the facts
2 Prior to the events which are presently relevant, the applicant was a property manager who provided services to the owners of about 40 properties. Those services included the collection of rent from tenants. In the course of this work, the applicant became aware of the problem presented by the infestation of properties with bed bugs. He became aware that, for landlords and tenants alike, bed bugs were a big concern, and the populations of them appeared to be increasing.
3 In about February 2008, the applicant decided to attempt to solve the bed bug problem, and established his own company called The Bed Protector Pty Ltd ("Bed Protector"). He became an Australian distributor for an American company that produced bed bug-proof mattress protectors. The feedback which he received, however, was that, although these mattress protectors helped to mitigate the problem, they did not solve it.
4 It seems that bed bugs can get into a bed by any route which provides physical access thereto, such as when a bed is placed against the wall, or when items are left draped on the bed in such a way as to be in contact with the floor. While it is possible to take measures to eliminate these points of access, bed bugs would always be able to secure access to the mattress by climbing up the legs of the bed. The applicant decided to address this problem.
5 Over the course of a period which was, it seems, nearly a year, the applicant invented a device that could be attached to the legs of a bed, either (in one form) at the point where the caster meets the floor or (in another form) at the point where the leg is attached to the bed. It is best described by reference to the abstract in a patent application which was filed on the applicant's behalf on 29 May 2009:
A barrier for inhibiting migration of crawling insects to a bed via a bed leg is described. The barrier is co-operable with a bed leg such that an insect must cross the barrier to reach the bed. The barrier includes a trapping portion having a coating of a tacky substance to impede insects upon contact. The barrier may include a perimeter wall for defining a seat for a bed leg, or may include an aperture for enabling a fastener to pass therethrough for securing the bed leg to the bed.
An example of a device adapted for mounting between the bed and the leg was placed into evidence. It takes the form of a shallow cylinder about 83 mm in diameter and 21 mm deep. The upper face of the cylinder is closed, save for a 10 mm diameter hole in the centre, through which the bolt securing the bed leg to the bed would pass. Over a diameter of about 55 mm, the lower face of the cylinder is open, such that there is a kind of rim, about 12 mm wide, encircling that opening. Inside this rim, and supported by a short lip in the interior of the cylinder, is a cavity which would contain a tacky substance over which insects, and bed bugs in particular, cannot pass. The way the device is designed, in order to pass from the floor to the mattress, a bed bug would need to negotiate this substance, and could not do so. The applicant gave a name to this device: the "Bed Bug Barrier".
6 Notwithstanding the viability of his invention, by March 2009 the applicant was starting to think of improvements that could be made to the bed bug barrier. One problem, apparently, was that the tacky substance, or glue, had to be replaced every two years. It seems that hotels and backpacker hostels were looking for a device that required little or no maintenance.
7 Stephen Doggett is a senior hospital scientist in the Department of Entomology at the Institute for Clinical Pathology and Medical Research at the Westmead Hospital. He is an acknowledged expert on bed bugs. Prior to the events which have become controversial in this proceeding, he had corresponded regularly with the applicant on the subject of mattress protectors, and with respect to bed bugs generally. The applicant introduced Mr Doggett to his Bed Bug Barrier, and Mr Doggett thought that it was a good idea which could work. At the invitation of Mr Doggett, in May 2009 the applicant presented his Bed Bug Barrier at a workshop of bed bug experts in Sydney.
8 The applicant was a contestant on the ABC television program "The New Inventors" broadcast on 20 May 2009. The program had been filmed on 14 April 2009, and the applicant must have been given some idea of the outcome since, on 19 April, he wrote to Mr Doggett saying that all three judges thought that his Bed Bug Barriers "were a fantastic idea". In his email by reply, Mr Doggett opened up a subject which has become a significant element of the applicant's case under the Trade Practices Act. It was whether barriers which operated by reference to a band of glue, or a similar tacky substance, would lose their effectiveness over time when large numbers of bed bugs became stuck in the glue, and formed a kind of bridge over which other bed bugs might pass unhindered. Mr Doggett said that there had been a discussion about the use of barriers in the deliberations of a recent working party, in the course of which Frank Meek, the international technical manager of a pest control company in the USA, had said:
… agree on the glue issue. If the population is high and bridge could form over the glue surface same with dust, lint and other particles that would gather. This is seen regularly in roach and mouse glue traps, stored product insect traps and even in fly light traps.
Mr Meek's comments were regarded by Mr Doggett as "quite reasonable". Mr Doggett added that he would like to see the applicant's barrier made from "a super slippery plastic such as a Teflon product". He added that this would "raise the cost considerably".
9 In reply to Mr Doggett's email of 19 April 2009, the applicant forwarded a lengthy email effectively defending the use of glue-based devices. In the course of that email, the applicant said:
He mention [sic] that they could make a bed bug bridge, there is about 60 square centimetres of glue in each barrier, if they were making a bridge over this then they would have caught thousands of bed bugs and I think this could only be seen as a positive outcome.
In his reply to that, Mr Doggett said:
To be honest, I have seen bed bug infestations that could have easily resulted in the glue being bridged, particularly in socially disadvantaged housing, which can also be very dirty.
Mr Doggett added that he "would still like to see a model that did not need glue".
10 I shall set out the next two emails between the applicant and Mr Doggett, both on 20 April 2009, in full. First, from the applicant:
Thanks Stephen. A model without glue would mean the barrier would need to be made from something that is impossible for bed bugs to walk on, do you know of a material that they cannot walk on? You mentioned Teflon, is it impossible for bed bugs to walk on this?
