FEDERAL COURT OF AUSTRALIA CRS Technologies Pty Limited v Jowa Group Pty Limited [2003] FCA 128 CRS TECHNOLOGIES PTY LIMITED v JOWA GROUP PTY LIMITED & ORS N 1287 of 2000 WHITLAM J 28 FEBRUARY 2003 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1287 of 2000 BETWEEN: CRS TECHNOLOGIES PTY LIMITED APPLICANT AND: JOWA GROUP PTY LIMITED FIRST RESPONDENT ENVIRO CYCLE WASTE WATER TREATMENT SYSTEMS PTY LIMITED SECOND RESPONDENT JOHN ANTHONY WATKINS THIRD RESPONDENT JOWA GROUP PTY LIMITED FIRST CROSS-CLAIMANT ENVIRO CYCLE WASTE WATER TREATMENT SYSTEMS PTY LIMITED SECOND CROSS-CLAIMANT CRS TECHNOLOGIES PTY LIMITED FIRST CROSS-RESPONDENT AWTS MAINTENANCE SERVICES PTY LIMITED SECOND CROSS-RESPONDENT FREDERICK CHARLES SEYMORE THIRD CROSS-RESPONDENT JUDGE: WHITLAM J DATE OF ORDER: 28 FEBRUARY 2003 WHERE MADE: SYDNEY THE COURT DECLARES THAT: 1. Each of the first and third respondents is guilty of contempt by reason of breach of the undertaking in paragraph 11 given to the Court on 26 October 2001. AND THE COURT ORDERS THAT: 2. Each of the first and third respondents is fined the sum of $5,000. 3. The first and third respondents pay the applicant's costs of the motion except insofar as they are of an unreasonable amount or were unreasonably incurred so that, subject to such exceptions, the applicant will be completely indemnified by the first and third respondents in respect of such costs. 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 1287 of 2000 BETWEEN: CRS TECHNOLOGIES PTY LIMITED APPLICANT AND: JOWA GROUP PTY LIMITED FIRST RESPONDENT ENVIRO CYCLE WASTE WATER TREATMENT SYSTEMS PTY LIMITED SECOND RESPONDENT JOHN ANTHONY WATKINS THIRD RESPONDENT JOWA GROUP PTY LIMITED FIRST CROSS-CLAIMANT ENVIRO CYCLE WASTE WATER TREATMENT SYSTEMS PTY LIMITED SECOND CROSS-CLAIMANT CRS TECHNOLOGIES PTY LIMITED FIRST CROSS-RESPONDENT AWTS MAINTENANCE SERVICES PTY LIMITED SECOND CROSS-RESPONDENT FREDERICK CHARLES SEYMORE THIRD CROSS-RESPONDENT JUDGE: WHITLAM J DATE: 28 FEBRUARY 2003 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is a motion by the applicant, CRS Technologies Pty Limited ("CRS"), for punishment of the first respondent, Jowa Group Pty Limited ("Jowa"), and the third respondent, John Anthony Watkins, for contempts allegedly committed in failing to comply with undertakings given to the Court. The undertakings in question were given in relation to consent orders made by the Court on 26 October 2001 otherwise dismissing the claims for relief. The parties requested the Court to make those orders pursuant to an agreement between them made on 27 September 2001 settling, without admissions, the proceedings on the application and the cross-claim. 2 CRS claimed relief in the application under the Copyright Act 1968, under the Trade Marks Act 1995, for passing off and under the Trade Practices Act 1974. The statement of claim alleged the unlawful use by the respondents of several names or marks, including ENVIROCYCLE. Specifically, relief was sought which included the following orders: "18. An order that the respondents, by themselves, their servants, agents or otherwise, be restrained from: (a) passing off Products or Services or both as being those of the applicant or being associated with the applicant or the applicant's Products or Services or having the endorsement, approval or sponsorship of the applicant, when in fact they do not; and (b) passing themselves off as being associated with, or having the endorsement, approval or sponsorship of the applicant when in fact they do not. … 24. An order that the respondents be restrained, by themselves, their servants or agents from, in trade or commerce: (a) representing to consumers that the Products and Services or both of the first or second respondent or both of them are the Products or Services or both of the applicant or are associated with the applicant or applicant's Products or Services or have the endorsement, approval or sponsorship of the applicant, when in fact they do not; (b) representing to consumers in trade or commerce that they are associated with or have the endorsement, approval or sponsorship of the applicant, when in fact they do not; … (d) representing that the business or services of the first or second respondent or both of them were formerly the applicant's business or services, or that the Products being offered for sale and installation by the respondents or either of them are, or were formerly known as, the applicant's Products, or both; … 31. An order that the respondents or any of them, within 7 days of the service of such order, take all necessary steps to disconnect the telephone number 08 8322 3933." 