The interlocutory application filed on 2 December 2024 be dismissed.
The applicant pay the respondents' costs of the application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
(REVISED FROM TRANSCRIPT)
MEAGHER J
INTRODUCTION
Before the Court is an application by the applicant seeking the grant of an interlocutory injunction to restrain the first and second respondents (together, the respondents), from using and operating certain platforms containing materials that allegedly infringe the applicant's copyright. The application also seeks ancillary orders for the preservation of certain evidence and disclosure from the respondents of entities or businesses used to facilitate the applicant's claimed copyright infringement. The application was provided via email correspondence to the Court on 28 November 2024 but was not filed until 2 December 2024. The applicant requested that it be heard before 16 December 2024. The application was, therefore, heard on 9 December 2024.
In its substantive application, the applicant seeks a permanent injunction and order requiring the respondents to deliver up on oath for destruction any infringing hard copy material, the deletion of any material from any electronic medium upon which it appears and declaratory relief as well as a number of orders with respect to an account of profits and/or damages.
The applicant read the interlocutory application affirmed on 28 November 2024, the affidavit of Ms Stephanie O'Callaghan, the applicant's solicitor, filed on 5 December 2024, the order made on 7 November 2024, and the applicant's outline of submissions filed on 5 December 2024. The applicant also relied upon its written submissions in reply provided to the Court on 9 December 2024 and an amended draft order provided to the Court on 9 December 2024. The respondents read the affidavit of Mr Shaddon Ga Wing Wong filed on 5 December 2024 and the respondents' outline of submissions filed on 9 December 2024.
The applicant was granted leave to read the affidavit of Ms O'Callaghan filed on 9 December 2024.
For the reasons that follow, the application is dismissed.
[2]
BACKGROUND
The applicant, Hix Investments Pty Ltd, is in the business of supplying portable homes in Australia and has done so since 2010. It is the holding company of HOMElife Pods, Spacee and Express Portables. The directors are Mr Andrew Hicks and Ms Lauren Hicks (the directors).
The portable homes supplied by the applicant are modified designs which were initially created by a Chinese supplier by the name of Hebei Weizhengheng Modular House Technology Co Limited (WZH, or the supplier).
The first respondent, Mr Shaddon Ga Wing Wong, is a marketing and e-commerce professional who is a citizen of, and resides in, New Zealand. He is the sole director and shareholder of the second respondent. The second respondent, SGW Capital Limited, is a company which imports and sells expandable and portable homes to the New Zealand market.
The affidavits of both the applicant and the first respondent contain submissions as well as evidence and, in some instances, depose to the issues.
Ms O'Callaghan deposed on behalf of the applicant to information provided to her by the directors, and her belief, as follows:
Over the past 14 years, the applicant has significantly refined, modified and enhanced generic floor plans of portable home products on the basis of client feedback.
The refinements, enhancements and modifications were undertaken by the applicant's in-house building designer, Mr Troy Madden, the applicant's in-house certified electrician, Steve, the applicant' salesperson, Mel, who is a retired certified plumber, and Mr Hicks, one of the directors of the applicant.
The products offered by the applicant are "curated from years of industry experience, expertise and educational knowledge and skill".
The types of modifications include:
the selection of better quality materials and appliances, such as additions of better cooktops;
labelling the designs with fixtures and fittings such as lights and windows;
relocating or removing fittings such as lights, cupboards or windows for better placement and functionality;
modification of placement and sizing of furniture to allow space, better lighting or to allow for new configurations such as robe additions to better suit the design of the portable expandable homes;
inclusion of depiction of desired placement of new robes and/or storage;
repositioning of doors or alteration in respect to which doors would swing to open and close to enable the fittings of fixed robes in bedrooms;
altering the width of the rooms;
altering the sizes of windows;
swapping the placement of certain fixtures, such as washing machines and dryers, to allow for optimal configurations.
some designs included the extension of the vanity benchtop in bathroom and repositioning of the plumbing outlets under the vanity sink to allow for the cabinetry under the sink to sit on one side and the washing machine to also fit under the sink on the other side, included because the templated floor plan could not be configured to allow laundry without compromising the rest of the floor plan;
modifying and implementing changes for electrical compliance to ensure that Hix maintained its status as a responsible supplier as per the 'Electrical Equipment Safety System' (EESS) standards, such as repositioning the electrical board to be beneath the ceiling and easily accessible by the customer as is required to meet the Australian standards and regulations;
marking up and altering service lines, such as those required for electricity, waste water management (drainage, hot and cold piping);
including specific double-pole switches and attending to the positioning of electrical power points in specific places to allow customers to plug in a fridge, washing machine, range hood, oven, split air-conditioning system and television; and
marking up and the addition of further required building materials, such as concrete placement.
This has led to the applicant's expansion and success.
The modified designs are converted into engineering designs which are provided to the supplier who produces the home products in accordance with the designs.
The finalised designs are "curated" at a cost of about $8,855.04 into 3D versions of the designs by a third-party subcontractor.
Within the portable homes product industry, unique to the applicant is the ability to supply homes compliant with the specific Australian and New Zealand regulations regarding electrical supplies.
Exhibited to the affidavit were two tables comparing the floor plans and 3D designs of the applicant and the respondents. One of the tables includes a commentary by Ms O'Callaghan, solicitor for the applicant, as to the similarities.