Next, from Mr Doggett:
There are Teflon plastics with very low coefficients of friction, naturally any surface would have to be tested.
11 It was next in mid-May 2009 that the applicant took further steps in his quest for a bed bug barrier that did not require glue. On 15 May 2009, he contacted a New York based company called "Ecological Coatings" seeking information as to its Australian distributor. He was seeking supplies of a non-stick paint. He was given the name of an Australian distributor, from whom he requested a sample. On 21 May 2009, the distributor sent an email that said that the sample was "on its way". The transactions just referred to were evidenced by copy correspondence. But what the applicant claims to have happened at about the same time was not. In his affidavit sworn on 30 June 2011, the applicant said:
On or around 18 May 2009, I contacted Gordon International Marketing, a supplier of high performance Teflon, by telephone and requested a sample of Teflon. In or about late May 2009, I received a 10cm x 8cm sheet of Teflon which I used in the development of New BB Technologies. I put a hole in the middle of the Teflon sheet and placed a bed leg through the hole and realised that I was on to something great. This was the beginning of the invention that later became the subject of Patent application 2010202206 ….
This evidence was controversial, for reasons to which I shall advert in due course.
12 The applicant's bed bug barrier was the winning entry on The New Inventors, from which the applicant secured substantial publicity. One of those who promptly congratulated him was the respondent, whom he had known since 2003, by reason of his management of a rental property which she owned in Melbourne. She had had an unhappy experience with bed bugs in that property, and was, therefore, no stranger to the problem which led to the invention of the Bed Bug Barrier. The respondent, who lived in Sydney but happened to be in Melbourne at the time, visited the applicant at his home on the evening of 22 May 2009. What transpired at that meeting was the subject of great controversy in this proceeding.
13 In his original affidavit, the applicant said that the respondent visited him at his home on the evening of Friday 29 May 2009. In her affidavit, the respondent said that she was not in Melbourne that day, and exhibited copy travel documentation to make good that point. In that affidavit, she said, without elaboration, that she went to the applicant's home on the evening of 22 May 2009 to collect rent, and that the applicant showed her a video of The New Inventors program. In his affidavit in reply, the applicant accepted that he was mistaken in saying that the respondent had visited his home on 29 May 2009, and accepted also that the respondent's visit had been on 22 May 2009. He rejoined that the respondent could not have made that visit in order to recover her rent, since he had discontinued collecting rent on her behalf late in the previous year. In her oral evidence, the respondent accepted that the applicant was no longer collecting rent for her in May 2009. She said that she had surmised that she visited the applicant in order to recover rent, since, to her recollection, that was the only reason that she ever visited his home. Likewise, in his evidence, the applicant accepted that his placement of the visit on 29 May, rather than 22 May, was a matter of surmise on his part: he knew that the visit was on a Friday shortly after the screening of The New Inventors, and assumed that it was unlikely to have been only two days thereafter.
14 The respondent recalls that she did visit the applicant at his home on the evening of 22 May 2009, that she congratulated him on his success on The New Inventors, that they watched a video of the program, and that she indicated that the applicant's invention was likely to make considerable money for someone. Beyond that, the respondent denies that anything of real substance, at least in the context of the present controversy, was discussed. The main factual issue in the case related not to things which the respondent claimed to recall, but to things which the applicant, and one of his witnesses, claimed to recall, and which the respondent denied.
15 As it happened, when the respondent visited the applicant on the evening of 22 May 2009, also present was one of the applicant's close friends, Sean Christie. Both the applicant and Mr Christie gave detailed evidence as to their recollections of the conversation which occurred when the respondent visited the applicant's home, notwithstanding that they both, initially, placed that visit on 29 May 2009. In each case, the applicant's, and Mr Christie's, recollection was recorded in detailed notes of the conversation with the respondent as they recalled it, in the form of sequentially-organised contributions to that conversation by the applicant and the respondent. Those notes were prepared, from recollection as it was said, in June 2011 when the applicant and Mr Christie came to make their affidavits for this proceeding. Originally, the applicant said that he made his notes in about mid-2010, but, after Mr Christie had given evidence, the applicant revised that estimate, to bring it into line with Mr Christie's evidence, which I accept, that these notes were prepared in June 2011.
16 I have reproduced the applicant's and Mr Christie's notes in a schedule to these reasons, and have laid them out in a way which highlights the similarity of their treatment of the subjects with which they were concerned, both in point of content and in point of sequence. I consider it to be remarkable, and quite improbable, that two participants in a very casual conversation would, some two years after the event, record their recollections of it in such strikingly similar terms, and sequence. The applicant freely admitted that he had discussed the matters covered by these notes with Mr Christie before each of them placed his recollections on paper, but he resisted the suggestion that his assistance in the preparation of Mr Christie's notes went any further than that. Both because of the similarity of the notes themselves and by reason of the circumstances to which I shall next refer, I find that denial highly implausible.
17 When he first gave evidence, the applicant was not cross-examined, or questioned by the court, about the process by which his, and Mr Christie's, notes had been prepared. However, Mr Christie was questioned on the subject. He said that, when it came time for the applicant to prepare his evidence for filing in this proceeding, the applicant asked him to write down everything he could recall of the meeting with the respondent at the applicant's home. Mr Christie said that, although he did have a conversation with the applicant in which they, in effect, jogged each other's memory, when he came to write the note which was, in due course, exhibited to his affidavit, he did so without any assistance or input from the applicant. He said that he wrote out his recollection of the conversation in hand, on an otherwise blank sheet of paper, in a room at the offices of the applicant's then solicitors. He said that no other person contributed to that process. Mr Christie's recollection was that the document, when completed by him, was typed up by the applicant, rather than by a member of the solicitors' staff. Mr Christie checked the typed-up product against his own handwriting, and found it to be correct (subject only to him having made a mistake about the date of the conversation). Notwithstanding that Mr Christie had previously been employed as a school teacher, I consider that his ability to recall the conversation with the respondent, in such detail in point of content and sequence, more than two years after the event, if that was indeed the situation, was remarkable.
