Nettlefold Advertising P/L v Cody Outdoor Advertising P/L

[1993] FCA 538

JUDGMENT No. .? .?.%,,,I e.j,2.,.

IN THE FEDERAL COURT OF AUSTRALIA	)
VICTORIA DISTRICT REGISTRY	)
GENERAL DIVISION	) No. VG 299 of 1993
B E T W E E N :

NETTLEFOLD ADVERTISING PTY LTD
(A.C.N. 005 861 183)

Applicant

- and -

CODY OUTDOOR ADVERTISING PTY LTD

(A.C.N. 059 604 278) and PIERCE CODY

Respondents

Coram:	Olney J
Place:	Melbourne
Date:	6 August 1993

MINUTE OF ORDERS

THE COURT ORDERS THAT the applicant's notice of motion dated 21 July 1993 be dismissed with costs (not including costs of

today) ;

AND DIRECTS THAT:

4.	On or before 3 September 1993 the respondents file and

1.    On or before 13 August 1993 the applicant file and serve an amended application and statement of claim;

2.   On or before 20 August 1993 the respondents file and serve any request for further and better particulars of the applicant's amended statement of claim;

3.    On or before 27 August 1993 the applicant file and serve any further and better particulars which it may be obliged to provide;

serve their defences;

5.   On or before 10 September 1993 the applicant file and serve any reply to the defences;

6.    Each party make discovery of documents on or before 17 September 1993 and provide inspection of discoverable documents on or before 24 September 1993;

7.    The directions hearing be adjourned to 28 September 1993;

8.    The costs of today be reserved.

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 )	GENERAL DIVISION	)	No. VG 299 of 1993
B E T W E E N :

NETTLEFOLD ADVERTISING PTY LTD
(A.C.N. 005 861 183)

Applicant

- and -

CODY OUTDOOR ADVERTISING PTY LTD

(A.C.N. 059 604 278) and PIERCE CODY

Respondents

Corm:	Olney J
Place:	Melbourne
Date:	6 August 1993

REASONS FOR JUDGMENT

The parties are competitors in the outdoor advertising industry. The applicant, which is a subsidiary of a well- known company, has been long established whereas the first respondent is a relative newcomer.

On 1 July 1993 the following article (the Age article) was

published in "The Age" newspaper.

Hoyts under pressure to sell Nettlefolds

By CRAIG THOMAS

Hoyts Entertainment is expected to announce soon - possibly tomorrow - that it will put Nettlefolds Advertising on the market, as part of the company's restructure.

It is belzeved Hoyts' bankers have pressured the cash-strapped entertaznment conglomerate to sell Nettlefolds and that Hovts executives have been negotiating with several outdoor advertising companies.

Sources said yesterday that Nettlefolds was llkely to be sold for between $2 mrllion and $3 million, a drastic reduction on the $15 million Hoyts paid for control of it rn 1989.

Nettlefolds, the core company within Hoyts Outdoor Advertising d~vision, holds second place rn the Australian outdoor advertising market.

One source said a deal was expected to be completed wlthin three weeks.

Nettlefolds recently made headlines with its "stripper"
billboard near Kingsway.

Nettlefolds' managing director, Mr Ross Hepburn, said parts of Hoyts Entertainment had been up for sale for some time "at the right price", but he knew of no current offer for Nettlefolds.

"There have been all sorts of discussions over the last 12
months," Mr Hepburn sald.

Hoyts Entertainment's managing director, Mr John Rochester, was unavailable for comment yesterday.

On the same day the first respondent wrote a letter (the letter) to each of a number of persons and companies with whom the applicant had leasing or licensing agreements in relation to outdoor advertising space. The letter was signed by the second respondent as managing director. The precise number of persons and companies written to is not known but there is some evidence to suggest that at least 14 letters were sent. Each letter was accompanied by a copy of the Age article and

was in the following form: 

Dear Sir/Madam

I am writing to express our company's very keen interest to form a relationship with you regarding the existing outdoor signage on your property.

The issue of securlty is one of the most important aspects of busrness today. The need for it now was highlighted through the turbulent eighties. It is therefore essential that you are confident in the security of tenancy of your outdoor signage contractor.

Cody Outdoor is in a relatively unique position in the industry as it can provide its lessors with complete security, and longevity of tenure. Our company is relatrvely new to the marketplace, but its purchase of exlsting busanesses, as well as the enormous experience and expertise of its directors, makes it the most viable operator m this industty.

We strive to provide the most professional service to our property owners, and ultimately to the advertisers that utilise our medium. Our company is continuing to make major acquisitions in the Australian outdoor market. We are also the only outdoor contractor that is aggressively pursuang development of sites throughout Australia.