On or around 12 April 2023, the first respondent entered into an employment contract with the applicant for the role of Digital Marketing Manager. He commenced employment on 13 April 2023. The employment contract contained express terms relating to intellectual property and the preservation of confidentiality and information as follows:
[3]
Intellectual Property
Any and all published working drawings, sketches, renders, drafts or final products and any other works produced during the term of employment with Hix Investments Pty Ltd trading as HOMElife Pods and its affiliated companies, businesses or entities (hereinafter referred as HOMElife Pods) will remain the property of HOMElife Pods unless otherwise approved by HOMElife Pods and its full discretion in writing with you. Any intellectual property currently owned, held or in draft held by HOMElife Pods will also remain the property of HOMElife Pods.
You hereby assign to HOMElife Pods all rights, including without limitation, copyrights, patents, trade secret rights and other intellectual property rights associated with any ideas, concepts, techniques, inventions, processes, works of authorship, Confidential Information or trade secrets:
developed or created by the Executive, solely or jointly with others, during the course of performing work for and on behalf of HOMElife Pods or any affiliated companies, whether as an employee or independent contractor, or at any time during the Employment Period;
that you conceive, develop, discover or make, in whole or in part, during your employment with HOMElife Pods that relate to the business of HOMElife Pods or any affiliated companies or the actual or demonstrably anticipated research or development of HOMElife Pods or any affiliated company;
that you conceive, develop, discover or make, in whole or in part, during or after your employment by HOMElife Pods that are made throughout the use of any of the equipment, facilities, suppliers, trade secrets or time of HOMElife Pods or its affiliated companies or that result from any work you perform for HOMElife Pods or its affiliated companies; or
developed or created by you, solely or jointly with others, at any time before the Employment Period that relate to or involve HOMElife Pods businesses, including but not limited to the business of HOMElife Pods, including but not limited to works, drawings, sketches, drafts and artificial drawings. If you, for any reason, seek to retain any right, title or interest in or relating to the aforementioned, you agree to promptly assign in writing and without any requirement of further consideration all such right, title and interest to HOMElife Pods. Upon request by HOMElife Pods at any time during or after the employment period, you will take such further actions, including execution and delivery to HOMElife Pods as may be appropriate to evidence, perfect record or otherwise with full and proper effect to any assignment of rights under or pursuant to this Agreement.
[4]
Confidentiality
Any confidential information obtained during, prior to or after your employment with HOMElife Pods is to be:
kept confidential and not to be disclosed to another person without written consent by HOMElife Pods or any of its affiliated entities prior to the disclosure.
not use it in any manner outside the course of employment
This obligation needs to continue during the employment relationship, and also after the employment relationship ends.
As part of his employment, the first respondent was provided with a company phone and laptop. He was also given login details for the applicant's Shopify and Dropbox accounts, client list, supplier information and contact details.
In employing the first respondent, the applicant provided the first respondent with access to confidential information, its online Shopify account and the Dropbox account. As well as being provided with information as to the floor plans, renders, photographs and supplier information, the first respondent was also provided with a training session from the applicant's electrician as to specific issues regarding compliance with respect to electricity in relation to the portable homes.
The first respondent's employment with the applicant ceased on 21 August 2023.
The applicant complains that the respondents have breached its copyright and the first respondent has breached his employment contract, duties owed as a result of the Corporations Act 2001 (Cth) (Corporations Act), and fiduciary duties owed as an officer and employee of the applicant.
The conduct about which the applicant complains includes as follows:
the registration of domains www.expanders.co.nz, the NZ website, www.portables.co.nz, on or about 17 July 2023. The New Zealand website was, at the time of its initial publication, copied and pasted from that of one of the applicant's websites.
On 18 August 2023, a Shopify email alert was sent to Mr Hicks, which stated that the first respondent had logged into the applicant's Shopify account and downloaded a "CSV" file which contains all data relating to the applicant's designs. The first respondent had also emailed the files to his personal email address. The notification included that the first respondent had accessed the account three months ago, which would place the access at February 2024, after the first respondent's employment ceased in August 2023.
The respondents had a number of social media accounts, one of which bore a post made on 29 July 2023, while the applicant was still in the employ of the applicant.
The respondents used a photograph of one of the applicant's home products on the @nzexpanders Instagram account. The photograph was taken by him during his employment with the applicant, on a telephone supplied to him by the applicant.
The first respondent has registered, on or before 30 October 2024, the domain www.expanders.com.au.
The first respondent has logged into a freelancer workforce website (the Fiverr account), and shared the list of freelancers used by the applicant to his personal email address.
The respondents' websites infringe the copyright of the applicant by using the same 3D drawings of 11 portable products, including:
40-foot four-bedroom design;
40-foot three-bedroom design;
40-foot two-bedroom plus laundry design;
40-foot two-bedroom plus study design;
40-foot two-bedroom plus walk-in robe design;
40-foot two-bedroom design;
20-foot four-bedroom design;
20-foot three-bedroom type B design;
20-foot two-bedroom type A design;
20-foot one-bedroom type A design;
20-foot one-bedroom type B design; and
20-foot open plan design.
Ms O'Callaghan also deposed that the results of the respondents' conduct include:
the amount of traffic or the number of leads to the applicant's websites has decreased, which the applicant attributes to the respondents' conduct;
the respondents' conduct with respect to its Australian websites has placed the applicant at a "serious competitive disadvantage";
the applicant has had to increase its Google and Facebook advertising as a result of the respondents' conduct;
without an injunction, the copyright in the works will dilute and further costs will be incurred by the applicant.