18 When the applicant was recalled to give further evidence, I raised with him certain aspects of the notes which he, and Mr Christie, had exhibited to their affidavits, and which concerned me. He said that he prepared his notes on his own computer, and that, at the time, he had not seen a typescript of the notes prepared by Mr Christie. He accepted that his notes were to some extent reliant upon reminders which he had been given by Mr Christie. When it was pointed out to the applicant that the font apparently used for the preparation of his notes was the same as that used for the preparation of Mr Christie's notes, and differed from the font apparently used in their affidavits as such, he accepted that Mr Christie's notes "must have" been prepared on his computer. However, he absolutely denied that he typed up Mr Christie's notes. The position which he was obliged to accept was that Mr Christie had used his (the applicant's) computer to type up his own notes. When I reminded him of Mr Christie's evidence that his statement had been written up by hand, the applicant really had no satisfactory explanation for that inconsistency. The solicitor who was then representing the applicant was still working in Melbourne as a solicitor, and there was no reason, known to the applicant, why she might not have given evidence on his behalf (other than that "they dropped the case").
19 In due course, I shall be obliged to resolve the differences between the accounts of the meeting of 22 May 2009 given by the applicant and Mr Christie of the one part and by the respondent of the other part. At this point, however, I would indicate the following bases for my reservations as to the evidence of Mr Christie, to the extent that he was proffered by the applicant as a witness in support of his version of the course of that conversation. Mr Christie was a long-time, close, friend of the applicant. They met socially on a regular basis. That may not, of itself, give rise to any sense of disquiet as to the likelihood of Mr Christie's evidence being accurate, but, under cross-examination in the present case, he left little doubt but that he had associated himself closely with the applicant's cause. He was well aware, for example, of the tenor of the email exchanges which the applicant had with the respondent, and especially of the content of the respondent's contributions. In answer to the respondent at one stage, Mr Christie said: "You wrote many, many emails repeating yourself over and over again, if I remember." And he said: "You repeated yourself many, many times in those emails … I read them. You repeated yourself over and over again. It was almost obsessive. You were obsessed with getting into this business, somehow and you were pushing him …". Mr Christie continued:
You were pushing him. From the day you got there I thought you were picking his brains too much. You were so interested in this Social Change Foundation. We skipped from homeless people to sex offenders, and helping the sex offenders, to helping people who have been offended by sexual assaults. It was a broad range of charities. And what you did then was - it was chopping and changing and you constantly wrote him emails and they were enormous, and he was running very short ... because he was so busy with ... [his] barrier. And that's my answer to you. You came to him, and that moment you were there, you definitely said to him - you were talking about your charity; you were talking about all these connections you had; you name dropped.…
You had many thoughts. You had many thoughts about the charity; about various charities; about him making millions; about going to France with this product. You were clued into this. You saw this and you were clued - very into this idea of somehow getting into this business. You were very interested, very thoughtful. You came along and you were just like his biggest team supporter, and unfortunately, what happened when you came along, you were there; I got suspicious because I didn't know you; I just heard stories, and who cares about that, but what I am saying to you is, you came around there and you said to him, "I am going to pick your brains", and you went at it for an hour and a half, and you didn't stop, and the emails were bombarding him constantly for days and days afterwards. Huge emails. We have got evidence of them.
In the light of this evidence, one would have to have reservations as to Mr Christie's objectivity in his recollection of the course of the conversation on the evening of 22 May 2009.
20 If Mr Christie did prepare his notes of that meeting on a blank sheet of paper, as he said in his evidence, nonetheless he did so after discussing the matters with the applicant, and fully alive to the matters which had by then become controversial in this proceeding, and presumably fully conscious to the points which would be likely to advance the applicant's cause. There are things which occurred at the meeting to which Mr Christie's notes relate, but which find no mention in them. For example, and quite obviously, he, the applicant and the respondent occupied themselves over what must have been a substantial part of their time together watching the video of The New Inventors program, yet that circumstance finds no reference in Mr Christie's notes. This leads me to conclude that, when Mr Christie prepared the notes, he probably did not make a conscientious, independent, attempt to retrace the course of the meeting from start to finish, but most likely attempted to focus upon those aspects of the meeting which might have the potential to support the applicant's case.
21 I do accept Mr Christie's evidence, however, that he first wrote out his recollections of this meeting in hand on a blank sheet of paper. I also accept his evidence that it was the applicant who typed the notes up. With respect to the latter aspect, I reject the applicant's denials. Since he denied having typed up the notes, the applicant was in no position to give evidence as to the faithfulness of his reproduction of Mr Christie's hand-written draft. The fact that the draft was typed up by the applicant himself, rather than by a member of the staff of his solicitors, is a source of considerable disquiet. That the applicant also prepared his own notes at about the same time, and that the two sets of notes are so strikingly similar, notwithstanding the passage of some two years of the events in question, redouble that sense of disquiet.
22 I shall return to this meeting on 22 May 2009, but first I shall continue laying out the broad chronology of the events which are relevant in the present case.
