Thompson v Eagle Boys Dial-A-Pizza Australia Pty Limited [2001] FCA 741

FEDERAL COURT OF AUSTRALIA

Thompson v Eagle Boys Dial-A-Pizza Australia Pty Limited [2001] FCA 741

KEVIN ROBERT THOMPSON and TRICON RESTAURANTS AUSTRALIA PTY LIMITED v EAGLE BOYS DIAL-A-PIZZA AUSTRALIA PTY LIMITED N 961 of 2001 WILCOX J 13 JUNE 2001 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 961 of 2001

BETWEEN: KEVIN ROBERT THOMPSON

FIRST APPLICANT

TRICON RESTAURANTS AUSTRALIA PTY LIMITED

SECOND APPLCIANT

AND: EAGLE BOYS DIAL-A-PIZZA AUSTRALIA PTY LIMITED

RESPONDENT

JUDGE: WILCOX J

DATE OF ORDER: 13 JUNE 2001

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The application for interlocutory injunction be dismissed. 2. The costs of the application for interlocutory relief be respondent's costs in the principal proceeding. 3. The matter be listed for final hearing at 10.15am on Wednesday, 11 July 2001. 4. The parties have liberty to apply by arrangement with the Associate to Wilcox J. 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 961 of 2001

BETWEEN: KEVIN ROBERT THOMPSON

FIRST APPLICANT

TRICON RESTAURANTS AUSTRALIA PTY LIMITED

SECOND APPLICANT

AND: EAGLE BOYS DIAL-A-PIZZA AUSTRALIA PTY LIMITED

RESPONDENT

JUDGE: WILCOX J

DATE: 13 JUNE 2001

PLACE: SYDNEY

REASONS FOR JUDGMENT

WILCOX J: 1 Application has been made to the Court for an interlocutory injunction to restrain the broadcasting, or authorising the broadcast, of a 15 second television advertisement and for other interlocutory orders. 2 The proceeding is brought by two applicants. The first applicant is Kevin Robert Thompson, a franchisee of the business known to the public as "Pizza Hut". The second applicant is Tricon Restaurants Australia Pty Limited ("Tricon Australia"). That company carries on the Pizza Hut business in Australia. It is wholly owned by a United States company. 3 The respondent is Eagle Boys Dial-A-Pizza Australia Pty Limited ("Eagle Boys"). This company is based in Brisbane and is involved in the production and distribution of pizzas throughout Australia; I gather primarily through franchise arrangements. 4 The Application filed by the applicants alleges the respondent has committed a breach of s 52 of the Trade Practices Act 1974, in that its advertisement is misleading or deceptive or likely to mislead or deceive. The Application also claims the advertisement constitutes an infringement of the copyright of Tricon Australia in the get-up used by that company, and its franchisees, on pizza delivery boxes. The subject television advertisement includes a shot of a Pizza Hut box. 5 In the television advertisement, Mr Tom Potter, the Managing Director of the respondent, is seen on screen. He uses the following words: "I reckon there's one really important thing all Aussies should look for in a pizza. Is it from a 100 per cent Australian owned company? Because if it's not, your money's getting delivered overseas. At Eagle Boys we're Australian through and through." Mr Potter utters these words against a background of shots of two pizza boxes, one being a mock-up created for the purpose of the television advertisement and the other the delivery box currently used by Pizza Hut. Mr Potter is seen to put those two boxes on an airport trolley, which is then wheeled in the direction of a United Airlines aeroplane waiting on the tarmac. Towards the end of his speech, Mr Potter picks up an Eagle Boys box and points proudly at it. 6 The applicants' argument, in relation to the s 52 claim, is that the advertisement suggests the entire proceeds of sales of Pizza Hut pizzas, or at least a substantial part of those proceeds, are remitted away from Australia, presumably to the United States. 7 There is evidence as to the use of the advertisement and a predecessor of it. This comes from Richard James Holliday, the Marketing Manager of Eagle Boys. Mr Holliday deposed to the fact that Eagle Boys showed a 30 second advertisement in the Toowoomba district for a period of about 16 weeks between 28 January and 20 May 2001. It is not clear to me whether the use was continuous during that period. Eagle Boys has two franchises in Toowoomba and another franchise in each of Dalby and Warwick, both of which towns are within the Toowoomba television area. Pizza Hut has two franchises in Toowoomba. The 30 second advertisement contained material additional to that which is in the current 15 second advertisement, but it included Mr Potter saying the same words as in the shorter advertisement. Mr Holliday gave evidence that no complaint was received by Eagle Boys in respect of the Toowoomba advertisement at any time. 8 Apparently a decision was taken in April, in the light of what was perceived to be the success of the Toowoomba advertisement in maintaining or increasing Eagle Boys Toowoomba sales, to embark upon a national campaign with a 15 second television advertisement. The subject advertisement was then made incorporating, as I have said, the same words as had been used by Mr Potter in the 30 second advertisement. This commenced to be shown nationally, with some exceptions, from 21 May 2001. Apparently bookings were made with each of the three national commercial television networks for two, six week periods. The first of those six week periods will expire during the next two weeks. Then there will be another six week period, running through till some time in September. I gather the screening is on the basis of one week on and one week off. 9 Mr Holliday said the company had embarked upon a print and flyer marketing campaign tying into the television advertisement. He deposed that Eagle Boys has no other suitable television advertisement to substitute for the subject advertisement, if it is unable to show that advertisement. However, I assume a substitute advertisement could quickly be put together, bearing in mind this is only a 15 second advertisement. Mr Holiday said that, if the advertising commitment was cancelled, a cancellation fee of some $82,000 would be payable. 