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FEDERAL COURT OF AUSTRALIA
Native Extracts Pty Ltd v Plant Extracts Pty Ltd [2023] FCA 1265
File number(s): QUD 215 of 2020
Judgment of: DOWNES J
Date of order: 19 October 2023
Date of publication of reasons: 23 October 2023
Catchwords: CONTRACT – restraint of trade – confidentiality clause – admissions made of breaches of contract during hearing of trial in relation to competing business – certain relief granted at conclusion of trial
CONSUMER LAW – admitted breaches of Australian Consumer Law – injunctions and corrective advertising ordered before final judgment in interests of consumers
COPYRIGHT – admitted breaches of Copyright Act 1968 (Cth) – certain relief granted with question of additional damages reserved to final judgment
Division: General Division
Registry: Queensland
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 9
Date of hearing: 9–10, 12 and 19 October 2023
Counsel for the Applicants: Mr D Logan KC with Mr J Mitchenson
Solicitor for the Applicants: Dundas Lawyers
Counsel for the First, Second, Third, Fourth and Sixth Respondents: Mr B Hall
Solicitor for the First, Second, Third, Fourth and Sixth Respondents: Stokes Lawyers
Counsel for the Fifth Respondent: The Fifth Respondent appeared in person
ORDERS
QUD 215 of 2020
BETWEEN: NATIVE EXTRACTS PTY LTD ACN 161 185 913
First Applicant
MATERBELLATOR PTY LTD ACN 600 036 342 AS TRUSTEE FOR THE NATIVE EXTRACTS HOLDING TRUST ABN 68 491 475 676
Second Applicant
EVOLVESK.IN PTY LTD ACN 604 152 061
Third Applicant
AND: PLANT EXTRACTS PTY LTD ACN 613 551 349
First Respondent
ROSS MACDOUGALD
Second Respondent
PHYTOVERSE PTY LTD ACN 603 360 112 (and others named in the Schedule)
Third Respondent
order made by: DOWNES J
DATE OF ORDER: 19 October 2023
RULE 41.06 ENDORSEMENT
IF YOU, PLANT EXTRACTS PTY LTD, ROSS MACDOUGALD, PHYTOVERSE PTY LTD AND BIOLOGI PTY LTD:
(A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER; OR
(B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU NOT TO DO,
YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR PUNISHMENT FOR CONTEMPT.
IN THIS ORDER THE FOLLOWING DEFINITIONS APPLY:
SFASOC means the Applicants' Second Further Amended Statement of Claim filed on 6 October 2023.
Deed of Settlement means the Deed of Settlement defined in paragraph 11 of the SFASOC.
Restraint means the term in the Deed of Settlement pleaded in paragraph 14 of the SFASOC.
Confidential Information means the information in:
(a) the First Applicant's Extract Log / Formula Book, a copy of which is Annexure LGC-007 to the affidavit of Lisa Carroll affirmed on 23 June 2022;
(b) the First Applicant's Grower's Matrix, being the spreadsheet a copy of which is Annexure LGC-029 to the affidavit of Lisa Carroll affirmed 23 June 2022 and the document at Exhibit 1, Volume 2, Tab 66;
(c) the First Applicant's List of Suppliers and Customers, a copy of which is Annexure LGC-024 to the affidavit of Lisa Carroll affirmed on 23 June 2022.
Contractual Duty of Confidence means the Contractual Duty of Confidence defined in paragraph 23 of the SFASOC.
Duties of Confidence means the Statutory Duty of Confidence, the Fiduciary Duty (Confidence), Fiduciary Duty (Trustee) and Equitable Duty of Confidence respectively defined in paragraphs 24, 25, 26 and 29 of the SFASOC.
Original SCU Certificates means the Original SCU Certificates defined in paragraph 56 of SFASOC.
Purported SCU Certificates means the Purported SCU Certificates defined in paragraph 72 of the SFASOC.
SCU means Southern Cross University.