The applicant does not consider damages to be an adequate remedy, given the difficulty in quantifying loss to competitive advantage, reputation, goodwill and market share, and the "potential for ongoing harm".
The applicant has concerns as to whether the respondents could pay damages, should they be awarded.
The applicant is willing and able to give the usual undertaking as to damages.
Ms O'Callaghan's second affidavit exhibited evidence that Mr and Mrs Hicks are directors of the applicant and deposed that they are Australian citizens. It also deposed to information regarding the applicant's financial position and exhibits the letter of advice provided to the applicant, which referred to the requirement to give the usual undertaking. As well, the affidavit deposes to the results of Google search results from inputting certain search terms, such as "supplier of portable homes". The respondents took objection to those paragraphs of the affidavit which impugned the first respondent's probity, such as that he chose WZH as his supplier because it was one of the first to come up in a Google search. The respondents submitted that the evidence as to the results of Ms O'Callaghan's Google searches were not indicative of the results which may be obtained in New Zealand, given that they were undertaken in Australia. In response, the applicant contended that the evidence is admissible and provides a foundation upon which the court could draw an inference as to the respondents' evidence. The evidence was taken into account for that purpose.
The respondents also took objection to paragraphs in Ms O'Callaghan's affidavit which constituted opinion evidence comparing the floor plans. The applicant properly accepted that the opinion evidence be struck out.
The first respondent deposes as follows:
that he used his personal email address to perform his role with the applicant as he was not provided with a work email address. He deposes that he used this email address to access the applicant's Dropbox, Shopify, and Fiverr accounts.
In or about August 2023, he resigned from his role with the applicant and returned to live in New Zealand where he incorporated the second respondent to conduct an expandable home business. The business of the second respondent caters to the New Zealand and Pacific Islands markets.
On or around 22 August 2023, he had begun the process of registering domains and setting up the second respondents business. The second respondents business relies predominantly on its website, www.expandables.co.nz, and online advertising for its operations.
He now has an Australian website, www.expanders.com.au, and has commenced advertising in Australia, although has not yet sold any products in Australia.
He is aware that he uses the same supplier as the applicant but is unaware that it has the exclusive rights to supply the supplied products in Australia or New Zealand.
He chose the supplier because it was one of the first suppliers to come up upon him undertaking a Google search for the products he was proposing to sell.
The second respondent purchases products such as associated floor plans, designs and specifications from the same supplier as the applicant, WZH. The floor plan provided by WZH is then given to a third-party freelance designer to make simplified versions of the floor plans and make them more presentable.
The second respondent also engages a third-party freelance designer to create three-dimensional floor plans and models of the portable homes for display on the second respondent's website and advertising.
All the floor plans and product information he uses come from the supplier, and he has not asked to be supplied with the same plans as they supplied to the applicant.
The floor plans received from the supplier change frequently.
He was unaware of the nature of the modifications made to the supplier's plans by the applicant until he received the applicant's statement of claim and affidavit.
The first respondent further deposed that he has reviewed the floor plans and 3D models depicting the products sold by the applicant in the tables exhibited to Ms O'Callaghan's affidavit of 5 December 2024 and considers that they contain both similarities and differences.
He considers any similarities are explained by the fact that both parties use the same supplier. The modifications possible are limited due to the size, layout and configuration of the products and that customers frequently request similar modifications.
He recently visited China and visited about seven suppliers of portable home products. In so doing, he observed that they supply the same expandable home products and use the same or very similar floor plans.
The respondents criticise the applicant's evidence as being on information and belief. However, as the applicant correctly pointed out, s 75 of the Evidence Act 1995 (Cth) (Evidence Act) provides that in an interlocutory hearing, the hearsay rule does not apply to evidence if the party who adduces it also adduces evidence of its source. Ms O'Callaghan's statements were largely supported by evidence as to their sources.
It should be noted that while submissions and even evidence was often couched in terms of designs, the Court understands the parties to be referring to the copyright which subsisted in the artistic works.
[5]
LEGAL PRINCIPLES
The principles governing interlocutory injunctions are well-settled and not in contention between the parties.
The two primary inquiries involved are explained by Gummow and Hayne JJ in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at [65] (see Gleeson CJ and Crennan J at [19], citing Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 at 622-623 as follows:
The relevant principles in Australia are those explained in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618. This Court (Kitto, Taylor, Menzies and Owen JJ) said that on such applications, the court addresses itself to two main inquiries and continued (at 622-623):
"The first is whether the applicant has made out a prima facie case, in the sense that if the evidence remains as it is, there is a probability that at the trial of the action, the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted."
By using the phrase "prima facie case", their Honours did not mean that the plaintiff must show that it is more probable than not that at trial that the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial. That this was the sense in which the Court was referring to the notion of a prima facie case is apparent from an observation to that effect made by Kitto J in the course of argument. With reference to the first inquiry, the Court continued, in a statement of central importance for this appeal:
"How strong the probability needs to be depends, no doubt, upon the nature of the rights [the plaintiff] asserts and the practical consequences likely to follow from the order he seeks."
(Citations omitted.)