10 The case put by the applicants depends substantially upon perceived misleading of consumers in relation to the franchised Pizza Hut restaurants. It appears there are, at the present time, 373 Pizza Hut restaurants operating in Australia. Of these, 128 restaurants are operated on behalf of the company itself. All profits go to Tricon Australia; and, as that company is wholly owned by the American parent, ultimately to the American company. The remaining 245 restaurants are operated on a franchise basis. A franchise fee of $60,000 has been paid to Tricon Australia in respect of each of those franchises. This fee has gone into the funds of that company, and ultimately to America. In addition, each franchisee pays a franchise fee. The fee seem to vary a little from year to year but it is of the order of about six per cent of turnover. 11 As I have said, the thrust of the case is that the advertisement is misleading in relation to franchised restaurants. Some evidence has been given by franchisees, who are Australians operating relatively small businesses on their own account. They retain, for their own benefit, whatever profits they can earn. 12 It is said by counsel for the applicants that it is misleading to suggest all Pizza Hut restaurants are owned by non-Australians. I agree this would be misleading if it was said, but I do not think Mr Potter's words convey that statement. It will be recalled Mr Potter commences by raising, as a possible issue for consumers, whether the company from which the purchase is being made is 100 per cent Australian owned. He then says "because if it's not, your money's getting delivered overseas". I do not think this conveys anything about the ownership of a particular Pizza Hut restaurant. The thrust of what is being said is that, if a company with whom the consumer is dealing - and that must mean more than the particular operator of the franchised site - is not Australian owned, then the consumer's money, or at least a part of it, is being sent overseas. 13 The real issue is whether the sentence in which Mr Potter says "because if it's not your money's getting delivered overseas" is misleading, in the context that it is obvious that not all money paid for a pizza would be delivered overseas, even if the restaurant was conducted directly by an overseas company. As is pointed out by Mr S Couper QC, counsel for Eagle Boys, all consumers would realise that a proportion, and no doubt a significant proportion, of the purchase price of a pizza would be expended in the purchase of materials, the payment of wages and defrayment of the many other expenses associated with running a business. 14 I think Mr Potter's comment really goes to the destination of profits. It is said by Mr J V Nicholas, on behalf of the applicants, that the profits stay in Australia, if there is a franchised site. That statement is no doubt true; but this is a profit after payment of a franchise fee of about six per cent to a company which is a subsidiary of an American company. There could be no complaint, if the sentence to which I have referred was amended by adding the qualification "some of" before the words "your money's". It would be literally true to say that, if the company with whom the purchaser is dealing is not one hundred per cent Australian owned, some of the consumer's money is going to be delivered overseas. 15 The real question is whether, as Mr Couper contends, the viewer of the commercial would understand this to be a reference to some of the money or whether, as Mr Nicholas suggests, it means all of the money. 16 I think the applicants' position in respect of this issue is an arguable one. I do not think it is appropriate to put the matter any higher than that at the present time. 17 The other complaint made by the applicants is of infringement of copyright. For the purpose of the present proceedings, at least, it is accepted that Tricon Australia is the owner of copyright in an "artistic work" consisting of the get-up used on the Pizza Hut delivery box. 18 However, the respondent relies on s 67 of the Copyright Act 1968 which is in the following terms: "Without prejudice to the last two preceding sections, the copyright in an artistic work is not infringed by the inclusion of the work in a cinematographic film or in a television broadcast if its inclusion in the film or broadcast is only incidental to the principal matters represented in the film or broadcast." 19 The respondent's argument raises an interesting question as to the application of s 67 to a case where there is deliberate use of an artistic work, comprising the get-up of a product, in order to make a point for the purposes of comparative advertising. In one sense, as Mr Nicholas says, there is nothing incidental about use of the Pizza Hut box. The whole point of the advertisement is to implant into the mind of the viewer a contrast between the advertiser, which claims to be one hundred per cent Australian owned, and a competitor, which is probably widely believed not to be one hundred per cent Australian owned. The way in which the competitor is mentioned is by showing the Pizza Hut box; there is no reference to Pizza Hut in Mr Thompson's words. 