23 At 12:54 am on 24 May 2009 (that is, effectively very late on the night of Saturday 23 May), the respondent sent a lengthy email to the applicant. She commenced "after I called you tonight, I had a thought", but there was no other evidence about any such telephone call on the Saturday night. In her email, the respondent raised the idea that the applicant might, in effect, make his Bed Bug Barrier available to a philanthropic business organisation, such as "Justice Action", a prisoner advocacy group in NSW. Although she admitted to a reluctance to being seen as "just another person trying to join the throng of others who want a piece of your action", the respondent said:
Imagine if the distribution of the bed bug catcher was the business arm of a not-for-profit organization that ran social programs that no other philanthropic organization would have a bar of because they're too cutting edge, or too controversial?
….
Or, imagine a philanthropic organization that could fund an interactive website for victims of child abuse or any number of other cutting edge social programs, for homelessness, drug addicts etc.
The respondent gave examples of other charitable or philanthropic organisations that could benefit from being associated with a profitable business. The respondent referred to "Sally's dad" in the email, from which I infer an assumption on her part that the applicant knew who Sally was. It was not suggested by the applicant that any such assumption would have been misplaced. Sally was Sally Gibson, a friend of the respondent, whose father Wal was a successful entrepreneur. In her email, the respondent suggested that Mr Gibson might be able to assist in an enterprise of the kind which she had in mind.
24 The respondent also referred to the fact that her solicitors, Clayton Utz, had been working pro bono on the registration of a philanthropic foundation, called the "Social Change Foundation", which she established. She mentioned other people who were giving their time to the administration of that foundation. In her email, the respondent continued:
If you were to consider handing over worldwide distribution to a business arm of the Social Change Foundation, I would make a lump sum payment to you from the proceeds of the sale of Mitford St. The sum to be determined by advice from, let's say, Sally's dad, Wal Gibson. This would be conditional upon Wal agreeing to be involved and coming on board to assist with business advice. I haven't even talked to him about it yet. You, of course, would also be on board. You could be involved as much or as little as you wanted. It could give you that life purpose, or destiny, that we talked about the other day.
The respondent said that this was "just a crazy idea I had soaking in a hot bath tonight", and that she had not thought it through. She said that she would like to talk to Mr Gibson first. She said that the applicant would still get his "$3 per unit" but that he would hand over the distribution to the foundation "in exchange for a lump sum up front payment". She invited the applicant to discuss the idea with her before she returned to Sydney.
25 I infer that, on or before Monday 25 May 2009, the applicant had accepted the respondent's invitation to visit a friend of hers, Jan Owen, of "Social Ventures Australia". The object, according to the respondent, was to introduce the applicant to "innovative social venture ideas". I so infer because there is an email from the respondent to the applicant, sent at 11:30 pm on 25 May 2009, suggesting that the applicant might pick her up from her flat at about 11:30 am on the following day, so that they might go together to Social Ventures in South Melbourne. In the same email, the respondent told the applicant that she had heard that Mr Gibson would be available to meet with them at 7:00 pm the following day, 26 May. She added:
Also, these meetings, of course, are just talking and sussing things out. No obligations or expectations anywhere.
By a return email sent almost immediately, the applicant accepted the proposal to meet Mr Gibson the following evening.
26 On 26 May 2009, the respondent and the applicant met with Ms Owen in a coffee shop in South Melbourne. The detail of that meeting is presently immaterial. It is the exchanges which passed between the applicant and the respondent on their way to and from the meeting which need to be considered. According to the applicant, as he and the respondent were driving to meet Ms Owen, he told the respondent that he had "other inventions coming". He said: "One is non-stick paint and the other is a Teflon barrier." Having passed this information on to the respondent, he began to worry that she might say something to third parties about these other inventions which the applicant had mentioned. Thus, when they returned to his car after the meeting with Ms Owen, the applicant said to the respondent something to the following effect:
I am happy to meet these people but you realise all the information I am giving you is strictly confidential. I am happy to talk to them about the Bed Bug Barrier but I don't want you talking about my new inventions.
In his oral evidence, the applicant said that this conversation occurred in the car as he was driving the respondent home after the meeting with Ms Owen.
27 According to the respondent's affidavit, it was after the meeting with Ms Owen that the applicant first mentioned the Teflon idea. She asked him what he would do if China copied his device. He said not to worry about that, as "I have Bed Bug Barrier Mark 2". The respondent asked what that was, and the applicant said that it was "the Bed Bug Barrier coated in Teflon". The respondent inquired "why Teflon?", and the applicant replied "because bed bugs can't crawl on it". The respondent inquired how he knew that, and the applicant responded "Stephen Doggett told me". The respondent insisted that this was the first occasion upon which the applicant had told her of his idea of using Teflon for a bed bug barrier.
28 However, while under cross-examination, the respondent was asked whether the applicant had told Ms Owen about the use of Teflon, to which the respondent replied: "I think I had already told her so that she knew that when you arrived." On the basis (which is common ground) that the applicant and the respondent arrived together to confer with Ms Owen, this evidence is consistent only with the respondent having informed Ms Owen about the use of Teflon at some time before she and the applicant travelled by car to meet Ms Owen. Indeed, it was not the respondent's evidence that the applicant said anything about the matter in the car on the way to the meeting. That the respondent would have informed Ms Owen about Teflon on some earlier occasion is consistent with the evidence of the applicant and Mr Christie that she was told about it on the evening of 22 May 2009. There was no suggestion in the evidence that she might have been so informed on any intervening occasion, but that too was quite possible.