In short, we are making the marketplace far more competitive and accountable.

It is no small coincidence that the timing of this correspondence follows previous advace to you from Nettlefold Outdoor Advertising. They have been successful operators in the market and we respect what they have achieved an the past.

The attached article appeared today in the Melbourne Age which confirmed a strong market "rumour" that Nettlefold are on the market to be sold bv ~ublic tender, or a similar sale Drocess within davs. This process can only lead to some degree of instability and this is the reason we believe it appropriate to approach you to open up mutual daalogue.

If you believe matters raised in this letter are of any interest, I would only be too happy to discuss the matter further wath you.

Yours sincerely,

(sagned) Pierce Cody

PIERCE CODY
Managing Director

The applicant commenced proceedings in this Court on 21 July 1993 against both respondents alleging breaches of the Trade

Practices Act, libel and unlawful interference with its	contractual relations. The application was accompanied by a
statement of claim. On the same day the applicant filed a notice of motion seeking interlocutory orders that:

1.     The first respondent, by itself, its servants or agents or otherwise howsoever be restrained from making representations, individually or collectively, to the effect that:-

(a) the applicant's business is unstable;

(b)	that the applicant is not able to provide its lessors or lacensors with security of tenancy;
(c)	that the applicant is not able to provide its lessors or licensors with longevity of tenure.

2.     That the secondnamed respondent by himself, his servants or agents or otherwise howsoever be restramed from causing, aiding, directing, abetting, procurmg or being directly or indirectly knowmgly concerned Ln or a party to the making of representations described in paragraph 1 hereof.

In its statement of claim the applicant says that by reason of its conduct in writing the letter the first respondent has in trade or commerce engaged in conduct that is misleading or deceptive or is likely to mislead or deceive contrary to section 52 of the T r a d e P r a c t i c e s A c t 1974 (TPA) and has engaged in conduct in connection with the possible supply of services to the persons and corporations to whom it is known the letter was sent which was in all the circumstances, unconscionable, in contravention of section 52A (sic, now S. 51AB) of the TPA.

It is further said that the respondents falsely and maliciously published the letter of and concerning the applicant in the way of its business and that the words used

understood to mean, or alternatively meant and were understood

in their natural and ordinary meaning meant and were

to mean,
(a) that the applicant is financially unstable;

(b)	that the applicant cannot provide its lessors and licensors with security to tenancy;
(c)	that the applicant cannot provide its lessors and licensors with longevity of tenure.

The applicant claims that it has thereby suffered greatly in its credit, character and reputation, in its business and has been brought into hatred, ridicule and contempt.

Further, the applicant pleads that on 1 July 1993 it had contractual relations with each of the persons to whom it is known the letter was sent and that by sending the letter the respondents intentionally interfered with those relations by unlawful means, namely by publishing the letter, with the intention of causing loss to the applicant.

The application for interlocutory relief came on for hearing on 27 July 1993 when I reserved my decision.

-. . .

The applicant's case is supported by affidavits dated 21 July 1993 by Steven Jacobson (the applicant's finance manager) and Ross Gordon Hepburn (the applicant's managing director).

Jacobson deposed to having between 2 July 1993 and 12 July

representing companies or firms with whom the applicant had	1993 had a number of telephone conversations with persons
existing site lease agreements, all of whom had received the letter. It is not clear from his affidavit how many of these conversations were initiated by the addressees of the letter and how many were initiated by Jacobson. In several cases the addressees had destroyed the letter. Only in 3 cases was any concern expressed, and of those, only in one case was the concern in relation to the applicant's continuing ability to meet future financial obligations.
The applicant's case for an injunction is put in detail in Hepburn's affidavit in these terms. The applicant's business primarily involves the acquisition of existing advertising signs or prospective sites which consist of air space. The applicant leases or secures a licence from the proprietors of the relevant site(s) for a fixed period. Many of the applicant's leases and licences have options to extend their terms. Where there is no existing signage at the site the applicant undertakes the construction of the advertising signage (which usually remains the property of the applicant) and subsequently sells advertising space on that sign to

