover the sum of $3,828 claimed in item 13.
The claim in item 14 is predicated on the assumption that IOOF was unable to sell the product durlng 15 working days in July 1989, after the interlocutory injunction was granted. As is clear from my earlier findings of fact I am not satisfied that this assumption is established.
Following the making of the interlocutory injunction on 10 July 1990 IOOF returned applications to persons who had lodged them seeking to invest in IOOF Flexi Bond. There were 37 such persons. IOOF invited each of them to reinvest in "IOOF Superchoice" products. To compensate them for the loss of interest suffered as a result of withdrawing their applications to invest in "IOOF Flexi Bond" and to lodge applications to reinvest in "IOOF Superchoice" IOOF paid them interest over this period as calculated in item 15. Pursuant to the undertaking to the Court Lumleys undertook to pay to investors or potential investors who on or before 10 July 1989 had received IOOF's brochures, such compensation as the Court thinks just. IOOF itself paid the interest lost by investors who withdrew their
reinvested in "IOOF Superchoice". IOOF however requested each applications to invest in "IOOF Flexi Bond" product and
applicant to resubmit his application within fourteen days of the date of the letter if he wished his investment to be credited as at the date of his original application to invest in "IOOF Flexi Bond". Some of the investors reinvested outside that period. In my opinion in all the circumstances it is just that IOOF be
reimbursed for the amount of interest paid by it to people who reinvested in "IOOF Superchoice" and that sum is $3,393.33.

Item 16 is a claim for $2,000 comprising the follow~ng:

"Incidental administration costs	$2,000.00
-	Staff costs (telephone & correspondence)

- New training modules

- Computer changes

- Additional postage

- Addi tlonal stationery

- Photocopying of interim disclosure
documents"

Again, the problem is to quantify what in principle appear to me to be legitimate losses and expenses resulting from the injunction. The claim was reduced from $5,000 to $2,000 and, applying the principles previously mentioned and referred to by Aickin J. in Air Express at 284, in my opinion the claim of $2,000 is a reasonable figure.

As to item 17, it is reasonable that IOOF consulted its lawyers as to what it should do following the grant of the interlocutory injunction. But in my view these items are recoverable not as an independent head of damage but as part of the costs of IOOF in its defence of the litigation. The order for costs previously made is that Lumley pay IOOF's costs of the proceeding including any reserved costs. The items claimed under this head should fall into that category of costs and be dealt with, failing agreement, by the taxing officer in the usual way.

That concludes all of the items contalned in the first claim. It also disposes of the whole of the third claim. As is clear from my earlier findings, I do not accept that the effect of the injunction was to cause a twelve week delay in the product life cycle, and thus I am not prepared to award damages for lost management fees said to have been occasioned by such a delay.

The only outstanding issue concerns some of the items in the second alternative claim. As set out earlier, the majority of this claim relates to expenditure on the promotion of "IOOF Superchoice" and I do not accept that these expenditures constitute a loss.

However, some of the items in thls claim appear to relate to the costs of printing new booklets, certificates and other

documents with the "Superchoice" name, although it is unclear on	t -
the evidence exactly what documents are the subject of each invoice.

During the course of the hearing on damages there was some

discussion as to whether some part of the costs of printing

disclosure documents and promotional posters etc. for "Flexi	1 :
Bondu should be recovered on the basis that, after the injunction
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was granted, many of these documents became useless. The	1.- 1 :
difficulty with this claim is that it was clear that some of the	1 .
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documents had been "used" and it is impossible to quantify the	1 , I
extent of the wastage.	i l .

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Virtually no submissions were directed spec~fically to the

Items in the second claim relating to "Superchoice" documents. However, I am prepared to accept in principle that some of those items were costs occasioned by the injunction. Clearly, without the injunction there would have been no change of name and no need to print a second run of disclosure documents and certificates.

The difficulty I have is that on the current state of the ev~dence I cannot be sure which of the expenses itemised in the second claim relate to such printing costs and which to advertising.

In the result I would allow IOOF to recover as damages the total of the damages claimed in items numbered 8, 9, 10, 11, 12, 13, 15 and 16.

Before awarding damages for any of the items in the second

claim I require further evidence as to the precise nature of

those expenditures.

I shall make no orders today, but stand the matter over to a date to be fixed. On that date the parties may hand up agreed short minutes of order giving effect to these reasons for judgment. If the parties are unable to agree on the appropriate orders then I shall hear brief submissions and further evidence as to the nature of the expenses itemised in the second claim.

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I Date of I.:eariiig : ? -. . 2 . i ~ ~ r i l ' , 3.0, 3f'!~U~uSt., L"L

Y T >., 24, 25 & 26 October 1990

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Date of ,Judgment 2 1 Deceirrber 1350

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