The two primary inquiries are related and are not to be considered in isolation from one another: Bullock v The Federated Furnishing Trades Society of Australasia (No. 1) (1985) 5 FCR 464 at 472 (Woodward J). As observed by the Full Court (Allsop CJ, Jagot and Nicholas JJ) in Warner-Lambert Co LLC v Apotex Pty Ltd (2014) 311 ALR 632; [2014] FCAFC 59 at [70]:
Whether an applicant for an interlocutory injunction has made out a prima facie case and whether the balance of convenience favours the grant of such relief are related questions. It will often be necessary to give close attention to the strength of a party's case when assessing the risk of doing an injustice to either party by the granting or withholding of interlocutory relief especially if the outcome of the interlocutory application is likely to have the practical effect of determining the substance of the matter in issue or if other remedies, including an award of damages, or an award of compensation pursuant to the usual undertaking, are likely to be inadequate.
The Court should "assess and compare the prejudice and hardship likely to be suffered by the respondent, third persons and the public generally if an injunction is granted, with that which is likely to be suffered by the applicant if no injunction is granted": GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser Healthcare (UK) Limited (2013) 305 ALR 363; [2013] FCAFC 102 at [81] (Bennett, Jagot and Griffiths JJ).
The question as to whether damages would be an adequate remedy is one of the matters which will ordinarily be considered in assessing the balance of convenience: Samsung Electronics Co Limited v Apple Inc (2011) 217 FCR 238; [2011] FCAFC 156 at [61] (Dowsett, Foster and Yates JJ).
Further to the principles with respect to the grant of an interlocutory injunction, at the hearing, the respondents handed up APT Technology Pty Ltd v Aladesaye [2014] FCA 966 and referred the Court to the comprehensive principles set out therein by Foster J at 64-66.
[6]
PRIMA FACIE CASE
The applicant relies on three causes of action in support of its claim for an interlocutory injunction. By its statement of claim, the applicant claims infringement of copyright, breach of contract and breach of fiduciary and statutory duties.
[7]
Infringement of copyright
Section 32(1) of the Copyright Act 1968 (Cth) (Act) provides that copyright subsists in an original literary, dramatic, musical or artistic work that is unpublished and in respect of which the author was a qualified person at the time when the work was made or if the making of the work extended over a period was a qualified person for a substantial part of that period. "A qualified person" is defined as an Australian citizen or a person resident in Australia: s 32(4) of the Act.
Pursuant to s 31(1)(b) of the Act, copyright in relation to an artistic work is the exclusive right to reproduce the work in a material form, to publish the work and to communicate the work to the public. Section 36(1) of the Act provides that the copyright in a literary, dramatic, musical or artistic work is infringed by a person who, not being the owner of the copyright and without the licence of the owner of the copyright, does in Australia or authorises the doing in Australia of any act comprised in the copyright.
Section 15 of the Act provides that:
[A]n act shall be deemed to have been done with the licence of the owner of a copyright if the doing of the act was authorised by a licence binding the owner of the copyright.
The notion of reproduction involves the resemblance to an actual use of the copyright work: S W Hart & Co Pty Ltd v Edwards Hot Water Systems [1985] HCA 59, (1985) 159 CLR 466 at 472, per Gibbs CJ (with whom Mason J agreed at 478 and Brennan J agreed at 491). To establish breach of copyright, the applicant must show a sufficient degree of objective similarity between the two works and some causal connection between the two works: S W Hart & Co at 472.
As set out by Murphy J in Carlisle Homes Pty Ltd v Tick Homes Pty Ltd [2018] FCA 973 at [29]:
The issues of resemblance to, and actual use of, the copyright work are discreet because, in the absence of the causal connection, objective similarity does not give rise to a finding of reproduction. They overlap, however, because the necessary causal connection between the alleged infringing work and the copyright work is often established by arguing that an inference of use of the copyright work should be drawn on the basis of a high degree of similarity between the two works, coupled with the opportunity to use the copyright work (access) and with failure by the alleged infringer to adequately explain that party's assertion of independent origination (authorship) of the work said to infringe. The elements of sufficient objective similarity and causal link are aspects of "reproduction" and it can be artificial to consider them separately, and where access to and use of the copyright work is to have occurred a finding of copyright can add significance to "objective similarity": Eagle Homes Pty Ltd v Austech Homes Pty Ltd (1999) 87 FCR 415 at [84]-[85], [98], per Lindgren J (with whom Finkelstein J agreed at [111]); Clarendon Homes Australia Pty Ltd v Henley Arch Pty Ltd [1999] 46 IPR 309 at [27], per Heerey, Sundberg and Finkelstein JJ.
The applicant contends that the floor plan designs, renders and 3D drawings for modular homes (collectively, the applicant's works) constitute original artistic works in which copyrights exist pursuant to s 32 of the Act. The applicant submits that its directors, Mr Andrew Hicks and Ms Lauren Hicks, as well as the in-house building designer, Mr Troy Madden, undertook design and innovation works to improve the floor plans provided by WZH. The applicant submitted that Mr Hicks, Ms Hicks and Mr Madden were Australian citizens at the time the works were made and were "qualified persons" pursuant to s 32(1)(a) of the Act.
In accordance with r 34.35 of the Federal Court Rules 2011 (Cth), the applicant took the Court to at least one instance of the type of infringement alleged. The applicant pointed to an exhibit to the affidavit of Ms O'Callaghan, which displays a table comparing the applicant's works, which include markup and designs advertised by the respondents on their New Zealand and Australian websites (the respondents' works).