-. .-

advertising agencies or direct to clients. The site owner is paid a rental by the applicant pursuant to the terms of the relevant lease or licence. The applicant has current lease agreements and/or licence agreements with in excess of 700 site owners Australia wide which involve in excess of 2400 advertising sites. In or about June 1993 Hoyts Entertainment

resolved that the applicant be placed on the market for sale	Ltd. ("Hoyts") the applicant's ultimate holding company,
as part of a commercial restructure. Potter Warburg & Co. Limited, Investment Bankers, were retained by Hoyts to seek acquirers for the business of the applicant. In July 1993 Potter Warburg & Co. Limited dispatched letters to parties, including the first respondent, who had made enquiries concerning the business of the applicant seeking expressions of interest. On 8 July, 1993 Potter Warburg & Co. Limited received an expression of interest from McKinley Wilson Limited on behalf of the first respondent. On or about 14 July 1993 he received a telephone call from Mr Bruce Abrahams, a site owner with whom the applicant has a current lease. Mr Abrahams said that he had received a copy of the letter via his managing agent and stated that he was concerned at the prospect of the applicant's business being sold and the suggestion in the letter that this could only result in instability. Hepburn says that if a site owner is concerned about the capacity of the applicant to meet its obligations pursuant to its lease or licence it is very likely that the subject lease or licence would not be renewed upon its expiration or that the site owner would be reluctant to grant r;he applicant a further option to lease. The acquisition and retention of advertising sites is central to the applicant's business operations. He believes that the letter has had a prejudicial effect on the applicant's relationship with its existing site owners and has sought to undermine same. Further, he believes that if the respondents are not
those contained in the letter, the relationship between the restrained from continuing to make representations such as
applicant and its lessors and licensors will be further undermined. He denies that a sale of the applicant's business will result in any instability on the part of the applicant or that the applicant will not be able to provide its site owners with security and/or longevity of tenure as a result. Any purchaser of the applicant's business will be required to honour existing contractual obligations between the applicant and the lessors and licensors of sites utilised by the applicant. The representation contained in the letter that the sale of the applicant's business will affect the security of existing lease/licence arrangements to which the applicant is a party is false. He says that the respondents are seeking to undermine the relationship between the applicant and its lessors and licensors with a view to acquiring the sites which are subject to the existing leases and licences. Further, at a time when the applicant's business has been placed on the market for sale any allegations of instability could adversely affect the ultimate offers received from prospective purchasers for the acquisition of the applicant's business.
In reply, the respondents filed an affidavit sworn by the second respondent on 26 July 1993. Much of the affidavit deals with the corporate structure of the applicant and its associated companies. Without going into detail it is fair to say that this material suggests that in recent past the applicant has not traded profitably and that several senior employees (including two directors) have left the applicant's
employ. By letter dated 16 June 1993 Hepburn as managing
director of the applicant had written to the applicant's site owners in the following terms:

16 June 1993

Dear Valued Site Owner,

Over the last year there have been a number of very important changes wrthrn Nettlefold Advertising Pty Ltd. I thought it

appropriate a s t h i s financial year draws t o a c l o s e t o wr i t e t o you and thank you very much f o r your continued support and

understanding i n what has been a f a i r l y d i f f i c u l t year.

During t h e year we have res t ruc tured our opera t ions and put t h e

company on a very sound footing f o r t h e fu tu re . W e a r e very

happy with our current s i t e s , e spec ia l ly those w e l e a s e from

you. I n t h e year ahead, w e a r e looking t o m a i n t a ~ n our current

sites and t o grow t h e number of supers i t e s w e have r i g h t around

t h e nat ion.

In t h i s competitive c l m a t e t h e r e a r e a number of very new and

very small companies t r y i n g t o acquire outdoor a d v e r t ~ s i n g

sites and you may w e l l receive a c a l l from them. I f you do

receive such a c a l l , p lease remember t h a t i n many cases, they

a r e new opera to r s t o t h e industry being small organisa t ions

without a f i n a n c i a l t r a c k record. W e would be happy t o d iscuss

with you any approach you may receive. I f you have some ideas

f o r new signage o r upgrad~ng your sites, w e would a l s o be happy

t o d i scuss any proposal with you.

For your information, Messrs David Net t le fo ld , Mark Fishwick, B r e t t J a r ~ c k and Nathan Nankin a r e no longer employed by t h i s

company and have no ongolng r o l e t o acquire o r nego t i a t e s i t e s

f o r t h i s company.

Should you have any site queries, you may address them t o myself o r t o Steven Jacobson, our National Finance and Administration Manager o r one of h i s S i t e Administration

Ass i s t an t s , Nlcole Shaw o r Mark Barraclough. A l l t h e s e people

can be contacted on [phone].