3 The undertakings given to the Court by Jowa and Mr Watkins on 26 October 2001 included the following: "5. the respondents, by themselves, their servants, agents or otherwise, will not: (a) pass off Products or Services or both as being those of the applicant or being associated with the applicant or the applicant's Products or Services or having the endorsement, approval or sponsorship of the applicant, when in fact they do not; or (b) pass themselves off as being associated with, or having the endorsement, approval or sponsorship of the applicant when in fact they do not; 6. the respondents will not, by themselves, their servants or agents, in trade or commerce: (a) represent to consumers that the Products and Services or both of the first or second respondent or both of them are the Products or Services or both of the applicant or are associated with the applicant or applicant's Products or Services or have the endorsement, approval or sponsorship of the applicant, when in fact they do not; (b) represent to consumers in trade or commerce that they are associated with or have the endorsement, approval or sponsorship of the applicant, when in fact they do not; … (d) represent that the business or services of the first or second respondent or both of them were formerly the applicant's business or services, or that the Products being offered for sale and installation by the respondents or either of them are, or were formerly known as, the applicant's Products, or both; … (i) aid, abet, counsel or procure the conduct set out in (a) to (h); or (j) be, directly or indirectly, knowingly concerned in or party to the conduct set out in (a) to (h); … 11. the respondents will, within 7 days, take all necessary steps to disconnect the telephone number 08 8322 3933." The respondents also undertook not to place advertisements which made reference to the name or mark ENVIROCYCLE. 4 The words "Products" and "Services" are identically defined in the application and for the purposes of the undertakings. "Products" means domestic and commercial waste water treatment systems and parts of and for such systems, and "Services" means services associated with the sale and installation of such products, including maintenance services. The causes of action pleaded by CRS relied, in part, on display advertisements incorporating the word EnviroCycle in the 1999 and 2000 editions of the Yellow Pages telephone directory for Adelaide relating to the supply of such products and services by Jowa. Copies of these advertisements were attached to a letter dated 9 February 2001 from CRS's solicitors to the respondents' solicitors which was received in evidence on the hearing of the present charges. Only one telephone number is given in the advertisements and that is 8322 3933. 5 The orders made on 26 October 2001 were entered on 21 November 2001. Soon after Marianne David, a solicitor employed by CRS's solicitors, made a "trap" call. In an affidavit she deposed: "2. At or about 2:20 pm on 28 November 2001 I made a telephone call to 08 8322 3933 and I had a conversation with the female operator to the following effect: Operator: Playsafe I said: I think I have the wrong number. I was looking for Envirocycle. Operator: They've got a new number. Would you like it? I said: Yes, thanks. Operator: 8381 9100. I then ended the telephone call. 3. Immediately afterwards I made a telephone call to 08 8381 9100 and I had a conversation with the female operator during which we said words to the following effect: Operator: Biocycle Jowa Group, can I help you? I said: I thought this was Envirocycle? Operator: Yes it is. Now Biocycle." Ms David was cross-examined. It was put to her that it was more likely that the last response was "Yes. It is now Biocycle." Ms David disagreed. I do not think that it much matters. However, I should say that Ms David struck me as a careful witness who would have done her best to render accurately the inflexion in the speaker's voice. 6 Ms David ascertained that a company called Playsafe Australia Pty Limited ("Playsafe") was located at 8 Lander Avenue, Sheidow Park. This was also Jowa's address. On 30 November 2001 CRS's solicitors wrote to the respondents' solicitors, complaining that anybody who telephoned 08 8322 3933 and asked for "Envirocycle" would be referred to a telephone number for Jowa. The respondents' solicitors replied on 5 December 2001. They said that "our clients have no control over the activities or conduct of Playsafe Australia Pty Limited". However, the respondents' solicitors said that "on a without admission basis … our clients have contacted the proprietors of Playsafe Australia Pty Limited and requested them to cease giving out our clients' telephone number in response to a request for 'Envirocycle'." 