Specifically, the applicant referred the court to a design that, in that table, named "40ft Premium Four Bed Design". The tables show the modifications undertaken by the applicant, including:
addition of cooker;
removal of window on south wall;
reduction of bedroom size;
increased living room window size;
repositioning of plumbing outlets;
adding overhead cabinetry;
inclusion of double-glazed windows;
coving and LED oyster lights.
The applicant submitted that such modifications display the originality required for copyright to subsist in its works.
The applicant also contends that any works created by the first respondent during his employment with the applicant are the property of and are owned by the applicant pursuant to s 35 of the Act.
For present purposes, the respondents were prepared to accept that the applicant's works are artistic works as defined in the Act. However, they contended that there is no evidence from Mr Madden, Steve or Mel, including as to whether they are Australian citizens or residents of Australia. Therefore, the respondent submitted that the applicant cannot establish that each of the claimed authors of the applicant's works was a "qualified person" and that, therefore, no copyright subsists in the works.
The applicant alleges infringement of copyright on the basis that in each of the instances set out in the tables, the respondents' works are replicas of the applicant's works, including the near-identical arrangement of rooms, placement of fixtures and overall spatial organisation, stylistic elements and perspectives.
The respondents' works are advertised on their websites and offered for sale. The respondent submits that such acts are sufficient to establish a prima facie case for a breach of s 36 of the Act, namely that the respondents have, without authorisation, done an act comprised in the copyright.
The respondents submit that the only act done in Australia is the publication of the works in the second respondent's Australian website, www.expanders.com.au. In that regard, the respondents contend that the Australian website was recently created and has not generated any sales in Australia. The remainder of the acts complained about, the respondents argued, occurred in New Zealand.
Further, the respondents submit that there is evidence that the second respondent purchases its products from WZH and engages a freelance designer to create floor plans and specifications for use in its marketing material. The respondents contend that this is evidence of a licence by WZH to the second respondent to use the floor plans and specifications. Therefore, the respondents argue, the question is whether WZH received a licence from the applicant in relation to the applicant's works, including a right to sub-licence use of those works.
The respondents contend that there is no evidence as to the terms on which the applicant contracted with WZH. However, the respondents contend that there is evidence from which the court may conclude that there was a licence between the applicant and WZH, including the right to sub-licence. In that regard, the respondents submitted:
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1. WZH had standardised floor plans and specifications, which it provided to the applicant;
2. The applicant modified WZH's floor plans and specifications over time;
3. The modified floor plans and specifications were sent to WZH;
4. The evidence is that the modifications were made iteratively over time rather than having to be incorporated each time an order was placed;
5. There is no evidence that WZH kept or was required to keep confidential the floor plans which were modified by the applicant;
6. WZH must therefore have incorporated the modifications into the floor plans and specifications for its products;
7. The applicant must have known that WZH supplied its expandable homes to other customers, which included providing floor plans and specifications, including for marketing purposes (as WZH has done for the applicant);
8. There is no evidence that the applicant did anything to protect confidentiality in its modified floor plans despite it having information from which it could infer that WZH was using the modified floor plans for other customers;
9. The applicant instead continued to deal with WZH in the above circumstances and over the many years of their trading relationship;
10. The second respondent obtained WZH's floor plans and specifications during the ordering process for its New Zealand business, and these floor plans and specifications were the same or similar to the applicant's modified floor plans;
11. WZH acted as if it had the freedom to use the floor plans as it wished including by permitting the applicant to use them, that is, as if it held a licence from the applicant.
[8]
Breach of Contract
The applicant contends that the contract operates to protect its copyright in the floor plans and assigns the content created by the first respondent during his employment to the applicant. The applicant contends that the contract also operates to restrain the use of intellectual property by the first respondent for purposes outside of his course of employment and which subsists after employment.
The applicant alleges the following instances of breach of contract:
on 17 July 2023, while the first respondent was still employed by the applicant, the first respondent, through the second respondent, registered the domain www.expanders.co.nz, being the New Zealand website;
on or before 30 October 2024, the first respondent also registered the domain www.expanders.com.au, being the Australian website;
the first respondent continued to use the applicant's accounts to access confidential information after his employment with the applicant; and
images of the applicant's product taken by the first respondent during his employment were posted to Instagram and Facebook accounts owned by the second respondent.
The applicant also contends that the first respondent used information obtained from the breaches outlined above, as well as from the applicant's works, to create and promote competing products in the New Zealand and Australian websites.
There was evidence before the court in Ms O'Callaghan's affidavit which showed the same image was used on the applicant's Instagram page and the second respondent's Instagram page. The respondents accepted that they appeared to be the same image, but submitted that the image on the second respondent's page is one that was only visible for 24 hours and is in a "different category". The applicant noted that the image on the second respondent's page included words stating "introducing the Studio. This 13 square metre container home comes with bathroom, shower, toilet, vanity, full kitchenette". Therefore, the applicant submitted, this supports an inference that the respondents sought to order and deliver the same products to its customers as the products of the applicant.
The applicant submits that it has suffered loss and damage due to the diversion of sales, leads and market share arising from the designs and increasing marketing costs.
The respondents submit that the employment contract does not provide for the protection of the applicant's copyright; rather, it relates to material which the first respondent produced. Further, the respondents contend that the contract requires the first respondent to maintain confidence in confidential information. In that regard, the respondent contends that the applicant's works were provided to WZH and to the applicant's customers and were advertised and disseminated in public, so they cannot be confidential.