29 On the evening of 26 May 2009, the applicant and the respondent met with Mr Gibson as previously arranged. According to the applicant, Mr Gibson provided him with "free information about patent protection and his experiences with and knowledge about worldwide distribution of a product". According to the respondent, they discussed the applicant's Bed Bug Barrier and the commercialisation of it. Nothing turns on what transpired at that meeting with Mr Gibson.
30 At 11:28 pm on 26 May 2009, the respondent sent another email to the applicant. She said:
Hearing Wal talk tonight was certainly sobering. It seems many things can go wrong and it's certainly no walk in the park. I think his advice of going slowly and steadily as she goes, was good.
It was also enlightening and heartening to see that you actually seem to have most bases covered. You said you don't want to be a businessman running a bed bug protector company, but you actually seem very good at it.
My advice, which I think Wal was saying too, is to trust your instincts about people. If you think someone is dodgey [sic], trust that and don't go near them.
The following day, 27 May, the applicant emailed the respondent, thanking her for introducing him to Mr Gibson. After mentioning that he intended to seek some help from someone he knew who was a buyer at Bunnings, he concluded: "Thanks for all your help and support. See you next time you're in Melbourne." The respondent replied promptly, commenting that Mr Gibson had made it clear that "it's a dog eat dog world out there" and adding, "if you want me to try France for you, as maybe a tester in Europe, let me know." The applicant replied that evening saying, "Sure you can try France".
31 The applicant and the respondent (by now in Sydney) exchanged a number of emails on 28 May 2009. The first three were from the respondent and, relevantly to the topic presently of interest, made mention of some preparatory issues which would need to be addressed if she were to take the applicant's product to France. The applicant replied to these in a brief but enthusiastic email: "That's fantastic, thanks for all your help". At 5:07 pm that day, the respondent sent a more lengthy email which included the following:
As you know, I'd see this as an income stream for the Foundation. Spending a year getting it up and running with an income stream would be a year less I'd have to spend fund raising in some other way. But I'd have to offer you something that others can't or haven't yet. The reason I've suggested France where you don't have any existing contacts. No need to tie anything up right now while everything's coming at you. It must be overwhelming. I think you and I trust each other so I don't need contracts and agreements yet. I'm happy to go and sus it out and then come back to you with what I find, and what I can do there. If/when I find funds are needed, I guess that's when we'd need to come up with something that you're happy with. You may have funds yourself by then and want to fund patents etc. but you may not and want me to put up some dough. That's when we'd need to work out an agreement. It's a rocky road and China ripoffs seem the biggest risk. One reason doing a patent in Europe earlier, rather than later, in my view, is a good idea. In theory, there's no reason why that European guy couldn't take out a patent on it right now over there. Does anyone other than you have samples? Does the New Inventor program show it up close enough for someone to apply for a patent based on the program alone? I guess you'll need to have nerves of steel and your wits about you at all times with this. You say everything's happening and nothing. I guess that means nobody is prepared to put any money down. If you want upfront funds, I'd be prepared to risk $50,000. I don't know what you'd give me for that, I'm just telling you that's what I'd be prepared to risk at this moment. Things may change. The longer you wait, the greater risk others will copy. On the other hand, as Wal says, steady as she goes, don't rush into anything. What a balancing act!
32 At 7:39 pm that day, the applicant replied, stating that he had a worldwide provisional patent that was valid for 12 months, "so we have a bit of time". He continued:
What do you think about this for the $50,000. I presell (not sure if that is a word) you 25,000 barriers ($2 each) which you can re sell for $3 or $4 each in France, so you could possibly make up to $100,000 for your $50,000 investment. If you're not able to sell them then I can buy them back off you went [sic] I start making a few sales. Simple idea but would work for both of us. Also having sales of $50,000 already would look good for my business plan etc. let me know what you think.
With that email, the applicant forwarded a copy of an email which he had received from a company called "Bed Bug Central" in the USA, which had expressed an interest in purchasing 16 Bed Bug Barriers. The respondent's reply sent, at 8:13 pm that day, was somewhat less enthusiastic than had been her earlier correspondence:
Well, what you've offered sounds interesting, however, my intention of investing isn't simply to make a good return on my investment. My intention of putting money up front with you would be to do a lot of work to get distribution lines with the view to keeping it going in that jurisdiction as an ongoing income stream. Before agreeing to your suggestion of buying yours and importing them into France (who would cover the cost of getting them to France?) I'd like to explore Wal's idea of getting quotes from a sourcing company in China. It seemed impossible to Wal, and me, that it would be cheaper in Australia than China. If it can't be sourced cheaper, and I do buy the units from you in Australia, how would you feel about adding to the agreement you've suggested, that nobody else can distribute in France for a specified period, conditional on me moving that 25,000. i.e. if you have to buy them back from me, the agreement lapses. Also, if you start to do internet sales, or the American guy does, where does that leave me? Or you for that matter. We could both spend a year setting up distribution etc only to find everybody's ordering online from the US.
In that email, the respondent also mentioned that Mr Gibson had said that "worldwide patents [were] virtually worthless" and expressed a real concern that a manufacturer in, for example, China would copy the bed bug invention from what had been shown on The New Inventors program, and then sell it over the Internet at prices which undercut the applicant (and, should it come to pass, the respondent also in France).
33 During the night of 28/29 May 2009, the turn which the email correspondence with the applicant on 28 May had taken was preying on the respondent's mind. She had "a restless sleep", as it occurred to her that the applicant's offer to sell Bed Bug Barriers to her was an indication that he saw her "more as a customer than a social venture partner". During this sleepless night, the respondent (in her words) "came up with the idea of Teflon coating bed legs, thus removing the need for a separate device to prevent bed bugs accessing a bed". She did not pretend that the idea of using Teflon as a barrier for bed bugs had not been given to her by the applicant, but the notion that the bed legs as such should be coated with Teflon was, according to her evidence, one which occurred to her during this sleepless night.
