CATCHWORODS TRADE PRACTICES ~ misleading or deceptive conduct - proxy fight - ambiguous statement comparing profits - criticism thereof said to be erroneous - use of how-to-vote form similar to opponents' form - use of livery of company in issue - interlocutory relief sought - whether misleading - relevance of motive. COPYRIGHT - licence implied by adoption of proxy form - whether joint ownership proved - whether infringement - relevance of quantum of skill and judgment. INJUNCTION - interlocutory relief sought, trial unlikely - relief likely to be in substance final ~ relevance to exercise of discretion. Trade Practices Act, 1974 s.52 Copyright Act, 1968 ss.35, 14(1){a), 10 F.A.I. Insurances Limited v. Advance Bank Australia Limited NSW G366 of 1986 PINCUS J. BRISBANE 4 September 1986 IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) N.S.W. G366 of 1986 GENERAL DIVISION ) BETWEEN: F.A.I. INSURANCES LIMITED Applicant AND: ADVANCE BANK AUSTRALIA LIMITED Respondent MINUTES OF ORDER / JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 4 SEPTEMBER 1986 WHERE MADE: SYDNEY THE COURT ORDERS THAT: l. The application be dismissed. 2. The cross-application be dismissed. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) N.S.W. G366 of 1986 GENERAL DIVISTON ) BETWEEN: F.A.I. INSURANCES LIMITED Applicant AND: ADVANCE BANK AUSTRALIA LIMITED Respondent PINCUS J. 4 September 1986 EX _TEMPORE REASONS FOR JUDGMENT This is an application for interlocutory orders restraining representations to shareholders of the respondent, with a cross-application of a similar kind. The latter adds a claim for alleqed breach of copyright. I shall call the applicant F.A.I. and the respondent, the bank. In what follows I set out the facts and contentions relating to the application and cross-application in more detail but it is, I think, convenient at the outset to outline the case and mv views about it. F.A.I. seeks relief under s.52 of the Trade Practices Act on the basis that the bank has engaged in conduct likely to mislead or deceive. That conduct was a criticism. published in the press, of statements made by Mr. L.d. Adler on behalf of F.A.I.,. comparing the bank''s earnings with those of other competing banks. I have already said that I propose to dismiss the application. The circumstances, in my view. arose out of a mutual misunderstanding. Mr. Adler's statement about earnings was, not unreasonably, construed as comparing the Advance Bank's earnings with the total earnings of the other banking qroups mentioned. The Advance Bank initiallv took it in that way and criticised it on that basis. In truth, Mr. Adler, no doubt in ali good faith, intended his comparison to relate to savings banks only, although he did not say so. It seems to me clear that in those circumstances, F.A.I. should be granted no relief. The cross-application is also based principally on s.52, but there is a claim of breach of copyright attached to it. The bank complains that F.A.I. sent to shareholders of the bank a form explaining how they should go about voting for F.A.I. nominees at the annual general meeting of the bank, to be held on 11 September, that is. in a week's time. The bank says the F.A.I. form is deliberately got up to look like a document emanating from the bank, with the idea of at least confusing people, in the hope that some advantage will accrue to F.A.I. Further, the bank says that F.A.I. copied substantial parts of a how-to-vote form which had been sent out by the bank, copyright in which form was vested in the bank. Of the three issues raised in the case the most substantial, in my opinion, is the bank's claim under s.52. There is. indeed, at first sight, something to be said for the view that the F.A.I. form was likely to mislead or deceive. The claim for breach of copyright, on the other hand, seems to me not a strong one. I have, however, in the end, come to the view that the bank's application should also be dismissed. It is important, of course, to keep in mind that each side claims interlocutory relief only. There has been no trial and the views I express in these reasons must be taken to be provisional only, although I do not trouble repeatedly to say so. The first question in respect of each application is whether there is a serious question to be tried. "That question having been answered in the affirmative, it is then necessary to consider whether the balance of convenience is in favour of the grant or refusal of the injunction": State of Queensland v. Australian Telecommunications Commission (1985) 59 A.L.R. 243 at pp.244, 245. In determining the latter question, however, a factor of considerable importance is that, if any useful relief is to be granted to either side in respect of the allegedly misleading conduct, that must be done straight away - or to be more precise, at such a time as to enable shareholders to be communicated with before next Thursday. It is the apprehension of each side that shareholders may have been misled in such a way as to influence the vote at that meeting which has produced this litigation; no order designed to disabuse the shareholders of any wrong impression they may have gained is likely to have a practical result if made after the meeting. For that reason, it seems to me likely that the case is one in which there will never be a trial and the onlv real contest will be the one I have heard. Anv relief which might be granted in these circumstances is likely to be, in substance. final. That remark particularly