W e look forward t o maintaming our successful re la taonshrp with

you	i n t o t h e fu ture .
Yours	s ince re ly ,

Ross G Hepburn,

MANAGING DIRECTOR.

that he believes that the sale of the applicant's business	The second respondent says in relation to the letter he wrote
will inevitably lead to some degree of instability. An example of potential instability is the fact that many outdoor advertising sites are leased to advertisers on short term leases, sometimes as short as month to month tenancies. At the end of the period of tenancy, the outdoor advertising contractor (such as the applicant) can seek to renegotiate the terms of the agreement with the advertiser. Accordingly, if
the applicant's business is sold, the new owners may seek to increase significantly the advertising rental being paid by advertisers, with instability being created as a result. Further, some site owners wish to know the identity of the persons controlling the outdoor advertising contractor, in order to come to their own view as to whether to contract with them or not. If there is uncertainty about the identity of the owners, then instability can result. Since the Age article appeared there have been further press articles concerning the proposed sale of the applicant. During the latter months of 1992 the first respondent investigated the possibility of purchasing the applicant's business. In the context of those discussions, a consultant to the first

-

respondent received from Hoyts correspondence dated 23 October 1992 and 19 January 1993 containing some financial information relating to the applicant's business.

The letter must be understood in the context in which it was written. It is not possible to divorce from that context the

Age article. The purpose of the letter is frankly stated in	applicant's letter of 16 June 1993 to its site owners and the
the first paragraph, namely, to advise that the first respondent is keen to do business with the addressee with regard to the existing outdoor signage on the addressee's property. The bulk of what follows the first paragraph is merely the writer's view as to his company's credentials in the industry.
The main thrust of the applicant's case is its complaint about the statement towards the end of the letter that "this process (i.e. the sale of the applicant by public tender, or a similar sale process) can only lead to some degree of instability
...". Given the total context in which the statement was made
it is neither misleading nor deceptive. The Age article (which has not been contradicted) suggests that the parent company is being pressured by its bank to sell off the applicant. The suggestion is made that a sale price of between $2m and $3m may be achieved for a company acquired in
1989 for $15m. Any reasonably enquiring mind may well ask
what is the applicant's standing in the period pending sale and further what will become of the applicant if a sale is not

-. --

achieved. In the circumstances, if a sale is not made receivership or liquidation must at least be possibilities and that being so it would be reasonable to suggest that until the sale process had been completed there may be some degree of instability in relation to the applicant's business affairs. In any event the statement complained of is patently a mere

was neither misleading or deceptive or likely to mislead or	expression of opinion. In the context in which it was made it
deceive. In the circumstances, on the material presently before me, I am not satisfied that there is a serious question to be tried in relation to the claimed contravention of section 52 of the TPA.
I am of the same opinion in respect of the claimed
contravention of section 51AB. Although it is not pleaded in the statement of claim, I understand it to be said that by failing to disclose in the letter the fact that it was interested in purchasing the applicant, the first respondent was guilty of unconscionable conduct. There are three problems with this assertion. First, the negotiations between the applicant and the first respondent had ceased in January 1993 and did not resume until after the letter had been written. At the time the letter was sent there were no current dealings between the parties. Second, the conduct complained of does not fit within the concept of unconscionable conduct (see for example Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 per Mason J at 461). Third, the section applies only to the supply or possible
.
supply of goods or services of a kind ordinarily required for personal, domestic or household use or consumption (TPA S. 51AB(5)).
There is nothing in the letter to suggest that the first respondent intended to interfere with any existing contractual
the letter. There is evidence that the letter was sent to relation between the applicant and any of the addressees of
persons with whom the applicant has contractual relations relating to the leasing and licensing of advertising space but there is also evidence that the leases and licences are often of short duration and come up for renewal from time to time. The letter indicates that the first respondent is in the market to acquire rights to the existing outdoor signage on the property of each addressee and invites the addressee to discuss the matters raised in the letter. In my opinion there is no serious question to be tried in relation to this cause of action.
For my own part I have difficulty in accepting that the words used in the letter are either defamatory in their natural and ordinary meaning or are capable of being understood to have the meaning ascribed to them. However, if I am wrong on that issue, there is no reason to suppose that an award of damages would not be an adequate remedy. The balance of convenience would lie heavily against the granting of injunctive relief. And this is particularly so in the case of an allegation of libel it being well-established that injunctive relief will be granted only when it is very clear that it should be granted. This is not such a case.
The notice of motion will be dismissed.

preceding 12 pages are a true I certify that this and the

copy of the Reasons for Judgment

of the Honourable Mr Justice
Olney

Associate: bcZk;i- P r I

Dated:  6 August 1993

Mr M. McDonald (instructed by Barker Gosling) appeared for the applicant.

Mr W. Houghton (instructed by Minter Ellison Morris Fletcher) appeared for the respondents.

27 July 1993

Place :	Melbourne
6 August 1993