THE COURT DECLARES BY CONSENT BETWEEN THE APPLICANTS AND THE RESPONDENTS (OTHER THAN THE FIFTH RESPONDENT) THAT:
1. Since 8 July 2016, the First Respondent, in trade or commerce, in connection with the supply or possible supply of goods, or in connection with the promotion of the supply of goods, by sending to its customers and prospective customers data packs containing the Infringing SCU Certificates and the Purported SCU Certificates, that it had modified from the Original SCU Certificates procured from the First Applicant by removing the date, the customer name, the customer reference number, the laboratory reference number and the job number, represented to its customers and prospective customers that (the Independent Testing Representation):
(a) it had contracted SCU to conduct independent analytical testing of each of its botanical plant extracts the subject of an Infringing SCU Certificate or Purported SCU Certificate, when it had not; and
(b) each of its botanical plant extracts that was the subject of an Infringing SCU Certificate or Purported SCU Certificate was of the standard, quality, value, grade or composition, or contained the characteristics depicted in the Infringing SCU Certificate or Purported SCU Certificate for that botanical plant extract, when they did not,
and thereby:
(c) engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of section 18 of the Australian Consumer Law (ACL); and
(d) made false or misleading representations that the First Respondent's goods were of a particular standard, quality, value or grade, in contravention of section 29(1)(a) and (g) of the ACL.
2. The First Applicant is the owner of the copyright subsisting in the Original SCU Certificates, and the First Respondent has infringed that copyright by reproducing in a material form the whole or a substantial part of those works.
3. Between 8 July 2016 and May 2018, the First Respondent, in trade or commerce, in connection with the supply or possible supply of goods, or in connection with the promotion of the supply of goods, by depicting the Organic Food Chain (OFC) logo on its products, represented to the public that it was certified as organic by the OFC (the OFC Representation), when in fact:
(a) the First Respondent was not certified as organic by OFC; and
(b) the OFC logo published by the First Respondent on the First Respondent's products belonged to the Third Respondent, not the First Respondent,
and thereby:
(c) engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 18 of the ACL; and
(d) made false or misleading representations that the First Respondent's goods were of a particular standard, quality, value or grade, in contravention of section 29(1)(a) of the ACL.
4. Between 20 June 2018 and 2020, the First Respondent represented that:
(a) its Finger Lime and Desert Lime extracts contain Byangelicin; and
(b) Byangelicin:
(i) improves collagen and elastin production in the skin;
(ii) is a potent anti-ageing active; and
(iii) reduces the potential of early ageing,
when in fact, Byangelicin does not exist, and thereby:
(c) engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of section 18 of the ACL; and
(d) made false or misleading representations that the First Respondent's goods were of a particular standard, quality, value or grade, in contravention of section 29(1)(a) of the ACL.
5. The Second Respondent was directly or indirectly knowingly concerned in, or a party to, each of the First Respondent's and Sixth Respondents' contraventions of sections 18 and 29(1)(a) and (g) of the ACL.
6. The Second Respondent has, by his acts pleaded in paragraphs 15 to 20, 45 and 48 of the SFASOC, breached his Contractual Duty of Confidence to the First Applicant and the Second Applicant.
7. The Second Respondent has, by his acts pleaded in paragraphs 15 to 20, 45 and 48 of the SFASOC, breached his Duties of Confidence to the First Applicant and the Second Applicant.
8. The First Respondent and Third Respondent were involved in the Second Respondent's breach of his Statutory Duty of Confidence to the First Applicant and assisted, with knowledge, in a dishonest and fraudulent design involving the Second Respondent's breach of his Fiduciary Duty (Confidence) and Equitable Obligation of Confidence to the First Applicant.
9. Between 24 April 2017 and 21 December 2018, the Sixth Respondent, in trade or commerce, in connection with the supply or possible supply of goods, or in connection with the promotion of the supply of goods, by publishing the OFC logo on its website, represented to the public that it was certified as organic by the OFC, when in fact (the OFC Certified Representation):
(a) the Sixth Respondent was not certified as organic by OFC; and
(b) the OFC logo published by the Sixth Respondent on the Sixth Respondent's website belonged to the First Applicant, not the Sixth Respondent,
and thereby:
(c) engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of section 18 of the ACL; and
(d) made false or misleading representations that the Sixth Respondent's goods were of a particular standard, quality, value or grade, in contravention of section 29(1)(a) of the ACL.