Further, the respondents contend that the contract does not restrain the first respondent from competing with the applicant in Australia, New Zealand, or in the Pacific Islands, registering the second respondent's New Zealand or Australian website, accessing the applicant's information from his personal email address during his employment, and using the same service providers as used by the applicant.
As to the applicant's contention that the notification from the Fiverr account that the first respondent shared the list Past Saved Freelancers with the entire team in May 2024, the respondents contend that the evidence suggests that the notification was three months old, and it is unclear as to the period to which it relates. Further, the respondents contend that the notification appears to show the sharing of information with the entire team, which meant the team of the applicant. Therefore, the respondents argue, this does not support a conclusion that information was stolen from the applicant.
As to the evidence regarding the Shopify CSV file, based on the first respondent's evidence set out above, the respondents submit the court should reject the inference that the applicant's works were taken by downloading the CSV Shopify file on 18 August 2023.
The respondents correctly submitted that the applicant says evidence as to what customers might do on Google, and any impact which may arise from that, is evidence of opinion or belief and is inadmissible. For the purposes of this hearing, opinion evidence provided by Ms O'Callaghan which was not supported by evidence that the source of her opinion is not admissible. Any other complaints regarding the evidence do not need to be resolved for the purpose of this hearing.
Further, the respondents argued that the second respondent's business operates in New Zealand and the Pacific Islands, which are different markets from that in which the applicant operates. According to the respondents, the Australian website has only recently launched and has not taken any orders yet. The respondents also submit that evidence of the applicant increasing its marketing spending does not support an inference of breaches of the employment contract.
[9]
Statutory and Fiduciary Duties
Section 182(1) of the Corporations Act 2001 (Cth) (Corporations Act) provides:
A director, secretary, other officer or employee of a corporation must not improperly use their position to:
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1. gain an advantage for themselves or someone else; or
2. cause detriment to the corporation
[…]
Note: this subsection is a civil penalty provision: see s 1317A of the Corporations Act.
Further, s 183(1) of the Corporations Act provides that a person who obtains information because they are, or have been, a director or other officer or employee of a corporation must not improperly use the information to gain an advantage for themselves or someone else or cause detriment to the corporation.
Section 9 of the Corporations Act defines "officer" as that which is defined in s 9AD. Section 9AD relevantly provides:
An officer of a corporation (other than a CCIV) is:
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1. a director or secretary of the corporation; or
2. a person:
(i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
(ii) who has the capacity to affect significantly the corporation's financial standing; or
(iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation); or
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1. a receiver, or receiver and manager, of the property of the corporation; or
2. an administrator of the corporation; or
3. an administrator of a deed of company arrangement executed by the corporation; or
4. a restructuring practitioner for the corporation; or
5. a restructuring practitioner for a restructuring plan made by the corporation; or
6. a liquidator of the corporation; or
7. a trustee or other person administering a compromise or arrangement made between the corporation and someone else.
Note: Section 201B contains rules about who can be a director of a corporation.
The applicant contends that the first respondent was one of only four employees of the applicant and its digital marketing manager. As such, the first respondent held substantial responsibility for the applicant's marketing strategy, oversaw significant budget for such tasks, had the capacity to influence the applicant's operational financial standing, and meets the criteria for an "officer" pursuant to s 9 of the Corporations Act.
The applicant contends that the first respondent owed fiduciary duties to the applicant as an employee and representative of the applicant, including duties to act with reasonable care, skill and diligence, in good faith for a proper purpose and not to misuse his position or information.
The applicant submits that the first respondent acted contrary to ss 182 and 183 of the Corporations Act, as well as his fiduciary duties to the applicant, as he:
improperly used his position to gain an advantage by accessing and downloading confidential data;
registered domains and established competing businesses during his employ;
used information acquired through his employment to benefit himself and the second respondent;
continued possession and use of the applicant's confidential information post-employment;
copied website content and marketing materials; and
engaged the same suppliers and freelancers used by the applicant.
(Footnotes omitted)
The applicant argued that it has suffered detriment, including loss of business opportunities, market share and increased competition as a result of the first respondent's breaches.
Those submissions must be rejected.
The respondents correctly submitted that the applicant has not provided evidence to substantiate that the first respondent was an "officer" as defined in s 9AD of the Corporations Act. Rather, the respondents submit that the evidence tells against the first respondent being an officer, including for the reasons that he was responsible only for the applicant's online presence. He held the position for only four months, of which only one month was outside his probation period, that his prior experience was as a car salesman and working in his own online business, that the position as advertised did not require business or management experience, that it was advertised with an annual salary of $90,000, and that the annual salary actually agreed and paid was $110,000 including superannuation. Therefore, the respondents submit the first respondent was not a person who made or participated in making decisions that affected the whole or a substantial part of the business of the applicant, or who had the capacity to affect significantly the applicant's financial standing, or in accordance with whose instructions or wishes the directors of the applicant were accustomed to act, in accordance with s 9AD(1)(b) of the Corporations Act.
The respondents' submissions in this regard must be accepted. On the evidence currently before the Court, the role of the first respondent, in the context outlined above, did not rise to the level of an officer of the applicant.
[10]
Consideration
I have taken into account the evidence provided by the parties in the submissions made.
I have reviewed the exhibits to Ms O'Callaghan's affidavit of 5 December 2024, including the table setting out the parties' respective floor plans and 3D plans for the purpose of comparison.