applies to the claim made by the bank (now embodied in exhibit 4) for an order that F.A.I. dispatch a letter to all shareholders designed to make it clear to them that the F.A.I. how-to-vote form was neither issued bv, nor bears the endorsement of, the bank. If that were done, it could not be undone, if there were ultimately a full trial of the action in which F.A.I. succeeded. Although the power of the Court to make such an order for corrective action in interlocutory proceedings is clear, it will not ordinarily be thought convenient to do so, in my view, unless it seems reasonably obvious that the conduct complained of would probably be held at the trial to fall within s.52 of the Trade Practices Act. To return now, ina little more detail. to F.A.I.'s application, it complains of a statement made to a reporter on 18 Auqust by Mr. Delbridge, an officer of the bank. That is able to be comprehended only by explaining what preceded it. On 13 August 1986 Mr. L.d. Adler, the chairman of F.A.I. siaqned a letter to shareholders of the bank. He said in it, and it is the fact, that the bank's annual general meeting is to be held on 11 September, as mentioned above, and that the shareholders would have the opportunity to vote on the composition of the bank's board of directors. Mr. Adler urged upon the shareholders in his letter the course of voting for four persons named therein in lieu of current directors of the bank. [In support of this. he invited shareholders to consider that the bank had announced earnings on shareholders' funds for the year ended 30 May 1986 of 7.3 per cent. Mr. Adler said: "This is considerably lower than any of its competitors (A.N.Z. 21.7%, Westpac 22.6% and National Australia Bank 33.1%)."" Mr. Adler aiso put forward other matters as considerations in favour of the four F.A.I. candidates, but it is not necessarv to set them out. The conversation on 18 Auaqust referred to above was conducted on the telephone and in it Mr. Delbridge spoke to a Mr. Avling, a newspaper reporter, who was called as a witness. Although Mr. Ayling was, 1n my view, frank in his evidence, I am not convinced that he had any clear recollection of the details of the conversation other than as set out in the newspaper report of it of 19 August 1986, which was tendered. Mr. Avling swore to the accuracy of that report and said that he had received complaint from neither Mr. Delbridge nor Mr. Adler about it. Although the application does not necessarily imply as narrow a complaint as was ultimately made. it appeared from discussion with counsel for F.A.I. that the sole objection to the conversation had by Mr. Delbridge with Mr. Ayling was that Mr. Delbridge erroneously asserted that the fiqures given by Mr. Adler in his letter and included in the quotation above were wrong and erroneously asserted that the figures Mr. Delbridge gave to Mr. Ayling were correct. Mr. Adler's figures were correct for savings banks. It was suggested by counsel that it was necessarily implicit in Mr. Adler's letter that the comparison was made with other savings banks. The submission has to be based upon an alleged implication, because, of course, the letter says nothing about savings banks. Apart from that fundamental difficulty there are other considerations against reading the letter in the way submitted by F.A.I. Firstly, it is not quite true that the @arnings of Advance Bank which were being compared with others were savings bank earnings only, as the annual report discloses that some substantial profits were made from other activities - in particular insurance underwriting, management and administration services and management of unit trusts. About 23 per cent of the income came from these activities. Secondlv., the names of the competing banks are the names commonly applied to the holding companies, with the possible exception of the name "National Australia Bank"; perhaps that is, ordinarily, simply called the "National". It should be added that the fourth comparison made was with F.A.I. itself. which is. as the letter explains, an insurance company and not a bank at all. That would certainly put off the scent anyone who suspected that the writer intended to make a comparison with the savings bank arms of maior banks. The fact is, however, that the Advance Bank and the reporter, Mr. Ayling, took the statement made by Mr. Adler in his letter quite literally. I hold that they did so. at least inthe first instance, not unreasonably, and that it is clearly a case in which no relief should be granted, because the statement made by Mr. Adler was at least capable of being read as 1t was initially read by Mr. Delbridge. It is necessary now to move to the application made by the bank under s.52, which, as I have said, seems to me to be the most substantial matter before the court. The evidence discloses that, apart from the litigation in this Court, proceedings have been brought in the Supreme Court and there has been a substantial amount of discussion in the press of eévents relating to F.A.I.'s attempts to get representation on the board of the bank. It seems to me likely that anyone holding shares in the bank who happened to be at all curious about its affairs would have become aware of the controversy surrounding those attempts, if not of the details of the controversy. At the cost of some repetition, the chronology of the events most immediately relating to the matters complained of should be set out. On 13 August, Mr. Adler signed the letter referred to