34 I shall return to the steps which the respondent took in that regard presently, but, as she said in her evidence, on the morning of 29 May 2009, she sent "one further email" to the applicant. That email was substantially concerned with patent issues in connection with the proposal to distribute the applicant's product in France. Nothing further needs to be said about it, its significance being that it was the conclusion of what had, over the previous week, been a course of quite intense email correspondence passing between the applicant and the respondent, but particularly originating from the respondent. From that point forward, the applicant and the respondent went their separate ways, and were not in further communication with each other until January 2010 in circumstances which I shall relate in due course.
35 In his investigation of non-stick paint and Teflon technologies to impede the progress of bed bugs, the applicant was hampered by an inability to obtain supplies of bed bugs for testing purposes. In September 2009 he did so, and he discovered that, while adult bed bugs could not climb up a non-stick painted surface, immature bed bugs could do so. But neither could climb up a Teflon surface. According to the applicant:
I now knew that using Teflon was an improvement on the BBB because it meant I didn't need to use glue and I could replace the glue with Diatomaceous Earth to kill bed bugs.
I then decided that I may be able to use a combination of paint, Teflon and Diatomaceous Earth to kill bed bugs and prevent access. If I replaced the glue with Diatomaceous Earth and used Teflon on the outside of the barrier to prevent access to the bed then I would have a killing barrier that would kill bed bugs for years and years with no maintenance.
That is to say, the applicant was then working towards a result in which a device generally in accordance with that which he took to The New Inventors would be wholly or partly coated in Teflon, and would contain a pesticide in place of the previous glue.
36 However, the second half of 2009 was not a propitious time for the applicant. Although not part of his evidence as such, I would accept what he told me in opening about this period:
… [A]fter I went on The New Inventors, my life just turned upside down and I was so busy with, you know, world wide distribution and I had to try and get the glue in the cups as you can see there and that was a complete disaster. It took months and months and months. It was extremely stressful and, you know, I tried to use, you know, sheltered workshops to do it and they ended up, you know, there was glue everywhere and I had to start back at scratch.
In January 2010, the applicant re-established contact with the respondent. But before I come to that event, I shall trace the respondent's own activities since her last email to the applicant in May 2009.
37 On 29 May 2009, the respondent mentioned her idea of coating bed legs with Teflon, to which I have referred in para 33 above, to her then partner, Stephen Trethowen, a former scientist who had worked with the CSIRO. He suggested that she telephone the CSIRO and DuPont, which manufactured Teflon, with a view to having them confirm that Teflon could be used as a barrier for bed bugs. The respondent attempted to obtain some assistance from the CSIRO, but without success. She also spoke to someone at DuPont, but he could not confirm that Teflon could be used as a barrier for bed bugs.
38 The respondent then asked Mr Trethowen to telephone Mr Doggett to discuss the subject. He did so, and explained to Mr Doggett the idea of bed bugs not being able to crawl on Teflon. Mr Doggett said that he believed that to be the case. After the telephone call (during which the respondent was present), Mr Trethowen told the respondent of Mr Doggett's view that, subject to testing, bed bugs could not crawl on Teflon. On the strength of that information alone, the respondent instructed a patent attorney to file an Australian patent application titled "bed bug reduction method". The application as made is not in evidence, but a draft of the complete specification is. It was said that the invention would provide -
… a method of bed bug infestation reduction by the method of applying a low coefficient of friction material to the substantially vertical surfaces of the support structures of beds.
As to how this would be achieved, the draft specification stated:
A Teflon® coating may be applied as a liquid to the material from which a bed leg is made. Alternatively it may be applied as a film of material, or in another arrangement, at least a portion of the leg could be manufactured from Teflon® itself, for example in the form of "feet" affixed at the lower end of the leg.
It is clear from the diagrams attached to the draft specification that the respondent had in mind something in the nature of a coating or tape which could be applied to the bed leg or, as noted above, that a portion of the leg itself could be manufactured from Teflon.
39 On 23 July 2009, the respondent made contact with Mr Doggett by e-mail. She said that she had recently lodged a patent for a bed bug device. Her long term objective was to provide a basis for fund raising for her Social Change Foundation. She sought an opportunity to speak to Mr Doggett about her device. When Mr Doggett asked the respondent for a "brief overview of the device and how it works", the respondent said that the device was "basically putting a strip of Teflon on bed legs to prevent the bugs crawling up them". She said that it was not "a device but integrated into the bed". In reply, Mr Doggett said that he had been looking at "a similar system, albeit slightly different application process", and that any product based upon the respondent's patent "would be up against devices like the Climb up Interceptor and the Bed Bug Barrier, both [sic] which also function as bed bug monitors." However, Mr Doggett was prepared to meet the respondent, and he did so on 30 July 2009.
40 That meeting lasted for about an hour. Mr Doggett told the respondent that the idea of using Teflon as a barrier was not his. He said that the use of Teflon as a barrier against bugs was already known by many people, particularly by entomologists who had used it to contain their laboratory samples, and that he recalled using it himself for that purpose about 20 years earlier. At this meeting, Mr Doggett realised that the respondent's ideas were similar to those which he had previously discussed with the applicant, specifically with respect to the use of slippery paints. Mr Doggett did not, however, disclose to the respondent the nature of his discussions with the applicant, or the identity of the applicant. Neither did the respondent mention the applicant or his product.