As to the claim of copyright infringement, while there are objective similarities in the plans, there are also differences, and I am not persuaded as to the ownership or subsistence of the copyright in the works and whether actual copying has occurred. This is particularly so given the absence of probative evidence as to the nature of the relationship between the applicant and the supplier, and the nature and extent of inferences that the applicant has asked the court to draw. Therefore, I do not consider that on the information presently available, a prima facie case of copyright infringement exists. It may be that with the opportunity afforded by the trial, the applicant is able to adduce further evidence including expert evidence, such that my views may change. However, as the evidence currently stands, I am not satisfied that a prima facie case exists.
Given my views regarding the prima facie case with respect to copyright infringement, much of the applicant's case as to the breach of the employment contract is also not made out on the current state of the evidence. Therefore, the case in relation to the employment contract appears to be confined to the short-term use of one of the applicant's photographs on an Instagram account. I am not satisfied that provides a basis for the grant of an injunction.
As to the case regarding breach of the statutory and fiduciary duties claimed by the applicant to be owed to it by the first respondent, my conclusions, based on the current state of the evidence have been previously set out. Given the findings with respect to whether the applicant was an "officer" of the applicant and the findings with respect to infringement of copyright, I am also not satisfied that the applicant has established a prima facie case of breach of fiduciary duties.
[11]
balance of convenience
The applicant stated that it is prepared to give the usual undertaking as to damages. As to the balance of convenience, the applicant argued that the consequences to the applicant are severe, including dilution of copyright value, loss of market share, loss of reputation and goodwill built over 14 years in the Australian market. Further, the applicant submits that such harm suffered by it cannot be adequately compensated by damages as the respondents' alleged replication of the applicant's works dilutes the applicant's brand identity, erodes customer trust, and that such damage to reputation and goodwill is difficult to quantify monetarily. The same was submitted in respect of lost business opportunities and future earnings.
The applicant contended that its position may not be able to be recovered if an interlocutory injunction is not granted, even if it was ultimately successful in obtaining a permanent injunction.
In response, the respondents submit that the balance of convenience does not favour the granting of the injunction on the following bases:
The respondents will face prejudice as the injunction will destroy the second respondents' business, including a business in a market in which the applicant does not operate. This is because the injunction would prevent the second respondent from using the floor plans and specifications of WZH, its supplier. Further, the primary way that the second respondent generates sales is through its New Zealand website, advertising campaigns and social media advertising.
As to the prejudice that will be faced by the respondents, the respondents also submit that the New Zealand business is growing, and the respondents anticipate a net profit of between 2 and 3 million dollars NZ by the end of the 2025 calendar year, which is when the respondents considered that a trial might occur.
The applicant's evidence of solvency is not sufficient to establish that the applicant's undertaking as to damages is meaningful. No evidence has been provided of the applicant's assets, liabilities, sales expenses, or other financial information.
The applicant's evidence does not assist the Court to conduct the exercise of valuing the loss of opportunity.
The applicant's causes of action are apt for an award of damages if successful. Accordingly, damages are an adequate remedy. The respondents have adduced evidence of its financial position, showing that it is of financial worth.
The applicant's case is weak, which is a factor against the granting of an injunction.
The applicant has not explained the delay in bringing this application. The second respondent's business has been operational since August 2023, but the applicant did not bring the originating application until 2 October 2024 and the interlocutory application until most recently.
It is therefore open to the Court to infer that the applicant has recently learned that the second respondent has commenced operating in Australia, and that it had therefore brought the application to quell competition in the market.
In reply, the applicant submitted that:
The orders sought by the applicant do not seek to prevent the respondents from operating their website in their entirety, only to the extent that the applicant's copyright is being infringed.
The respondents' evidence as to their projections are speculative, with no evidence provided in support. Their financial statements show assets totalling $700,584.00 and expenses amounting to $158,134.00, demonstrating their liquidity to cover expenses during the injunction if it were granted.
The inadequacy of damages is concerned not with whether the respondents were able to pay the damages, but whether monetary damages would restore the applicant's lost goodwill or reverse the dilution of its copyright or loss of market share.
The delay in the applicant seeking this interlocutory relief is explained by its numerous attempts to resolve matters via correspondence.
The applicant is not required to adduce evidence of its financial capacity to give the usual undertaking, referring to the Court's Usual Undertaking as to Damages Practice Note (GPN-UNDR).
The first respondent gave evidence that when he visited China and about seven different suppliers, he observed that they supply the same expandable home products and use the same or very similar floor plans. Therefore, the applicant contended that the respondents could cease their business with WZH and approach another supplier.
The applicant contended that the Court clearly has jurisdiction over the Australian website as it targets Australian consumers and operates within Australia. The applicant also contended that the Court's jurisdiction over the Instagram and Facebook posts are supported by the platforms being accessible by Australian consumers, as well as the fact that the pages state that the delivery is worldwide. The applicant referred to s 115A(1) of the Act, which provides as follows:
The owner of a copyright may apply to the Federal Court of Australia to grant an injunction that requires a carriage service provider to take such steps as the Court considers reasonable to disable access to an online location outside Australia that:
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o
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1. infringes, or facilitates an infringement, of the copyright; and
2. has the primary purpose or the primary effect of infringing, or facilitating an infringement, of copyright (whether or not in Australia).
Further, the applicant argued, jurisdiction over the New Zealand website exists due to the respondent's act of downloading the applicant's work and registering a competing company whilst living in Australia. In that regard, the applicant submitted that the initial reproduction occurred in Australia.