above, comparing the bank's performance with that of other banks and with that of his own company. It is not very clear when that letter was dispatched. There is evidence that it was sent on 22 August, but that can hardly be so, since Mr. Delbridge's attack on it was made on 18 August, and the conversation with the reporter resulted in Mr. Ayling's saying in the Dailv Telegraph on 19 August that the letter had been sent out "last week". I infer that it went out at about the same time as the incumbent board's how-to-vote form which was said to have been sent on 15 August. On 18 August there occurred the conversation between Messrs. Ayling and Delbridge; then there was the Daily Telegraph report. Between 26 and 29 August the F.A.I. how-to-vote form, toqether with accompanying proxy form and envelope addressed to F.A.1I., were dispatched. The applications before me were filed on 28 August (F.A.I.) and 29 August (the bank). By the time shareholders received the F.A.I. form said to be misleading, they would be likely to have had the board's form for 11 davs or more. The latter went with a letter siqned by the chairman, Mr. Urquhart, explaining that the re-election of five of the directors. including Mr. Urquhart, was opposed by the F.A.I. nominees and adding argument against the course advocated by F.A.I. I do not, by any means, assume that all the shareholders read Mr. Urquhart's letter. but those of them who were more interested in the company's affairs would be likely to have at least absorbed the gist of it, namely that the board was under attack from F.A.I, Of those shareholders who, because they were persuaded by Mr. Urquhart's letter or for some other reason, wished to support the incumbent board, no doubt a significant proportion would have had time to translate their wish into action bv completing the proxy form and sending it back, before they got the F.A.I. how-to-vote form. It would be wrong to infer, however, that there would not have been shareholders disposed to support the board, but not sufficiently determined in that direction to have sent the board's form back in the period before the F.A.I. material arrived. It appears to me that it is that category of shareholders which must be especially considered in determining whether there was a significant risk of the F.A.I.'s form misleading anyone. Those who had already responded to the board's plea would hardly have been stirred into any further action by the F.A.I. material. Would the F.A.I. form have been likely to mislead or deceive those who had, either because they had not made up their minds as to what to do or from simple inertia, not sent back the board's form? Counsel for the bank pointed out that the F.A.I. form used the bank's colours and used its stvle of printing for the words "Advance Bank" on the front cover. He pressed the submission that there could have been no reason to do so other than to mislead or to deceive, and that one should defer to the commercial judgment of those who composed the form and presume that their purpose was effected. I say more as to motive below, but direct my attention first to what must be the critical question, namely, whether - whatever anvone's motives were - the F.A.I. form was in fact likely to mislead. 10. I think many shareholders, on first alancing at the F.A.I. form, may well have gained the impression that it emanated from the bank. They would derive that from the fairly well-known colours and the style of printing of the bank's name. The most casual inspection of the document, however, would tend to dispel that impression. In the middle of the front page appear the words "how to vote by proxy for F.A.I.'s nominees". Wot only are those words in large print but they are prominent, by virtue of their being printed in white against a qreen background and because there is nothing else on the front page except the name of the bank, The same words appear (printed in green on white) at the top of the second page, being by far the most noticeable words on that page. The second most noticeable words, printed in heavy type at the bottom, are "Return your completed proxy form to F.A.I. Insurances Limited. 185 Macquarie Street, Sydney, 2000 immediately to ensure it arrives at F.A.I. by 8th September, 1986". For the bank it was arqued that the form might attract the votes of some of those who gave no thought to the matter and exercised their right to appoint a proxy without any care or attention. The F.A.I. form, like that of the board. night well secure some of such votes, although I would think that most of those who troubled to return either form would have some modest interest in the future of the company. But it is not enouch to show a likelihood that the F.A.I. form micght attract the alleqiance of some of those who act at random. To have anv 11. practical misleading effect the form must be such as to create a wrong impression persistent enough to induce people who really wanted to support the board to send their proxies to F.A.I. instead, failing to notice the plain, unequivocal assertions that the form was concerned to instruct them how to vote by proxy for F.A.I.'s nominees. The question is one of impression and I can quite understand the bank's board being concerned that the F.A.I. tactics might cause some shareholders who wished to support the board, but whose wish was not urgent enough to have caused them to do so by the time F.A.I.'s arrived, to send the latter form to F.A.I., thinking that was the way to support the