41 Over the ensuing months, the respondent made many inquiries as to the technical and commercial aspects of the implementation of the ideas which were embodied in the draft complete specification to which I have referred. Those inquiries extended to manufacturers of Teflon, in the course of which the respondent discovered that painted Teflon would have to be baked to such a high temperature as to make the idea impracticable for application on to wooden bed legs. She made inquiries of manufacturers in China with a view to ascertaining the cost of production of bed legs treated in the way she proposed. I need not provide further details of these exertions by the respondent, since ultimately they came to nothing.
42 In July or August 2009, Mr Trethowen suggested to the respondent that she might take a different approach. He suggested that she consider cutting a disc of solid Teflon, and fitting that to the top of the bed leg. The respondent did not immediately take up that suggestion, but by 15 September 2009 she had commenced to make inquiries of manufacturers, with a view to ascertaining the cost of production of such discs. The first documentary evidence of these inquiries, and of the respondent's interest in the disc idea generally, is a communication from her to a coatings company on 15 September 2009, in which she suggested that "we could put a thin disc of either pure Teflon, or metal coated in Teflon, between the bed leg and the mattress base". In response, the respondent was quoted $2 per piece for Teflon-coated rings, and considered that that was too expensive.
43 However, the respondent continued working on the Teflon disc idea. She arranged for a piece of Teflon to be sent to her. She maintained contact with Mr Doggett, with a view to him testing any prototype product that she made. She made contact with scientists in other disciplines with a view to understanding the relationship between the properties of Teflon and the crawling mechanisms of bed bugs. This work on the part of the respondent led to her filing a patent application, titled "insect infestation reduction method", on 25 September 2009. The specification was an adaptation of the draft to which I have referred in para 38 above, this time including the insertion of a Teflon, or similar, disc or plate between the top of the bed leg and the mattress base.
44 On the instructions of the respondent, Mr Doggett carried out tests on the ability of bed bugs to obtain traction on Teflon. His first report to the respondent was dated 3 November 2009, and demonstrated that bed bugs were much less able to obtain traction on a sheet of Teflon, when tilted to varying degrees, than on a piece of chipboard, which he used as a control.
45 Mr Doggett conducted a second test in early January 2010, this time using Teflon discs attached to wooden spindles which simulated bed legs. Again, it seems, Mr Doggett used chipboard as a control. The results were reported to the respondent by email dated 21 January 2010. To say the least, the results were encouraging for the respondent: in the control group, 73.6% of the bed bugs had walked on to the chipboard, whereas, in the group where the respondent's discs were used, 0% did so. Mr Doggett described this result as "another success story". He proceeded to repeat the test, using a more virulent strain of bed bugs. This time, 98% of the bed bugs in the control group crossed over, but, again, 0% did so when the Teflon disc was inserted.
46 It was at about this time that the applicant made further contact with the respondent. He did so, of course, unaware of the respondent's work on her Teflon device, and unaware of her interactions with Mr Doggett. In his email, he referred to the problems which he had encountered when he engaged a sheltered workshop to have the glue inserted in his bed bug barriers (see para 36 above), and said, in effect, that this amounted to a substantial commercial setback for him. He described the technical and commercial difficulties which he had encountered finding a way to automate the insertion of glue into his barriers. However, by the time he resolved that issue, he was "running out of money". He said that he was "looking for investors to get me over this hurdle", and thought the respondent might be interested. He suggested that the respondent might take 10% of his business for an investment of $30,000, adding "I'm planning on making millions so it would be a great return for you". The respondent replied immediately, saying that she had been putting off contacting the applicant "because, you'll probably feel pretty angry to hear, when you didn't seem interested in the Social Change Foundation idea, I started going down my own bed bug path". She said that she had her own patent, and that half of her profits would go to the foundation. However, she saw possibilities in incorporating what the applicant was doing with what she was doing herself, and suggested that they have a talk.
47 On 25 January 2010, the applicant telephoned the respondent, and, in the course of the conversation that followed, learnt that the invention which the respondent had patented was a bed bug protection device made from Teflon. After that conversation, the respondent sent an email to the applicant, accepting that "this must have been quite unexpected". The applicant sent an e-mail in reply, as follows:
To be honest I was completely shocked when you told me but thinking about it I still have the only discreet bed leg barrier that is also a monitoring system which is what the hotels want. Hotels want to know if the [sic] have an infestation before someone gets bitten. Teflon is a great idea but it won't give hotels the heads up so it really is a different product to mine.
Still on 25 January 2010, the respondent replied as follows:
I thought you might be shocked but if I didn't do it someone else was going to and I figured since I'm trying to do something quite important with any possible money made from it might as well be me.
I'd been trying to figure out how to tell you for a while but figured we'd bump into each other sooner or later and I'd let you know then….as it happened.
It certainly wasn't planned and since we last met in about January, I didn't do anything about it until almost July so it wasn't as if I rushed out to compete with you. It just kept coming into my mind as a solution to funding this Foundation that is going to be extremely hard to get donations for being as how I want to set up treatment programs for child sex offender - like who would?
48 The events just described led to the applicant causing a letter of demand to be sent to the respondent on 7 April 2010. On 12 April 2010, the respondent denied the applicant's allegations. The present proceeding was commenced on 21 September 2010.
49 Iaso was incorporated by the respondent on 12 April 2010, with the intention of it being the trading entity for her Teflon disc. Iaso published a web site called "bbsafe.com.au" on 14 May 2010, the contents of which were written, and updated from time to time, by the respondent. Statements which appeared on the web site at about the end of June 2010 provide the foundation for the applicant's claims under the Trade Practices Act in the present case.