10. Since 2018, the Sixth Respondent, in trade or commerce, in connection with the supply or possible supply of goods, or in connection with the promotion of the supply of goods, represented on its website, product packaging, in an interview with Lab Muffin and on its Facebook and Instagram pages that (the Vitamin C Representations):
(a) its Biologi Bk Rejuvenating Eye Serum (made from Kakadu Plum) contains high levels of Vitamin C, when it does not; and
(b) its Biologi Bf Hydration Body Serum (made from Finger Lime) contains Vitamin C, when it does not,
and thereby:
(c) engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of section 18 of the ACL; and
(d) made false or misleading representations that the Sixth Respondent's goods were of a particular standard, quality, value, grade or composition, in contravention of section 29(1)(a) of the ACL.
11. Since 24 April 2017, the Sixth Respondent, in trade or commerce, in connection with the supply or possible supply of goods, or in connection with the promotion of the supply of goods, represented on its website, Facebook and Instagram pages that each of its skin care products (the Pure Plant Representation):
(a) contain only one ingredient;
(b) contain only pure plant;
(c) do not contain any additives; and
(d) are not diluted,
when in fact, its skin care products:
(e) do not contain only one ingredient;
(f) do not contain only pure plant;
(g) contain additives; and
(h) are diluted,
and thereby:
(i) engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of section 18 of the ACL; and
(j) made false or misleading representations that the Sixth Respondent's goods were of a particular standard, quality, value, grade or composition, in contravention of section 29(1)(a) of the ACL.
12. Since 13 November 2017, the Sixth Respondent, in trade or commerce, represented on its website and Instagram pages that (the Only Supplier Representation):
(a) it had, for the first time, developed a method to stabilise natural Vitamin C; and
(b) its products are the only skin care products in the world that contain natural Vitamin C,
when in fact:
(c) the First Applicant developed a method to stabilise natural Vitamin C as early as 2013, prior to incorporation of the Sixth Respondent; and
(d) the Third Applicant (under the name Onoir Pty Ltd) had sold a skin care product known as Onoir Raw C serum which contained natural vitamin C as early as 2015, prior to incorporation of the Sixth Respondent,
and thereby engaged in conduct that was misleading or deceptive or likely to mislead or deceive, in contravention of section 18 of the ACL.
13. Since 20 July 2018, the Sixth Respondent, in trade or commerce, in connection with the supply or possible supply of goods, or in connection with the promotion of the supply of goods, represented that (the Byangelicin Representation):
(a) its Biologi Bf Hydration Body Serum contains Byangelicin; and
(b) Byangelicin reduces the appearance of ageing,
when in fact, Byangelicin does not exist, and thereby:
(c) engaged in conduct that was misleading or deceptive or likely to mislead or deceive in contravention of section 18 of the ACL; and
(d) made false or misleading representations that the Sixth Respondent's goods were of a particular standard, quality, value, grade or composition, or had particular performance characteristics, uses or benefits, in contravention of section 29(1)(a) and (g) of the ACL.
THE COURT ORDERS BY CONSENT BETWEEN THE APPLICANTS AND THE RESPONDENTS (OTHER THAN THE FIFTH RESPONDENT) THAT:
14. Pursuant to section 1324 of the Corporations Act 2001 (Cth) (Corporations Act), and/or the general law, the First Respondent, whether by itself, its directors, officers, employees, agents or otherwise, is permanently restrained from:
(a) using or disclosing the Confidential Information, and any information, document, material or article made using, or containing, the Confidential Information; and
(b) aiding, abetting, counselling or procuring, or being knowingly concerned or involved in, the Second Respondent's breaches of his Duties of Confidence.