board. That hypothesis, however, requires the assumption that the shareholder in question has not troubled to read either the title of the whole document on the front page, or the heading on the second page, but has nevertheless read detailed instructions set out on the second page as to how to complete the proxy forn. Alternatively, I suppose, one might postulate a shareholder who, having read the title and heading, appreciates that he is being directed how to vote for F.A.I.'s nominees, but nevertheless thinks, because of the colour and of the print in the words "Advance Bank" that it is the bank and not F.A.I. which is urging him to vote for F.A.I.'s nominees. Whether one takes the view of the operation of s.52 espoused by the Chief Justice in Parkdale Custom Built Furniture 12. Proprietary Limited v. Puxu Proprietary Limited 149 C.L.R. 191 at p.199 or the wider view adopted by Mason J. in that case, I do not think the section was intended to catch conduct which could be alleged to be misleading only by postulating that it has deceived people in the way just mentioned. The result of the same case, on the facts, is in my view such as substantially to discourage the grant of relief in the present case. There the two products (furniture) were substantially identical and the way in which consumers were to distinguish between the two, if at all, was by reading the label at the bottom of the upholstery, which might well have to he pulled out in order to be read. Although, no doubt, the decision whether or not to vote for the incumbent board would not be as important, to those making it. as that to be taken by the consumers buying furniture mentioned in the Parkdale case, it is at least as unlikely that a shareholder would fail to notice the true purport of the F.A.I. form as that a buver would fail to pull out, read and comprehend the significance of the label which was the distinguishing feature in the Parkdale case. To return to the question of motive, it was argued by senior counsel for the hank that the sending out of the F.A.I. form was an attempt at self-help on the part of Mr. Adler. Counsel invited the making of the assumption or inference (which was said to be more easily able to be drawn by reason of Mr. Adier's havina given no evidence) that, being affronted by the 13. board's action in using the bank's resources to urge the re-election of retiring directors, he decided to take the law into his own hands and use a form which would neutralise anv advantage the existing board had obtained by sending out an official-Looking form. It appears to me possible that that submission has some foundation in fact. It might well be imaqined that one who thought it to be unfair that the incumbents had used their positions as directors in the wav I have mentioned should respond by himself sending out a similar-looking document with the intention mentioned. Such an intention. however, is not the same as an intention to deceive. It has to be kept in mind that the shareholders fairly recently received the bank's how-to-vote form and many of those in the undecided category I have mentioned. that is, those who were interested but had not yet responded to the bank's invitation, would presumably still have the bank's form. If there had been anv intention on the part of F.A.I. to cause people who wished to vote for the bank to send their proxies to F.A.I. instead, one would have thought a much more effective tactic would have been to at least senda form which looked generaily similar to that dispatched by the bank. There could hardly have been a legal complaint about F.A.I.'s using ordinary white paper for the cover, but it used bright green which must have reduced the risk that anyone would confuse one form with the other. 14. One Rosemarv Luker., who was involved in the preparation of the F.A.I. form, gave evidence to the general effect that the idea of using the bank's colours and stvle of print of its name was to attract initial attention. The imitation of that colour and style of print may be open to criticism as being rather offensive, but I cannot be persuaded that the bank has a reasonable prospect of establishing at the trial that it was a breach of s.52. The claim for breach of copyright is based on the notion that there is evidence that the bank is at least a part-owner of the copyright in the how-to-vote form, which is spread across two pages. On the right-hand side is a form of proxy which undoubtedly is the bank's form. Equally clearly, F.A.I. has used that form of proxy. There was a meeting of the board of directors of the bank on 6 Auqust 1986, at which a committee of directors was established to approve the notice of annual general meeting and all accompanying documents. That committee met on the following day and approved the proxy form, "subject to any amendments the bank's legal advisers may notify to the secretary". Under article 84(5), "The company shall with each notice of general meeting of the company set out a form of proxy in or to the effect following or in such other common formas the directors may from time to time prescribe or approve in particular cases ..." There follows a form of proxy set out in the articles, which is the basis of 15. that which the directors approved, the latter having some additions necessitated by the particular business to he dealt with at the meeting, and some other additions. It was argued by senior counsel for F.A.I. that the board could not have been intended to have a monopoly of a proxy