7 A further "trap" call was placed by Julia Hoffmann, a law graduate employed by CRS's solicitors. She deposed: "2. At or about 1:08 pm on 18 March 2002 I made a telephone call to 08 8322 3933, and I had a conversation with the female operator to the following effect: Operator: I'm sorry all our lines are busy at the moment would you like to leave a message? I said: I've actually called this number a couple of times and the lines have [sic] busy. I'm wanting to get in touch with Envirocycle? Operator: As in the company looking after the water treatment? I said: Yes. Operator: We're the switchboard for them, if you'd like to leave a message, and I'll emphasise that you've tried to call a couple of times and the lines have been busy. I said: Is there no direct number for them? Operator: I do have a number for them but it's probably the same number that you already have, that's 8381 9100. I said: No, I don't have that one, could I have that again? Operator: Yes, it's 8381 9100. That will get you through to Jowa Group that are the company that looks after water treatment. I said: Ok, I'll try that first before I leave a message. I then ended the phone call." Ms Hoffmann was cross-examined and agreed that it was clear to her during the above conversation that she had reached an answering service. 8 CRS's solicitors wrote to Mr Watkins on 18 March 2002 complaining, amongst other things, that he and Jowa had not disconnected the telephone number 08 8322 3933. The respondents' solicitors replied on 21 March 2002, saying that in accordance with their undertakings "our clients disconnected the telephone number" and that "our clients are in no way related to the current owners of the telephone number and have no control over them." 9 On 22 April 2002 CRS filed the present motion and its statement of charge. The statement alleges (1) that Jowa and Mr Watkins breached the undertaking in paragraph 11 to disconnect the telephone by the time there specified; (2) that representations made in the telephone conversation on 28 November 2001 breached the undertaking in paragraph 6(d); (3) that representations made in the telephone conversation on 18 March 2002 breached the undertakings in paragraph 5, 6(a) and (b); and (4) that, in respect of the conversation on 18 March 2002, Mr Watkins breached the undertakings in paragraph 6(i) and (j). 10 The facts relating to telephone number 08 8322 3933 emerge quite clearly from various business records of Telstra Corporation Limited ("Telstra") and the testimony of Mr Watkins and Anthony Godden, a Telstra manager. The building at 8 Lander Avenue, Sheidow Park is owned by Mr Watkins and his wife. Jowa has its place of business there. Until March 2002 Playsafe leased the second floor in the building for use in its business. Mr Watkins and Playsafe's managing director, Mark Weber, are old friends. Although they operated completely different businesses and occupied separate parts of the building, Jowa and Playsafe shared an NEC brand proprietary telephone system. This system supported ten exchange lines, seven of which were used for voice communication. Jowa leased four of these lines from Telstra, and Playsafe leased the other three. The service numbers of the lines leased to Jowa at Sheidow Park were 08 8322 3933, 08 8322 1701, 08 8322 3564 and 08 8381 9100. The service provided by Telstra on these numbers included its proprietary product, "Line Hunt", which allowed incoming calls to the advertised number 8322 3933 to go straight through, when that number was busy, to whichever of the other numbers was free. (Jowa also leased a telephone number at the Gawler exchange which was diverted to 8322 3933.) Mr Watkins said that the staff at both Jowa and Playsafe would answer the other company's calls "if no one is around". The staff would take a message or transfer the call "if someone was available". 11 On a Friday evening in September 2001 Mr Watkins told Mr Weber over a drink that, as part of the settlement arrangements with CRS, he had to disconnect the number 8322 3933. Mr Weber asked if Playsafe could take the number over, and Mr Watkins agreed. On or about 10 September 2001 Mr Watkins spoke to Mr Godden, who was responsible for managing Jowa's account with Telstra. Mr Godden then arranged to disconnect the number 8322 3933, which meant that the service could not be used after 11 September 2001. At the same time, however, Mr Godden also arranged to reserve that number at the exchange "in Jowa's name". On 28 September 2001 Mr Godden sent Mr Watkins Telstra's application form for the transfer of an exchange line service. Mr Watkins completed the form on behalf of Jowa and, with Mr Weber's authority, on behalf of Playsafe. He requested the service be transferred on 5 October 2001. Mr Watkins indicated that Playsafe did not want to consolidate the new account for this service with any existing Telstra account numbers and that it did not require a White Pages listing. Mr Watkins returned the form the same day to Mr Godden, who then faxed it on to the appropriate "cell" in Telstra. The transfer was completed on 11 October 2001 and backdated to 2 October 2001. 12 Mr Watkins was shown the Telstra bill to Playsafe dated 6 November 2001 for the telephone service 08 8322 3933. In that bill he recognized and identified calls made throughout October 2001 from that service to telephone numbers used by Jowa. Mr Watkins agreed that Jowa paid that bill as "a gesture of faith or friendship" because a large number of calls were still coming in for Jowa on that line. Telstra records show that Jowa's cheque for $232.45 in payment of that bill was drawn on 12 December 2001. Mr Watkins agreed that Jowa also paid a subsequent bill for Playsafe. The Telstra records include another cheque for $961.90 drawn on 12 December 2001 was also credited to Playsafe's account for service number 08 8322 3933. 