50 The respondents' product was the subject of a segment of the Today Tonight television show on 28 June 2010. The content of the segment was as follows (as recorded by the applicant from the show's web site the following day):
Dubbed the pest of the 21st century, bed bugs are in plague-like proportions worldwide. Finding a solution has reached desperation point. Barbara Biggs is an author and inventor of the BB Safe Ring which starves out bed bugs. "It's huge. We've got 400 times more bed bugs now than we did just a few years ago," Barbara said of the issue. "We want to stop the problem by stopping people getting bitten before it becomes a problem," Barbara said. Invading homes, hotels, hospitals, schools, mattresses, couches, then every nook and cranny - the bloodsuckers attack occupants all over. Greg Mills from Allpest said the only way to combat bed bug infestations is with drastic action - strong chemicals and disposing of all furniture and contents. "20,000 bugs would be conservative. This is just what we can see in a quick 5 minute inspection," he said. "A year ago we did no jobs, now we're doing hundreds. In a world economic crisis, the bed bug industry is booming, absolutely booming," Greg said.
The show's web site named the respondent and the bbsafe web site as points of contact in relation to the segment. It was said that Today Tonight viewers would be "able to purchase the BBSafe ring for half price", and they were directed to the bbsafe web site.
51 According to material downloaded by the applicant on 29 June 2010, statements to the following effect appeared on that website:
"Half the price of currently available bed leg barriers";
"Other bed bug barriers are either unsightly or provide a bridge for bed bugs once bugs are caught in the glue";
"The BB Ring is about half the cost of similar products, making it the most cost effective and durable product on the market".
52 Although the respondents' bbsafe.com.au web site was substantially concerned with their Teflon disc, a page on the site was headed "A Systems Approach to Prevention and Control of Bed Bugs", on which the following statements appeared:
No one solution prevents bed bugs. According to the Bed Bug Code of Practice, a systems approach is the only effective prevention. This involves four measures:
1) A leg barrier such as the BB Seucre [sic] Ring, the only no-maintenance barrier 100% effective and suitable for hotel use. It is easy to install, durable and enhances the effectiveness of other parts of a systems approach …
2) The Protector Bed mattress encasement - the only one found to be 100% effective. See www.bedbbugsalert.com [sic] for more details.
3) A Bed Bug Alert to allow early treatment at early infestation stage. This is a simple device placed in the corner of a room, or under the bed, which is a monitoring device to provide an early warning. www.bedbugsalert.com. for more details see www.bedbugsalert.com
4) A device to stop the bedhead touching the wall, another access point to the bed. The BB Secure Ring can be used between the two door-stopper type rubber plugs to prevent the bed butting up to the wall ….
53 The Today Tonight program had an impact on one of the applicant's commercial arrangements. Mario Pizarro is a director of a concern which goes by the name of "Landmark Investments". He has a background in property ownership and investment, and has contacts amongst property owners. In about June 2010, the applicant - with whom Mr Pizarro had had dealings over a number of years - contacted him and suggested that he might become a distributor for mattress protectors and bed bug barriers. After some discussion about the subject, Mr Pizarro placed an order and, on 20 June 2010, Bed Protector sent him an invoice in the total sum of $144,250. Of this, $90,000 was for 20,000 Bed Bug Barriers (10 x caster; 10 x screw-in) at a unit price of $4.50. Mr Pizarro's intention was to on-sell these to property owners whom he knew.
54 However, in late June 2010, one of Mr Pizarro's employees told him of the bed bug segment on the Today Tonight show. Mr Pizarro himself then found out (from the show's producers) the identity of the web site for the respondents' product, viewed that web site and, in his own words, "I was very disappointed because the statements I read on the web site made it appear that Mr Abrahams' bed bug protection products were not 100 per cent effective." Mr Pizarro then rang the applicant and cancelled his order because he believed that too many people would have watched Today Tonight, and would not be interested in buying the applicant's products.
55 Mr Pizarro was cross-examined about these matters by the respondent. That enabled the court to get a clearer and more rounded impression of why he cancelled his order with the applicant than was possible from the terms of his affidavit, from which the above narrative is taken. In the result, I would make the following findings. The purchase and re-sale of bed bug barriers was not Mr Pizarro's main line of business. However, because of the exclusivity which, from what he had been told by the applicant, the Bed Bug Barrier enjoyed as a mechanism against the march of bed bugs, he saw the opportunity to generate a profit from sales made to property owners. But the respondents' web site demonstrated to him that the applicant's product was not exclusive - he came to wonder how many other products purporting to solve the bed bug problem there might be - and that there may well be real issues with the effectiveness of that product. Whether there was any substance in the respondents' criticisms of the Bed Bug Barrier was not Mr Pizarro's main concern. The fact is that these things had been said and would presumably come to the attention of property owners in whom he might otherwise be intending to generate an interest in that product. This not being his main line of work, it was not worth his while getting involved in the merits of the debate. The reality is that he could no longer be assured of a reasonably swift turnover of the products which he had ordered from the applicant.
56 The other impact which the Today Tonight show had on the applicant relates to a Mr Dane Kip Lyons of a company which traded as "Noleema Services". He had offered to invest $200,000 in the applicant's business, in exchange for a 20% share of the business. However, after Mr Lyons had seen the show, he told the applicant that, because of what was said during the segment, he had lost confidence in the applicant's products. He reduced his investment offer to $10,000.