With respect to the balance of convenience, as already set out, the applicant claims that dilution of copyright and brand identity, loss of market share, loss of reputation and goodwill built over 14 years in the Australian market are difficult to quantify and cannot be adequately compensated by damages. The same was submitted in respect of loss of business and future earnings.
On the other hand, the respondents submit that were the injunction to be granted, they would no longer be able to operate, including in markets in which the applicant does not operate, as they would be precluded from using the floor plans and specifications provided by their supplier. While the respondents' submission as to the applicant's solvency and its relationship to the undertaking as to damages is misconceived and the applicant's submissions in reply must be accepted on this point, I am not satisfied that any damage that the applicant might suffer is not able to be compensated in damages.
For these reasons, I am satisfied that the balance of convenience favours the respondents and that therefore the injunction must be refused.
[12]
conclusion
The application for an interlocutory injunction is refused.
There seems to be no reason why the applicant should not pay the respondents' costs of the application.
I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Meagher.
He denies that he has taken, used or copied the applicant's floor plans, including any modifications they make to the suppliers plans.
To the extent that he has accessed the applicant's Shopify account, it was for the purposes of his employment with the applicant.
In any case, he downloaded an example of such a CSV file from his own Shopify account and observed that it contained a spreadsheet with basic product information such as prices, search tags and HTML text. He deposed that it did not contain images or information that would allow him to understand the modifications made to the generic designs.
He denies using or wanting to use the same freelancers as the applicant and is not aware of the identity of the applicant's freelancers.
He denies copying and pasting the applicant's website and says, in any case, his website now is very different.
Were the respondents to be prevented from using the websites, they could not make sales, which would lead to them having to make staff redundant, being unable to pay rent and utilities bills with respect to the premises, suffer reputational harm and severely limit the growth of business.
He anticipates significant growth over the next 12 months, if not limited in the way sought by the applicant in how he trades.
The respondents contended that the applicant is required to establish the elements of infringement as set out in s 36(1) of the Act, which includes that the copyright is infringed "by a person who, not being the owner of the copyright, and without the licence of the owner of the copyright" (emphasis added) did an act comprised in the copyright. Therefore, the respondents argued, the onus is on the applicant to show the absence of a licence.
In that regard, the respondents also referred to the High Court case of Avel Pty Ltd v Multicoin Amusements Pty Ltd (1990) 171 CLR 88, wherein Mason CJ, Deane and Gaudron JJ stated at 94-95:
(vi) The onus of proving the absence of the licence of the owner of the copyright in relation to an issue of infringement under s. 37 or s. 38 of the Act lies on the party who asserts infringement. The reason why that is so is that the absence of such licence constitutes an element of the wrong of infringement under those sections as distinct from a justification or excuse for doing something which prima facie constitutes infringement. A fortiori, a defendant to proceedings under s. 202 bears the onus of establishing absence of licence in a case where he seeks to "establish" by way of defence that the actual or proposed import for sale or sale in respect of which the threat of infringement proceedings was made constituted or would have constituted an infringement under s. 37 or s. 38.
At the hearing, the respondents took the Court to the case of realestate.com.au Pty Ltd v Hardingham (2022) 277 CLR 115 as an example of how a licence agreement might be inferred, including by the application of the principles in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 282-283, in a "flexible" and "non-rigid" way, and on the basis that "reasonableness" and "equity" are elastic notions :[114]-[115] per Edelman and Steward JJ.
As to the question of whether the first respondent had obtained the applicant's works, the respondents submitted that if that had occurred it was in the course of the first respondent's employment. Further, even if the first respondent did have the applicant's works in his possession that does not support the inference that the works were used in the second respondent's New Zealand business.
In response to the respondents' contentions regarding an implied licence, the applicant made the following submissions:
That the respondents obtained the designs from WZH is merely an assertion contained in the first respondent's affidavit. If the court were to accept this position it would require the court to accept that WZH took the applicant's works and provided the designs to a third party as a generic design. The more likely position is that the first respondent obtained the designs through his employment with the applicant and provided them to WZH for reproduction, noting that there is evidence of the first respondent downloading the designs after his employment with the applicant.
Even if the court accepts that WZH provided the designs to the first respondent, WZH does not have a licence to do so. In that regard the respondents' submission that the applicant is to provide evidence of a licence is a reversal of the onus of proof.
The position that the applicant provided its designs to WZH by an implied contractual term is illogical. The test for implying contractual terms is stringent and requires the fulfilment of the following criteria: necessary, reasonable and so obvious that "it goes without saying": BP Refinery at 268. It would be detrimental to the applicant's business to give WZH a licence to use its works for no consideration.
If a licence did exist between WZH and the applicant, there would have to be a sub-licence between WZH and the first respondent, which the first respondent could have put in evidence. The fact that the first respondent has not done so supports an inference against the existence of such licence.
Referring to an annexure to Ms O'Callaghan's affidavit filed on 9 December 2024 which displays an image of a floor plan on WZHs website,the applicant contended that if there was a licence, why would WZH advertise the basic generic floor plan, as opposed to the best product, incorporating the changes of its customers.
The case of Hardingham does not stand for the proposition that an inference of a licence can be drawn in the absence of any evidence from the applicant. In that case, the High Court inferred an inference on different facts, including that there was already a potential licence agreement in place, due to the terms and conditions of the agreement between Mr Hardingham and the company, and that there were oral conversations that potentially expanded the scope of the licence. That is not the case here.