13 In cross-examination, Mr Watkins was most reluctant to acknowledge that he could simply have cancelled the service number. When it was put to him that he "understood … that there was no need for Playsafe to take the number over [in order] to take a line over", he said that he "never gave it any thought". Mr Watkins denied that he made an arrangement with Mr Weber that "he and his company would look after the number for you". 14 At the beginning of 2002 both Jowa and Playsafe engaged Link Communication to provide a telephone answering and message service for overflow and after hours calls. 15 Counsel for Jowa and Mr Watkins submits that the charges in respect of the undertakings in paragraph 5 and 6 are not made out. It is true that their terms replicate orders sought in the application. However, the undertakings were given without admission. In order to establish a breach of the undertaking in paragraph 5, CRS would need to prove all the elements of the tort of passing off. Further, he submits, the statements by the "Operator" in each of the conversations do not involve representations covered by paragraph 6(a), (b) or (d) of the undertakings. I accept these submissions and find that those charges are not established. 16 So far as paragraph 11 is concerned, counsel for Jowa and Mr Watkins draws attention to the fact it does not specify the date from which the period of "7 days" is to run. He contends, therefore, that the period may well commence on 27 September 2001, when the settlement agreement was exchanged. If that be the case, he submits, the telephone number was disconnected on 2 October 2001 when the transfer of the service was effected in Telstra's books. I have looked at the settlement agreement, the terms of which are confidential. It gives no support to any suggestion that an undertaking to be given in relation to the consent order would operate otherwise than in accordance with its terms. In my opinion, on the true construction of paragraph 11, the period of seven days runs from 26 October 2001, when the undertakings were given to the Court. After that date there is no evidence that Jowa or Mr Watkins took any steps to disconnect the telephone number 08 8322 3933. 17 I reject the submission of counsel for Jowa and Mr Watkins that paragraph 11 is ambiguous and uncertain in the sense explained in Microsoft Corporation v Marks (No 1) (1996) 69 FCR 117 at 139-141. The meaning of the undertaking is plain. The respondents were to ensure that the number 08 8322 3933 was not used to contact them by telephone. Jowa and Mr Watkins failed to take any steps to achieve that result. The necessary steps were simple. The number could have been changed or the service cancelled. Mr Godden explained that a change of number for an existing line involves some "jumpering" work at the exchange and in the street. Whether the number of a telephone service is changed or the service is cancelled, in common parlance one refers to the old number being disconnected. It is not at all to the point that by 26 October 2001 Jowa had transferred the service to Playsafe. The number was not important to Playsafe. It merely wanted the use of the exchange line. Mr Watkins knew this. He completed the transfer form, which did not seek a directory listing. In any event, as the chief executive of Jowa, he took no steps to fulfil the undertaking they had both given in paragraph 11. Accordingly, the charge is made out and in this respect they are both guilty of contempt. 18 CRS submits that the contemnors should be fined and ordered to pay indemnity costs. On the other hand, their counsel said that, if there were any finding of contempt, a particular costs order should be sufficient. In any event, neither side wished to be heard on the question of penalty after the charges were determined. 19 There is no evidence of the contemnors' subjective circumstances. Nonetheless, the breach was a serious one and, in my view, quite flagrant. In making my finding of guilt, I have dealt strictly with the charge as drawn. However, in fixing a penalty, I think I may have regard to the fact that, by virtue of the breach of the undertaking given to the Court, Jowa was able to continue utilizing telephone number 08 8322 3933. In the circumstances Jowa and Mr Watkins will each be fined $5,000. They must also pay CRS's costs on an indemnity basis. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Whitlam J. Associate: Dated: 28 February 2003 Counsel for the applicant: Richard Cobden Solicitors for the applicant: Baker & McKenzie Counsel for the respondents: R J Webb Solicitors for the respondent: Cowley Hearne Date of judgment: 28 February 2003