20 I think Mr Nicholas is correct to say the use of the Pizza Hut get-up was deliberate and that it relates to the rationale of the television commercial. On the other hand, Mr Couper says that, although the reference to Pizza Hut is deliberate, the inclusion of the art work is only incidental, simply to get across the major point. He says this is not a case where the published matter focuses on the artwork as such; as would be the case, for example, if there was a program dealing with a particular artistic work and its merits or lack of merits. 21 The point is an interesting one. I think it has widespread ramifications. If Mr Nicholas' argument is correct, it would seem to be an infringement of copyright for any advertiser - or for that matter, any other broadcaster - to make use of the logo of a company or product in order to illustrate a matter being discussed. It is not uncommon, for example, for the editor of a television program relating to a particular company or product to use shots of a logo or advertising material used in connection with that company or product; the purpose being to provide recognisable graphic material against an oral presentation. 22 I regard the s 67 point as being both important and difficult. I am inclined to think the answer offered by the respondent is to be preferred, but this is not the occasion for coming to any concluded view. 23 I think there is an arguable case in the applicants' favour. On the other hand, I do not think the case is particularly strong. That is a factor I take into account in considering whether I ought to grant interlocutory relief, having regard to the balance of convenience. 24 The matter that influences me most is the likely difficulty in quantifying any loss that would be sustained by the respondent if an interlocutory injunction were granted. 25 The applicants offer the usual undertaking as to damages and I have no reason to doubt their ability to make good that undertaking. However, quantification of any loss is another matter. If they were restrained, it might be very difficult for the respondent to establish what profits it might have made, had it been able to undertake the advertising campaign. The applicants respond to this by saying it would be difficult for them to quantify the loss they would suffer if the advertising is allowed to continue. I appreciate there is some difficulty in that respect, but two comments are apposite. 26 First, I do not think it is correct to say, as Mr Nicholas does, that the applicants would have to demonstrate the loss they sustained by these advertisements, as compared with any loss they might have sustained if similar advertisements had been displayed, but without the objectionable statement. Mr Nicholas gave the example of an Eagle Boys' advertisement which emphasised only the 100 per cent Australian ownership of the respondent and said nothing about the applicants. It seems to me that, if a party sustains loss because of the use of a television advertisement which infringes that party's rights, then it is no answer for the respondent to say the same loss might have been caused by some other advertisement which did not infringe those rights. 27 Second, the applicants have the advantage of established track records, as it were, in regard to their turnover and profitability. So it ought to be possible for them to demonstrate any change which occurred during the period of the advertising campaign. Indeed, I would have thought such a loss would have been suffered by the Toowoomba Pizza Hut franchisees if the advertisement was one calculated to cause loss to Pizza Hut franchisees. 28 I do not place any weight on the fact that no such evidence has been put before the Court today. I realise time has been short. The applicants may not have realised the Toowoomba advertisements would be mentioned. Indeed, it is not clear to me that those who are running the case on behalf of the applicants, or even any executives of Tricon Australia, were aware of the Toowoomba advertisements before today. However, I think the difficulty in quantifying any loss suffered by the respondent is likely to be greater than it would be in relation to any loss by the applicants. 29 Another matter that I take into account is that it seems possible for there to be an early final hearing of this matter. I raised this briefly with counsel during the course of submissions. So far as I can see, the evidence that is important to the critical questions is within a very small compass. It should be possible to arrange a final hearing within a month or so from today. I cannot imagine any irreparable loss will be suffered by the applicants during that time. 30 On the whole, therefore, and bearing in mind my assessment of the strength of the applicants case together with the other matters to which I have referred, I have come to the conclusion that this is not a case in which an interlocutory injunction ought to be granted. I propose to dismiss the application for an interlocutory injunction. I think the costs of the application for interlocutory relief should be respondent's costs in the principal proceeding. I am happy, either now or after counsel have had some time to consider the matter, to make directions aimed at an early final hearing.