15. Pursuant to section 115(2) of the Copyright Act 1968 (Cth) (Copyright Act), the First Respondent, whether by itself, its directors, officers, employees, agents or otherwise, is permanently restrained from:
(a) infringing the First Applicant's copyright in the Original SCU Certificates; and
(b) in particular, reproducing in a material form the whole or a substantial part of the Original SCU Certificates.
16. Pursuant to section 232 of the ACL, the First Respondent, whether by itself, its directors, officers, employees, agents or otherwise, is permanently restrained from, in trade or commerce, making the Independent Testing Representation.
17. Pursuant to section 1324 of the Corporations Act, and/or the general law, the Second Respondent is permanently restrained from using or disclosing the Confidential Information, and any information, document, material or article made using, or containing, the Confidential Information.
18. Pursuant to section 115(2) of the Copyright Act, the Second Respondent is permanently restrained from authorising the First Respondent or any other person to do acts that infringe the copyright of the First Applicant in the Original SCU Certificates, in particular by reproducing in a material form the whole or a substantial part of those works.
19. Pursuant to section 232 of the ACL, the Second Respondent is permanently restrained from aiding, abetting, counselling or procuring, or being knowingly concerned in, the First Respondent, Sixth Respondent or any other person, in trade or commerce, making the Independent Testing Representation, the Vitamin C Representations, the Pure Plant Representation, the Only Supplier Representation and the Byangelicin Representations.
20. Pursuant to section 1324 of the Corporations Act, and/or the general law, the Third Respondent, whether by itself, its directors, officers, employees, agents or otherwise, is permanently restrained from:
(a) using or disclosing the Confidential Information, and any information, document, material or article made using, or containing, the Confidential Information; and
(b) aiding, abetting, counselling or procuring, or being knowingly concerned or involved in, the Second Respondent's breaches of his Duties of Confidence.
21. Pursuant to section 232 of the ACL, the Sixth Respondent, whether by itself, its directors, officers, employees, agents or otherwise, is permanently restrained from, in trade or commerce, making the Vitamin C Representations, the Pure Plant Representation, the Only Supplier Representation and the Byangelicin Representation.
22. Within 14 days of the date of this Order, the First Respondent cause, at its own expense, the notices in the form of Annexures A, B and C to this Order to be displayed (for a period of not less than ninety (90) days):
(a) on the homepage of its website located at the URL: http://www.plantextracts.com.au in a form that is crawlable (i.e. its contents may be indexed by a search engine)
(b) on its official Instagram page located at: @plantextractsofficial
(c) on its official Linkedin page located at: https://www.linkedin.com/company/plant-extracts-australia
23. Within 14 days of the date of this Order, the Sixth Respondent cause, at its own expense, the notices in the form of Annexures D, E, F, G and H to this Order to be displayed (for a period of not less than ninety (90) days):
(a) on the homepage of its website located at the URL: http://www.biologi.com.au, in a form that is crawlable (i.e. its contents may be indexed by a search engine)
(b) on its official Facebook page located at: https://www.facebook.com/biologiserum/
(c) in the Biologi private group on Facebook: "biologi beauty community"
(d) on its official Linkedin page located at https://www.linkedin.com/company/biologi/
(e) on its official Instagram pages located at:
(i) @biologiserum
(ii) @biologiserum_education
(iii) @biologi_russia
(f) on its Youtube channel located at:
(i) @biologiserum7655.
24. From the date of this Order, the First Respondent, Second Respondent and Sixth Respondent are to maintain, at their own expense, each of the webpages and accounts mentioned in paragraphs 22 and 23 hereof for a period of not less one hundred and four (104) days.
25. Each of the First, Second and Third Respondents:
(a) deliver up to the Applicants' solicitors, or destroy with verification on oath or affirmation, all Confidential Information, including all information, documents, material or articles made using, or containing, the Confidential Information, in the possession, custody or power of each of those Respondents;
(b) arrange, at his or its own expense, an independent information technology expert (to be agreed by the parties, or if not agreed, to be appointed by the President of the Queensland Law Society) to:
(i) confirm those Respondents' compliance with the order in paragraph 25(a); and
(ii) search for, permanently delete or destroy all electronic and physical copies of the Confidential Information, including all information, documents, material or articles made using, or containing, the Confidential Information, in those Respondents' possession, custody or power.