form approved by it for the purposes of the meeting and that any shareholder such as F.A.I. might freely copy or use the form for the purpose for which it was intended, namely, voting at the annual qeneral meeting. He arqued that there was an implied licence to use the approved proxy form and that therefore there was no infringement within the meaning of s.36 of the Copyright Act 1968 which, in effect, defines as infringement only acts done "without the licence of the owner of the copyright". I accept the correctness of counsel's contention. That is not the end. however, of the dispute with respect to copyright, for the left-hand page of the bank's how-to-vote form, which contains directions as to the mode of filling in the proxy form appearing on the right-hand page was, as I understand the argument, alleged to be a literary work within the meaning of the Copvright Act, embodying sufficient skill and judgment to be the subject of copyright. F.A.I. challenged the allegation of breach of copyright by saying that the bank had not advanced a sufficient case to show that it had any interest in the copyright, had not shown that the material was capable of being copyright, and had not' shown infringement. It is my view that all these submissions have 16. considerable substance. My discussion of them relates only to the left-hand page, that is. to the directions as to how to use the proxy form. The evidence is that those directions were desiqned by aDr. Parkes, an executive director of Lloyds International Limited. There is no evidence, or reason to infer, that Dr. Parkes' work was done on the basis the bank would own the copyright in the results. As is pointed out by counsel by F.A.I., there is also no evidence as to how much of it was original and how much was itself taken from other previous versions of similar forms. It seems to me likely that Dr. Parkes and Lloyds wouid have intended that they were free to re-use the same directions in other proxy fights. The Parkes document went to a Mr. Partinaton, described as the corporate secretary of the bank, who is said to have prepared a form based on it; then that form was settled by the board committee. The arqument for the bank was that this raised a prima facie case of joint authorship. I find it difficult to agree. There is simply no evidence, although the matter must be within the bank's knowledge, as to the extent of the emendations made by Mr. Partington or the board to the Parkes draft. For all I know, thev may have been so trivial as not even possibly to affect Dr. Parkes' right to claim to be the author. As to the question whether the form of directions is capable of being the subject of copyright, counsel have directed my attention to a wide variety of tests. not all of them 17. consistent. It appears clear, however, that a certain minimun amount of skill and judgment must be exercised; the difficulty is to determine how much. Counsel for the bank relied heavily upon the principle that what is worth copying is prima facie worth protecting, adopted inter alia by Lord Pearce in Ladbroke (Football) Ltd. v. William Hill (Football) Ltd. (1964) 1 W.L.R. 273 at p.292. I do not find it easy to see of what use the presumption is in respect of material for which copyright is claimed where it is as rudimentary as here. There is no doubt that F.A.I.''s agent copied part of the directions, finding it convenient to do so, but there is nothing necessarily sinister in that. The use of the expressions in question may have been made, as I think it probably was, to save the draftsman of the F.A.I. forma slight amount of thought and trouble. It is unnecessary, however, to reach, for the purpose of these interlocutory proceedings, any precise conclusion on the issue being discussed. That is so because the parts copied cannot be said to represent "the application of a high degree of skill and labour on the part of the author". In those circumstances, the parts copied should not be regarded as a "substantial part" within the meaning of s.14(1)(a) of the Act - see Ricketson, The Law of Intellectual Property p.170. To demonstrate this, it is not necessary to be exhaustive. The first direction in the bank form is "Insert the name and address of the registered shareholder here", The F.A.I. form says "Insert your name and address here". The second F.A.I. direction begins with a sentence which is 18. identical with the bank form, but then departs substantially from it. The third direction is identical: "Iqnore unless more than one proxy is to be appointed". These are very ordinary words indeed and, as was pointed out on behalf of F.A.I.. there is no great number of other ways in which to convey the same information. In summary, the bank's case for infringement of copyright seems to me not to have, on the material presently available, any real strength. The breach complained of. if it be one, has already occurred. I have the assurance of Mr. Bainton Q.C. on behalf of F.A.T. that it is not proposed to use what I am told is a substantial quantity of surplus how-to-vote forms, but even if that assurance had not been given. it would seem to be clear that the case is not one in which it is right to grant interlocutory relief. For those reasons I propose to dismiss both applications. The applications will be dismissed with no order as to costs. i certify that this and the /77 preceding pages are a true copy of the reasons for judgment herein of His Honour Mr, Justice Pincus GAt Associate Dated ¢ konto Ler /97P6