26. The First Respondent deliver up to the Applicants' solicitors, for destruction with verification upon oath or affirmation, all Infringing SCU Certificates in the possession, custody or power of the First Respondent.
27. Pursuant to section 115(2) of the Copyright Act, the First Respondent pay to the First Applicant the sum of $168,053 as compensatory damages.
28. Pursuant to section 236 of the ACL, or alternatively, section 237 of the ACL, the First Respondent and Second Respondent pay to the First Applicant:
(a) the sum of $168,582, as damages or compensation in respect of the Independent Testing Representation; and
(b) the sum of $105,459, as damages or compensation in respect of the OFC Certified Representation.
29. The Second Respondent and Fourth Respondent pay to the First Applicant the sum of $5,792 as damages for breach of the restraint in the Deed of Settlement.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DOWNES J:
1 Between 2012 and 2016, Ms Lisa Carroll and Mr Ross Macdougald (the second respondent), who were in a personal relationship, operated a business through Native Extracts Pty Ltd (the first applicant).
2 Native Extracts manufactures and sells botanical extracts for use in products such as food, beverages, cosmetics and pharmaceuticals.
3 In December 2015, Ms Carroll and Mr Ross Macdougald separated, and Mr Macdougald agreed to leave the business.
4 On 31 March 2016, Native Extracts, the Native Extracts Holding Trust, Mr Ross Macdougald, the third respondent and the fourth respondent executed a deed of settlement. Relevantly, the deed of settlement contained a restraint of trade clause (with a restraint period of 12 months) and a confidentiality clause.
5 On 8 July 2016, Plant Extracts Pty Ltd (the first respondent) was incorporated, with Mr Jordan Macdougald (the fifth respondent) appointed as one of its directors. The ownership and control of Plant Extracts was transferred to Mr Ross Macdougald shortly after the restraint period ended.
6 By this proceeding and in summary, the applicants' case against the respondents (other than the fifth respondent) was that:
(1) the restraint of trade clause and confidentiality clause in the deed of settlement had been breached;
(2) Mr Ross Macdougald also breached his statutory and equitable duties of confidence which arose by reason of his position as a director of Native Extracts and a trustee of the Native Extracts Holding Trust;
(3) Plant Extracts had infringed Native Extracts' copyright in circumstances where Plant Extracts modified scientific documents that belonged to Native Extracts before sending them to customers;
(4) Plant Extracts and the sixth respondent had engaged in misleading or deceptive conduct.
7 During the trial, the respondents (other than Mr Jordan Macdougald) amended their defence to admit many of the allegations made against them. With my encouragement that they attempt to do so, they also agreed to a form of order which, after hearing further submissions from the parties, I made on 19 October 2023. The annexures to the order are annexures to these reasons.
8 Other orders continue to be sought against these respondents, as well as the fifth respondent, and judgment in relation to whether those orders will be made has been reserved.
9 As third parties (namely existing and potential customers) were likely being misled by the impugned conduct, I made this order at the conclusion of the trial rather than waiting for the final judgment to be handed down. I was particularly concerned that the injunctions be issued and that the corrective advertising occur as soon as possible. I am grateful to the parties for reaching agreement about the form of orders.
I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Downes.
Associate:
Dated: 23 October 2023
SCHEDULE OF PARTIES
QUD 215 of 2020
Respondents
Fourth Respondent: FPI OCEANIA PTY LTD ACN 089 947 482
Fifth Respondent: JORDAN RADLEY ROSS MACDOUGALD
Sixth Respondent: BIOLOGI PTY LTD ACN 618 697 297
Annexure A
Annexure B
Annexure C
Annexure D
Annexure E
Annexure F
Annexure G
Annexure H